Concept Paper

Project Number: 53260-001 November 2019

Proposed Loans and Technical Assistance Grant Bangladesh: South Asia Subregional Economic Cooperation Integrated Trade Facilitation Sector Development Program

This document is being disclosed to the public in accordance with ADB's Access to Information Policy.

CURRENCY EQUIVALENTS (as of 12 November 2019)

Currency unit – taka (Tk) Tk1.00 = $0.11782 $1.00 = Tk84.875

ABBREVIATIONS

ADB – Asian Development Bank BCP – border-crossing point BLPA – Bangladesh Land Port Authority CCL – central customs laboratory GDP – gross domestic product km – kilometer LCS – land customs station LGED – Local Government Engineering Department NBR – National Board of Revenue PBL – policy-based loan RHD – Roads and Highways Department RTC – regional training center SASEC – South Asia Subregional Economic Cooperation TA – technical assistance TFA – Trade Facilitation Agreement WTO – World Trade Organization

GLOSSARY

Land customs – Refers to customs offices and laboratory facilities administered by the station National Board of Revenue at border-crossing points.

Land port – Refers to cargo transshipment, storage, and weigh station facilities administered by the Bangladesh Land Port Authority at border-crossing points.

Trade – Contains provisions for expediting the movement, release, and clearance of Facilitation goods, including goods in transit. It also sets out measures for effective Agreement cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues, including provisions for technical assistance and capacity building. It entered into force on 22 February 2017 following its ratification by two-thirds of the World Trade Organization membership.

Revised Kyoto – Refers to the international convention on the simplification and Convention harmonization of customs procedures. The Revised Kyoto Convention promotes trade facilitation and effective controls through legal provisions that detail the application of simple yet efficient procedures. It also contains new and obligatory rules for its application that all contracting parties must accept without reservation.

NOTES

(i) The fiscal year (FY) of the Government of Bangladesh and its agencies ends on 30 June. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2019 ended on 30 June 2019. (ii) In this report, "$" refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Hun Kim, South Asia Department (SARD) Director Ronald Antonio Butiong, Regional Cooperation and Operations Coordination Division, SARD

Team leaders Masato Nakane, Senior Economist, SARD Yasushi Tanaka, Principal Transport Specialist, SARD Team members Ana Maria Benoza, Senior Operations Assistant, SARD Maria Iris Bombay, Associate Safeguards Officer (Environment), SARD Amrita Kumar Das, Associate Project Officer (Transport), SARD Soon Chan Hong, Senior Economist, SARD Sajid Raza Zaffar Khan, Financial Management Specialist, SARD Utsav Kumar, Senior Country Economist, SARD Vergel Medina, Senior Social Development Specialist, SARD Agnes Navera, Senior Operations Officer, SARD Aileen Pangilinan, Senior Regional Cooperation Officer, SARD Anita Reyes, Associate Programs Officer, SARD Satomi Sakaguchi, Transport Specialist, SARD Nasheeba Selim, Senior Social Development Officer (Gender), SARD Asghar Ali Syed, Principal Counsel, Office of the General Counsel Peer reviewers Kuancheng Huang, Senior Transport Specialist, Sustainable Development and Climate Change Department (SDCC) Yuebin Zhang, Principal Regional Cooperation Specialist, SDCC

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

PROGRAM AT A GLANCE PROBLEM TREE I. THE PROGRAM 1 A. Rationale 1 B. Proposed Solutions 2 C. Proposed Financing Plans and Modality 3 D. Implementation Arrangements 4 II. ATTACHED TECHNICAL ASSISTANCE 4 III. PROGRAM PREPARATION AND READINESS 5 IV. DELIBERATIVE AND DECISION-MAKING ITEMS 5 A. Risk Categorization 5 B. Program Procurement Classification 5 C. Scope of Due Diligence 6 D. Processing Schedule and Sector Group’s Participation 6 E. Key Processing Issues and Mitigation Measures 6

APPENDIXES 1. Preliminary Design and Monitoring Framework 7 2. Program Procurement Classification 10 3. List of Linked Documents 11

Project Classification Information Status: Complete

PROGRAM AT A GLANCE 1. Basic Data Project Number: 53260-001 Project Name South Asia Subregional Economic Cooperation Department/Division SARD/SARC Integrated Trade Facilitation Sector Development Program Country Bangladesh Executing Agency Bangladesh Land Port Borrower Government of Bangladesh Authority, Bangladesh Railway, Local Government Engineering Department, National Board of Revenue, Roads and Highways Department Country Economic https://www.adb.org/Documents/LinkedDocs/?id Indicators =53260-001-CEI Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/?id =53260-001-PortAtaGlance 2. Sector Subsector(s) ADB Financing ($ million) Industry and trade Industry and trade sector development 150.00 Total 150.00

3. Operational Priorities Climate Change Information Accelerating progress in gender equality Climate Change impact on Medium Strengthening governance and institutional capacity the Project Fostering regional cooperation and integration Sustainable Development Goals Gender Equity and Mainstreaming SDG 1.a Some gender elements (SGE) SDG 5.c SDG 9.4 Poverty Targeting General Intervention on Poverty 4. Risk Categorization: Complex . 5. Safeguard Categorization Environment: B Involuntary Resettlement: B Indigenous Peoples: C . 6. Financing Modality and Sources Amount ($ million) ADB 150.00 Sovereign SDP - Program (Concessional Loan): Ordinary capital resources 50.00 Sovereign SDP - Project (Regular Loan): Ordinary capital resources 100.00 Cofinancing 0.00 None 0.00 Counterpart 20.00 Government 20.00 Total 170.00 Note: An attached technical assistance will be financed on a grant basis by the Technical Assistance Special Fund in the amount of $1,000,000. Currency of ADB Financing: US Dollar

Source: Asian Development Bank This document must only be generated in eOps. 21102019095358192192 Generated Date: 13-Nov-2019 14:51:24 PM

PROBLEM TREE

I. THE PROGRAM

A. Rationale

1. The proposed South Asia Subregional Economic Cooperation (SASEC) Integrated Trade Facilitation Sector Development Program of the Asian Development Bank (ADB) will help improve Bangladesh’s border infrastructure and trade facilitation environment, thereby contributing to the national goals of promoting a favorable industrialization and trade policy regime.1 The program will support Bangladesh’s implementation of the World Trade Organization (WTO) Trade Facilitation Agreement (TFA), and related best practices in transport and trade facilitation. It will also support the Government of Bangladesh in establishing and improving border infrastructure as public goods, which will reduce the cost and time of cross-border transactions and the handling of international transit cargos. The program is aligned with (i) the government’s ongoing customs reform and modernization initiatives under the Customs Strategic Action Plan 2019–2022; and (ii) the priority objective of fostering regional cooperation and integration under ADB’s Strategy 2030, SASEC Operational Plan, 2016–2025, and country partnership strategy for Bangladesh.2

2. Initiatives on trade facilitation. The performance of Bangladesh in various global indices reflects improvements in its trade facilitation environment, but it also indicates ample scope for further enhancement. To promote and facilitate exports, and improve the quality of exports, the government formulated the Export Policy 2015–2018, and signed 29 bilateral Trade and Investment Cooperation agreements. The impact of the export policy and bilateral agreements, however, has yet to be realized because of slow, costly, unpredictable, and insecure cross-border flow of trade. This is the result of inadequate infrastructure, insufficient use of advanced technology in border operations, a shortage of human resources, and delays in introducing new and complementary trade facilitation reforms, including the implementation of the WTO TFA. To comply with the TFA and improve the environment for international trade, the government has identified 13 areas that need external assistance.3

3. Performance in cross-border trade. Bangladesh ranks 168th out of 190 countries in the World Bank’s Doing Business survey, which is partly the result of significant inefficiencies in border operations.4 Customs and other border clearance operations are inefficient and costly because of poor facilities at border-crossing points, excessive physical inspection of cargos, and time-consuming documentation processes. Modernizing customs and improving trade and transport infrastructure are imperative in the current competitive trade environment. In the World Bank’s logistics performance index, weakness is apparent in many areas of Bangladesh’s global performance, notably in its customs operations and the quality of infrastructure. Its overall logistics performance index score in 2018 was 2.58 out of 5, and its country ranking is 100th out of 160 countries. Insufficient public investment and lack of coordination by government agencies have hindered the development of border infrastructure and clearance procedures to respond to growing trade and demand.

1 The project is included in ADB. 2019 Country Operations Business Plan: Bangladesh, 2020–2022. Manila. The South Asia Department confirmed that such financial assistance can be accommodated for the 2020 resource envelope. Transaction technical assistance (TA) will be provided for program preparation; the TA report is accessible from the list of linked documents in Appendix 3. An initial draft of the design and monitoring framework is in Appendix 1. 2 Government of Bangladesh. 2019. Customs Strategic Action Plan 2019–2022. Dhaka; ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila; ADB. 2016. South Asia Subregional Economic Cooperation Operational Plan 2016–2025. Manila; and ADB. 2016. Bangladesh: Country Partnership Strategy, 2016–2020. Manila. 3 World Trade Organization. 2019. Notification of Category Commitments Under the Agreement on Trade Facilitation. Geneva. 4 World Bank Group. 2019. Doing Business 2020. Washington, DC.

2

4. Legal and regulatory framework. The WTO TFA provides a regulatory framework for the release and clearance of goods, and freedom of international transit, but Bangladesh has not yet formulated the necessary regulations for the pre-arrival processing of customs documents, and for handling and clearing perishable goods. This increases the cost and time of border transactions, hampers TFA compliance, and contributes to a high spoilage ratio. India and Bangladesh have agreed on international transit cargo operations, but the protocol places restrictions on vehicles and vessels. The policy reforms proposed under the program will help ensure that Bangladesh’s trade processes comply with the TFA and facilitate international freight transit. This will allow for cargoes imported at Chattogram Port to be transported in Bangladesh and exported to the northeastern states of India; and cargoes moved between the northeastern states and the other states of India to be transported through Bangladesh.

5. Border infrastructure. Bangladesh has 23 declared land ports at border-crossing points (BCPs) with India and Myanmar. Most existing customs offices, and the cargo transshipment and storage facilities are underdeveloped, and their capacity is insufficient to handle international transit cargoes. The last 2–5 kilometers (km) of roads leading to BCPs are generally narrow and their pavement conditions are poor. Also, India and Nepal need to trade goods using the railways in Bangladesh. Bangladesh needs to modernize its land ports and build up-to-date land customs stations (LCSs) and improve the road conditions and railway cargo facilities at the BCPs. The National Board of Revenue (NBR) plans to update the customs facilities and equipment at Benapole, Burimari, Banglabandha, and Hili with funding from the World Bank and the Government of Bangladesh, while the Bangladesh Land Port Authority (BLPA) has begun to improve some of the land ports. ADB financed the development of land ports at Benapole and* Burimari under the SASEC Road Connectivity Project,5 and the World Bank is financing similar interventions at Benapole, Bhomra, Sheola, and Ramgarh under its Bangladesh Regional Connectivity Project 1. The land ports at Banglabandha, Bibrbazar, Birol, Teknaf, and Sonamasjid were developed and operate under public–private partnership arrangements. However, the respective agencies have been developing border-crossing facilities without coordination. No integrated border-crossing facility exists at the 23 declared land ports.

6. Previous ADB assistance. ADB has been supporting trade facilitation in Bangladesh through policy-based loans (PBL) and related capacity building of NBR, the Ministry of Commerce, and the Ministry of Shipping.6 The previous PBL for trade facilitation had three objectives: (i) modern and effective customs administration and/or management; (ii) streamlined and transparent trade processes and procedures; and (iii) improved services and information for private sector traders and investors, including women entrepreneurs. The project completion report recommended a follow-up program to deepen the reforms focusing on compliance with WTO TFA which was formulated after the previous program. 7

B. Proposed Solutions

7. Proposed program. The proposed program will help speed up customs clearance, improve customs compliance, focus essential resources on higher-risk cargo, strengthen

5 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Administration of Loan and Technical Assistance Grant to the People’s Republic of Bangladesh for the South Asia Subregional Economic Cooperation Road Connectivity Project. Manila. 6 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Loans and Grants for the South Asia Subregional Economic Cooperation Trade Facilitation Program. Manila; and ADB. 2013. Technical Assistance to the People’s Republic of Bangladesh for Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program. Manila. 7 ADB. 2017. Completion Report: Bangladesh, Bhutan, Nepal: South Asia Subregional Economic Cooperation Trade Facilitation Program. Manila.

3

infrastructure, and lead to better administration of customs laws and regulations. The PBL includes (i) improving the legal and regulatory framework by enhancing freedom of transit, clearance of perishable goods, and pre-arrival document processing; (ii) stepping up cargo clearance by introducing systems-based post-clearance audits and new technology; (iii) equipping the Dhaka customs laboratory with functional structure and the regional training center (RTC) with trade facilitation training modules. The project loan includes boosting trade and cargo infrastructure by (i) building modern LCSs, expanding the capacity of land ports, and improving the last 2–5 km of roads leading to BCPS as well as the facilities to handle railway cargo at selected BCPs (Appendix 1); and (ii) constructing a central customs laboratory (CCL) and an RTC in Dhaka. An electronic cargo tracking system will be introduced at the LCSs to register and monitor international transit cargoes.

8. Impact and outcome. These solutions will result in the following outcome: faster, cheaper, more predictable, and more secure cross-border trade in Bangladesh achieved. The program will be aligned with the following impact: the region’s trade and commerce expanded.8

9. ADB’s value addition. In Bangladesh, the key jurisdictions of government agencies in border infrastructure development and operations are: (i) customs—the NBR under the Ministry of Finance; (ii) trade and transshipments—the BLPA under the Ministry of Shipping; (iii) road transport—the Roads and Highways Department (RHD) under the Ministry of Road Transport and Bridges, and the Local Government Engineering Department (LGED) under the Ministry of Local Government, Rural Development and Cooperatives; and (iv) rail transport—Bangladesh Railway under the Ministry of Railways. The proposed program will deepen ADB’s engagement in the trade sector in Bangladesh and provide a platform for various government agencies to collaborate in facilitating trade with neighboring countries within the SASEC framework.

C. Proposed Financing Plans and Modality

10. A sector development program is proposed as the financial modality because the industry and trade sector requires both an investment part and a policy reform part.9 The existing customs offices at the BCPs are not very functional. Unstable electricity supply and internet connection often suspend their operations, and they lack a customs laboratory to inspect goods. Also, the transport infrastructure is underdeveloped (para. 5). Even if Bangladesh improves its customs legal framework and aligns it with international standards, the cross-border flow of trade will remain inefficient because the existing infrastructure cannot handle and accommodate the expected increase in traded cargo, including international transit cargo. Investments in trade and transport infrastructure will encourage the NBR to accelerate policy reform and the institutional integration of government agencies involved in trade. On the other hand, improving the trade and transport infrastructure without issuing the government regulations to enable the free international transit of goods and the pre-arrival processing of customs documents will not improve the cross- border flow of goods. Therefore, policy reform and investment in trade and transport infrastructure at BCPs should be implemented in a coordinated way. The financing modality consists of (i) a PBL of $50 million from ADB’s concessional ordinary capital resources to promote reforms in line with the WTO TFA, and (ii) a project loan of $100 million from its regular ordinary capital resources to improve border infrastructure at selected BCPs and develop the Dhaka CCL and RTC.

11. The tentative financing plan is in Table 1. Bangladesh has substantial development financing needs, and the government set the target of development expenditure at 7% of gross

8 ADB. 2017. SASEC Vision: Powering Asia in the 21st Century. Manila. 9 Bangladesh has not experienced a sector development program in its industry and trade, but the modality was used in education, energy, and water.

4

domestic product (GDP). Its fiscal deficit averaged 3.6% of GDP in FY2009–FY2017, and about 25% of that deficit was financed externally. In FY2018, the government spent about $17 billion on development activities, and the fiscal deficit was 4.7% of GDP or about $13 billion. The amount of development expenditure could increase to $35 billion in FY2024, and the fiscal deficit is projected to be about 4.7% of GDP from FY2019 to FY2024.10 The PBL loan of $50.0 million will be released in two tranches—$25.0 million upon loan effectiveness and $25.0 million about 24 months after loan effectiveness, once the government has complied with the policy conditions of each tranche.

12. The estimated costs of climate mitigation and adaptation are unknown at this stage. The total costs, including ADB’s share, will be determined during the preparation of the investment component of the program. Table 1: Indicative Financing Plan Amount Share of Total Source ($ million) (%) Asian Development Bank 150.0 88.2 Ordinary capital resources (concessional, policy-based loan) 50.0 29.4 Ordinary capital resources (regular, project loan) 100.0 58.8 Government 20.0 11.8 Total 170.0 100.0 Source: Asian Development Bank.

D. Implementation Arrangements

Table 2: Indicative Implementation Arrangements Aspects Arrangements Indicative implementation period November 2020–June 2024 Indicative completion date 31 December 2024 Management (i) Executing agencies Bangladesh Land Port Authority, Bangladesh Railway, Local Government Engineering Department, National Board of Revenue, Roads and Highways Department (ii) Key implementing agencies Program implementation unit in each of the executing agencies Source: Asian Development Bank.

13. For the PBL, the executing agency will be the NBR. For the project loan, the executing agencies will be the NBR (customs component), BLPA (land port component), RHD and/or LGED (road component), and Bangladesh Railway (railway component). A program management unit to be formed in each executing agency will implement day-to-day program activities. A program steering committee comprising the chairman of the NBR (as chair) and the directors of the program management units will oversee the entire program.

II. ATTACHED TECHNICAL ASSISTANCE

14. Transaction technical assistance (TA) of $1.0 million to be financed from ADB’s Technical Assistance Special Fund is attached to the program. The TA will support the NBR in implementing the policy actions under the policy reform component of the program, and strengthen its institutional capacity. It will also support the development of trade facilitation training modules for the regional training center, and preparation of an organogram for the new CCL to be constructed under the investment component.

10 International Monetary Fund. 2019. Bangladesh: 2019 Article IV Consultation – Press Release; Staff Report; and Statement by the Executive Director for Bangladesh. Washington, DC.

5

III. PROGRAM PREPARATION AND READINESS

15. Program preparatory TA of $1.5 million to be financed from the Technical Assistance Special Fund will be provided to help the government (i) prepare the investment part of the proposed program, and (ii) coordinate the development and modernization of the border facilities at the selected BCPs with the Government of India.11 The possibility of private sector financing for the land port component and the use of design–build contracts for the customs component will be examined during program preparation. The use of the Transport Connectivity Improvement Preparatory Facility12 will be considered for the preparation of detailed engineering designs.

16. To ensure timely implementation of the required policy reforms, NBR has assigned a core group of its senior staff in different areas with specific responsibilities and timeline. For the investment part, the TA team will prepare the basic designs, and the safeguard and bidding documents for the development or modernization of the LCSs, land ports, roads, and railway cargo facilities at the selected BCPs, and for the Dhaka CCL and RTC. The LCSs and land ports at the selected BCPs will be implemented on existing government properties, and land acquisition may not be required. The land for the Dhaka CCL and RTC, to be purchased from the Capital Development Authority (RAJUK) or a land developer, will be selected during program processing. Advanced contracting and retroactive financing will be used to recruit construction supervision consultants.

IV. DELIBERATIVE AND DECISION-MAKING ITEMS

A. Risk Categorization

17. The program is categorized as complex because the aggregate loan amount exceeds $50 million. All executing agencies have sound capacity for implementing externally funded projects. The safeguard categorization is B for environment,13 B for involuntary resettlement, and C for indigenous peoples. The climate risk is medium. All other criteria for complex projects do not apply.

B. Program Procurement Classification

18. The program procurement classification is A (Appendix 2). The NBR will carry out the procurement for works to improve the LCSs, the BLPA will do so for the land ports, the RHD and/or LGED for the roads, and Bangladesh Railway for the facilities to handle railway cargo. The NBR will also handle the procurement for building the Dhaka CCL and RTC. The procurement for the LCSs will involve information and communication technology products, for which bid preparation and evaluation are complex. Design–build contracts will be considered for improving the LCSs and land ports, and building the Dhaka CCL and RTC. While Bangladesh Railway, and the BLPA, LGED, and RHD have procurement experience from earlier ADB-funded projects, the

11 Technical Assistance Report: Preparing the SASEC Integrated Trade Facilitation Sector Development Program (accessible from the list of linked documents in Appendix 3). 12 The project preparatory facility amounting to $42.0 million from concessional ordinary capital resources lending is being processed as part of the 2019 firm pipeline under the country operations business plan, 2020–2022. 13 The investment works include (i) building new customs offices and laboratories; (ii) building new transshipment facilities, warehouses, and weigh stations at land ports; (iii) widening existing roads; and (iv) improving the facilities to handle railway cargo alongside the existing railway lines. The works are unlikely to have significant adverse environmental impacts that are irreversible, diverse, or unprecedented. The environmental impacts that may be caused by civil works are site-specific.

6

NBR has no such experience and will require support from the procurement specialists of the Bangladesh Resident Mission.

C. Scope of Due Diligence

19. Due diligence as outlined in Table 3 will be conducted by ADB, the consultants engaged under the ongoing regional knowledge support TA,14 and consultants to be engaged under the proposed transaction TA.

Table 3: Scope of Due Diligence Due Diligence Output To be undertaken by Development coordination ADB Economic analysis ADB and TRTA consultants Financial management assessment, financial analysis, and design of fund flow ADB and disbursement mechanisms Gender analysis, collection of baseline data, and gender action plan ADB and TRTA consultants Safeguard screening and categorization results ADB and KSTA consultants Initial poverty and social analysis ADB and KSTA consultants Program administration manual ADB Risk assessment and management plan ADB Safeguard documents on environment and involuntary resettlement TRTA consultants Sector assessment ADB and KSTA consultants Summary poverty reduction and social strategy ADB and TRTA consultants TA attached to the program ADB ADB = Asian Development Bank, KSTA = knowledge and support technical assistance, TRTA = transaction technical assistance. Source: Asian Development Bank estimates.

D. Processing Schedule and Sector Group’s Participation

Table 4: Processing Schedule by Milestone Milestones Expected Completion Date 1. Concept clearance November 2019 2. Loan fact-finding mission May 2020 3. Management review meeting July 2020 4. Loan negotiations August 2020 5. Board consideration October 2020 6. Loan signing November 2020 7. Loan effectiveness / policy-based loan first-tranche release January 2021 Source: Asian Development Bank.

E. Key Processing Issues and Mitigation Measures

Table 5: Issues, Approaches, and Mitigation Measures Key Processing Issues Proposed Approaches and/or Mitigation Measures 1. Sustainability of the policy reform ADB supports capacity building for the government through the momentum in the government ongoing knowledge support TA. 2. Preparation of development project ADB assists and coordinates 4–5 government agencies in proforma involving 4–5 government preparing development project proforma under the proposed agencies transaction TA. ADB = Asian Development Bank, TA = technical assistance. Source: Asian Development Bank.

14 ADB. 2016. Regional Technical Assistance for Project Development Support for the South Asia Subregional Economic Cooperation Operational Plan, 2016–2025. Manila (TA 9231-REG).

Appendix 1 7

PRELIMINARY DESIGN AND MONITORING FRAMEWORK

Impacts the Program is Aligned with Region’s trade and commerce expanded (SASEC Vision: Powering Asia in the 21st Century)a Data Sources and Performance Indicators with Reporting Results Chain Targets and Baselines Mechanisms Risks Outcome By 2025: Faster, cheaper, more a. Overall score of 1.0 on OECD OECD TFIs Upgrade of SASEC predictable, and more TFIs attained b transport corridors secure cross-border (2018 baseline: 0.78) involving Bangladesh is trade in Bangladesh delayed. achieved b. Number of measures classified WTO report as Category C of WTO TFA Finalization of through- reduced to 6 c transport arrangements (2019 baseline: 13 measures) (BBIN MVA) is delayed.

c. International transit cargo Customs report operations increased to at least (NBR) xx (2019 baseline: 0)

Outputs Indicative Policy Actions

1. Customs legal By 2022: framework improved and 1a. SROs for freedom of transit 1a. Customs report Completion of customs aligned with international approved by the Ministry of Law (NBR) reforms is hampered by standards and gazetted with the effectivity personnel changes and date vested interests. (2019 baseline: n.a.) (TI 7.1.2) Breakdown of 1b. SROs related to perishable 1b. Customs report coordination between goods approved by the Ministry (NBR) multiple executing and of Law and gazetted with the implementing agencies effectivity date delays program (2019 baseline: n.a.) (TI 7.1.2) completion.

1c. Draft SROs for pre-arrival 1c. Customs report processing approved by the (NBR) Ministry of Law and gazetted with the effectivity date (2019 baseline: n.a.) (TI 7.1.2) 2. Cargo clearance By 2022: processes made 2a. Action plans with timeline, key 2a. Customs report efficient, predictable, performance indicators, and key (NBR) transparent, and recommendations implemented, automated and the impact measured by additional time release study (2019 baseline: n.a.) (TI 7.1.2)

2b. Policy on risk management 2b. Manual on rules approach for conducting and procedures systems-based PCA, and (NBR) findings and recommendations from PCA reflected in the risk management system approved by the NBR Customs Member and implemented (2019 baseline: n.a.) (TI 7.1.2)

8 Appendix 1

2c. Non-intrusive inspections, e- 2c. Customs report payment, and electronic cargo (NBR) tracking system established along the relevant corridors leading to the land border posts under this program (2019 baseline: n.a.) (7.1.1) 3. Institutional capacity By 2022: strengthened 3a. At least 5 training modules on 3a. TRTA report promoting trade facilitation compliant with international standards, including gender mainstreaming, developed for the regional training center (2019 baseline: n.a.) (TI 7.1.2)

3b. An organogram for the new 3b. TRTA report Dhaka central customs laboratory, with provision for a pool of technical experts to operate the laboratory approved (2019 baseline: n.a.) (TI 7.1.2) 4. Trade and transport By 2024: infrastructure improved 4a. Land customs stations at 4a. Quarterly Extreme weather 9 BCPs modernizedd progress reports of conditions delay (2019 baseline: 0 station) (TI CSC (NBR) completion of planned 7.1.1) infrastructure.

4b. Capacity of land ports at 3 BCPs 4b. Quarterly expandede progress reports of (2019 baseline: 0) (TI 7.1.1) CSC (BLPA)

4c. Conditions of the last 2–5 km of 4c. Quarterly roads leading to 8 BCPs progress reports of improvedf CSC (RHD) (2019 baseline: 0 km) (TI 7.1.1)

4d. Railway cargo handling facilities 4d. Quarterly at 3 BCPs improvedg progress reports of (2019 baseline: 0 facility) (TI CSC (BR) 7.1.1)

4e. Dhaka central customs 4e. Quarterly laboratory and regional training progress reports of center established CSC (NBR) (2019 baseline: n.a.) (TI 7.1.1) Key Activities with Milestones 4. Trade and transport infrastructure improved 4.1 Engage construction supervision consultants by Q2 2021 4.2 Complete bidding process for civil works (customs component) by Q4 2021 4.3 Complete bidding process for civil works (land ports component) by Q3 2021 4.4 Complete bidding process for civil works (road component) by Q3 2021 4.5 Complete bidding process for civil works (railway component) by Q3 2021 4.6 Complete all civil works by Q4 2024

Program Management Activities Program implementation units established by 2020 Program review missions conducted. Program progress reports submitted quarterly Program completion report submitted within 6 months of loan closure

Appendix 1 9

Inputs ADB: $150 million (policy-based loan of $50 million from concessional OCR lending, and project loan of $100 million from regular OCR); and $1.0 million (technical assistance grant) Government: $20 million Assumptions for Partner Financing None. ADB = Asian Development Bank; BBIN MVA = Bangladesh–Bhutan–India–Nepal Motor Vehicle Agreement; BCP = border-crossing point; BLPA = Bangladesh Land Port Authority; BR = Bangladesh Railway; CSC = construction supervision consultant; km = kilometer; n.a. = not applicable; NBR = National Board of Revenue; OCR = ordinary capital resources; OECD = Organisation for Economic Co-operation and Development; PCA = post-clearance audit; Q = quarter; RHD = Roads and Highways Department; SASEC = South Asia Subregional Economic Cooperation; SROs = statutory rules and orders; TFA = Trade Facilitation Agreement, TFI = Trade Facilitation Indicator; TI = tracking indicator, TRTA = transaction technical assistance; WTO = World Trade Organization. a ADB. 2017. SASEC Vision: Powering Asia in the 21st Century. Manila b The TFIs are 11 indicators covering the full spectrum of border procedures. Each indicator is composed of a set of variables, measuring the extent to which a country has introduced and implemented trade facilitation measures in absolute terms as well as performance relative to other countries. The TFIs take values from 0 to 2, where “2” designates the best possible performance. The TFIs mirror the substantive provisions of the TFA. http://www.oecd.org/trade/topics/trade-facilitation/ (accessed on 11 November 2019). c The TFA contains provisions for expediting the movement, release, and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. A WTO member country must categorize each provision: category A— provisions that the member will implement by the time the TFA enters into force; category B—provisions that the member will implement after a transitional period following the entry into force of the TFA; and category C—provisions that the member will implement on a date after a transitional period following the entry into force of the TFA and requiring assistance and support for capacity building. The TFA also contains provisions for technical assistance and capacity building in this area. https://www.wto.org/english/tratop_e/tradfa_e/tradfatheagreement_e.htm (accessed on 11 November 2019). d BCPs include Darshana, Sonamasjid, Birol, Sonahat, Tamabil, Sheola, Akhaura, Bibirbazar, and Teknaf. Modernization involves, among other works, construction of a new customs laboratory, gender-responsive customs offices, border official’s dormitory, and rest facilities with provisions for electricity and information and communication technology. e Target BCPs include Darshana, Tamabil, and Akhaura. BCP expansion involves construction of transshipment yard, new warehouses, weigh stations, parking spaces, among other facilities. f Target BCPs include Darshana, Sonamasjid, Sonahat, Tamabil, Sheola, Akhaura, Bibirbazar, and Teknaf. Expected improvement includes road widening and installation of new pavement, drainage, and road safety facilities. g Target BCPs include Darshana, Sonamasjid, and Birol. Expected improvement includes construction of new spur railway tracks, and installation of container loading and unloading equipment, among other facilities. Contribution to the ADB Results Framework TI 7.1.1: Transport and ICT connectivity assets established or improved (number). Target: 27 TI 7.1.2: Measures to improve the efficiency and/or productivity of cross-border connectivity supported in implementation (number). Target: 7 Source: Asian Development Bank.

10 Appendix 2

PROGRAM PROCUREMENT CLASSIFICATION

Characteristic Assessor’s Rating: Is the procurement environment risk for this program assessed to ☐Yes ☒No be high based on the country and sector and/or agency risk Risk rating for transport sector assessments? is moderate. Risk assessment was not made for industry and trade sector. Are multiple (typically more than three) and/or diverse executing ☒Yes ☐No ☐Unknown agencies and/or implementing agencies envisaged during program BLPA, BR, NBR, and RHD/ implementation? Do they lack prior experience in implementation LGED will be the executing under an ADB-financed project? agencies. While BLPA, BR, and RHD/LGED have prior experience under ADB-funded projects, NBR does not. Are multiple contract packages and/or complex and high-value ☐Yes ☒No ☐Unknown contracts (compared with recent externally financed projects in the DMC expected? Does the project plan to use innovative contracts (e.g., public– ☐Yes ☒No ☐Unknown private partnership, performance-based, design and build, operation and maintenance)? Are contracts distributed in more than three geographical locations? ☒Yes ☐No ☐Unknown The contracts will be implemented in eight locations. Are there significant ongoing contractual and/or procurement issues ☒Yes ☐No ☐Unknown under ADB- (or other externally) financed projects? Has Cost overruns have occurred misprocurement been declared in the DMC? under ADB-funded projects. Does the DMC have prolonged procurement lead times, experience ☒Yes ☐No ☐Unknown implementation delays, or otherwise consistently fail to meet RHD has experienced delay in procurement time frames? bid evaluation. Do executing and/or implementing agencies lack capacity to ☒Yes ☐No ☐Unknown manage new and ongoing procurement? Have executing and/or NBR has no experience in implementing agencies requested ADB procurement support under procurement under ADB-funded previous projects? projects, and asked ADB for procurement support. Regional department’s overall recommendation (Yasushi Tanaka, Principal Transport Specialist, Transport and Communications Division, South Asia Department) Overall program categorization recommended ☒ Category A ☐ Category B Procurement required for the investment part of the sector development program is for small works to build customs buildings and facilities and improve the pavement of short road sections. Procurement risk is low. However, NBR will require additional procurement support from procurement specialists of the Bangladesh Resident Mission. BLPA, BR, and RHD/LGED are considered to have adequate resources and institutional capacity to deal with such low-risk and simple procurement. Procurement, Portfolio, and Financial Management Department’s recommendation (Hiroyuki Maruyama, Principal Procurement Specialist, Procurement Division 1, Procurement, Portfolio and Financial Management Department) Program procurement classification A is duly noted. Procurement, Portfolio and Financial Management Department staff outposted to the resident mission will assist the program. ADB = Asian Development Bank, BLPA = Bangladesh Land Port Authority, BR = Bangladesh Railway, DMC = developing member country, LGED = Local Government Engineering Department, NBR = National Board of Revenue, RHD = Roads and Highways Department. Source: Asian Development Bank.

Appendix 3 11

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/LinkedDocs/?id=53260-001-ConceptPaper

1. Initial Poverty and Social Analysis

2. Technical Assistance for Program Preparation