UPDATE 1-Bangladesh drops plan to seek World Bank aid after graft charge

Fri Feb 1, 2013 6:36am EST

DHAKA Feb 1 (Reuters) - Bangladesh has dropped plans to seek renewed World Bank assistance for construction of the country's longest river bridge while it investigated allegations of corruption in the project, the bank said on Friday.

The bank last year cancelled a $1.2 billion credit for construction of the 6.2-km (4-mile) bridge over the Padma river after it found "credible evidence" of high-level corruption among Bangladeshi officials.

On Friday, the bank said it had received a letter from the government, indicating that it would not be asking the bank to lift its suspension of funds for the long-running project.

"The (Bangladesh government's) letter to the World Bank confirms the authorities' intent to continue the investigation of alleged corruption related to the project," the bank said in a statement.

"The World Bank has taken note of the Government's decision of not seeking renewed World Bank financing for the Padma Bridge, and it encourages the Anti-Corruption Commission to complete a full and fair investigation of the corruption allegations."

Dhaka's decision came after World Bank President Jim Yong Kim said this week that while funding for the bridge would not resume until the government addressed the problems, the Bank remained engaged in the South Asia country with commitment of about $4.3 billion in over 30 projects.

Last month, Prime Minister Sheikh Hasina said her government would try to build the bridge with its own funds or arrange the money from other sources if the World Bank failed to release the funds.

Building the bridge was one of Hasina's top promises before the 2008 election and remains critical to maintaining her popularity in the next polls in a year's time, officials and analysts say.

They say the government's standing suffered a dent after the Padma scam came to light while the nation's image was also damaged.

Communications Minister Obaidul Quader told reporters the issue of financing the bridge would be clear by this month and construction would start while the current government was still in office.

"Proposals of Malaysia, China and India on financing Padma bridge are under consideration, while building the bridge with our own funding is still not ruled out," he said.

In December, Bangladesh's Anti-Corruption Commission sued several Bangladeshi officials and three executives of a Canadian firm involved in the project, but excluded ex-communications minister Syed Abul Hossain from the list of accused, which displeased the World Bank.

Two former executives from Canadian engineering company SNC-Lavalin Group Inc, which bid to supervise the contractor on the bridge project, appeared in a Toronto court in July accused of bribing officials in Bangladesh.

Canada launched an investigation in 2011 into allegations of corruption in the bridge bidding process after the World Bank brought the issue to their attention.

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