Graft drained 35% of large project costs in 16 years: study

A new study has found that more than one-third of the total cost of large infrastructure projects over the past 16 years has been eaten up by corruption and inefficiency.

“Billions of dollars have been effectively wasted due to inflated contracts, collusive pricing, and procedural weaknesses,” said Mushtaq Khan, professor of economics at SOAS University of London and one of the three study authors.

Khan unveiled the findings at a roundtable on public debt and governance held in Dhaka yesterday, organised by the research-based think tank Change Initiative.

The study, titled Corruption in Infrastructure Projects in Bangladesh and Sri Lanka: Implications for Public Debt, reviewed 42 major infrastructure projects undertaken between 2009 and 2025. It was carried out by the SOAS University of London in partnership with Change Initiative for the Bangladesh part.

Around 35 percent of total project costs were lost to corruption and inefficiency, the study found.

Researchers looked at projects spread over 15 distinct subsectors, which were grouped into six broad meta-sectors for comparative assessment: transport and connectivity, power and energy, maritime and ports, rail and metro systems, economic zones, and urban and utility infrastructure.

However, Khan did not cite the actual figure lost to corruption.

Bangladesh is moving from a “moderate debt” position toward a solvency risk-trap, the study warns. Statistical shielding and hidden liabilities have further increased this risk, as it is difficult to verify the actual state until a moment of liquidity crisis arrives.

It is much like taking a long-term mortgage, but even if the procurement price increases and contracts do not ensure real results, the interest bill arrives on time, while the results do not, the study noted.

According to the findings, projects awarded through open international competitive bidding were found to be significantly cheaper. In contrast, direct government-to-government deals consistently drove up costs by more than 400 percent compared to more transparent alternatives.

“When only politically connected firms participated in bidding, prices tended to be collusive and substantially higher.

In such cases, formal transparency and accountability mechanisms had limited impact,” said Khan.

“In circumstances where a small circle of politically connected investors dominates the bidding process, businesses collude, and there are no effective horizontal checks on bureaucrats and regulators,” he added.

“We have to attract new investors who are not politically connected, but they keep away because of the high political risks,” said Khan.

The impact was immediate and measurable.

New investors entered the market, and contracted prices dropped by at least 25 percent because new actors ensured horizontal checks on procurement agencies, the study author noted.

At the event, Zakir Hossain Khan, chief executive officer (CEO) of Change Initiative, urged the new government to revise or scrap the corruption-prone contractor agreements signed by the previous administration.

Bangladesh’s external debt has risen from $23.5 billion in 2009 to nearly $112 billion in 2025, a 377 percent increase.

At the same time, one out of every Tk 5 of government revenue is now spent solely on interest payments, even before repaying the principal.

“Energy is the lifeblood of the economy. But if, after crossing $100 billion in external debt, we continue to subsidise corruption-ridden power and energy projects with $5 billion annually, Bangladesh will rapidly move toward financial insolvency. The power and energy master plan has been hijacked by masterminds of corruption,” the CEO said.