At project appraisal in 2008, public investments in infrastructure in Bangladesh were found stagnant. Inadequate energy supply, congested ports, and underdeveloped transport imposed a major and growing drag on economic performance. To help address the situation, the Asian Development Bank (ADB) approved in October 2008 a $165 million loan for the Public–Private Infrastructure Development Facility.  The facility’s envisaged impact was improved infrastructure through increased private sector participation. It was expected to help address infrastructure deficiencies, as outcome, by providing long-term debt financing and catalyzing private sector participation.  

At appraisal, the facility had three components: (i) component A was to finance large infrastructure subprojects (costs higher than $30 million); (ii) component B was to focus on small- and medium-sized infrastructure subprojects (costs lower than $30 million), especially in the energy sector; and (iii) component C was to support renewable energy systems.  Two grants complemented the facility: $1.3 million from ADB’s Climate Change Fund and $2 million from the ADB-administered Asian Clean Energy Fund.  The grants were to support renewable energy subprojects and provide buy-down grants to reduce the high cost of solar home systems (SHS). The Islamic Development Fund also provided $18 million independently for the SHS program. 

The Infrastructure Development Company Limited (IDCOL), the financial intermediary for the facility, disbursed the allocated $82 million for component A to 3 new, large power subprojects, each costing more than $30 million. Under component B, which turned out to be difficult to implement because of the lack of small and medium subprojects willing to comply with IDCOL’s stringent environmental and social safeguards framework (ESSF) requirements, $5 million was disbursed to 2 telecom subprojects. Due to slow fund utilization, $45 million from component B was reallocated to component C which boosted the penetration of electricity to remote off-grid populations, enabling the facility to finance 349,199 SHS in remote off-grid areas, generating 16.3 megawatts (MW) power and providing electricity access to an estimated 1.5 million people.  Grants provided by the facility subsidized an additional 81,315 SHS and supported 3 renewable energy subprojects (biodigesters, solar mini-grid, and solar irrigation pumps) in remote areas. The facility-financed subprojects are spread all over the country.

Of the 5 infrastructure subprojects financed under components A and B, only 1 telecom subproject has been facing operational problems because of technological obsolescence. The subprojects financed under component C are in operation without any technical difficulties as IDCOL implemented a quality assurance system. However, some partner organizations have encountered collection problems due to the expansion of the national grid, commercialization of the SHS market, and a government initiative to provide free SHS under its social safety net program. There has also been a concentration risk in the facility’s SHS component as 84% of the SHS funds were disbursed through only 2 partner organizations.

Full disbursement of the subloan allocations meant that the facility achieved its overall targets in leveraging increased private sector infrastructure investment through commercial financing, with some adjustments under components B and C.  However, this achievement could not be substantially attributed to its output deliveries, as at the output level the project achieved only 3 of its 9 targets. Some of its output indicators were overambitious and not well aligned with outcome and impact indicators.  Of the total 6 outcome indicators, the only one it was not able to achieve was also not well defined.

Nevertheless, as a pioneering project, the facility most remarkably fostered national awareness of the need to establish an enabling regulatory and institutional framework in public-private partnership (PPP), which culminated in the enactment of the Bangladesh Public-Private Partnership Act, 2015 and the operationalization of the PPP Authority in 2010. Apart from extending finance to infrastructure subprojects, the facility also significantly helped develop the capacity IDCOL in implementing the ESSF, enabling it to do a better evaluation of infrastructure subprojects from the environmental and social perspectives.  Most importantly, the facility showed the way for catalyzing private investment in infrastructure, and its success in doing so led to two follow-on ADB projects for bridging the infrastructure financing gaps under the government’s Seventh Five-Year Plan FY2016–FY2020.

There was confusion over the designated executing agency (EA).  The Report and Recommendation of the ADB President to the Board of Director mentions the Finance Division of the Ministry of Finance (MOF) as the EA. The delegation memorandum mentions another MOF division, the Economic Relations Division, as the EA. Despite the confusion, both government agencies provided the required support and guidance in project implementation. The Finance Division eventually informed that, as IDCOL was the implementing agency, the Economic Relations Division was the more appropriate EA.