Collusive Pricing in SolarPower in Bangladesh: Mapping Informal Processesand Corruption Risks

​We map the formal and informal processes involved in contracting for solar power projects in Bangladesh. The governance of these processes has been poor, and Bangladesh has been contracting solar power at prices that are often more than twice as high as in comparable neighbouring countries.

Even allowing for higher land prices and transmission costs, the prices awarded are excessive, and high electricity prices are making Bangladeshi businesses uncompetitive relative to competitor countries. The governance failures here can be traced to several factors. The most obvious is the prevalence of unsolicited bids and the absence of competition in the bidding process. A deeper problem is that capable investors without strong political connections are likely to find this investment environment too risky, particularly in the absence of financing instruments or co-investments that reduce their risks. These investors stay away and do not submit unsolicited bids of their own. In their absence, the formal governance structure based on vertical checking fails to work.

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