Bangladesh may sign a US$4.0-billion five-year cooperation framework with South Korea within months, as the country looks to replenish its foreign-exchange reserves amid the global financial crunch. This framework, called the Economic Development Promotion Facility (EDPF), will provide official development assistance in priority areas, particularly transport infrastructure, from 2023 to 2027.
Key bilateral donor
“We’re expecting to sign some $4.0-billion cooperation framework within two months or three with Korea. After the deal, Korea will be one of the key bilateral donors to Bangladesh,” said a senior official from the Economic Relations Division (ERD).
Currently, Japan is the largest bilateral development partner of Bangladesh, followed by China.
South Korea is expected to become Bangladesh’s second-largest bilateral development partner after Japan with this new deal, as it will provide nearly $750 million in aid per annum on average.
Bangladesh is currently the third-largest recipient of South Korea’s development assistance.
New investment plan
The proposed EDPF will be a new investment plan from the Korean Exim Bank in Bangladesh. Under the deal the credit will be disbursed at higher concessional rates. The loan will charge only 1.0-per cent interest rate and have a maturity period of 30 years, with a grace period of seven years.
This is especially beneficial for Bangladesh, as loans from key development partners, including the ADB, the World Bank WB, China and Japan, are gradually getting costlier.
Project proposals
There could be approximately 10 project proposals under the proposed EDPF with Korea. Most projects will be for transport-sector infrastructure development, while some will be in health, ICT, and education sectors.
South Korea has already proposed to support mass rapid transit (MRT) line development in Dhaka and Chattogram cities, and has started framing a master plan for Chattogram city so that its transport system can be developed at a standard format.
In Dhaka, South Korea wants to partially bankroll the southern route of MRT Line-05 and the full portion of MRT Line-04. It has also proposed to build the Dhaka Ring Road aimed at easing traffic pressure inside the capital city. Other projects, including the Dhaka-Chattogram Expressway, are also under consideration.
Trade and development Partner
South Korea is also a key bilateral trade-development partner of Bangladesh as the trade volume between the two countries hit a historic high of $3.035 billion in 2022. The increase in Bangladesh’s import of diesel from the East Asian country has been a major contributor to the growth of their bilateral trade in the last two years.
Bangladesh’s export to South Korea reached a record high of $678 million in 2022 with 22.9% year-on-year growth. RMG products dominate the export scene.
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