The World Bank approves a US$235 million credit to the Government of Bangladesh for a Private Sector Infrastructure Development Project. The project will provide both funding and technical assistance to promote greater private sector participation in power, gas, water supply, telecommunications, and transportation. The credit is provided by the International Development Association, the World Bank's concessionary lending arm.

Besides gas pipelines, the sub-projects could include new port facilities, toll roads such as the Dhaka bypass, and a water treatment plant for Dhaka.

Sufficient private commercial financing is not available-primarily due to non-investment grade rating for Bangladesh debt and the absence of creditworthy public utilities. Investors, therefore, seek additional security for mobilizing market-based funding and supplement it with other sources of long-term financing. The project will address this constraint by establishing a Private Sector Infrastructure Development Fund. The fund will provide long-term debt financing for privately-sponsored infrastructure. The availability of this type of financing will facilitate better risk-sharing between private sponsors and the government, and increase the likelihood that projects with a high economic priority are implemented. The fund will thus have a catalytic role in attracting other sources of commercial and institutional finance, such as from export credit agencies and multi- and bilateral institutions.

Lack of a well-defined policy, legal and regulatory framework, and the inability of public agencies to develop and promote sound transactions for private participation further constrain private investment. The project provides technical assistance to address these constraints and to strengthen the government's ability to develop and market well-structured project opportunities. Technical assistance will also be provided to bolster transaction development and facilitation, capacity building, institutional development, and for conducting feasibility studies. A key feature of this project is the assistance to the Government for establishing transparent, internationally competitive bidding processes for selecting private sector sponsors and awarding concessions.

It is expected that the total investment in private sector projects will be nearly US$900 million. Nearly two-thirds of this funding will be from private sector, commercial, and institutional sources. Besides the US$235 million provided by this credit, additional financing will be forthcoming by the British Department for International Development (US$7.5 million) and the Canadian International Development Agency (US$3.5 million). The credit will be on standard IDA terms with a maturity of 40 years including a 10-year grace period