Ex Ante Evaluation
Private Sector Investment Finance Division,Private Sector Partnership and Finance Department, JICA
1. Name of the Project(1) Country: People's Republic of Bangladesh ("Bangladesh")(2) Project Site / Target Area: Mirsharai, Chattogram District(3) Project: Mirsharai Steel Plant Development Project ("Project")(4) Signing Date: October 4, 2023
2. Background and Necessity of the Project(1) Current State and Issues of Private Sector Development in Bangladesh
In recent years, Bangladesh has been developing large-scale infrastructure such as metros,
airports and bridges, using yen loans, and with rising average incomes, the construction ofhousing, commercial facilities and hotels is also underway. These infrastructure andconstruction projects are also driving demand for steel products in Bangladesh, with thecountry's recent steel demand growing at an annual rate of 15-20% (IDLC, 2020). Current
per capita steel consumption in Bangladesh is around 50 kg, which is very low compared to
the Asian average (283.5 kg) and neighboring countries (India: 70.9 kg) (EBL Securities,2019）.. Big Mint1 reported that current production capacity by local steel manufacturers are
9 million tonnes, which is very limited whereas actual demand, viz. production is 8.5 million
tonnes. In the light of such circumstances, BigMint projects that steel consumption in
Bangladesh will rise by 25 percent to around 10.6 million tonnes in 2027 from 85 lakh tonnes
at present due to growing infrastructure development projects and individual consumption 2.
The demand for rebar, a key steel product, is also projected to double from 7 million t/y in2019 to 14 million t/y by 2030, while wire rod, another key steel product, is expected toincrease from 490,000 t/y in 2019 to 980,000 t/y by 2030 (KPMG, 2022). The iron and steel
industry in Bangladesh melt scrap iron to reproduce steel, and these furnaces produce theintermediate product, billets3, which are then processed to produce processed steel products
such as rebar and wire rod. While domestic production of billets and rebars, the mainprocessed steel products, has already progressed, domestic production of wire rods iscurrently not possible, and the industry is dependent on imports.
On the other hand, environmental pollution from the steel industry is a challenge. The
average concentration of air pollutants (PM10) in urban areas in Bangladesh is 220-310µg/m3 (2021), which is much higher than the WHO guideline level of 45 µg/m 3 and a health1

Platform for commodity price reporting, market intelligence and consulting(www.bigmint.co)
Reported by The Daily Star on 20th May 2024 (https://www.thedailystar.net/business/news/four-steelmakerscontrol-53-the-market-study-3613811)
3Intermediate product in the rolling process of steelmaking, produced by melting scrap iron in an electric furnace, adjusting its
composition and casting it.
2hazard is a concern. In this context, one of the main causes of air pollution in Bangladesh isconsidered to be the manufacturing sector. Among manufacturing industries, the brick andcement industries are considered major sources of air pollution, but the steel industry is
considered the third largest source of air pollution, emitting 17 tons of PM10 every year 4(Nature Environment and Pollution Technology, 2020). The Bangladesh Environment
Department has stated that air pollution from the steel and cement industries cannot be
overlooked and has recommended the introduction of an air pollutant management system
for these industries.5 In addition, the iron and steel industry requires large amounts of waterfor processes such as iron cooling, and there are concerns that draining this industrial water
into rivers will exacerbate water pollution and taking water from groundwater will deplete
groundwater supplies. Furthermore, the iron and steel industry consume large amounts ofelectricity in the process of melting scrap iron in electric furnaces6, and CO2 emissions fromelectricity consumption using thermal and diesel power generation dedicated to the iron andsteel industry are an issue 7 (Bangladesh Power Development Authority, 2016). The
Government of Bangladesh has set out in the Eighth Five Year Plan to reduce air pollutant
emissions and industrial wastewater emissions, with a specific target of reducing the averageamount of PM10 emissions from 145 µg/m3 in 2017 to 120 µg/m3 by 2025 and is considering
taxation on industrial wastewater to reduce the emission levels. Furthermore, the Five-Year
Plan also includes the promotion of renewable energy and aims to build 2,014 MW ofphotovoltaic power generation capacity in the five years from 2021 to 2025.
In addition to the above challenges, Bangladesh is increasing its domestic manufacturing
capacity for billets and processed steel (rebar, wire rod, etc.), but the value of steel imports
has increased at an average annual rate of 14.4% from 172 billion taka in 2015-16 to 295
billion taka in 2019-20, contributing to the country's deteriorating trade balance. This is anegative factor for the country's balance of trade (imports equivalent to about 8% of foreignexchange reserves). If supply cannot keep up with the further increase in demand in thefuture, there is concern that the trade balance could deteriorate further. In addition, although
domestic manufacturing of billets has progressed to a certain extent, the country relies onimports of wire rod, the main processed steel, from India and China, and imports of processedsteel are increasing rapidly at an average annual rate of 32%, from 2.7 billion taka in 201718 to 4.8 billion taka in 2019-20. Thus, in order to improve the balance of trade, it is important
to increase domestic manufacturing capacity in the future. In its budget speech for 2022-23,
the Ministry of Finance, the Government of Bangladesh has stated that steel is an important

The brick industry, for example, emits 83 tons of PM10 each year.
Air Pollution Reduction Strategy for Bangladesh, Department of Environment, 2012.
6The electricity consumption required for the billet production and rolling processes is approximately 740 kWh/MT; the electricity
consumption of the steel industry in Bangladesh, estimated from this figure, is approximately 6.5% of the country's total electricity
consumption.
7 BSRMSL uses Induction Furnaces instead of EAF which requires lesser electricity and thereby have lesser impact
to the environment.
45

raw material to support infrastructure construction projects and that tax support will beprovided.
(2) Japan and JICA’s Cooperation Policy and Operations in Private Sector Development
Japan’s Development Cooperative Policies for the People’s Republic of Bangladesh(February 2018) identifies “Accelerating economic growth for the benefit of all citizens toward
a middle-income country” as a priority area, specifically targeting the development ofindustrial infrastructure and the promotion of private-sector activities. In addition, the JICA
Country Analysis Paper for Bangladesh (March 2023) also lists diversification into industries
other than the garment industry, promotion of private investment and climate change
measures. So far, JICA has supported the promotion of Bangladesh's domestic
manufacturing industry through the technical cooperation Project for Promoting Investment
and Enhancing Industrial Competitiveness” (May 2017 - May 2022) and the technicalcooperation Project for Capacity Building of BEZA on EZ Management and Investment
Promotion (May 2022 - May 2027), and through the ODA loan Foreign Direct Investment
Promotion Project (1st L/A approved in 2015, 2nd L/A approved in 2019) supports thepromotion of private investment. Furthermore, BSRM Steels Ltd ("BSRMSL”) is promoting
infrastructure development through the ODA loan Hazrat Shahjalal International Airport
Expansion Project (1st L/A approved in 2017, 2nd L/A approved in 2020) and the Jamuna
Railway Bridge Construction Project (1st L/A approved in 2018, 2nd L/A approved in 2020),
among others. BSRM Steels Ltd (BSRMSL), the borrower of the Project is supplying steel
products as a sub-contractor for these and other ODA loan projects, which will contribute tothe implementation of existing and new ODA loan projects.
(3) Other Donors’ Activities
The Export-Import Bank of India (India EXIM Bank) is one of the co-financing banks.
3. Project Description(1) Project Description① Project Objective
The objective of the Project is to expand Bangladesh's domestic steelmaking capacity
in an environmentally friendly manner and contribute to the country's sustainableeconomic growth by developing an induction furnace and a rolling mill in Bangladesh,which will melt low-quality scrap iron to enable reproduction of steel, as well as solar
power generation facilities, air pollution management systems and water
treatment/recycling plants, and thereby contribute to the sustainable economic growthof Bangladesh.
② Project Components
The loan will be used to develop a steel mill to be implemented by BSRMSL.
Specifically, the funds will be used for (i) billet production facilities using induction

furnaces, (ii) rolling and processing facilities for the production of rebar and wire rod,(iii) roof-top photovoltaic power generation facilities, (iv) air pollutant management
systems, (v) materials and construction of water treatment and recycling plants, and(vi) land development costs.
③ Project Beneficiaries (Target Group)
Bangladesh citizens(2) Estimated Project Cost: About 217 million dollars(3) Schedule:
June 2024: Completion of Equipment Installation
September 2024: Commercial Operation(4) Project Implementation Structure① Borrower: BSRMSL② Executing Agency: BSRMSL③ Operation and Maintenance Organization: BSRMSL(5) Collaboration and Sharing of Roles with Other Donors
1) Japan’s Activity:
BSRMSL is a subcontractor for ODA loan projects such as the Hazrat ShahjalalInternational Airport Expansion Project (1st L/A approved in 2017, 2nd L/A approved in2020) and the Jamuna Railway Bridge Construction Project (1st L/A approved in 2018,
2nd L/A approved in 2020). Steel materials are being supplied, and cooperation withODA loan projects is expected. Support for economic zones and the private sector isbeing provided through the ODA loan Foreign Direct Investment Promotion Project (1stL/A approved in 2015, 2nd L/A approved in 2019) and the technical cooperation Projectfor Capacity Building of BEZA on EZ Management and Investment Promotion (May2022 - May 2027).
2) Other Donors’ Activity: Co-finance with India EXIM Bank
(6) Environmental and Social Consideration / Cross-Sectoral Issues / Gender Category
1) Environmental and Social Consideration① Category: B② Reasons for Categorization: The Project does not fall under the large-scaleindustrial development sector listed in the Japan International Cooperation
Agency’s Environmental and Social Consideration Guidelines (announced in April2010), as it is judged to have no significant undesirable effects on the environmentand does not fall under the sensitive characteristics and sensitive areas listed inthe JICA Guidelines.
③ Environmental Permits: The Site Clearance for the project was obtained in 2020.
Environmental Impact Assessment for the construction of the steel plant was also
prepared and submitted to the Bangladesh Environment Department at the end of

August 2022.
④ Pollution Measures: Impacts on air quality, water quality, waste and noise
generated during construction and service are expected to meet Bangladesh
national and international environmental standards through mitigation measures.
In particular, gas emissions from the induction furnaces during the operation phasewill be controlled by an air pollutant management system and waste will be sortedand disposed of by a licensed contractor.
⑤ Natural Environment: The project area does not fall in or around sensitive areas
such as national parks, and undesirable effects on the natural environment areminimal.
⑥ Social Environment: The project site is constructed on the existing BSRMSL
factory site, and no additional land acquisition or resettlement will occur.
⑦ Other: The project will be monitored by the borrower for air quality, water quality,
noise and vibration, soil contamination, impact on waste and noise.
(7) Cross-Sectoral Issues: The project will install roof-top photovoltaic installations, which will
reduce greenhouse gas emissions and contribute to climate change mitigation.
(8) Gender Category: GI: Gender mainstreaming needs assessment and analysis Project
Reasons for classification: gender mainstreaming needs were identified, but specificinitiatives contributing to gender mainstreaming were not included.
(9) Other Important Issues: N/A
4. Targeted Outcomes(1) Quantitative Effects:
1) Outcomes (Operation and Effect Indicators)
Indicator

Baseline (2021)

Target (2029)(Five years after theCommercial Operation)

BSRMSL's billet production capacity (tons/year)

780,000 tons/year

1,030,000 tons/year

BSRMSL's production capacity of processed

800,000 tons/year

1,400,000 tons/year

Number of BSRMSL employees (persons)

1,449 persons

1,949 persons

BSRMSL installed renewable energy sources

0MW

3.0 MW

0MW

3.2 MW

N.A..

10,230 tons CO2/ year

871 million taka

1,166 million takasteel products (tons/year)(MW)
Installed renewable energy sources of other
BSRM Group companies (MW)Greenhouse gas emission reductions (tons CO2/year)
BSRMSL tax payments (million taka)(2) Qualitative Effects: Improvement of the trade balance through import substitution
5. External Factors and Risk Control
N/A
6. Lessons Learned from Past Projects(1) Evaluation Findings of Similar Past Projects
From the results of the ex post evaluation of the Myanmar Steel Plant Expansion Project,among other things, lessons have been learnt that smooth supply sources of raw materials
and spare parts, as well as a stable power supply, are important for achieving stablesteelmaking capacity.
(2) Lessons for the Present Project
In light of such lessons learnt, the project confirmed the prospects for the supply of raw
materials such as scrap iron and the status of studies to secure stable electricity, gas andother utilities through the screening. With regard to the supply of raw materials, BSRMSL
imports most of its scrap iron and steel, with 45% imported from Japan, 20% from the USA,
15% from the UK, 15% from Australia, confirming that the company is limiting raw material
supply risks by securing a diverse range of import sources. The use of imported scrap iron isaffected by international scrap iron prices and exchange rates, but the company has
confirmed that it is able to pass on these raw material price increases to its sales prices, andthat it will be able to secure sufficient profits even if raw material prices rise in the future. Inaddition, the company has confirmed that it has already obtained permits and approvals fromthe Bangladeshi authorities for utilities such as electricity and gas, and that there are noconcerns.
7. Evaluation Results
As described above, the project is in line with Bangladesh's development issues andpolicies, as well as the cooperation policy and analysis of Japan and JICA, and will contributeto job creation, industrial promotion and environmental conservation through support for
Bangladesh's environmentally friendly steel industry, and will also contribute to Goal 8(Decent Work and Economic Growth), Goal 9 (Industry, Innovation and Infrastructure) andGoal 17 (Partnerships for the Goals) of the SDGs, and therefore support through overseas
investments and loans is highly significant.
8. Plan for Future Evaluation(1) Indicators to Be Used: As shown in Section 4.
(2) Future Evaluation Schedule (estimate): Ex post evaluation to be conducted five years
after the commercial operation.

ENDAnnex: Project Site Map

Annex
Project Site Map