Electricity in Bangladesh

Bangladesh had a number of cost-effective private sector investments in the power sector in the 1990s but in the following decade investments dried up, resulting in severe power shortages. To break the impasse the government chose to solicit investments without competitive tenders. Power sector investments increased but some of these investments have been high-cost and there have been allegations of political connections between investors and government. Procurement reforms have not been effective. Why did this change happen and is it possible to reverse this and improve the sustainability of investments?

This project used qualitative and quantitative econometric data to examine the complex relationship between the mode of subsidy provided to the power sector and the types of investors and investments it attracts. Our hypothesis was that the government’s change of mode of subsidy contributed to a reduction in the number of competent bidders. The government’s strategy solved the supply problem but at an unsustainably high cost.

This study tested the plausibility of our hypothesis with data from power plants, comparing this with the form of subsidy received to understand the impact on the costs of generation from 2010‑2016. From this drew implications about the most effective financing structures which could be cost-effective and limit damaging forms of corruption.

SOAS-ACE is currently undertaking research in Bangladesh and Nigeria, including in the education, health and power sectors, as well as on successful collective action that overthrew a corrupt autocracy. Moving beyond pure research, we are also monitoring the implementation of anti-corruption strategies our research has recommended, such as a strategy to reduce pharmaceutical companies’ overpricing of medicines.

Our partners on this project were: Joseph Ajefu (SOAS University of London), Iffat Zahan, and Mehnaz Rabbani (BRAC Institute of Governance and Development (BIGD-BRAC University).