Why $30b Saudi investments see little progress

Even though the country is hungry for foreign investment, the proposals of some top Saudi Arabian companies to invest around $30 billion in various sectors in Bangladesh over the past six-seven years have gone nowhere.

Only one project that has made some progress after a long gap is a cement factory in Chhatak, Sunamganj with an investment of $600 million. Currently, tender evaluation work is going on for the project.

But, uncertainties are still there because there are instances of factories set up with Saudi investment not going into production eventually.

The apparent failure to implement the proposed Saudi investments is attributed to differences of opinion between government agencies in Bangladesh and the Saudi firms concerned as well as a lack of cooperation from Bangladeshi bureaucrats, sources at Bida and other government agencies say.

The government agencies frequently delay project decisions for unexplained reasons, thus denying the country the benefits of the Saudi investments, they add.

Officials of various government bodies including the Bangladesh Investment Development Authority (Bida) also supported this claim.

Bida Executive Member Mohsina Yasmin told The Business Standard, “The Saudi investment proposals are joint-venture investment proposals between government agencies and Saudi Arabian companies. This takes time.”

Golam Moshi, former Bangladesh ambassador to Saudi Arabia, said although Saudi companies have been showing increasing interest in investing in the country since 2016, many companies have already lost the interest “due to the non-cooperation of government agencies”.

Against this backdrop the 14th meeting of the Bangladesh-Saudi Arabia Joint Commission (JC) is going to be held in Riyadh on 30-31 October.

At the meeting Bangladesh will request Saudi Arabia to speed up the process of implementing investment projects in the greater interest of the two counties, sources said.

The previous JEC meeting between Bangladesh and Saudi Arabia was held on 12-13 February 2020 in Dhaka.

What happened to various Saudi investment proposals?

ACWA Power, one of the largest power companies in Saudi Arabia, on 17 October 2019 expressed interest to invest $2.5 billion in Bangladesh to build a gas-run plant capable of generating 3,600MW of electricity.

The company signed a memorandum of understanding (MoU) with the Bangladesh Power Development Board (BPDB) for the development of a natural gas/ R-LNG-based combined cycle power plant.

But because of a scarcity of natural gas, Bangladesh wanted to go for a solar or wind-based power plant.

At one point, the Saudi company agreed to invest in renewable energy and proposed to set up the plant in the char areas of Barisal.

Again, the power development board objected to this proposal as there was no power transmission line in the proposed site. At the same time, the board offered ACWA Power to set up a renewable power plant at Rampal in Bagerhat.

But no response has been received from the Saudi company yet.

Mohammad Nazmul Abedin, joint secretary of the Power Division, ‍said it has been three years since the signing of the MoU but the project has made no progress because of slow responses from both sides.

For similar reasons, Saudi company alfanar has backtracked on its decision to invest in a 100MW solar power plant in Bangladesh, according to Bida sources.

Meanwhile, sources with the industries ministry told TBS that a Saudi company, Engineering Dimensions, set up an electrical item manufacturing plant, General Electric Manufacturing Co. Ltd (Gemco), on its own land in Chattogram three years ago, but could not go into production yet.

The industries ministry had assured the company of providing a DPM (direct procurement method) facility – meaning, the company can sell its products directly to the Power Development Board without participating in tenders.

But the ministry later decided not to grant the DPM facility to the company as Engineering Dimensions formed a separate company to go into production itself although, as per the agreement, the company was supposed to set up a transformer and other electrical equipment manufacturing plant in a joint-venture with Gemco, said officials of the industries ministry.

Now the ministry has offered Engineering Dimensions to sign a new deal.

The Saudi company promised to invest $35 million in this sector. Later, this investment was to be increased to $80 million.

Fertiliser plant sees no progress either

Also, no progress has been made on an investment proposal to set up a di-ammonium phosphate (DAP) plant.

Hanwah Saudi Arabia Limited had signed an MOU with the Bangladesh Chemical Industries Corporation (BCIC) to set up a DAP plant either in Morocco or the Kingdom of Saudi Arabia with an investment of $700-900 million.

The Saudi company does not want to build the factory in Bangladesh because 90% of the raw material and fuel for the production of DAP have to be imported from abroad.

On the other hand, the BCIC wants this factory to be set up in Bangladesh.

As a result, this investment proposal has not made progress.

Saudi Aramco loses interest as well

Meanwhile, Saudi company Aramco expressed keenness to invest around $15-20 billion in a number of sectors including petrochemical, installation of the second unit of Eastern Refinery, and LNG terminal, but Bangladesh could not retain the company finally, even though officials of the company visited Bangladesh three times.

A Saudi firm, Red Sea Gateway Terminal, has promised to invest $1.5 billion for the development of the Chattogram seaport and the construction of a bay container terminal under a private-public partnership (PPP).

State Minister for Shipping Khalid Mahmud Chowdhury held a meeting with the Red Sea Gateway Terminal authorities during his visit to Saudi Arabia earlier this month. In the meeting, the Saudi company reiterated its proposal to invest in Bangladesh.

Besides, proposals to set up a 100MW solar power plant at North Bengal Sugar Mill, Al-Jomaih Group’s 300MW solar power plant projects in Gaibandha and Dinajpur are also pending for a long time.

The only exception

Finally, the process of setting up a clinker-cement plant under the Saudi-Bangladesh joint investment at Chhatak in Sunamganj has gained momentum after the Covid-19 pandemic delayed the process of the project, officials said.

The investment has been revised to $600 million as of now with Engineering Dimensions International Investment owning a 60% stake in the plant and the BCIC owning the remaining 40%.

The BCIC on 30 June 2020 entered a joint venture agreement with the Saudi firm to set up the plant with a production capacity of 15,000 tonnes of clinker-cement per day.

If everything goes as per plan, the cement manufacturing unit will be built on more than 160 acres of land next to the existing state-run Chhatak Cement Factory, sources said.

A senior BCIC official told TBS that a company was formed in June 2021 in this regard and now tender evaluation work is going on.

The project will meet the demand of the clinker-based cement factories in Bangladesh by supplying four million tonnes of clinker per annum against the country’s import of 19 million tonnes per annum and save $225 million in foreign exchange annually.

A MoU was signed to set up a cement and clinker manufacturing factory in Chhatak, Sunamganj during Prime Minister Sheikh Hasina’s visit to the Kingdom of Saudi Arabia in October 2018.

Currently, the Saudi Arabian Public Investment Fund (PIF) has assets to the tune of $600 billion. The country has formed this fund for investment across the globe.

In 2016 during the Bangladesh premier’s visit to Saudi Arabia, the PIF authorities expressed interest in investing in Bangladesh.

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