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The World Bank for OFFICIAL USE ONLY Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 3423 1-BD PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 34.9 MILLION ($US50 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR AN INVESTMENT PROMOTION AND FINANCING FACILITY PROJECT April 4, 2006 Public Disclosure Authorized Finance and Private Sector Development South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective February 28,2006) Currency Unit = Taka Taka67.70 = US$1 US$1.43559 = SDRl FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS ADP Annual Development Plan AKFED/IPS Aga Khan Fund for Economic Development / Industrial Promotion Services BIWTA Bangladesh Inland Water Transport Authority BO1 Board of Investment BOO Build, Own, Operate BOOT Build, Own, Operate, Transfer BOT Build, Operate, Transfer BPDB Bangladesh Power Development Board BTTB Bangladesh Telegraph and Telephone Board CAS Country Assistance Strategy CCEA Cabinet Committee on Economic Affairs CIDA Canadian International Development Agency CPA Chittagong Port Authority CSE Chittagong Stock Exchange DESCO Dhaka Electricity Supply Company DFI Development Finance Institution DOE Department of Environment DSE Dhaka Stock Exchange DSK Dushtha Shasthya Kendra EIA Environmental Impact Assessment EMP Environment Management Plan ERC Energy Regulatory Commission FIDP Financial Institutions Development Project FIL Financial Intermediary Loan GDP Gross Domestic Product GOB Government of Bangladesh IBRD International Bank for Reconstruction and Development ICA Investment Climate Assessment ICB International Competitive Bidding IDA International Development Association IDCOL Infrastructure Development Company Limited IFC International Finance Corporation IIFC Infrastructure Investment Facilitation Center IPFF Investment Promotion and Financing Facility IPO Initial Public Offering IPP Independent Power Producer M&E Monitoring and Evaluation MDGs Millennium Development Goals MFA Multi-Fiber Arrangement MIGA Multilateral Investment Guaranty Agency MoU Memorandum of Understanding MW Mega Watts NBFI Non Bank Financial Institutions NCB Nationalized Commercial Bank NGO Non Governmental Organization NPL Non Performing Loan OECD Organisation for Economic Co-operation and Development p.a. per annum PFI Participating Financial Institution PICOM Private Infrastructure Committee PPA Power Purchase Agreements PPP Public-Private Partnerships PSIDP Private Sector Infrastructure Development Project PSIG Private Sector Infrastructure Guidelines RAP Resettlement Action Plan RAPSS Remote Area Power Supply Systems REB Rural Electrification Board SBD Standard Bidding Documents SDR Special Drawing Rights SEC Securities and Exchange Commission SOE State-Owned Enterprise TEU Twenty-Foot Equivalent Unit UNCTAD United Nations Conference on Trade and Development Vice President: Praful Pate1 Country ManagedDirector: Christine Wallich Sector Director: Barbara Kafka Sector Manager Simon Bell Task Team Leader: Christopher Juan Costaiii FOR OFFICIAL USE ONLY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. PEOPLE'S REPUBLIC OF BANGLADESH INVESTMENT PROMOTION AND FINANCING FACILITY PROJECT APPRAISAL DOCUMENT SOUTH ASIA REGION FINANCE AND PRIVATE SECTOR DEVELOPMENT UNIT Date: April 6, 2006 Team Leader: Christopher Juan Costain Country Director: Christine I.Wallich Sectors: General finance sector (60%);General Sector ManagedDirector: Simon C. Bell energy sector (1O%);Other industry (1O%);General transportation sector (1O%);General water, sanitation and flood protection sector (10%) Themes: Infrastructure services for private sector development (P) Project ID: PO89382 Environmental screening category: Financial Intermediary Assessment Lending Instrument: Financial Intermediary Safeguard screening category: Requires Loan framework For Loans/Credits/Others: Total Bank financing (US$m.): 50.00 Proposed terms: Financing Plan (US$m) Source I Local 1 Foreign 1 Total I BORROWEWRECIPIENT 10.00 0.00 10.00 INTERNATIONAL DEVELOPMENT 0.00 50.00 50.00 ASSOCIATION BORROWING COUNTRY'S FIN. 45.20 0.00 45.20 INTERMEDIARY/IES Total: 55.2 50.00 105.20 Borrower: People's Republic of Bangladesh Responsible Agency: Bangladesh Bank Bangladesh Bank Head Office Motijheel C/A, Dhaka 1000 Tel: 880-2-71201 07 Fax: 880-2-9566212 FY 06 07 08 09 10 11 12 0 0 Annual 0.00 5.00 10.00 10.00 10.00 10.00 5.00 0.00 0.00 Cumulative 0.00 5.00 15.00 25.00 35.00 45.00 50.00 0.00 0.00 Expected effectiveness date: August 3 1 2006 Expected closing date: December 3 1, 20 11 loes the project depart from the CAS in content or other significant respects? [ ]Yes [XINO Re$ PAD A.3 loes the project require any exceptions from Bank policies? Re$ PAD D. 7 3ave these been approved by Bank management? :s approval for any policy exception sought from the Board? [ ]Yes [XINO Ioes the project include any critical risks rated "substantial" or "high"? [XIYes [ ]No Ref: PAD (2.5 Does the project meet the Regional criteria for readiness for implementation? ~~~ rvlvpQLLXJ IbL1 L J iYiv Re$ PAD D. 7 Project development objective Re$ PAD B.2, Teclznical Annex 3 The proposed project will make available partial debt financing through private sector financial intermediaries for eligible, government-endorsed infrastructure projects to be developed by the private sector. Projects developed solely by the private sector but identified by Government to be in the public interests, such as captive power plants, will also be eligible for financing. The project will also seek to assist the Government of Bangladesh in facilitating new infrastructure projects with potential for private sector participation and in developing the capacity ofthe financial sector for the ongoing provision of infrastructure finance. The developmental goals of the proposed project reflect key priorities identified by the World Bank Bangladesh Country Assistance Strategy (CAS), namely (i)to accelerate private-sector led growth; (ii)to support an integrated approach to rural development; and (iii)to strengthen government and build institutions. Project description [one-sentence summary of each component] Re$ PAD B.3.4 Teclznical Annex 4 The proposed project would consist oftwo components, a lending component and a technical assistance component. Lending Instrument: The project will make available long term finance in Taka to qualifying financial intermediaries for onlending to eligible, government-sponsored infrastructure projects to be developed by the private sector. Technical Assistance Component: Technical Assistance activities will include: (a) Capacity building for Bangladesh Bank for the development of infrastructure finance capacity amongst the local market participants and within Bangladesh Bank for the oversight ofthis sector (b) support for the promotion ofprivate financing ofinfrastructure within the government framework and (c) technical assistance to project promoters in the execution of environmental impact assessments. Which safeguard policies are triggered, if any? Ref: PAD 0.6, Technical Annex 10 Environmental Assessment (OP/BP/GP 4.0 1) Significant, non-standard conditions, if any, for: Re$ PAD C. 7 Board presentation: None Loadcredit effectiveness: None Covenants applicable to project implementation: 1. For the purposes of the Project, the GOB shall, no later than the last day ofeach Fiscal Year, make available on an annual basis, from its own resources, an amount equivalent to 20 percent of the amount disbursed by IDA for each such Fiscal Year. 2. Participating FIs will submit annual audit reports to BB and IDA within four months of the end ofthe year. BANGLADESH Bangladesh Investment Promotion and Financing Facility CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues................................................................................................. 1 2 . Rationale for Bank involvement...................................................................................... 6 3. Higher-level objectives to which the project contributes .............................................. 8 B. PROJECT DESCRIPTION................................................................................................. 9 1. Lending instrument .......................................................................................................... 9 2 . [IfApplicable] Program objective and phases ............................................................... 9 3. Project development objective and key indicators ........................................................ 9 4 . Project components ......................................................................................................... 10 5 . Lessons learned and reflected in the project design .................................................... 14 6 . Alternatives considered and reasons for rejection....................................................... 15 C. IMPLEMENTATION ........................................................................................................ 16 1. Partnership
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