Interestingly, the government is seriously considering an unusual plan to hold the tender bidding in China for setting up this telecom exchange and have the Chinese government evaluate the bid.

Sources in the massive project's implementing authority Bangladesh Telegraph and Telephone Board (BTTB) however said the government is yet to decide where the bid will take place. "Whether it will be held in China or not will be decided when we sign the loan agreement with China," one source said.

Unprecedented as the tender for the project might be, the idea is to ensure that the deal goes to a certain Chinese company. The local representative of the company has made an arrangement with the members of a top political family under which he will pay the lobby 10 percent of the total project cost as commission, the source claimed.

"This is one of the last big deals of this political lobby ahead of the next general elections," he added.

The Cabinet Division on January 22 cleared a proposal to seek this loan from China for the project. The Economic Relations Division (ERD) is likely to formally write to China in this regard.

From 2003, when the project was conceived and exclusively tailored for China- based procurement, Finance Minister M Saifur Rahman has been resisting the project titled Setting up Digital Telephone Exchange in the metropolitan cities, important towns and upazila growth centres.

Prime Minister Khaleda Zia, during her first China visit in 2003, discussed the project with the Chinese premier, who had instantly agreed to provide funds for it under "Supplier's Credit" system.

But Saifur's resistance to Supplier's Credit system, which is a non-transparent financing mechanism that encourages corruption, shelved the project till recently. Now, the project's mode of financing has been converted into "buyer's credit".

According to the draft loan agreement between the two countries, interest rate has been fixed at two percent while Bangladesh will have to make a down payment of five percent of the total project cost or $10.5 million. The repayment period is 20 years, management fee is 0.2 percent and loan disbursement period is five years.

The sources said China Exim Bank submitted a loan proposal in this regard and the government's Hard Term Loan Standing Committee on August 8, 2005, identified the loan terms as "buyer's credit" as the terms are rigid.

Meanwhile, the government received a letter from China suggesting that contract for the project be awarded to a certain Chinese company without any tender. If it is not possible, the government may refrain from inviting an open international tender, and limit it only to Chinese suppliers.

"If there is no open competitive tender, the cost of procurement will be much higher. If the tender is limited only to Chinese companies, this would just be a set game in which one particular company will surely bag the deal and the cost of procurement will also be very high," noted a top official.

During the previous Awami League (AL) government's tenure, the same Chinese company set up a digital telephone exchange with very low quality equipment. When the BNP-led coalition came to power, the cabinet members, especially Saifur Rahman, severely criticised that procurement.

"But now the same company is being favoured with a very unfavourable loan and bidding terms, which will unnecessarily and unjustifiably impose millions of dollars of debt burden on the people of Bangladesh," the official added.

The BTTB has around 600 telephone exchanges across the country, 75 percent of them digital. The remaining 25 percent exchanges situated at upazila level badly need modernisation.

It now provides 1.1 million phone lines but it is unable to meet the demand for more than 500,000 new ones due to lack of expansion of its exchanges, sources pointed out.

At the fag end of its tenure, the previous AL government had hurriedly signed a $300 million land phone deal with WorldTel through a flawed bid. Some policymakers of that government allegedly received huge amounts in bribe in the name of "election fund" from WorldTel. Later, the present government suspended the project on grounds of corruption and irregularities.