Bangladesh Chemical Industries Corporation seeks to pull out of joint venture with Saudi Arabia over anomalies

After raising allegations of financial irregularities, cost escalation even before beginning of the main project work and tender anomalies, state-owned Bangladesh Chemical Industries Corporation calls for pulling out of a Saudi-Bangladesh joint venture under which a cement factory is to be built in Sylhet's Chhatak upazila, show documents.  

According to the primary estimation, the $321 million joint venture – officially named as Saudi Bangla Integrated Cement Company Limited – will incorporate 40% Bangladeshi and 60% Saudi investment.

A deal for the joint venture between the two countries was signed during Prime Minister Sheikh Hasina's Saudi Arabia visit in 2018. According to the agreement, the manufacturing unit will have a daily capacity of 12,000 tonnes of clinker and 3,000 tonnes of cement.

On behalf of Bangladesh, the chemical corporation will make the investment while the Engineering Dimension International Investment LLC will act as the investment arm for Saudi Arabia.      

But in a recent letter to the Ministry of Industries, the chemical corporation sought the pull out as it noted the irregularities and anomalies by their counterpart has put the investments by both the countries at risk. 

The joint venture cement company has five directors nominated by the chemical corporation and six directors, including three Bangladeshi nationals, nominated by the Saudi investor. 

The chemical corporation complaints are mainly against those three Bangladeshi directors. The state-owned corporation in the letter to the industries ministry mentioned that the three Bangladeshi citizens are also on the board of directors of a local engineering and construction firm named Dipon Group.

"They did not disclose that they are directors of Dipon Group. But it was discovered subsequently that the directors also hold positions at the group as none except the local firm was eligible to respond to the joint venture tender, and picked up for the work eventually," a top chemical corporation official told The Business Standard on condition of anonymity.  

"This was one of the irregularities," the official added.

Chemical corporation Chairman Shah Md Imdadul Haque told the industries ministry that Dipon Group directors nominated by the Engineering Dimension International Investment LLC have considerable deficiencies in various activities, financial spending, managements and transparency overall in the joint venture project. 

"This has prompted a high risk of undermining Saudi investment and government interests too" he noted.

A questionable feasibility  

The initial feasibility study for the cement manufacturing project estimated the cost at $321 million. However, a subsequent study recommended increasing the cost to $604 million, drawing objections from the company's board.

Acting Managing Director of the joint venture Syed Javed Iqbal told the company board that the second study was conducted by Mumbai-based BOE Consulting Firm, but the report submitted to Saudi Bangla Integrated Cement Company lacked any signatures or seals from BOE.

The revised feasibility report also showed a cost of $117 million for a 18-km-long conveyor belt – which will transport materials to the cement plant – despite the first study estimating the cost at $49.8 million. No drawings, designs, or cost estimates were provided for the belt in the report.

Dipon Infrastructure Services Ltd – a sister concern of Dipon Group – was picked up by the above-mentioned tender to buy and install the conveyor belt.    

Chemical corporation officials alleged the three directors of Dipan Group – led by Syed Javed Iqbal – are exerting influence on the board and forcing various decisions to be passed. This had led to arguments and quarrels in their various board meetings with chemical corporation directors.

According to the chemical corporation, there is no scope for unreasonably increasing the cost before the project starts. 

MD says no comment as ministry to probe  

Acting Managing Director of the joint venture Syed Javed Iqbal said that he did not wish to make any public statements on the internal affairs of the company to the media. 

"If the Saudi investor wants to know anything, then I will brief them. And if there are any issues… the government which holds a significant stake in the company, can seek legal action or hold a press conference," he added.

Zakia Sultana, secretary of the Ministry of Industries, said they are going to approach the issue in two ways.  

"First of all, we will form an inquiry team and take decisions upon the findings," she told The Business Standard on Sunday. 

"Since the image of the country is also involved in such joint investments, we have discussed with the Bida [Bangladesh Investment Development Authority]. We will hold discussions with all parties in phases too," she added.