Bilateral Accord On Matarbari Coal Project: Diplomatic Milestone For Bangladesh-Japan Collaboration – OpEd


On September 30, 2023, an auspicious occasion unfolded as the “Exchange of Notes” and a “Loan Agreement” pertaining to the seventh tranche of the Matarbari Ultra Super Critical Coal-fired Power Project were formally executed. This significant event transpired through the mutual collaboration between the Governments of the People’s Republic of Bangladesh and Japan. The ceremonious undertaking materialized at the NEC-2 Conference Room within the precincts of the Economic Relations Division situated in Sher-E-Bangla Nagar, Dhaka, thereby adding yet another noteworthy chapter to the continuum of bilateral cooperation between the two sovereign entities.

Representing the Government of Bangladesh, Sharifa Khan, the esteemed Secretary of the Economic Relations Division at the Ministry of Finance, played a pivotal role in ratifying both the “Exchange of Notes” and the “Loan Agreement.” Conversely, the Japanese Ambassador to Bangladesh, Iwama Kiminori, affixed his signature to the “Exchange of Notes,” whereas Ichiguchi Tomohide, assuming the role of Chief Representative at the JICA Bangladesh Office in Dhaka, undertook the responsibility of signing the “Loan Agreement” on behalf of the Japanese Government. This collective endorsement not only symbolizes a diplomatic milestone but also underscores the commitment of both nations to the realization of the Matarbari Ultra Super Critical Coal-fired Power Project.

Embedded within the paradigm of the 44th Japanese Official Development Assistance (ODA) Loan Package, denominated as its second tranche, Japan is positioned to furnish financial support amounting to 217,556 million Japanese Yen (JPY), which equates to approximately $1,500 million. This fiscal backing is earmarked for the facilitation of the Matarbari Ultra Super Critical Coal-fired Power Project. The intricately devised loan framework delineates a series of meticulously stipulated conditions, encompassing a discerningly set interest rate of 1.60%, specifically earmarked for the financing of construction endeavors. Simultaneously, a nominal interest rate of 0.10% is designated for consultancy services. Additionally, an inaugural Front End Fee of 0.2% is imposed within the ambit of this financial arrangement. The holistic repayment trajectory spans 30 years, seamlessly integrating a grace period extending over a decade, thereby encapsulating a nuanced and protracted commitment to the project’s financial underpinnings.

The fundamental objective of this strategic undertaking is to effectively address the burgeoning requirements for electricity while reinforcing the stability of the power supply infrastructure. This ambitious endeavor entails the establishment of a state-of-the-art 1200 MW Ultra Super Critical Coal-fired Power Plant, a configuration consisting of two units each with a capacity of 600 MW. This advanced power facility is slated to be strategically located in Matarbari within the Maheshkhali upazila, an area situated within the precincts of the Cox’s Bazar district. The choice of this locale reflects a meticulous consideration of geographical factors and energy distribution dynamics to optimize the project’s impact on meeting the region’s escalating electricity demands and ensuring a robust and dependable power provision system.

The comprehensive financial allocation for the project is quantified at Tk51,854.88 crore, wherein the Government of Bangladesh assumes a financial commitment of Tk6,406.16 crore, the Japan International Cooperation Agency (JICA) disburses Tk43,921.03 crore, and the China Power Global Company Bangladesh Limited (CPGCBL) contributes Tk1,527.69 crore. This intricate financial structure reflects a collaborative effort among the project stakeholders to sustainably fund and facilitate the realization of the outlined objectives. The temporal horizon of project implementation spans from July 2014 to December 2026, encapsulating a strategic timeframe for the meticulous execution of the multifaceted initiatives associated with the project.

As of August 2023, the project has achieved a commendable physical advancement, reaching a notable milestone of 78.30%, underscoring the efficiency and progressiveness of the implementation processes. Furthermore, the financial progression stands at 65.14%, indicative of judicious fiscal management and resource utilization. Notably, the Japan International Cooperation Agency assumes a pivotal role as a key collaborator throughout diverse project phases, having disbursed a cumulative sum of 437,754 million JPY through six tranches. The imminent disbursement of the 7th tranche, totaling 217,556 million JPY, is distinctly earmarked within the framework of the Official Development Assistance (ODA) Loan, thus exemplifying the continued commitment to the project’s financial sustainability and successful realization.

The implementation of the Matarbari Ultra Super Critical Coal-fired Power Project, facilitated through the recent ratification of the “Exchange of Notes” and subsequent “Loan Agreement” between Bangladesh and Japan, carries profound implications for the national energy landscape and transcends conventional considerations. This transformative endeavor is poised to catalyze the diversification of Bangladesh’s energy domain, heralding a paradigm shift marked by technological advancement and fortified energy resilience.

The establishment of the 1200 MW Ultra Super Critical Coal-fired Power Plant in Matarbari signifies a strategic maneuver towards cultivating a more diversified energy portfolio, thereby diminishing over-reliance on traditional energy sources. This strategic shift assumes pivotal significance for Bangladesh’s energy security, fostering an augmented internal production capacity poised to make substantial contributions to meeting the escalating demand for electricity.

The ramifications of this transformative initiative reverberate across the national power grid, anticipating heightened levels of stability and connectivity. The infusion of a reliable and substantial power supply resulting from the Matarbari project is anticipated not only to ameliorate prevailing energy deficits but also to serve as a foundational catalyst for the expansion and modernization of industries dependent on uninterrupted power sources.

In diplomatic terms, Bangladesh stands to acquire a discernible advantage as it progresses towards attaining a heightened level of energy sufficiency. The efficacious implementation of such a consequential power project fortifies Bangladesh’s standing on the global stage, spotlighting its unwavering commitment to sustainable development and self-reliance within the energy sector. This newfound energy autonomy augments the nation’s diplomatic leverage, positioning Bangladesh as a pivotal player in the broader regional energy landscape.

Moreover, the financial underpinnings of the project hold far-reaching implications for economic growth. The substantial investment injected into the power sector not only fortifies energy infrastructure but also acts as a catalyst, propelling augmented financial commitments into ancillary industries. This infusion of capital into the power sector creates an environment conducive to broader economic development, fostering opportunities for employment, innovation, and technological advancement.

The ramifications extend to the overarching national image, with Bangladesh cultivating a narrative of forward-thinking and progressiveness in its dedicated pursuit of sustainable development. This power project transcends mere infrastructural undertakings; it serves as a testament to Bangladesh’s unwavering commitment to addressing its energy requisites while concurrently contributing to global environmental sustainability objectives.

Bangladesh’s ascent as a regional energy hub holds substantial implications for key players like the “Big-B.” The strategic positioning of Bangladesh in this role fosters regional energy connectivity, optimizing supply chains and enhancing energy security. As a linchpin in the energy trade network, Bangladesh’s regional prominence creates opportunities for shared objectives and economic collaborations. The “Big-B” stands to benefit from this interconnected energy landscape, gaining access to a diversified energy portfolio and leveraging the economic vibrancy facilitated by Bangladesh’s pivotal role in regional energy dynamics. This trajectory positions Bangladesh as a significant contributor to the broader energy objectives of key stakeholders.

The Matarbari Ultra Super Critical Coal-fired Power Project emerges as a transformative initiative endowed with multifaceted implications. Ranging from the facilitation of energy diversification and the fortification of internal production capacity to the enhancement of the national power grid and the elevation of diplomatic standing, the project’s constructive effects permeate diverse sectors, marking a pivotal juncture in Bangladesh’s trajectory towards energy resilience and sustainable development.

Syed Raiyan Amir

Syed Raiyan Amir is a Research Associate at The Center for Bangladesh and Global Affairs (CBGA)

Leave a Reply

Your email address will not be published. Required fields are marked *