The Phulbari coal project will generate more than US$ 21 billion in economic benefits to Bangladesh over its 30 years life and add one percent a year to Gross Domestic Product (GDP), according to a new study report released recently.

"The direct effect on GDP is expected to be US$ 7.8 billion over the life of the project," the report by international professional services company GHD said. "The indirect or multiplier effects are expected to be US$ 13.7 billion. This gives a total GDP increase of US$ 21.4 billion."

"In summary, the mine and power station development is expected to contribute up to an additional one percent to GDP. This represents an average of US$ 0.7 billion addition to GDP per year," the report said.

GHD (http://www.ghd.com.au) has extensive experience in working on and evaluating major infrastructure projects and was commissioned to carry out the report by Asia Energy Corporation (Bangladesh) Pty Ltd which is developing a 15 million tons per annum open pit coal mine at Phulbari as well as a 500 MW coal-fired power plant which will be later upgraded to 1,000 MW.

Over the life of the project Asia Energy intends to spend an estimated US$ 3 billion in capital on the mine and power plant and an additional US$ 10.4 billion in operating costs. Payments to the government of Bangladesh will exceed US$ 7 billion, it said.

"The project is expected to contribute significantly to the development of the Bangladesh economy by adding up to 10 percent to the country's energy supply by 2015," GHD said. "The productivity and business growth impacts will be very significant. The US$ 13.7 billion indirect impact over the life of the project is likely to materially underestimate the benefit."

GHD used a multiplier of 1.75 for the indirect impacts, which it said was conservative, given that multipliers in terms of spin-off industries and service sector growth for similar large scale projects around the world range from 1.5 in highly developed countries to 3.5 in poorer, subsistence economies.

The multiplier effects included development of industries from the mine's valuable co-products but did not take into account any contribution from savings on foreign exchange from substituting imported coal with local coal, which would amount to a saving of US$ 3 billion over the life of the project, GHD said.

"The effect of this development is expected to radically improve the social and economic well being of the local, regional and national community in Bangladesh," GHD said. "This will be in areas as diverse as job opportunities, health facilities and general literacy."
GHD estimated there would be 8-10 additional jobs for every person employed directly on the project. During construction phase the project will employ 2,100 people. When fully operational the mine will employ 1,200 and another 450 will work on the barging and shipment operations at Khulna. The total employment will be 16,500 as GHD says indirectly 8-10 people will be employed for one direct employment.

As a result of the project, a total of US$ 314 million would be spent on rail and port development to provide a reliable export route.

GHD said US$ 4.2 billion would be pumped back into the project area in Phulbari, including US$ 310 million on resettlement and relocation of part of Phulbari township and surrounding villages.

There will also be programs to increase local agricultural production and re-cultivate the land backfilled after the mining as well as a major operation to inject water drawn down from the mine back into nearby fields which will involve laying more than 100 kilometers of pipelines.

Asia Energy, which operates in Bangladesh under an existing contract, has established a resource of 572 million tons of high quality thermal and semi-soft coking coal in the Phulbari basin and is waiting government's approval of its scheme of development for the mine in line with its contract.

Plans for the mine were given environmental clearance by the government in September 2005. Pre-mining activity is scheduled to start later this year with first coal expected in late 2008 and production then increasing rapidly to 15 million tons per annum by 2013.