Bangladesh
Interim Poverty Reduction Strategy Paper

This paper reviews Bangladesh’s Interim Poverty Reduction Strategy Paper (I-PRSP). The paper addresses the question as to “what are the broad lessons from the past development experience.” It captures the salient features of social progress notwithstanding the challenging odds facing the country. The paper reviews the trends of poverty to set the benchmark for the subsequent discussion on poverty targets as well as antipoverty policy and institutional actions necessary to achieve the targets. The paper also sets the major targets and goal posts sketching a transition path for Bangladesh.

Abstract

This paper reviews Bangladesh’s Interim Poverty Reduction Strategy Paper (I-PRSP). The paper addresses the question as to “what are the broad lessons from the past development experience.” It captures the salient features of social progress notwithstanding the challenging odds facing the country. The paper reviews the trends of poverty to set the benchmark for the subsequent discussion on poverty targets as well as antipoverty policy and institutional actions necessary to achieve the targets. The paper also sets the major targets and goal posts sketching a transition path for Bangladesh.

Chapter 1 Introduction

A. Process of Policy Ownership

1.1 The process of policy ownership, as has been adopted in Bangladesh, aims at providing a well-prioritized national strategy for economic growth, poverty reduction, and social development. Social development captures inter-related issues of human development, gender equality, social deprivations and environmental sustainability. For this, the process has combined policymaking and broad-based consultations with different stakeholders. Moreover, the strategy has been worked out based on the rich experience of existing poverty research and participatory poverty assessments, impact and outcomes of past strategies and policies, and assessment of development and reform issues.

1.2 The planning and policy-making agencies of the Government, including the Planning Commission and the relevant Ministries, have been involved in the process. Along with using structured proforma, detailed interaction with Government functionaries was used to get their perception on cross-cutting and sectoral needs and issues, factors behind past successes and failures, and views and suggestions on how the situation can be improved. An Inter-Ministerial Task Force was formed to ensure close interaction and coordination. For operational purposes, the strategy paper will form the core of the Three-Year Rolling Plan (TYRP) providing the basis for the annual budget which will help maintain consistency between the development strategy and the Plan, on the one hand, and between the Plan and the Annual Development Program (ADP) on the other. The Three-Year Rolling Plan would be formulated within the framework of a long-term Perspective Plan.

1.3 In addition, while formulating the strategies, past achievements and failures in specific areas of both income poverty and human poverty were considered in combination with future imperatives like achieving the Millennium Development Goals (MDGs) and the targets set in the Partnership Agreement on Poverty Reduction (PAPR) with the Asian Development Bank (ADB). Additional inputs for preparing the strategy paper were gathered through commissioning a number of studies in key poverty related areas such as economic, social, and infrastructure development; public expenditure analysis; poverty diagnostics; and governance issues.

1.4 Consultations with different stakeholders has been a key element for ensuring right priorities on competing claims based on needs and demands of the poor and reaching a broad-based consensus for establishing national ownership of the poverty reduction agenda. The process of consultations was conceived in two stages and separately for different stakeholders.

1.5 At the first stage, twenty-one preparatory consultations have been conducted at upazila, division and national levels. In each division of the country, consultations were organized at the upazila level with the poor including women and men, members of non government organizations (NGOs), and various occupational groups. Similar consultations were also organized with field-level functionaries of the Government Ministries and Agencies, NGOs, women’s groups, local and religious leaders, local government representatives, and cross-section of the civil society. This was followed by consultations at the divisional level with Government officials, representatives of the civil society, professional and women’s groups and NGOs. A separate consultation with the urban poor in Dhaka city was also organized. Finally, three separate consultations were held at the national level involving the Government officials, representatives of professional groups and the civil society, and the development partners. Along with the expectations of different stakeholders, the consultations provided important platforms to share ground realities, assess deficiencies of past efforts and factors behind slow achievements, and measures needed to achieve faster poverty reduction and social development. The consultations were organized and facilitated by the Bangladesh Rural Advancement Committee (BRAC), a leading NGO of the country.

1.6 At the second stage, after the preparation of the draft strategy paper in April 2002, twelve mid-term consultations with a wider cross-section of stakeholders were organized to solicit their views, incorporate suggested changes, and validate the proposed strategy. A major focus at this stage was to achieve and deepen the ‘ownership of the strategy by the development machinery’ of the Government, involving all line Ministries. Written comments and suggestions on the draft were received from virtually all the Ministries following which extensive consultations, dialogues, and exchange of views were organized. In addition, separate stakeholder dialogues were organized with specific civil society groups such as activists from the women organizations and advocacy groups, representatives from NGOs and civil society organizations (CSOs), business leaders from the various Chambers of Commerce and Industry, economists and social scientists, and social leaders and key development practitioners. The dialogue process reviewed both diagnostic and prescriptive aspects of the poverty reduction efforts proposed in the draft document. These dialogues helped identify the specific policies in different sectors as well as in bringing out to the forefront the available strategic options needed to implement the poverty reduction agenda. The consistency among the poverty reduction strategy, the medium-term policy framework, and the social targets was closely examined during the dialogue process. The importance of the strategy dialogue process goes beyond the current exercise.

1.7 The Government would like to make such consultations a part of the planning process of the country and continue efforts for fuller participation of the stakeholders in formulation, implementation, and monitoring and evaluation of the poverty reduction agenda both at the level of sectoral and sub-sectoral policy and in the screening of development projects and programs. Apart from being a planning tool, consultations with different stakeholders including the poor, women, and socially disadvantaged groups would be used as a diagnostic tool, i.e., for monitoring social weather and gathering storms, pin-pointing the burning issues, devising social response mechanisms to crisis-points, and deploying rapid action initiatives to combat negative tendencies in development and preventing social atrophies.

B. Silent Ascent

1.8 On many counts, Bangladesh’s performance has been better than the initial anticipations after the country’s political independence. The predominant theme at the time was one of negative images. The account of progress achieved by the country, however, shows rapid improvements in many indicators.

1.9 First, Bangladesh has achieved impressive success in the area of population control. Total fertility rate (TFR) declined from 6.3 in 1975 to 3.3 in 1997–99. Accordingly, the population growth rate has come down from 2.9 per cent per annum in the mid-seventies to 1.5 per cent in the late-nineties. The remarkable feature of this rapid decline was that it had been achieved not only at a low level of income but also at a low level of literacy.

1.10 Second, mortality is often considered as the criterion for judging economic success and failure of nations. Bangladesh has displayed considerable success in this respect, especially in reducing infant and child mortality. The infant mortality rate also declined from 153 deaths per thousand live births in 1975 to 94 deaths in 1990, dropping further to 66 in 2000. The pace of progress in infant and under-five mortality reduction during the nineties was among the fastest in the developing world.1

1.11 Third, Bangladesh witnessed significant success in disaster preparedness and in overcoming the phenomena of mass starvation and the threat of famine syndrome in the backdrop of endemic vulnerability to natural disasters. At the aggregate level, the country has achieved the desirable objective of near self-sufficiency in rice production with a declining cultivated area.2 The production of cereals increased at a trend growth rate of 2.4 per cent per year between the early eighties and the late nineties. This was mainly achieved through the expansion of rice areas under high-yielding varieties (HYVs). Although the overall issue of food security remains the next decade’s challenge, increased disaster preparedness combined with expanded capacity to implement lean-season targeted wage-employment and transfer programs have played an important role in ensuring minimum food entitlements for the poorest during the times of crisis.

1.12 Fourth, Bangladesh has made impressive gains in reducing child malnutrition rates during the last 15 years. According to Bangladesh Bureau of Statistics (BBS) data, the rate of stunting for children in the age group of 6–71 months which was 69 per cent in 1985/86 dropped to 49 per cent in 2000. The proportion of underweight children has gone down from 72 per cent in 1985/86 to 51 per cent in 2000. The Demographic and Health Survey (DHS) data available for the second half of the nineties show a faster decline. The rate of stunting for the age group of 0–59 months has gone down from 55 to 45 per cent during 1996–2000 and, that for underweight, from 56 to 48 per cent during the same period.

1.13 Fifth, Bangladesh has achieved considerable success in mainstreaming women into the development process. Bangladeshi women have played an important role in the success of microcredit, ready-made garment exports, reducing population growth, increasing child nutrition, and in the spread of primary education. The country has achieved gender parity in primary education and nearly removed gender gap in secondary education. Recent evidence also suggests that the country is close to achieving parity in life expectancy at birth as well. While significant gender gaps still persist, the role of women in all walks of life has become increasingly visible and would be instrumental in bringing about wider social and economic changes in future.

1.14 Sixth, low-income countries are typically marked not only by ‘weak’ state, but also weak civic and grass-roots movements and activism. Bangladesh was an instructive outlier in this regard. The advances made by the NGOs and CSOs as alternative delivery mechanisms as well as vocal civic institutions have played a significant role in the reversal of fortunes. The emergence of these actors played a partially compensatory role in the backdrop of weak state and market institutions. Social entrepreneurialism through catalyzing the developmental roles of the organizations of the poor such as community based organizations (CBOs) and organizations for the poor (NGOs and CSOs) has been an important strategic element in the poverty reduction strategy. These social enterprises will continue to play an important role in developing a pro-poor development agenda in Bangladesh.

1.15 Seventh, Bangladesh has achieved significant progress towards a viable democratic transition. Ensuring free and fair elections through non-partisan caretaker government has been a noteworthy political innovation in the backdrop of weak democratic institutions in the country. There have also been important gains in terms of increased political and electoral participation of women, enhanced press freedom, and increasingly active civic movements. Although the process of democratization is yet to take deeper roots, the success achieved so far was not inconsequential prompting many observers to term Bangladesh’s experience as a role model of “moderate Muslim democracy”.3

C. Progress in Cross-Country Perspectives

1.16 Bangladesh’s progress also stands out in cross-country comparisons. This supports the proposition that higher social/ human development outcomes can be achieved even at a lower level of per capita national income. Bangladesh’s growth performance was relatively modest with a per capita GDP growth of about 2 per cent per annum (Annex Table 1). The growth performance started to improve only in the nineties. Similarly, the pace of income-poverty reduction was very slow. During the period between early eighties and early nineties, the incidence of income-poverty declined by 0.8 per cent per year in Bangladesh compared with 1.9 per cent for India, 1.4 per cent in Pakistan and 3.6 per cent in Sri Lanka.4

1.17 Notwithstanding the relatively slow income growth and modest pace of income poverty reduction, Bangladesh’s achievements in the broad area of human development were faster and, in some respects, remarkable.5 Although the level of social deprivations in Bangladesh is still high, the pace of improvement has been encouraging. Indeed, the pace of progress in reducing TFR, bringing down the level of under-five mortality, and lowering the prevalence of child malnutrition is not only higher than the average progress recorded in LDCs, but also stands out in the overall context of South Asia.6

1.18 The relatively higher social progress at a low level of income is also vindicated by the comparison of predicted (for a given level of per capita income) with the actual values of social indicators achieved by the country (Table 1). Compared with the predicted values, the actual progress recorded has been higher for the contraceptive prevalence rate, lower for population growth rate as well as for TFR and CBR, higher for life expectancy at birth and child immunization coverage, and lower for IMR. While there has been considerable progress in the expansion of literacy, the pace needs to be accelerated.7

Table 1

Social Development in Bangladesh: Predicted vs. Actual Values

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Note: The term ‘predicted value’ is an estimated value for the present (benchmark) level of national income. The figure is derived from the implied functional relationship between the indicators of interest (as given in the Table) and the level of per capita national income, the parameters of the relationship being estimated from the cross-country data.Source: Based on available data of 163 countries out of 210 obtained from ‘World Development Indicators, 1999’ published by the World Bank.

1.19 The notable success achieved by the country at a relatively low level of income is, however, not a source of self-complacency for setting out the agenda for the poverty reduction strategy. For years, the country suffered from an overblown negative image. Bangladesh’s growth potential was assessed at best as modest with little scope for modernization and structural change. A brief account of the successes at the beginning will help restore some balance in the distorted self-negating perception about our history conditioned partly by an aid discourse characterized by dependence and influence. This is also necessary to draw attention to the realm of the possibilities amidst conceivable odds and adversities, that all is not lost, that a break-through is achievable even in the most trying of circumstances.

D. Structure of the Paper

1.20 The paper is divided into seven chapters, each addressing a lead question. The first chapter addresses the question as to “what are the broad lessons from the past development experience”. It captures the salient features of social progress notwithstanding the challenging odds facing the country. The second chapter addresses the question as to “where we stand now in terms of poverty and social indicators”. It reviews the trends of poverty to set the benchmark for the subsequent discussion on poverty targets as well as anti-poverty policy and institutional actions necessary to achieve the targets. The third chapter addresses the question as to “what do the voices of the citizens suggest”. It discusses the key messages and concerns—focusing on the progressive gains and regressive moments emerging from the broad-based consultations with various stakeholders. The fourth chapter addresses the question as to “where we would like to go by the year 2015”. It sets the major targets and goal posts sketching a transition path for Bangladesh. The fifth chapter addresses the question as to “how we are going to reach the social targets”. It highlights major policies and institutional measures required to achieve the long-term poverty reduction and social development objectives. The sixth chapter addresses the question as to “what would be the macroeconomic framework for poverty reduction strategy in the medium-term”. It proposes a financing plan, outlines the broad parameters of the macroeconomy, sets the fiscal targets, and projects the growth parameters consistent with the long-term goal of poverty reduction and social progress. The seventh and final chapter addresses the question as to “how do we know that we are reaching our targets”. It presents an institutional framework for monitoring and evaluating the poverty reduction targets and social development goals.

E. Summary Points

1.21 Bangladesh had adverse initial conditions at the start of its journey three decades ago. With one of the most vulnerable economies of the world characterized by extremely high population density, low resource base, high incidence of natural disasters, and extremely adverse initial circumstances associated with the inheritance of a war-ravaged economy, the implications for long-term savings, investment, and growth were deemed extremely bleak. Notwithstanding the early negative predictions, Bangladesh has achieved considerable success in several spheres such as population control, reduction in child mortality and child malnutrition, disaster mitigation, mainstreaming women into the development process, catalyzing grass-roots activism through NGOs and CBOs, and in making democratic transition. The growth performance and income-poverty reduction have also improved in the decade of the nineties compared with the previous decades, though much leaves to be desired in these areas. These successes show the importance of undertaking public action (through the Government and non-government sectors) at low-income level to realize higher social possibilities. These signs of improvement indicate that development is possible even in the most trying of circumstances. Bangladesh which was once termed ‘the test case of development’ may indeed represent a learning site for keeping the hopes alive for other equally less fortunate post-colonial societies with adverse initial conditions. This would be especially important in the context of overcoming the persistent economic pessimism and hopelessness—‘Afro-pessimism’ is a case in point—that is often cited in relation to the most disadvantaged parts of the developing world.

Chapter 2 Poverty State of the Nation

2.1 In this chapter, we review the poverty situation of the country. Poverty, as is known, has manifold expressions, many dimensions and, indeed, many roots. Given the multidimensionality, it is not difficult to see why all routes, income and non-income, matter for combating poverty in the country. Poverty, seen in this context, cannot be conceived as something reducible or summarily expressible in terms of quantitative indicators alone. What is critical is to recognize the heterogeneity of voices and perspectives expressed in economic as well as socio-cultural terms such as class, gender, caste, ethnicity, and community. Any meaningful poverty reduction strategy for Bangladesh needs to be based on a multidimensional approach with due weights given to all relevant dimensions (where the “weights” are determined by the voices of the poor themselves).

A. Broad Trends over Last Decades

2.2 In this section, poverty trends are reviewed in terms of income-poverty and human-poverty.

Trends in Income-Poverty

2.3 Bangladesh made notable progress in income-poverty reduction since Independence.1 The income-poverty trends since the early nineties based on the unit-record data of the Household Income and Expenditure Survey (HIES) show the following pattern. Between 1991/92 and 2000, the incidence of national poverty declined from 58.8 to 49.8 per cent, indicating a modest reduction rate of 1 percentage point per year. The declining trend remains valid for other poverty measures as well (Table 2). The results further show that progress on reducing the head-count index of poverty was better in urban areas. However, rural areas displayed better progress in reducing the depth and severity of poverty, as captured by trends in poverty gap and squared poverty gap, respectively.

Table 2

Trends in Poverty and Inequality in the Nineties

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Source: BBS, Preliminary Report of Household Income and Expenditure Survey 2000, Dhaka, 2001 and World Bank, op. cit.

2.4 Additional evidence from the Bangladesh poverty literature based on HIES grouped distribution data maps the progress in poverty reduction since the early eighties (see Annex Tables 3 and 4). The results broadly indicate that the progress was faster during the nineties compared with the eighties. The faster pace of poverty reduction in the nineties is attributable to the accelerated growth in consumption expenditure (income).2 The comparative progress was uneven between rural and urban areas. The pace of rural poverty reduction was slow in the eighties, but became faster in the nineties. The reverse is true for the urban areas.

2.5 Poverty trends are influenced by the contemporaneous changes in inequality. Inter-decade contrasts are noticeable in this respect as well. Thus, the level of inequality, as measured by consumption expenditure distribution, showed very little change during the eighties (Annex Table 4). The picture changed during the nineties as the Gini coefficient rose considerably, with urban inequality rising much more than rural inequality. Thus, during the period between 1991/92 and 2000, the level of consumption expenditure inequality increased from 30.7 to 36.8 per cent in urban areas, and from 24.3 to 27.1 per cent in rural areas (Table 2). The rising trends in inequality is possibly one important reason as to why the poverty reducing effects of accelerated growth were not translated in full in the nineties. The analysis based on the ‘growth incidence curve’ shows that growth in rural areas was broad-based while urban growth mainly benefited the relatively affluent.3 Even though average growth in mean per capita expenditures over the nineties was lower in rural areas than urban areas (1.7 per cent vs. 2.3 per cent per year), it was more evenly distributed across different expenditure groups. In contrast to the rural areas, the difference in growth rates across the income distribution in urban areas is striking: the average growth rate for the bottom 20 per cent was less than one-third the rate for the top 20 per cent of the urban population (0.8 per cent vs. 2.9 per cent per year). The sources of rising inequality are linked with the uneven spread of economic and social opportunities, unequal distribution of assets especially in respect of human capital and financial capital, growing disparity between urban and rural areas as well as between developed and underdeveloped areas.4

2.6 In addition to sectoral variation, considerable regional variation in poverty is noticeable. Dhaka and Khulna (including Barisal) divisions have much lower incidence of poverty than Rajshahi. Progress in poverty reduction over the nineties has been unequal across regions, with rapid progress in Dhaka division and very little change in Chittagong (including Sylhet) division. There is considerable district-level variation in poverty, as suggested by the district level agricultural wage data as well as various indicators of social deprivations such as illiteracy and child mortality. Regional variation in poverty is also influenced by the incidence of natural hazards and tends to be higher in disaster-prone areas. The level of poverty is typically higher for the landless, especially those who have agricultural wage labor as their principal occupation, and for those who are engaged in marginal occupations and skills. Poverty and social deprivations tend to be higher in case of the hill people of the Chittagong Hill Tracts (CHT) and for tribal population residing in other parts of the country.

2.7 Income (consumption) differentials between the poor and the poorest are important aspects of the poverty reality in Bangladesh. The estimate can vary depending on the definition of ‘extreme poverty’ used.5 Whatever the definition adopted, it appears that at least about 45 per cent of the poor population of Bangladesh currently subsist in extreme poverty. The progress in tackling the incidence of extreme poverty has not been satisfactory and needs to be taken up as a priority area within the context of the proposed strategy. Several layers of economic and social deprivations can be identified under the broad rubric of extreme poverty, including the persistence of specific chronic poverty groups. The latter includes a heterogeneous mix of identities, including elderly poor, disabled people, the shelterless, the child-headed households, the female destitutes, socially marginalised ethnic groups, deprived castes, and those engaged in dying occupational groups, to name a few. There is a considerable interface between the persistence of chronic poverty and unfavorable agricultural environments (e.g. salinity-prone, flood-prone, river-erosion prone, drought-prone areas). Multiple and overlapping vulnerabilities such as the longer duration in poverty often spanning generations, adverse interplay between vulnerable ecology and chronic social disadvantages, and very high level of consumption short-falls and high food insecurity (with frequent exposure to starvation) make a compelling case for giving priority to the extreme poor in designing social policy agenda under the proposed strategy.

2.8 Significant gender disparity also exists in income-poverty. This is evidenced by several indicators.6 First, the incidence of extreme poverty (however defined) is generally higher for the female-headed, female-managed, and female-supported households. Second, both Labor Force Survey (LFS) and micro-level household surveys point out that female workers earn considerably less than the male workers. Third, lower average consumption for females is also evident from the persistent gender inequality in severe malnutrition, mortality, and morbidity.

Trends in Human-Poverty

2.9 Human-poverty trends also show considerable improvement. The human poverty index which stood at 61 per cent in the early eighties (1981/83) has declined to 47 per cent in the early nineties (1993/94) dropping further to 35 per cent in the late nineties (1998/00).7 The index of human poverty declined by 2.54 per cent per year compared with 1.45 per cent in the national head-count ratio for income-poverty over the last two decades.

B. Trends in Rural Poverty

2.10 Available evidence indicates faster progress in rural poverty reduction in the nineties compared with the eighties. According to HIES data, the incidence of rural poverty, which declined by only 0.9 percentage point between 1983/84 and 1991/92, has gone down by 9.3 percentage points between 1991/92 and 2000 (Annex Table 3). The higher progress in the nineties is also indicated by alternative source of data such as the 62-village panel data generated by BIDS. Thus, the incidence of rural poverty marginally increased from 57.5 per cent in 1987/88 to 59.3 per cent in 1989/90; poverty situation improved in the subsequent period as the rural head-count declined to 51.7 per cent in 1994. Even though the pace of poverty reduction has accelerated in the nineties, the overall pace of reduction has been modest. This modest poverty reduction rate has been expressed as being restricted to about “I percentage point decline per year”. This is borne out by virtually all survey data for the nineties, including HIES and micro-level panel surveys. A recent update of the BEDS panel survey available for a sub-set of 16 villages shows a decline in the incidence of rural poverty from 64.8 per cent in 1987/88 to 53.9 per cent in 1999/00.8 Data collected from the Poverty Monitoring Survey (PMS) carried out by BBS with support from the MIMAP-Bangladesh Project also show similar modest rate of rural poverty reduction: from 47.9 per cent in 1996 to 44.9 per cent in 1999.9

2.11 The immediate question that springs up is—what explains the relatively modest progress in rural poverty reduction in the nineties? The slow progress in rural poverty reduction is especially intriguing in the backdrop of higher agricultural growth witnessed during the second half of the nineties. One possible explanation is that much of the agricultural growth came from the expansion of HYV rice production, especially during the winter season. The increase in productivity in rice cultivation has, however, not been translated into higher farm incomes due to slower increase in paddy prices compared to the wage rate and fertilizer prices. The nominal wage rate increased almost at par with the consumer price index, but because of the slow increase in the nominal price of paddy, the entitlement of staple food for the land-poor households improved substantially. It is possible that increase in rice production benefited the land-poor labor-selling households more through the effects of low staple prices than the rice farmer households because of the relatively small farm size in the country and the unfavorable terms of trade of rice. Thus, the improvement in rice technology can make only a modest contribution to increase in household income and hence, the rate of reduction of income-poverty in rural areas. It appears, therefore, that while agricultural growth will continue to play a major role in rural poverty reduction process, its quantitative impact on poverty reduction would be contingent on diversifying to high-value added crops as well as non-crop agriculture such as poultry, livestock and fishery sectors. The same applies to the prospects for non-farm economy in rural poverty reduction where the key challenge would be to link the poor producers with high value-added non-farm activities.

C. Trends in Urban Poverty

2.12 The head-count index of urban poverty declined from 34 per cent in 1991/92 to 26 per cent in 2000. According to HIES data, the entire decrease in urban poverty during the nineties have taken place during the first half of the nineties while the second half experienced deterioration in urban poverty situation. The worsening of urban poverty situation during the second half of the nineties was almost entirely driven by negative growth in per capita real consumption.

Simulating National Poverty with Macro Growth Data

A comparison between the rate of change in per capita consumption expenditure between HIES and National Accounts series shows considerable discrepancy. The rate of per capita consumption expenditure growth as per HIES was considerably higher than the matched figure obtained from National Accounts during the first half of the nineties while the reverse is true of the second half of the nineties. Thus, during the period between 1991/92 and 1995/96 the growth in nominal terms in per capita consumption expenditure for the national sample was assessed at 8.7 per cent nominal per year as per HIES data compared with only 6.1 per cent per year as per national accounts. Note that per capita GDP grew at a rate of 7.2 per cent per year during the period. In contrast, the corresponding annual growth in consumption expenditure between 1995/96 and 2000 was estimated to be only 4.2 per cent as per HIES compared with 6.3 per cent according to National Accounts. The per capita annual GDP growth in nominal terms was considerably higher during this period (7.1 per cent). What are the implications of these differing growth rates on the level and trends in national poverty? A simple sensitivity test has been done to check the robustness of the conclusions regarding poverty trends based on HIES. Using the distribution of national consumption expenditure data with the alternative survey mean consistent with the rate of growth suggested by the series of National Accounts on per capita private consumption and per capita GDP one can derive two alternative series of equally plausible poverty estimates. The results indicate a complete reversal of national poverty trends between the sub-periods. If one uses the growth rate as implied by National Accounts private consumption, then the incidence of national poverty would show a marginal increase by 2 percentage points in the first half of the nineties, while decreasing impressively by 10 percentage points in the second half of the nineties. If one uses instead the growth rate as implied by per capita GDP, then the incidence of national poverty would display a slight drop by less than 1 percentage point during the first half, while registering an impressive decline of about 11 percentage points during the second half.

Which of the two—the HIES or the National Accounts—gives the correct picture of rate of progress over the two halves of the nineties? While the debate on the growth trends continue, two routes may be followed for poverty assessments. First, when it comes to using the HIES data, it is, perhaps, desirable to focus on the broad trends in income-poverty (or consumption-poverty) over the entire decade rather than on sub-period fluctuations. Looking at other sources of data such as micro or panel survey available from non-HIES sources one may try to fill in the gaps in income-poverty information. Second, apart from income-dimensions of poverty more extensive use of measures reflecting non-income dimensions of poverty would be desirable from the discourse-broadening point of view as well as from the premise of assessing overall progress. This is not to suggest that statistics on non-income dimensions of poverty are free from controversies, but the degree of divergence in assessing trends is much less apparent in these respects.

2.13 Available information from other sources, however, provides conflicting evidence. The national accounts data for the period show that real per capita national private consumption increased by about 14 per cent between 1995/96 and 2000 and it is more likely that per capita urban private consumption growth was higher compared with that for rural areas.

2.14 The PMS indicates that, between April 1996 and May 1999, the urban poverty gap index—a distributionally sensitive measure of poverty—declined from 14.2 per cent to 11.2 per cent. The squared poverty gap index for urban areas also declined from 6.1 to 4.2 per cent indicating improvement in the conditions of the poorest of the poor in urban areas. The incidence of urban head-count shows a very small decrease—from 44.4 to 43.3 per cent.

2.15 The evidence from the Nutritional Surveillance Project (NSP) of Helen Keller International (HKI) in urban slums of Dhaka, Chittagong, and Khulna shows that there has been an overall improvement in the nutritional status of under-five children residing in urban slums in all three cities between 1996 and 2000.

2.16 In short, these alternative evidence casts some doubt on negative per capita real consumption expenditure growth in urban areas during the late nineties as indicated by the HIES 2000. This suggests that the HIES has possibly overestimated growth in urban per capita consumption expenditure between 1991/92 and 1995/96 and underestimated similar growth between 1995/96 and 2000.

D. Dimensions of Human Poverty

2.17 Three broad dimensions of human poverty are considered: (a) deprivation in health, (b) deprivation in education, and (c) deprivation in nutrition (including food insecurity).

Deprivation in Health

2.18 Infant mortality rate (IMR) stood at 153 deaths per 1000 live births in mid-seventies. The recent estimate provided by the DHS for 2000 puts the figure at 62. The under-five mortality rate was over 250 deaths per 1000 births during the early seventies which, according to DHS, declined to 83 in 2000. Notwithstanding these improvements, significant gender discrimination continues to persist. In the 1–4 age group, female mortality is about one-third higher than male mortality and the difference has remained nearly unchanged between the DHS surveys of 1993/94 and 1999/00. The rural-urban gap in infant and child mortality has declined: in 1993/94 DHS, the gap was 26.8 per cent which declined to 8.3 per cent in 1999/00 DHS. Similarly, the gap for under-five mortality dropped from 34 to 16 per cent between the two surveys.

2.19 There exist considerable socioeconomic differentials in mortality. Infant mortality is about 70 per cent higher for the poorest quintile than for the richest group. The gap for under-five mortality is higher (about 86 per cent). In terms of gender, the poor/rich ratio is higher for male in case of infant mortality, but higher for female in case of under-five mortality. The higher level of under-five mortality for female suggests that female disadvantage is an independent consideration in equity over and above the traditional poor/rich divide requiring additional gender focus in designing pro-poor health programs.

2.20 Both fertility and mortality situations in Bangladesh raise concerns for poverty reduction. The TFR has plateaued at 3.3 since mid 1990s. The maternal mortality rate (MMR) is an important indicator of well-being. The Bangladesh Maternal Mortality Survey 2001 indicates a mortality rate of 320 deaths per 100,000 live births in the period 1998 to 2001 using the method based on household deaths with a verbal autopsy identification of maternal deaths. Clearly, access to choice and reproductive health (RH) care continue to remain a major weakness in the health care system in Bangladesh and this affects women’s status and their empowerment. RH is a social development objective in itself and has critical linkages with other poverty reduction programs. Provision of quality RH services continues to be limited to rural areas only and targeting the urban poor remains a daunting problem. Moreover, significant socio-economic differentials persist in maternal health care. Thus, 69 per cent of the households belonging to the lowest wealth quintile do not access any antenatal care compared with 22 per cent in the richest quintile.

2.21 Available evidence suggests a high degree of morbidity in Bangladesh. The prevalence of morbidity has been assessed at 188 per 1000 population in the HDS of BBS in 2000. Diseases for which comparable inter-temporal data are available show that there has been a considerable compositional shift in the prevalence of morbidity with some improvement for diseases such as diarrhoea, malaria, tuberculosis, anemia, filariasis, goitre, kala-zar, whooping cough, polio, and diphtheria. Although comparable data are not available, indications are there that the share of non-communicable diseases such as hypertension/ cardiac ailments, diabetes, injuries due to road accidents and physical violence, mental health problems has gone up. There is also the menacing emergence of major public health problems such as dengue fever and arsenicosis. The other formidable challenge is to limit the prevalence of HIV/AIDS in Bangladesh. The HDS 2000 shows considerable sex differential in case of morbidity. The prevalence rate is about 11 per cent higher for female than male. The poor are more prone to illness and disease than the non-poor and this cuts across various classification of social position. Moreover, the diseases of the poor represent a much wider band of vulnerability than the current coverage under the Essential Service Package. These diseases of the poor provide one important basis for rethinking the current strategy.

Deprivations in Education

2.22 Impressive progress has been achieved in expanding basic and elementary education in the nineties, at least judged by the pace of quantitative expansion. Underlying the progress in basic education is the rapid expansion of school enrollment at the primary level. Thus, the gross enrollment in primary schools increased from 59 per cent in 1982 to 96 per cent in 1999. The gender gap in education is closing at an impressive pace. Both DHS and HIES data point out a clear female edge over male at primary and junior secondary (VI-VIII) levels. There is, however, considerable gender gap in enrollment in age group 16–20, which becomes especially pronounced after 21. While one cannot undercut the success already achieved in promoting gender equality at primary and junior secondary level, Bangladesh needs to make a major effort to achieve gender equality at higher secondary and tertiary levels. There is also the problem of considerable drop-out from the system, especially among the extreme poor, which needs to be seen as linked with the problem of deteriorating quality of education affecting the apparent lack of incentive to learn (and to teach well), over and above the problem of poverty as barrier to universal primary and secondary education. This entails a huge loss of human potential to the future of the nation. Besides, the content of education needs to be thoroughly modernized responding to the needs of the ‘age of globalization’, made consistent with national priorities, rendered socially more relevant and responsive to evolving market opportunities. Social education especially gender sensitive education needs to play an important role in the curricula at appropriate levels. For example, population education programs may help in raising awareness and need to emphasize RH of youth and adolescents, especially to contain prevalence of STD and RTI infections.

Trends in Child and Maternal Malnutrition

2.23 The nutritional situation started improving since the mid-eighties. According to BBS data, the rate of stunting for children in the age group of 6–71 months which was 68.7 per cent in 1985/86 dropped to 49 per cent in 1999/00. The proportion of underweight children in the similar age group has gone down from 72 per cent in 1985/86 to 51 per cent in 1999/00. The DHS data, available for the second half of the nineties, show that the rate of stunting for the age group of 0–59 months reduced from 55 to 45 per cent. Similarly, the rate of underweight declined from 56 to 48 per cent between 1996/97 and 1999/00. The NSP data collected by HKI also confirms the trend of improvement in the child nutritional situation in the nineties in both rural and urban slums. Notwithstanding these improvements, the overall level of child malnutrition in Bangladesh remains one of the highest in the developing world, representing one of the most pressing concerns under the poverty reduction strategy.

Inequality in Malnutrition

2.24 Socioeconomic inequalities in malnutrition—as measured by standard anthropometric measures—appear to be much higher than in case of mortality. While the poor/rich ratio was 1.76–1.85 for infant and child mortality, it was 2.15 for stunting and underweight. This is especially true in case of child malnutrition as high initial malnutrition adversely affects child health, child schooling performance, and child’s likelihood of getting high productivity jobs, having implications for the future productivity of the nation.

Table 3

Rates of Child Malnutrition among Under-five Children

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Note: * 0-59 months, ** 6-71 months, *** 6-59 months.

2.25 Notwithstanding the general improvement in the child nutritional status over the nineties, the female disadvantage in malnutrition continues not only to persist, but has also increased over the period. The DHS for 1996/97 and 1999/00 show that girls are more likely to be stunted and underweight than boys. The female-male gap for the severely stunted (percentage below-3 SD) increased from 10 per cent in 1996/97 to 16 per cent in 1999/00. Similarly, the gap for the severely underweight (percentage below-3 SD) increased from 19 per cent to 26 per cent over the same period. The gender inequality is sharper in case of severe malnutrition compared with moderate malnutrition—a striking similarity to what has been observed with respect to greater feminization of extreme poverty. As expected, child malnutrition is considerably higher in rural areas than in urban areas. The 1999/00 DHS shows 47 per cent of rural children as stunted and 49 per cent as underweight compared with the urban figures of 35 per cent as stunted and 40 per cent as underweight.

2.26 Maternal malnutrition, as proxied by body-mass index (BMI) less than the critical value of 18.5, turns out to be very high in Bangladesh. Applying this criterion, DHS estimates the proportion of malnourished mothers at 45 per cent in 1999/00, showing some improvement over 52 per cent estimated for 1996/97. The rural-urban gap in maternal malnutrition, as measured by BMI, has increased during the period—from 50 to 63 per cent. The high rate of malnourished mothers in the poor households has adverse implications for poverty reduction. A high priority needs to be assigned to reducing maternal malnutrition in the country. Such programs should give priority to mothers from the poor households due to existing high degree of inequality in maternal nutrition.

E. Summary Points

  • Bangladesh has achieved considerable progress in reducing income-poverty and human-poverty since Independence. The progress on human poverty reduction front was faster than in case of income-poverty.

  • The rate of income-poverty reduction was slower in the eighties compared to the nineties. However, the overall pace of decline in income-poverty has been modest, being restricted to the reduction rate of 1 percentage point per year.

  • The rising trends in income (consumption) inequality in both rural and urban areas are disturbing and need to be tackled as an independent area of policy and institutional concerns.

  • Considerable regional variation in income-poverty and social indicators is noticeable.

  • Significant gaps exist between the poor and the poorest, making the case of the ‘extreme poor’ as a priority issue in the social policy agenda.

  • Even though the pace of improvement in social indicators has been impressive, this has not often accompanied by gender equality. A significant gender disparity persists in both income and human poverty, especially at the lower end of the income distribution. The female disadvantage in child mortality (1–4 years) has remained persistent, while the female-male gap in acute malnutrition (as represented by severe stunting and wasting) has increased.

Chapter 3 Participatory Consultations on Poverty Reduction Strategy: Emerging Lessons

3.1 The past decade has been both a time of hope and a time of despair. The consultations with the poor held in both rural and urban areas as well as with the civil society confirmed several positive trends as well as negative concerns.1

A. Positive Achievements

3.2 The grass-roots consultations point to general improvement in several quantitative indicators. These include: increase in educational and health facilities, increase in enrollment at primary and secondary levels, reduction in gender inequality in education, better access to preventive health care, greater awareness about diseases and environmental health, and improvement in child nutrition status. The consultations indicate the general favorable effects of government-supported targeted cash/food programs such as old-age pension schemes, vulnerable group development (VGD), food-for-education (FFE), and food-for-works (FFW). The consultations also reveal the potentials for further improvement in each area both in terms of equity and efficiency through ensuring closer monitoring, coordination and accountability of relevant development agencies at the field level.

3.3 The grass-roots consultations indicate important changes in market arrangements having implications for the livelihoods of the poor. Considerable labor market dynamism has been noted with pronounced role for seasonal migration, tightening of the labor market and discernible shift from casual to contract labor, and generally rising agricultural wages. The consultations suggest the growing role of remittances, and faster expansion of non-crop (especially, poultry and fishery) and non-farm (especially, transport, trade, and services) activities. A perceptible increase in employment opportunities both within and outside of agriculture in the rural areas has been noted with rising share of peri-urban employment and seasonal migration. The consultations also indicate considerable change in the tenancy market, with gradual shift from share-cropping to fixed cash tenancy in case of HYV cultivation during the winter (boro) season. Remarkable change has been noted in the credit market, with a generally declining importance of the role of traditional moneylenders and attendant extra-economic coercion. The credit access on the part of land-poor—especially for emergency purposes—appears to have increased, with women playing an increasingly important role both as small savers and small lenders.

3.4 On the well-being dimensions, acute deprivations measured in terms of food and income entitlements seem to have improved. Enhanced access of the poor can be noted in terms of some basic non-income dimensions of poverty such as schooling and health care and access to water supply and sanitation. Visibility and voice of women in intra-household and extra-household contexts have also increased. Perhaps, the singular idea that emerges from the participatory consultations at all levels relates to the deep sense of awareness relating to under-performance relative to potentials in every respect. There seems to exist a general agreement that through improved governance and better coordination among the government, the private sector and the civil society, the major development impasses facing the country can be overcome.

B. Areas of Key Concerns

3.5 The grass-roots consultations have also revealed several key concerns that represent powerful negative tendencies in the development experience of the nineties2. As one participant—a day laborer in Rupsha thana—puts it, “positive developments in our lives have been precariously counterbalanced by equally powerful negative tendencies”.

Law and Order and Economic and Social Violence

3.6 Law and order has been identified as a critical concern. This has been attributed to weakening of governance, criminalization of politics, corruption, violation of citizen rights, break-down of traditional moral order, and intolerant political culture. The law and order situation is marked by insecurity and violence, having negative implications for poverty reduction. This also reveals several interlocking aspects of vulnerability and the often-neglected psychological aspects of poverty.

3.7 The consultations point out the need for democratizing the state institutions operating at the local level including reform in the police system. The identified objectives of reforms include accountability of the law-enforcing agencies to the civil administration, greater sensitivity to issues of human rights, increased transparency and enhanced effectiveness. The growing violence against women both in public places and at home has been identified as a major social concern in urban as well as rural areas. This represents a serious constraint on the physical mobility of women, acts as a hindrance to women’s participation in market activities especially in the labor market and restricts their pursuit of education beyond the primary level and access to health services. The emergence of mastanocracy (local terrorism) imposing considerable “transaction costs” on normal economic activity has been singled out as a major barrier to private investment and socially secure life. The emerging picture is strikingly uniform in this respect—from Rupsha of Khulna and Sadar Upazilla of Barisal to Mìrsharaì in Chittagong and Poba Upazilla in Rajshahi, from Sadar Upazilla of Sylhet to Savar in Dhaka. Patron-client politics, rising educated unemployment, criminalization of economic and political activities, and lack of adequately effective state machinery reflected in the declining enforcement capability have been cited as the major triggers of organized crime and violence and principal causes of persistent law and order problems and widely shared feeling of citizen insecurity in the country.3

3.8 The grass-roots consultations have provided important insights regarding the social background of the local terrorists as well. While there exists considerable social heterogeneity, the terrorists are mostly high school or college dropouts, suggesting the possibility of interface between educated unemployment and terrorism. The political patronage was mentioned as one of the important concerns. The consultations at the divisional level have stressed the need for setting up of an independent judiciary, an independent anti-corruption body, a powerful office of the Ombudsman, and highlighted the role of a free press and active media. Many grass-roots participants have advocated the setting up of separate TV channels for the poor, which would be focused on development issues as well as programs that promote awareness about citizen rights and civil liberties. Many participants also supported recruitment of women police in large numbers, including the idea of hiring of female sub-inspectors for each thana; this was seen as an instrument of socially empowering women at the community level as well as facilitating more effective access to justice.

Effective Local Government and Decentralization

3.9 The consultations reveal the importance of local government as one of the most desired institution for improved governance, accelerated economic growth, and faster poverty reduction. Attention was drawn to the fact that Bangladesh has the highest population density in the world (excluding the city-states) and it is difficult to govern such a vast mass of population from “one centre”. Thus decentralization and devolution of power has been suggested as a technical necessity for good governance rather than a matter of political choice. A broad-based suggestion emerged in favor of creating a multi-tier ensemble of effective local government bodies at union, thana, and district levels. The consensus view was that public action can have maximum impact on poverty only with the support of a strong (with adequate financial and administrative power) and popular (elected with people’s mandate) local government. Without having effective structures of local governance at union and thana levels, the issues of improving quality and enhancing accountability of public services at local level cannot be effectively addressed.

3.10 The consultations indicated broad areas where local government can and must play a critical role. One such area is the management and coordination of many nation-wide programs such as targeted food or cash assisted programs designed for the poor. Similarly, the consultations strongly favored local government’s involvement (with active support from the community) in the management of schools, community clinics, union-level family planning and health centres, and thana health complexes. A strong and effective local government was also considered necessary for coordinating various government and nongovernment programs in an area thereby reducing wastage and duplication, and facilitating greater synergies. The consultations strongly recommended the development of local-level democracy through the promotion of grass-roots organizations as well as fostering community activities that encourage greater social solidarity. The consultations have broadly suggested the need for ensuring effective women’s participation in local government affairs by addressing both representational and functional aspects. The developmental role of the elected women representatives needs to be strengthened further.

3.11 The consultations suggested that the local bodies should be given adequate budget allocations on a matching grant basis keeping in view the poverty ranking of the area. While decentralizing without capacity building at the local level would not produce the desired results, it was argued that this should not be used as an argument against devolution of power. The support for an effective local government and decentralization at various levels has been very strong throughout the consultations irrespective of administrative divisions and socioeconomic backgrounds of the participants.

Quality of Education, Health, and Public Services

3.12 The grass-roots consultations pointed out many weaknesses in the current pattern of delivery of education, health and public services. Many rural participants expressed concerns over teacher absenteeism, hidden costs in getting admission at the primary level, leakage in food-for-education (FFE) and in stipend schemes for girls attending secondary schools, low quality of education, and rising costs for meeting private tuition expenses. Poor quality of teachers and inadequate learning materials were cited as major weaknesses.

3.13 Participants in general voiced negative assessments about the effectiveness of food-based assistance schemes and suggested the need for effective cash-based delivery systems. The food-transfer was advocated only in the context of emergencies and very poor areas. The abolition of the financing of food-assisted programs through GOB procurement beyond the critical minimum need for maintaining overall food stock at the national level was advocated. These measures were seen as instruments for improving efficiency in the targeted programs and reducing wastage and corruption.

3.14 In both rural and urban consultations, a critical concern among the poor was the widening of the “education divide” between the rich and the poor. The poor were not able to provide their children with quality education. Consultations suggested a multidimensional action program involving the provision of uniform curricula at the primary and secondary levels, increased teacher-student contact hours, lowering the size of the student-classroom ratio, ensuring supply of trained Science, Mathematics, and English language teachers, periodic teachers training and quality inspection, adequate lab facilities, playground and extra-curricular activities, accountability to the local community and to parents. A particularly recurrent theme in these consultations was the issue of inappropriate functioning of the School Management Committees (SMCs).

3.15 Most participants voiced serious dissatisfaction over the quality of health services available at upazilla and district hospitals. Doctor absenteeism, inadequate nursing services, poor quality pathological tests, lack of adequate diagnostic facility, overcrowding, lack of maintenance and unclean environment, lack of attention to the patients, lack of sensitivity to women patients, rising hidden costs involved in availing public services were some of the problems mentioned during the consultations. The consultations stressed the need for greater utilisation of the existing Union Health and Family Welfare Centre (UHFWC) and Thana Health Complex (THC) as the most urgent imperative. The consultations recommended that every union should have a functioning UHFWC and every thana an effective THC for greater impact on curative health of the rural population. Strengthened preventive public health measures such as improved and safe water supply and hygienic sanitation were also seen important in reducing disease transmission and relieving burden on curative health services.

3.16 The general view of both pre-and post-draft consultations was in favor of an effective local government playing a critical role in the delivery of both public education and health programs at the community level. Accordingly, the consultations advocated the inclusion and mainstreaming of the local government responsibility in a major way in the future policies of the Government on public health and education, bringing it to the center stage of decentralized development.

3.17 Bangladesh’s health program is enriched by the contributions made by NGOs. The discussion in general envisaged a greater role for NGOs as provider of educational and health services in rural and peri-urban areas both as sources of alternative finance and as mobilizing agents. An enhanced role for NGOs as provider of primary and secondary education—beyond their traditional focus on non-formal primary education—was suggested during consultations with the poor. Similarly, the consultations rated positively the delivery of curative health care services by the NGOs at secondary and tertiary levels, i.e., beyond its traditional role as provider of primary health care. Thus, suggestions were made that the relatively successful experience of Family Health Clinic providing curative services may be extended to all thanas. The NGOs were also seen as important players in the implementation of the Community Health Clinic (CHC) program, community empowerment projects, VGD, advocacy programs and women’s empowerment through employment.

3.18 In general, the grass-roots consultations advocated higher allocations to education and health for financing quality services, on the one hand, and indicated the need for greater involvement of the local government in the overall supervision and management of these sectors.

3.19 The concerns expressed over the quality of public services were not restricted to education and health sectors. The urban consultations revealed equally serious concerns regarding other basic social services such as poor housing and sanitation, deteriorating quality of water, irregular power supply, poorly maintained roads and culverts, long waiting period as well as poor quality of telephone services, cumbersome billing facilities, and rising hidden costs in getting access to basic public services. Municipal services were rated very poor. In rural consultations an additional concern related to poor quality of agricultural extension services, especially with respect to promoting new production technology and marketing skills in the area of vegetable cultivation, poultry and livestock rearing, and fish cultivation.

Coordination among Development Agencies and Institutions

3.20 The consultations revealed the need for forging greater coordination among diverse stakeholders functioning at the local level such as various government agencies and departments, NGOs and CBOs. The potential areas of development cooperation encompass the entire spectrum of service delivery involving agriculture, livestock, fishery, education, health, nutrition, disaster mitigation, social safety net, microcredit, and social mobilization. A particularly disturbing aspect has been the lack of coordination of development activities among the NGOs themselves, leading to fragmentation of efforts, duplication and wastage, and lack of synergies.

Remunerative Employment and Economic Opportunities

3.21 A considerable part of consultations was devoted to ways and means to accelerate the pace of income-poverty reduction. The discussion pointed out the beneficial effects of rice-based new technology and stressed the importance of developing such technology for unfavorable environments. The consultations noted the impressive growth of poultry and fishery sub-sectors. Within non-agriculture, the development of road and marketing linkages and the attendant growth of transport, trading, and service sector employment were highlighted. The need for developing employment-generating sectors such as agro-processing and information-technology (IT) related industry for both domestic economy and export markets was emphasized. The role of information technology was viewed as important for generating employment for the graduates in both rural and urban areas.

3.22 The consultations at the divisional headquarters further identified the need for exploring the full potentials of sub-regional and regional cooperation. The participants emphasized the need for greater access to the regional and sub-regional markets and suggested a pro-active policy for developing trade-related infrastructure, pressing in international and regional fora for removal of non-trade barriers, and greater trade creations.

Physical Infrastructure

3.23 The consultations strongly emphasized the role of physical infrastructure in accelerating the rate of poverty reduction, especially in rural areas. The package includes eleven important elements: road, bridge, railway, waterway, safe water supply and sanitation, electricity, gas, storage, port, telecommunication, and information. The consultations underscored the need for expanding further the network of all-weather feeder roads in rural areas and drew attention to the problem of maintenance. The neglected areas of railways and waterways received particular attention, especially from the viewpoint of environment-friendliness of these modes of transport. The growth impact of electricity through its cost-reducing effects on use of irrigation equipment was emphasized. In addition, its direct impact on modernization of rural industry, contribution to longer working hours for commercial enterprises, along with favorable influence on social development was mentioned. The consultations stressed the importance of developing adequate storage facilities at the thana level, especially in promoting increasing commercialization of agriculture (vegetables, poultry, and fishery products). The critical importance of developing adequate and efficient port facilities figured prominently in consultations at divisional headquarters. The consultations strongly emphasized the need for extending telephone networks to rural areas and advocated greater competition and privatization in this area. Telecommunication would help in regional market integration and increase the effectiveness of the early-warning system for preventing disasters. Availability of information technology at the local level was advocated from the perspective of improving the overall system of governance as well. The post-draft consultations especially drew attention to the need for sensitiveness to the gender dimension in planning and designing infrastructure projects. Examples range from women and disabled-friendly transport system, installation of toilets for women in bus and railway stations, childcare facilities in workplaces, and similar measures. Building codes should also be designed to address the needs of the disabled.

Other Issues

3.24 The grass-roots consultations pointed out several issues, which demand additional attention. Thus, broad concern was expressed over the tendency of regionally unbalanced development, highlighting the widening gaps between infrastructurally advantaged and disadvantaged areas. The problems of environmentally fragile settings such as hill areas, char areas, river-erosion areas, salinity and flood-prone areas received particular attentions in this regard. An important area of concern was the lack of adequate participation of diverse categories of socially vulnerable groups such as those residing in ecologically vulnerable areas, such as cyclone-prone coastal areas and char and river-bank erosion areas, the tribal and the hill people, specific social categories such the disabled, women-headed households, and those engaged in marginal occupations. Another important issue was the need for developing social solidarity at the community level. While a plethora of poor people’s organizations such as micro-finance groups and samities had emerged at the local level, the extent of cooperation across the poor communities and groups (the bonding and bridging aspect) was considered low undermining a potential important source of faster poverty reduction and social development. The consultations also pointed to the persistent problem of polarized politics, lack of cooperation, mutual respect and trust among major political parties, lack of democratization of the political parties and processes acting as serious constraints on economic and social progress. A particular concern was expressed over the continued expression of ‘social poverty’ indicating in some areas and contexts the still continuing presence of general obscurantism, attitude of conformism and fatalism, ignorance and prejudices, and the persistence of a mindset against change.

C. Summary Points

3.25 Broad-based consultations around the issue of poverty reduction strategy have confirmed several aspects of progressive gains in the broad sphere of poverty reduction and social development over the past two decades. However, these have also indicated the fragility of the past success, suggested the points of worrying slippage and underscored the salient moments of regress. The latter relates to the following areas of citizen concerns: lack of physical infrastructure; law and order situation amidst incidence of organized crimes, extortion and economic violence; lack of effective local government and decentralization; poor quality of education, health, safe water supply and environmental sanitation, and other social services; lack of coordination among development agencies and institutions operating at the local level; lack of remunerative employment and economic opportunities; lack of social capital at the community level resulting in low-level of collective action; and lack of democratization of political processes.

Chapter 4 Major Milestones: Poverty Targets and Key Social Development Goals

A. The Vision

4.1 With the Constitutional obligation of developing and sustaining a society in which the basic needs of all people are met and every person can prosper in freedom and cherish the ideals and values of a free society, the vision of Bangladesh’s poverty reduction strategy is to substantially reduce poverty within the next generation. For this, poverty reduction (with special focus on the removal of hunger and chronic poverty) and social development (with particular emphasis on gender equality) have been made the overarching independent strategic goals. The vision proposed here adopts a comprehensive approach premised on a rights-based framework, which highlights the need for progressive realization of rights in the shortest possible time. It also takes into consideration Bangladesh’s previous official commitment to achieve the MDGs as well as social targets set in the PAPR with the ADB. Through adopting a comprehensive approach and by taking into account the country’s past international commitments and evolving national realities, the Strategy visualizes that, by the year 2015, Bangladesh would achieve the following goals/targets:

  • (i) Remove the ‘ugly faces’ of poverty by eradicating hunger, chronic food-insecurity, and extreme destitution;

  • (ii) Reduce the proportion of people living below the poverty line by 50 per cent;

  • (iii) Attain universal primary education for all girls and boys of primary school age;

  • (iv) Eliminate gender disparity in primary and secondary education;

  • (v) Reduce infant and under five mortality rates by 65 per cent, and eliminate gender disparity in child mortality;

  • (vi) Reduce the proportion of malnourished children under five by 50 per cent and eliminate gender disparity in child malnutrition;

  • (vii) Reduce maternal mortality rate by 75 per cent;

  • (viii) Ensure access of reproductive health services to all;

  • (ix) Reduce substantially, if not eliminate totally, social violence against the poor and the disadvantaged groups, especially violence against women and children; and

  • (x) Ensure comprehensive disaster risk management, environmental sustainability and mainstreaming of these concerns into the national development process.

B. Feasibility of Target Attainment

4.2 The poverty targets and social development goals are presented in Table 4. Given the pattern of economic growth, which is accompanied by rising inequality, the growth elasticity of poverty reduction for rural areas is estimated at -0.73, while the figure for urban areas is -0.64.1 Using these elasticities, the results, as presented in Annex Table 6, show that the 2015 only if the per capita rural consumption expenditure grows at a rate of at least 4 per cent per year. The calculations show that if the goal of reducing the incidence of national poverty prevailing the year 2000 by half is to be achieved by 2015 then Bangladesh needs to sustain a GDP growth rate of about 7 per cent per year over the next 15 years.2 It may be noted that the MDGs have been set within a time-frame of 25-year period with 1990 as the benchmark. This implies that Bangladesh can adopt a more feasible target setting in the light of MDGs by using 1990 as the benchmark year (as shown in Annex Table 7). However, the Government has made a conscious choice in favor of an accelerated development strategy for attaining poverty and social development goals in the shortest possible time. Major goal posts worked out in Table 4 by taking the 2000 figures as the benchmark estimates are premised on this vision. The question is: are these targets realistic?

Table 4

Major Goal Posts in Poverty and Social Indicators under an Accelerated Social Development Strategy with 2000 as the Benchmark Year for Target Setting

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Source of Benchmark Data: In come-Poverty (Table 2); Adult Literacy (BHDR 2000); Primary Enrollment (HIES 2000); Secondary Enrollment (HIES 2000); Tertiary Enrollment (HIES 2000); IMR (BDHS 1999/00); Under-Five Mortality (BDHS 1999/00); MMR (NIPORT/ Macro International); Life Expectancy (BHDR 2000); Population growth (BBS); Children Underweight (CNS 2000).Source of 1990 Data; Income-Poverty (Table 2); Adult Literacy (Population Census 1991); Primary Enrollment (APT 1990); Secondary Enrollment (APT 1990); IMR (SYB of BBS); Under-Five Mortality (SYB of BBS); MMR (SYB of BBS); Life Expectancy (SYB of BBS); Population growth (SYB of BBS); Children Underweight (BBS 1989/90).Note to the Table;1. The data for 2000 have been considered as the benchmark for making projections for the subsequent period in the light of MDG goals as well as development experience of the recent decade. The projections are based on the premise of ‘progressive realization of rights’ in the shortest possible time. A more modest projection based on 1990 as the benchmark data is given in the Annex Table 8.2. Primary and secondary enrollment rates are age-specific (net) enrollment rates as estimated from die survey data. Accordingly, they differ from gross enrollment rates estimated from secondary data showing higher level of educational attainment (official estimate being over 90 per cent).3. The estimate of literacy rate is not uncontroversial as it can vary depending on how literacy is defined. Accordingly, the benchmark estimate for literacy varies from 45 per cent (can both read and write letter) to 64 per cent (as defined under the ‘total literacy movement’). Ideally, the Census 2001 results can provide a definitive light on the issue.4. The estimate of children underweight for 1999 refers Lo the Child Nutrition Survey carried out by BBS in 1989/90 and refers to children aged 6–71 months. The recent estimates are available from two sources, namely, CNS 2000 and the DHS 1999/00. The DHS figure relates to children aged 0–59 months, while that for CNS refers to children aged 6–71 months. The draft strategy report in April 2002 used the DHS figure. However, for the sake of comparison with the 1990 survey, we have switched to the CNS data to represent the benchmark figure.5. Extreme poverty corresponds to population consuming less than 1800 kcal/person/day as per direct calorie method. Note that the incidence of so-called ‘very poor’ estimated by the World Bank method of setting ‘lower poverty line’ gives a much higher figure than the direct calorie method (34 vs. 20 per cent nationally in 2000). Given the large divergence, we have used the direct calorie measure, especially in the context of wider concern over the incidence of “hungry poor”.

4.3 A comparison of the projected targets with the actual pace of progress achieved during the nineties shows that for some indicators, while being higher than the historical trends, these are not far off the mark. Thus, the projected reduction rate for child mortality and child malnutrition is only slightly higher than the average progress recorded in the nineties. Given the renewed emphasis on population control, primary health care, and National Nutrition Program (NNP) and the possible added synergies expected from the incremental social benefits from greater investments in girl’s education and in general rising social awareness about public health, these targets in the area of child mortality and malnutrition are within the feasible range of attainment. The only possible exception is the target of lowering the overall incidence of income-poverty by half, which requires that Bangladesh accelerates the pace of reduction from 1.5 per cent per year observed for the 1990s to 3.3 per cent for the period 2000–15. Again, this is not a tall order given the past record of accelerating progress in reducing poverty in the nineties compared with the eighties. The target for extreme poverty reduction is statistically less daunting, but may be more socially challenging given the need for re-orienting the allocation of resources towards the most needy poor.

4.4 As regards other indicators, the likelihood of target attainment is higher given the encouraging performance of the nineties in reducing child mortality and child malnutrition as well as success in removing gender inequality at primary and secondary schooling. The available evidence also suggests that the MDG target of halving malnutrition rates by 2015 is not likely to be met through economic growth alone. More effective public actions than in the past will be necessary in attaining the social goals described in Table 4.3 This is especially true of the goal of halving the present level child malnutrition. This would also require the exploitation of important synergies between income and non-income indicators. Many of the social indicators included under the MDGs are influenced by economic growth through the channels of income-poverty reduction and public expenditures on social sectors. As the level of income-poverty gets reduced and private spending on social sectors increases, progress in attaining social development goals will be further stimulated. Better governance of social expenditures along with higher allocations through government and non-government channels, as emphasized under the strategy, would provide additional momentum to the process of social development.

C. Summary Points

4.5 Attainment of the target of poverty reduction by half will require significant additional efforts given the past growth performance. If the goal of reducing the incidence of national poverty by half is to be achieved by 2015, Bangladesh needs to sustain a GDP growth rate of about 7 per cent per year over the next 15 years. As regards other indicators, the likelihood of target attainment is higher given the encouraging performance of the nineties in reducing child mortality and child malnutrition as well as success in removing gender inequality at primary and secondary schooling. However, these targets will not be met through economic growth alone. Pro-active public actions will play a significant role in attaining the national targets set in the light of MDGs and national priorities.

Chapter 5 The Poverty Reduction Strategy

A. The Strategy: All Routes Matter

5.1 Bangladesh faces three strategic challenges. First, consolidation of the past successes witnessed during the nineties, as described in Chapters 1 and 2, will not be an easy task. These included improvements in child nutrition, expansion in primary and secondary education, reduction of gender inequality in education, decrease in chronic food shortage and insecurity, enhanced capacity for disaster management, and declining trends in income-poverty. Consolidation of the past efforts would be critical in the attainment of the MDGs consistent with the national priorities, as set in Chapter 4. Second, combating the negative tendencies unfolded over the past decade, as indicated in the participatory consultations discussed in Chapter 3, poses an additional strategic concern. Issues range from the problem of law and order, deteriorating investment climate, economic misgovernance such as persistent “system loss” and avoidable leakages, policy inconsistency and lack of coordination among the development agencies, poor quality of education, health and public services, ill-consequences of polarized politics to name a few. Attacking these economic and social ills will be a priority though admittedly a very difficult task. Third, there are also emerging concerns over managing the risks and uncertainties posed by the changing global economic environment especially with respect to trade, aid, and investment, confronting the new tensions in the wake of MFA withdrawal, growing urbanization, deteriorating environment, and new public health concerns and security threats. Sustaining the past positive trends over the next decade while overcoming the accumulated negative trends and facing up to the new agenda posed by globalization would be the central task of the poverty reduction strategy. This task would dictate new ways of managing the development process, demanding a new mix of poverty reduction strategies and policy priorities, and inviting a new ensemble of change-agents both within and outside the government. This would require taking initiatives on all fronts.

5.2 With many roots and multidimensional characteristics, all routes matter for the poverty reduction strategy. These routes will combine measures to address underlying causes and practical interventions to mitigate poverty. The strategic elements of anti-poverty policies and institutions will cover five broad avenues. The first set of policies would accelerate and expand the scope for pro-poor economic growth for increasing income and employment of the poor. The second set would foster human development of the poor for raising their capability through education, health, nutrition, employment-oriented skill training and social interventions. The third set of policies would support women’s advancement and closing of gender gaps in development. The fourth set of policies would provide social protection to the poor against anticipated and unanticipated income/consumption shocks and vulnerabilities to disasters through targeted and other efforts. Environmental sustainability will be a key factor here as a cross-cutting issue. The fifth set would favorably influence participatory governance, enhance the voice of the poor, and improve non-material dimensions of well-being including security, power and social inclusion by improving the performance of anti-poverty and disaster preparedness and mitigation institutions and removing institutional hurdles to social mobility.

5.3 The above interventions will have maximum impact on poverty, especially in minimizing the severity of poverty, when these are targeted to the poor regions and with special focus on the needs of the most disadvantaged population and ethnic groups. Policies and institutional actions delineated under the poverty reduction strategy will be designed to reach out to the poorest and the remote rural areas, which are vulnerable to adverse ecological processes (including cyclone-prone coastal regions, chars and river erosion affected areas) and those with high concentrations of socially disadvantaged and marginal ethnic groups. Special attention will be given to the development problems of the hill people of CHT and tribal population residing in other parts of the country.

5.4 While the strategy adopts a comprehensive approach covering all routes, the important task would be to spell out appropriate prioritization and sequencing of actions needed to replace the business-as-usual scenario with a changed agenda so as to ensure accelerated poverty reduction and achieve the proposed targets. Within the five broad avenues, the present document spells out several policy and sectoral/subsectoral concerns based on the priorities identified by the poor during the consultations and available analysis of the issues. This medium term agenda would be further elaborated while preparing the more specific mix of macroeconomic, sectoral and governance policies and programs through participatory interactions with the poor and other stakeholders during the process of formulating the full-blown strategy.

Emphasis on Employment Generation

5.5 Along with integrating economic and social policies, the strategy aims at expanding decent employment opportunities through both wage and self-employment. For this, an integrated approach would be followed to create an employment-expanding macroeconomic framework through (i) adjusting public expenditure, ensuring monetary and fiscal prudence, and promoting employment friendly private investments; (ii) addressing sectoral employment concerns with appropriate investment and trade policies and promoting ‘lead’ sectoral and sub-sectoral activities; (iii) strengthening special and targeted employment programs for the vulnerable poor; and (iv) implementing measures for skills upgradation of the labor force on the basis of demand-oriented skills mapping. In view of the importance of congenial labor relations and an efficient and equitable regulatory framework in attracting domestic and foreign investments, the strategy would broaden the social dialogue on labor policies to include dispute settlements along with issues related to skills development, social protection, productivity, gender discrimination, and child labor.1

5.6 For maximizing direct and indirect employment multipliers, both vertical and horizontal linkages and macro and micro-level interactions will be emphasized. With the dominance of the informal sector in overall employment, thrust will be given on raising productivity, dynamic informal activities and expansion of women’s productive employment. The emphasis will be on promoting entrepreneurial skills, creating information channels on appropriate technology and better organization of production; strengthening rural-urban and external linkages and marketing chains; ensuring necessary infrastructure support; providing credit facilities, business advisory and development services; and ensuring conducive investment and policy regimes. Along with self-employment generation and micro-enterprise development through government and NGO interventions, public works and other labor-based infrastructure and social capital development programs will be stressed to increase employment and income earning opportunities for the poor. Carefully designed credit and support services will be provided for establishing productive enterprises to address the problem of unemployed educated youth and for promoting women entrepreneurs. Special efforts will be given to avail the opportunities of exporting skilled manpower to meet the demands in developed (e.g. OECD) countries over the medium term through adequate training and skill-developing measures for the youth.

B. Accelerating Pro-poor Economic Growth

5.7 Accelerating pro-poor economic growth will be one of the key elements in achieving success of the Strategy. The sources of increased growth would involve several areas: (i) higher private investment in all sectors and increased inflow of foreign direct investments (FDIs) through ensuring good governance and installing measures to reduce transaction costs and promote investment-friendly environment; (ii) increased efficiency and technological progress across the economy including promotion of information and communication technologies (ICTs) and biotechnology; (iii) expanded growth of industry (particularly small and medium enterprises) and service sectors; (iv) diversification in crop production and non-farm (e.g. livestock) sector growth; and (v) expansion and diversification of the export sector. The aim would be to increase GDP growth to around 7 per cent per year, on an average, during the next decade along with a rapid expansion of the rural economy. For ensuring such growth, priorities, sequencing and interrelationships of macro and sector policies would be taken into account. Within the medium term framework, priorities would be given to ensure the following: (i) stable macroeconomic balances; (ii) strong institutions and improved governance; (iii) private sector-led and outward oriented growth; (iv) Government-private sector (including NGOs) partnership; and (v) gender sensitive macro and policy framework and the national budget. The priorities of sectoral and sub-sectoral activities will be worked out in such a way that the growth elasticity of poverty reduction can be increased. For the purpose, emphasis will be given to the activities that contribute to a lowering of the incremental capital-output ratio across the economy. Such a strategy would favor more labor-intensive sectors and sub-sectors, which would simultaneously contribute to higher GDP growth and higher employment elasticity of growth leading to higher growth elasticity of poverty reduction.

5.8 Accelerating growth and bringing a pro-poor orientation in the growth process with special emphasis on the most disadvantaged social groups including women would be achieved through emphasizing four priority areas: (i) accelerated growth in rural areas and development of agriculture and non-farm economic activities; (ii) small and medium manufacturing enterprises; (iii) rural electrification, roads, water supply and sanitation, and supportive infrastructure including measures to reduce natural and human induced shocks; and (iv) information and communication technologies. The rural growth strategy would be driven by policies to intensify rice production and spur crop diversification and nonfarm production requiring more effective water management, improved rural infrastructure and institutions, strengthened research and development efforts, enhanced credit access, and expanded domestic/export marketing and distribution channels. To catalyze growth of non-farm activities and small enterprises, expansion of infrastructure facilities and supportive policies would be given priority. The rural growth policies would address environmental problems ranging from widespread resource depletion and ecological degradation, arsenic contamination of water, and vulnerability to natural disasters to ensure sustainability of the outcomes. The development of ICTs would be used as an expanding source of growth of the economy. For the purpose, appropriate strategies would be adopted to harness the employment generation and welfare-enhancement potential of ICTs by creating an enabling environment for comprehensive technology acquisition and its diffusion through developing required infrastructure, creating legislative and policy framework, supporting entrepreneurial activities, facilitating and fostering community initiatives, and developing partnerships among public-private institutions. In all these efforts, the private sector would play a key role. To facilitate the process, a strong and competitive private sector would be fostered, infrastructure capacity (especially power, telecommunications, roads and ports) would be expanded, financial markets would be strengthened, environment for foreign investment would be improved, quality of the labor force would be raised, administrative and legal systems would be reformed, law and order situation would be improved, and public transparency and accountability would be increased. Similarly, the potentials of tourism will be exploited for employment generation and poverty reduction following the guidelines suggested in the National Tourism Policy 1992.

B.1. Ensuring Macroeconomic Balances

5.9 The recent developments indicated strains in several macroeconomic indicators.2 The fiscal and external imbalances were aggravated, pressure on foreign exchange reserves mounted, export earnings and industrial production slowed down, and overall growth rate of the economy declined in 2001/02. In addition to domestic imbalances, a weakened global economy fueled the events. Nonetheless, the per capita GDP grew by about 3 per cent during FY02 which was no small achievement for Bangladesh in a turbulent year.

5.10 The Government implemented several measures to improve the macroeconomic situation during FY02. The monetary policy was made more accommodating: lending rate was lowered for exports of RMG items, frozen food, and agro-industrial products; refinance facility was provided for lending for RMG exports; bank rate was lowered which led to reduction of lending rates by commercial banks. Efforts to contain fiscal pressures included lowering of interest rates on savings certificates; containing public expenditure by rationalizing ADP spending, introducing hiring freeze in public sector employment, reviewing some contracts under suppliers’ credit, and canceling the Non Aligned Movement (NAM) summit in Dhaka; introducing measures to increase revenue collection; and increasing fuel, power and gas prices. For improving external balance and mitigating foreign reserve losses, the exchange rate was refixed, regulatory duty on import of several nonessential products was imposed and several administrative measures were effected e.g. enhanced enforcement of foreign exchange regulations, discouraging the use of hundé system for remittances through enactment of Money Laundering Prevention Act 2002 and by improving bank services and opening more exchange houses abroad, and increasing L/C margins on imports on selected non-essential and luxury goods.

5.11 The Government’s priority would be to improve external and domestic imbalances expeditiously to pave the way for implementing the comprehensive medium term stabilization and reform measures under the poverty reduction strategy. Within the program, fiscal measures would be taken to contain fiscal deficit; limit deficit financing and domestic borrowing; mobilize domestic resources (tax and non-tax) through better compliance, collect arrears, reduce exemptions, extend the VAT net, and improve tax and customs administration; rationalize pubic expenditure and ensure gender equality and equity through improving quality, reducing subsidies to SOEs, implementing non-productive expenditure control measures, and improving procurement and financial accountability. The monetary and exchange rate policies would undertake a strict credit program to reduce pressure on foreign exchange market and, if necessary, employ market based instruments to achieve inflation and reserve objectives; and take measures to move towards more flexible exchange rate management. Several structural measures e.g. improved performance of nationalized commercial banks (NCBs) and development financial institutions (DFIs), better enforcement and elimination of loopholes in the Bankruptcy Act, privatization or liquidation and reforms of the SOEs to contain their demand on budgetary and bank resources would be implemented to support the stabilization policies in the short term. Several measures along these lines have already been proposed in the budget of FY03.

5.12 While the above measures would contribute to re-establishing the macroeconomic stability, the Government would remain vigilant against the potential threat to price and exchange rate instability, adverse effects on resource allocation, credibility of its policies and restoring confidence. In the medium term, a strategy for moving forward would be adopted covering two elements: (i) developing a medium term macroeconomic framework including a coherent set of policy measures to guide future efforts; and (ii) establishing an early warning and effective economic information system to guard against possible slippage and prevent any deterioration of the macroeconomic environment that would undermine growth and poverty reduction. The approach would ensure that the underlying macro-framework is moving in the right direction which is essential for successful implementation of the poverty reduction strategy.

5.13 A stable macroeconomic framework e.g. low and stable inflation, low budget deficits, and sustainable external debt would be critical for implementing the poverty reduction strategy. This would create an enabling environment for higher growth with greater scope for poverty reduction. Within the medium term, four areas would be emphasized: (i) increased domestic resource mobilization; (ii) rationalized and improved quality of public expenditure; (iii) a prudent monetary policy; and (iv) improved foreign sector management. The task of macroeconomic management will be extended beyond the core concern of stability to create favorable impact of various instruments like taxes, tariffs, exchange rates, and interest rates for employment and poverty reducing outcomes in the economy.

5.14 For effective resource management, the Government would limit the use of non-concessional loans, broaden the tax base and enhance the efficiency of the tax system, and rationalize the SOEs (Box 2). The Government has already set up a Public Expenditure Review Commission and a Commission on Reforming the Public Revenue System for reviewing expenditure and revenue decisions, respectively. A similar review mechanism has already been institutionalized as an ongoing internal activity of the Ministry of Finance. The budgeting process would be made more transparent through increased pre-budget consultations and creating institutional mechanisms for participation of various groups and the civil society. The Parliamentary oversight of the budget will be strengthened through ensuring more effective roles of the Public Accounts Committee, Public Estimates Committee, Public Undertakings Committee and the thirty-five Parliamentary Standing Committees on individual Ministries.

Reforming State-Owned Enterprises

Given the large fiscal drain by the SOEs and their overall inefficiency, a key ingredient of the Government’s deficit reduction strategy would be to bring a balance in their financial accounts. The Government would implement a comprehensive program aimed at privatization and downsizing of the state-owned sector. For the purpose, a sequenced approach would be followed beginning with privatizing or liquidating the manufacturing enterprises. Until FY2001, 502 public enterprises out of 586 have been sold or disinvested and another 40 have been selected for sale. The Adamjee Jute Mill has been closed down. A time bound action plan has been taken up to stop losses of the remaining SOEs and make them profitable. The process of privatization will continue in a phased manner. In the case of utilities and services (e.g. gas, power, water, railways, shipping and telecommunications), appropriate modes would be adopted like outsourcing, divestiture, public-private partnerships and others. While liquidation of non-viable enterprises and privatization of manufacturing SOEs would be the priority agenda to ease the administrative and financial burden in the short run, remaining SOEs would be given operational autonomy and allowed to operate along commercial lines under hard resource constraints. In case any SOE is required to pursue noncommercial objectives, the costs of such constraints would be calculated and compensated through the budget in a transparent manner. For ensuring a successful privatization program, the priority would be to create the basic environment for attracting private investment so that the enterprises can be sold at fair prices. For this, the regulatory and policy environment will be rationalized so that public monopolies do not turn into private monopolies, and attention will be given to creating the non-distortivc environment for the private sector to function in a level-playing field. In such cases, the interim strategy would be to allow private entry and competition in industries where such SOEs exist and take time-bound and concrete steps for privatization. The cross-sectoral linkages of SOE reform would also be considered.

For those SOEs which would be retained in the public domain, clear guidelines would be specified. These would be corporatized and required to operate under hard budget constraints. Such enterprises would access financing from the banks on their own financial strength along with mobilizing funds from the capital market.

5.15 Several reforms would be considered for improving budget preparation and implementation and increasing its effectiveness and pro-poor orientation. The budget will be made gender sensitive in order to ensure that the benefits are distributed in an equal and equitable manner. In addition to adopting a medium-term framework, the quality of budgeting would be improved through using strict criteria for project selection, instituting strategic planning through budget committees in ministries/agencies, streamlining financial management and procurement procedures, and strengthening internal control and audit systems. The process of adopting a modern accounting system, initiated under the Reform in Budget and Expenditure Control (RIBEC) project, would be geared towards providing an effective management information system for expenditure control and rationalization. The capacity of the Implementation Monitoring and Evaluation Division (IMED) would be enhanced to undertake effective performance audits and evaluation along with follow up actions to improve quality of projects. For making public expenditure more pro-poor, the Government would reallocate budgets more towards basic services emphasizing quality of service delivery and ensuring improved targeting. An integrated budget framework will be adopted that effectively incorporates the fiscal, monetary and external sectors.

Leveraging Globalization

5.16 The move towards globalization, with its significant social and economic impact, has brought both challenges and opportunities. The strategy would be to pursue the process of globalization and seize the opportunities by effectively managing the process. This would require strengthening institutional capabilities, addressing structural weaknesses, and improving the policy regimes. For managing the process in a successful manner, the measures will be appropriately sequenced to generate higher investments and productivity improvements needed for increased economic growth. This will be supported by sound policies in areas such as infrastructure, market facilitation and access and competitiveness particularly to meet the challenges of the post-MFA era. Measures will be taken to increase the supply response of the poor households and their ability to cope with risk and uncertainty through complementary public policies for developing SMEs and agro-based industries, improving access to the credit market, ensuring better asset distribution, increasing labor market flexibility, disseminating market and technical information and investing in human and skill development. The process would take account of the ability of the poor households to cushion themselves against the costs of adjustment and would be supported by appropriately targeted social protection measures for the affected poor and guided by institutional capacity to manage the transition period. For exploiting the globalization opportunities, the government would emphasize a sound investment climate, affordable access to ICTs, capacity building in trade and investment promoting services, and investments in human capital and skills to exploit new opportunities, market access, and regional collaboration for increasing global competitiveness.

5.17 Considering the significant role of the external sector, the Government has taken several measures including liberalization of import and export regimes and provision of incentive packages for export promotion since the early 1990s. In order to effectively steward the trade sector towards progressive expansion, specific strategies and concrete plans of action would be taken up in several areas including reforms in trade policy; diversification of the export base and increasing export competitiveness; strengthened system of standardization to ensure good export quality; development of food safety, plant and animal health services; development of Intellectual Property Rights (IPR) regime in conformity with the WTO standards; expansion of skilled manpower exports; strengthening trade support capacity to cope with emerging changes in the global trade environment; and increased and effective participation in regional blocks and the WTO negotiations.

Developing the Private Sector

5.18 Under the strategy, the private sector will be the engine of economic growth. The Government will create an investment-friendly environment and act as a facilitator through pursuing policies to create a stable macro economy, improve law and order, promote good governance, maintain competitiveness, remove infrastructure bottlenecks, ensure cost effective fiscal and financial services, and provide market information and support services. With increasing role of the private sector, competition and transparent rules would be framed for protecting consumer’s rights and trust in the market, minimizing the cost of information and enhancing sustainable growth of the private sector. Women’s participation in private sector activities will be effectively supported both as participants in the labor market and as entrepreneurs.

5.19 Under the 1999 Industrial Policy, restrictions on private sector participation in all sectors except defense, nuclear energy, printing of currency notes, and forest plantation and mechanized extraction in reserved forests, have been removed. The Government is aware of the constraints hindering the growth of the private sector and would implement effective measures to remove the hurdles through effective and coordinated policies and actions. The key areas would be: infrastructure development (e.g. power, telecommunications, roads and ports), strengthened financial and capital markets, quality of the labor force, reduced costs of doing business by reforming institutional and regulatory framework, improved law and order condition, and better environment for foreign investment. Specific measures would be worked out in consultation with the private sector. For proper functioning of the private sector, physical improvements and management reforms in the basic infrastructure including power, water supply, port and telecommunications will be given priority along with private sector participation. The government would take effective measures to encourage the private sector to become gender sensitive, facilitate women’s participation in private sector activities and create institutions like childcare centres to facilitate women’s enhanced participation.

Financial Sector Management

5.20 For implementing the strategy, a sound and well-functioning financial system is required for ensuring growth and providing access to financial resources to the poor. The Government will address three major issues in the financial sector: (i) weak regulatory power of the Bangladesh Bank; (ii) poor governance of the public financial institutions; and (iii) deficiency of the legal framework. The Bangladesh Bank will be strengthened with adequate autonomy and accountability to function effectively. For this, relevant laws will be amended to provide operational autonomy and extend the operational authority over the banking system and reorganize its functions along with measures to rationalize staff and strengthen human and management capacity.

5.21 The poor governance of the nationalized and domestic commercial banks and specialized development banks has resulted in high share of classified loans, low loan recovery rates, lack of discipline and other symptoms limiting access to credit to genuine investors, raising interest rates and acting as a drag on economic growth. Along with necessary legal amendments, the Government would improve overall governance of financial institutions through several measures e.g. appointing suitable persons on the boards and in the top management of public financial institutions with adequate restructuring authority and autonomy, strengthening loan approval departments, and enforcing the requirement to regularly publish financial statements prepared in accordance with International Accounting Standard (IAS). A banking sector policy will be formulated which will define the role of the NCBs and suggest appropriate restructuring including an efficient regulatory framework for the microfinance institutions (MFIs). The government would establish strict financial discipline by encouraging all banks to use both legal and moral pressure on the defaulters to pay back their loans and would take steps for repayment of the overdue loans by the SOEs.

B2. Promoting Good Governance

5.22 A broad consensus on the need to improve governance exists along with the recognition that poor governance is a strong impediment to current poverty reduction efforts. Keeping a long-term vision, the strategy of improving governance will cover three major areas: (i) creating a competitive environment across all segments in the society along with unhindered flow of information; (ii) establishing and enforcing clear rules and regulations for public sector administration supported by separation of power among three branches of governance (the legislature, the executive and the judiciary) along with pragmatic oversight arrangements; and (iii) promoting voice and participation of the civil society, including women, the poor and disadvantaged groups, as a step towards a transparent and ‘open’ government. The mass media and information channels will be used in moulding public opinion and creating awareness on issues of good governance and poverty reduction including population control, women’s development and empowerment, reproductive health and gender, nutrition, literacy, arsenic mitigation, environment and pro-poor development issues.

5.23 The Parliament, being the apex institution for ensuring accountability, will be made more effective and women’s effective representation in the Parliament will be promoted. The role of the Parliamentary Committees will be strengthened through providing research and logistic support so that these Committees can submit detailed reports. These reports will be discussed in the Parliament and the deliberations will be made open to the civil society and the media. The Government’s action on the observations and recommendations will be similarly reported. The Parliamentary Committees would be encouraged to address gender issues.

5.24 The Government’s commitment is to guarantee the constitutional rights of the citizens through an efficient legal system. To this end, a judicial reform program has been developed and the process of implementation has started. Measures to separate the judiciary from the executive, which is a constitutional requirement, have been taken on the basis of time-bound and specific directions of the Supreme Court. The process of establishing separate Judicial Service Commission and Judicial Pay Commission has started. The Government’s priority is to take all necessary measures for ensuring a strong and independent judicial system.

5.25 With increasing concerns regarding law and order situation and violence against women, comprehensive and fundamental reform in the police service is a priority agenda for the Government. The measures will include review of the structure of incentives, training and modernization of the police force, steps to remove undue political and other interference in performance of duties, rapid action against negligence of duty and corruption, strict enforcement of existing laws relating to violence against women, and mechanisms to institutionalize civilian oversight. The Citizen’s Charter enshrining the rights of individuals to access public services would be framed and advocated for the information of all. Initially such efforts will focus on the rights of the poor and the most disadvantaged in accessing the most essential services like primary health, education and RH.

5.26 For ensuring accountable management of public resources, the Government would undertake measures for establishing effective planning and budgeting system supported by timely accounting and auditing with feedback for corrective actions. Several changes are contemplated in the budget system e.g. framing the budget within a consistent macro-economic and medium-term expenditure framework, preparing a consolidated budget to better integrate the revenue budget and the development budget, improving the quality of projects, and enhancing the planning and oversight capacity of the ministries. A more effective and independent role of the Comptroller and Auditor General’s (C&AG) office would be ensured. For this, the separation of accounting and auditing functions would be effected. The Public Accounts Committee of the Parliament will be made more effective within the chain of accountability.

5.27 Improvements in public purchase and procurement systems are closely linked to financial accountability. For improving efficiency, transparency and accountability, several measures will be adopted e.g. introduction of effective and well-specified public procurement rules and guidelines, standard bidding documents, procurement laws, public procurement website and electronic bid processing, rationalization of procedures and approval process, framing of code of conduct and procurement auditing and monitoring indicators. For this a Central Procurement and Technical Unit in the IMED has been created. The management capacity will be improved through training and institutionalizing monitoring and evaluation of performance.

5.28 The Government would take steps to promote unhindered flow of information and enhance the role of the press and mass media as agents of accountability. Decentralization and developing effective local government institutions would be taken as a key element in improving accountability of public service delivery. The progressive building of networks of civil associations and social capital of the poor would be encouraged to ensure their equitable access to public services and strengthen ability to influence policy.

5.29 A competent and motivated public administration system is central to achieving the poverty reduction and development goals of the strategy. Along with providing adequate compensations and right incentives and promotion on the basis of merit and efficiency, a credible oversight system will be installed which is results-directed and regulations-driven rather than inputs-oriented. The Government would establish the office of the Ombudsman and establish an independent Anti-Corruption Commission along with measures to expedite investigation procedures to ensure better governance. The recommendations of the Public Administration Reforms Commission (PARC) would be implemented in phases starting with those that are critical to visibly improve efficiency, effectiveness, accountability and transparency in the short run e.g. rightsizing the Government, redesigning performance appraisal system, appointing competent persons from the private sector on contractual basis at senior policy levels, and transferring relevant government support services to the private sector on a contract basis.

5.30 The use of modern information and communication technologies (e.g. e-governance) has a significant scope in addressing weaknesses in governance. The Government’s aim is to use informatics to improve governance in multiple ways e.g. as a tool to enhance productivity and improve service quality, institutionalize management systems to reduce the scope of rent-seeking opportunities, and strengthen information flows both across government agencies and with the private sector and the civil society, including the poor and women. Recognizing that good governance requires time to ensure, the Government would initiate time-bound action plans with clearly defined objectives, responsibilities and performance evaluation systems to measure progress.

B3. Agriculture

5.31 For rapid poverty reduction, the Government’s priority is to develop the rural areas where most of the poor people live. This requires accelerated growth of agriculture and the rural nonfarm sector. A rapid agricultural growth will sustain high growth with better capacity to reduce poverty through enhancing rural wages, creating synergies for diversifying the rural economy, and enabling the supply of low-cost food to improve nutritional status and food security of the people.

5.32 Encouraging agricultural growth requires various policies ranging from new technology and extension services to credit for small farmers. The past growth in agriculture was helped by new HYV technology, particularly in rice, in which both the state and the market played important roles. The Government would continue its pro-active role in key public goods in agriculture particularly in improving the ability of the farmers to adopt new technology and providing appropriate mix of incentives to pursue profitable operations. Efforts would be made to ensure the preservation of indigenous knowledge with respect to seeds, plants and herbs, where tapping the traditional knowledge base of both rural men and women would be important. Particular attention would be given to developing and adapting technologies and improved agricultural practices in ecologically vulnerable areas such as flood and drought prone locations.

5.33 The recent growth of agriculture was greatly influenced by macroeconomic and sector specific policy changes. Reforms in trade and exchange rate policies created favorable incentive structures and dismantling of state interventions, market-oriented reforms and reduced regulations favored growth in agricultural production and productivity. The reforms led to faster growth in minor irrigation, increased the supply of fertilizer and seeds, helped in wider adoption of HYVs, and encouraged the farmers to go for more rational input use and production decisions. The Government’s priority would be to intensify efforts such that positive achievements are expanded and the constraints limiting their potential are resolved.

5.34 The Government would create a policy environment that is (i) supportive of agriculture and rural nonfarm sectors; (ii) oriented towards small farmer development; (iii) capable of providing right incentives to adopt new technologies; (iv) conducive to higher investments in social and economic infrastructure in rural areas; and (v) adequate to ensure proper functioning of rural institutions and provide market access for rural products (see Annex 4 for detailed policies). For the purpose, the Government has taken up a Plan of Action (PoA) to implement the National Agricultural Policy 1999, which indicates specific areas where interventions would be needed. Forestry, fisheries and livestock sub-sectors have high potential to accelerate growth and create employment, including social development multipliers. In these areas, specific target-oriented policies and programs would be taken up. While a significant share of the participants in different sub-sectors of agriculture is women, their participation will be strengthened further particularly in non-field crop production and non-farm activities for which marketing, information, technology and extension services will be specifically directed towards women. Measures will be taken to recognize women’s contribution to GDP, especially by way of homestead production.

5.35 The development of water resources including irrigation development, flood control, and drainage improvement has played significant roles in increasing agricultural production and food security. Following the vision of the National Water Management Plan (NWMP), policies would be undertaken to (i) promote rational management and optimal use of the country’s water resources; (ii) improve the people’s quality of life by ensuring equitable, safe and reliable access to water for production, health and hygiene; and (iii) ensure availability of clean water in sufficient quantities for multipurpose use and reservation of the aquatic and water dependent eco-systems. Along with facilitating the cultivation of HYVs of rice and other crops and increasing the yield levels of boro and aman crops, the interventions would contribute to saving properties and lives by controlling river erosion, monsoon flooding and saline water intrusion; and improving irrigation and drainage congestion and mitigating drought through re-excavation of khals and canals. Measures would also be taken to enhance the social impacts of flood control drainage and irrigation (FCDI) projects through rationalization of existing projects, and promoting stakeholder participation and multipurpose use of flood embankments. The National Water Policy and the National Water Management Plan will be periodically reviewed and revised to guide the management of the country’s water resources.

5.36 The important aspect of the food security policy relating to access to food would require both increasing the purchasing power of food-insecure households and providing access to government food assistance programs. While the long run solution to food insecurity would require sustained increase in income of the poor households, greater efforts would be directed to address the short-term and transitory food insecurity of the poor households through increasing coordination across various food assisted programs at both national and local levels to ensure maximum efficiency and coverage; improving infrastructure to reduce price variability and marketing margins; strengthening disaster prevention and mitigation particularly in disaster-prone areas; maintaining quality foodgrain security reserve; and strengthening the development role of food-assisted programs.

Rural Non-farm Growth

5.37 Through rapid expansion of non-farm activities, the Government’s strategy is to make the rural non-farm sector as the leading sector of Bangladesh’s rural economy. Given the characteristics of the rural labor market and the structure of farm holdings dominated by small and marginal farmers, both farm and non-farm incomes would be increased along with incentives for movement of labor from farm to non-farm sector. This requires a steady growth in productivity in the non-farm sector. The access to non-farm income is critical in raising household income along with enhancing the capacity of the farmers to invest in agriculture. The non-farm activities would also serve as important safety-nets during post-calamity periods which experience large-scale damages to crop agriculture and loss of agricultural wage employment.

5.38 In the past, rural non-farm activities played an important role in generating new sources of employment in the rural area, but the productivity growth in the sector has been modest. The way-out from the situation requires some degree of upscaling with improved technology and marketing support. The process can be further stimulated by forging urban-rural links at design, production, and marketing stages and focusing more on selected dynamic activities within the non-farm sector. Three key elements will be emphasized: (i) education and skills; (ii) roads and communication network; and (iii) access to credit. For this, a decentralized industrial process will be pursued.

5.39 For accelerating rural non-farm growth, measures would be taken to strengthen both backward links e.g. agricultural equipment and repair services, marketing of fertilizer, seed and other inputs as well as forward links to agricultural activities like processing and marketing of agricultural products. Since increasing urbanization and higher incomes would increase the demand for processed food products links with urban and export markets would be used as a major factor in increasing the beneficial interactions. The role of women workers in the supply of processed food products will be emphasized. The thrust will be on rural non-farm activities in and around growth centres having high growth potential and in periurban fringes of major cities to take advantage of better transportation networks and urban spillover benefits. Specific measures would be taken to exploit the vast potential of rural growth through rural-based textile activities such as sericulture and silk industry, handloom and small power loom units. In order to make these products competitive in the local and export markets, measures like technology dissemination through client-focused extension and training, product and market development, and other supportive infrastructure and policy measures would be emphasized.

5.40 Along with a trade regime that focuses on correcting the policy distortions that hurt rural non-farm activities and rationalizing tariffs on raw materials and inputs used by these industries, the Government would address infrastructural problems e.g. power, communication, information, transport facilities, roads, market places, ports and other facilities needed to improve their competitive edge and growth potential.

5.41 For ensuring product standardization, quality control and flow of information necessary for access to foreign markets, the Government would encourage formation of small enterprise associations to support respective activities. These would provide market information, quality guidelines, and link rural enterprises to large enterprises or export houses through contracting arrangements. The Government would devise mechanisms to access required levels of credit by the rural non-farm entrepreneurs from formal financial institutions. The NGOs will also be encouraged to expand their coverage of credit programs to include rural small and medium scale enterprises. Investments in education and skill training would be considered crucial in improving rural productivity and incomes. The efforts would also emphasize on promoting appropriate technology for year-round operation of non-farm enterprises particularly during critical periods of crop failures following disasters.

B4. Rural Development

5.42 The Government has formulated the National Rural Development Policy 2001 to guide the comprehensive development of the rural areas. The Policy attaches importance on creating efficient and effective local government institutions as the decentralized decision-making framework within a participatory mode. The Government would operationalize the integrated approach of the Policy to expand employment and decent income earning opportunities in rural areas along with measures to enhance the capacity and power of the rural poor to develop, protect and sustain their livelihoods.

5.43 For accelerating rural development, an integrated approach would be taken consisting of effective policies, institutional measures, and other policies to generate economic activities and strengthen administration and support services in rural areas. Along with increased flow of resources to the rural areas, several actions will be considered for accelerating rural growth including reorganization of existing government facilities at the local level with the union as an important focal point; encouraging rural industrialization through infrastructure investment, marketing and quality control facilities and effective incentive and credit mechanisms; introducing policy guidelines for rural housing to encourage rural cluster of houses and promote optimal use of agricultural land; encouraging agro-processing industries by small entrepreneurs in unused land in industrial estates; supporting women entrepreneurs; revamping the cooperative sector; improving local governance and creating platforms for ensuring participation and voice of the poor in local development; promoting the poor’s empowerment through human resource and skill development; expanding information and communication technologies to the rural areas; and covering the deprived population of char areas, coastal and hard-to reach areas under special rural development programs through both government and NGO/CBO efforts. Area specific programs will be emphasized for integrated development of the disadvantaged localities and population groups. A National Cooperative Policy will be framed keeping in view the dynamic changes in the rural economy.

B5. Manufacturing Growth

5.44 For sustained growth and poverty reduction, the Government would pursue a globally competitive industrialization strategy dictated by the dynamic comparative advantage of the country. This means an employment-intensive industrialization based on competitiveness with emphasis on small and medium enterprises (SMEs) and export-oriented industries. Manufacturing growth in the country still remains narrowly based with only a few industries (e.g. readymade garments) spearheading recent growth. While trade liberalization measures in the early 1990s provided easier access to imported raw materials particularly for small industries, several factors e.g. increased imports of competing products due to lowering of tariffs, illegal imports from India encouraged by unfavorable movement in Bangladesh’s exchange rate vis-a-vis Indian rupee, dislocations caused by natural and manmade factors, and deterioration in the overall investment climate led to a slow and fluctuating manufacturing growth. Moreover, Bangladesh needs to take concrete steps to face the challenge of the RMG sector as the MFA is phased out and to move aggressively to encourage export-oriented labor intensive manufacturing to locate in the country.

5.45 The FDI flow into the manufacturing sector is small. Foreign investment in Export Processing Zones (EPZs) accounted for less than 10 per cent of total manufacturing investment in the 1990s. Bulk of the investments in the EPZs went into garments, textiles, footwear and other labor-intensive industries with little in high-tech industries. The FDI outside of the EPZs went mostly into gas and power sub-sectors. The limited size of the domestic market and lack of a facilitating environment discouraged the inflow of FDI into manufacturing industry outside the EPZs. For stimulating FDI flows, the role of the Board of Investment and the Bangladesh Export Processing Zones Authority (BEPZA) will be strengthened to increase employment, foster technology transfer and enhance foreign exchange earnings.

5.46 Slow manufacturing growth and the emergence of industrial sickness have many roots. The problems relate to deficiencies in industrial finance, slow pace of privatization of public sector enterprises, mixed impact of rapid trade liberalization, lack of a competitive exchange rate policy, discriminatory fiscal incentives, and the persistence of a legal and regulatory framework that is characterized by pervasive, archaic and unnecessary laws, vague and discretionary regulations, and flawed and weak enforcement. Infrastructure bottlenecks e.g. inadequate transport, power, telecommunications, ports and other facilities, lack of investment-friendly labor relations and procedural complexities make setting of viable industrial enterprises very costly in the country.

5.47 The Government’s efforts to accelerate manufacturing growth and increase its poverty reduction role would emphasize several elements. The employment-oriented growth strategy for the manufacturing sector would emphasize a two-pronged approach: a primarily export-oriented segment consisting of labor intensive manufactures, and a domestic market-oriented segment with major contributions from medium, small and cottage industries. Specific strategies for the broad-based growth of both segments would be worked out and policies formulated and implemented accordingly. While the private sector will be the principal actor, the government will act as a facilitator in creating the enabling industrial environment. The role of the Bangladesh Small and Cottage Industries Corporation (BSCTC) will be focused on promoting and supporting small, cottage and rural industries. For the privatization program, a firm timetable would be set to assert the Government’s political will and send clear signals to those who oppose the program. The Industrial Policy 1999 will be appropriately revised to include future plan of action and strategic vision of different enterprises. Necessary measures would be taken to reduce social costs of labor adjustment through appropriate safety-nets and help retrenched workers to reintegrate into the labor market. The growth in the manufacturing sector will focus on creating jobs for women along with measures to address the issue of displaced women workers from the RMG sector. While emphasis on development of SMEs would be continued as a medium term measure, long term vision must be to achieve large scale industrialization, (see, Annex 5 for details on industrial policies).

B6. Infrastructure Development

5.48 The impact of roads and bridges on poverty is well documented in Bangladesh. Similarly, along with the spread of literacy, improvement in road network, and higher household savings through microcredit operations, the availability of electricity is important in promoting private investment in rural areas. In rural Bangladesh, a large part of the growth impact of electricity is realized through its cost-reducing effects on use of irrigation equipment. In addition, provision of electricity will directly impact on the modernization of rural industry, contribute to longer working hours for commercial enterprises, along with favorable influence on social development. The provision of infrastructure support (e.g. gas, electricity, water supply and sanitation facilities) to the household sector is also important for women to undertake income generating activities. In general, power sector investments would be given priority over other investments in physical infrastructure in the coming years along with reforms in the port sector for improving competitiveness and facilitating export-led growth. For ensuring effective and efficient infrastructure development, integrated national and regional plans will be taken up keeping in view the increasing importance of urban infrastructure development and access of the urban poor to basic services.

5.49 Telecommunication is the third critical clement in the infrastructural package for pro-poor growth. The relative importance of telecommunication has increased manifold following the revolution in information technology. Telecommunication will help in regional market integration, increase the effectiveness of the early-warning system for prevention and preparedness for disasters, improve the system of governance and, serve as a useful means for public service delivery to the poor and poor areas (e.g. satellite learning, tele-medicine etc.). The policies will also support the development of ICT at all levels of education, including development of institutions on vocational and technical education and technology transfer.

5.50 The organizational restructuring of the Bangladesh Railways under the Organizational Reforms Project will be pursued with the aim of separating operations from the infrastructure, greater involvement of the private sector, manpower rationalization through job analysis, traffic costing and modernization of accounts. Similarly, the navigability of inland waterways will be improved to provide an integrated network in the rural areas served by the system to facilitate movement of people, efficient marketing and distribution of agricultural inputs and outputs and products of agro-based industries, (see Annex 6 for detailed policies).

5.51 Improved and safe water supply and sanitation services will be emphasized for reducing health costs, improving malnutrition, and increasing productivity of labor. The problem of arsenicosis related with arsenic contamination of drinking water from tubewells, to which the poor are more vulnerable, will be addressed through effective measures and exploring alternative sources. This will also contribute to reducing the time spent by women and children in water collection and domestic chores resulting in more productive use of time and resources by the poor households. Following the National Water Supply and Sanitation Policy 1998, a development framework will be worked out to address the issues in a comprehensive manner.

B7. Technology Policy

5.52 A comprehensive technology policy (especially ICT and biotechnology) would be adopted for purposes of eradicating poverty in the country. New technology is critical in developing seeds of new varieties for agriculture and in their adoption in adverse agro-ecological environments. A Task Force, formed to recommend policies and steps needed to promote biotechnologies suitable to the climate and socio-economic conditions of the country, has submitted its report which will be implemented following the guidelines of the National Agricultural Policy. Development of information technology will be an important source of future economic growth and play a critical role in employment generation, fostering productivity enhancing human development (impacting on both knowledge as well as service delivery dimensions) and improved governance. It will also help linking hitherto disintegrated national and local markets with global markets.

5.53 The present institutional infrastructure for delivery and adoption of new technology, however, is inadequate. Enhancing technological capability in the public sector and removing barriers in the private sector remains the strategic challenge. Innovation and adoption of technology requires skills that depend on vocational and technical education, transfer of appropriate technology and more reliance on “learning by doing” in the globalized supply chains of production. It is also important to ensure that women benefit equally from the technological advancement in agriculture and from ICTs.

5.54 The scope of employment creation through ICTs, particularly for the young women and men, will be harnessed through providing them with opportunities to develop ICT literacy through the education system and ICT training facilities and providing affordable access to computers and the internet. The government would also provide credit and support services for exploiting opportunities of paid and self-employment and entrepreneurial activities offered by international and domestic-oriented ICT industries and deployment of ICT across different industry groups; promote greater use of ICT as tool for development and for ensuring greater voice and empowerment for all groups in collaboration with employer’s organizations, ICT service vendors, NGOs, youth and other organizations; take actions to bridge the ICT gender divide and maximize the potential of internet to women as a means of access to knowledge and information; create an enabling environment for ICT diffusion through infrastructure development and appropriate trade and fiscal policies and legislative framework; use ICT to improve the quality and efficiency of public service delivery systems by strengthening internal information flows, increasing accountability and transparency, and enhancing efficiency of procurement systems; and foster community initiatives and partnerships between public and private institutions to bridge the digital divide between the rich and the poor. In addition to supporting training facilities on hardware maintenance and troubleshooting, several areas will be emphasized like electronic book/library, including cyber-cafe, cyber kiosks, call centres, telemedicine and other internet-based activities; electronic mail and web-site design; electronic journalism; on-line education; medical transcription; ICT in banking and health sectors; multimedia and web technology; and telework for self-employment. The long term vision of the technology policy would be to leap frog the development divide and transform the society from being the receiver of technology to one of producer of technology.

B8. Microcredit Policy

5.55 Microcredit will play an important role in the poverty reduction strategy. Bangladesh has achieved impressive success in extending microcredit facility to the assetless poor households who were earlier considered “non-bankable” under the traditional collateral-based financial practices. The success of the microcredit model in providing credit access to the poor, as pioneered by the Grameen Bank, has been widely acknowledged in the world and has spread out to over 50 countries. A large number of NGOs as well as government agencies now have adopted the microcredit model in extending credit support to the poor, especially women. The Government has also set up a very successful example of creating a special umbrella support institution, Palli Karma Sahayak Foundation (PKSF) under the public sector for providing funding to mainly local level small and medium sized NGOs in order to expand the credit reach for the poor.

5.56 The idea of microcredit rests on four key pillars. These are relative homogeneity, social collateral, individual ownership and access to developmental knowledge at the grassroots level. First, the poor are organised into relatively homeogeneous groups in terms of initial asset endowments, which helps bonding and bridging, leading to mutual trust, support and networking. Second, while lending in most cases is made to the individual it is the group as a whole that remains responsible for the repayment of the individual loans. The cost of individual default is high since non-repayment of any one member may bar any future loans to other members of the group. This results in peer screening, monitoring and pressure to ensure full repayment except under some extraordinary circumstances such as unexpected income shocks. Third, the system harnesses the entrepreneurial potential of the poor, rewarding innovation and risk-taking while penalising inefficiencies. The choice over the loan project entirely lies with the borrower who usually takes decision in consultation with the group. Fourth, the external agency (or animator) plays an important role in facilitating the development of institutional capability of the poor, especially by providing them access to the domain of developmental knowledge traditionally reserved for the non-poor. The knowledge in this case encompasses information and training (and mutual sharpening) of diverse nature ranging from training on how to “do organisation”, keep financial accounting, get access to primary and promotive health, and raise the level of social awareness.

5.57 There has been a rapid expansion of microcredit programs over the last two decades. The programs are implemented under various institutional arrangements run by NGOs, CBOs as well as (increasingly so) by government organizations (GOs). The average annual disbursement of loans from these programs stands over Taka 5000 crores (about USS 1 billion), far exceeding the scale of total rural operations of nationalised banks and specialised banking institutions taken together. The Grameen Bank, one of the pioneers of microcredit, alone has expanded to 40,000 villages. Indeed, except for the very distant charlands (low-lying areas) and some inaccessible hill-areas, it is difficult to find villages now-a-days without the presence of any microcredit program. One recent estimate suggests that the aggregate number of borrowers would be about 5 million. About 90 per cent of these are poor women. The general repayment performance is outstanding by any standard: the share of cash recovery as proportion of the total dues is over 90 per cent (it is over 70 per cent even in a flood-affected or agriculturally bad year). This stands in sharp contrast to the performance of the traditional banking system where the weight of non-performing loans is about 32 per cent. On the whole, these are believed to be conservative estimates regarding the reach of microcredit and the pace with which it has expanded in Bangladesh. But, the figures speak for themselves. The aggregate coverage is truly formidable.

5.58 Successive evaluations have found microcredit programs to be beneficial to their members. The results are robust as to the method of comparison (before vs. after, project vs. control, modified control group comparisons), the choice of survey year, area and data. The economic effects in terms of broad based growth opportunities (as measured by income, expenditure, asset, employment) generated because of these programs have been rather modest, however. This is primarily because the average size of loan disbursed under microcredit is rather modest limiting the possibility of a big-push. These programs have various non-credit components as well. Available evaluations tend to suggest that poor members who get enrolled in such programs receive social awareness training, often packaged with health and education. The aggregate social effects seem to have been higher than the income or asset generating effects. While the employment effects consisted in reducing the extent of total household underemployment, in most cases the activities promoted by microcredit did not graduate beyond the reach of part-time self-employment. The aggregate effects of microcredit have been poverty reducing both as part of enhanced “Voice” and increased income/ employment. The poverty and human development situation could have been much worse in the absence of these programs. But, there is hardly any scope for complacency given the modest nature of these interventions in the general backdrop of enormous challenge of poverty reduction that the country faces.

5.59 This calls for a rethinking on the present nature of financial interventions involving issues such as credit upscaling, interest rate practices, vertical integration, loan packaging, higher access to knowledge (including new information and agricultural bio-technology), greater use of savings instruments and insurance provisions against risks and uncertainties. The new approach also requires putting more explicit emphasis on strengthening social capital, designed to harness the developmental potentials of the entire community—and not just that of the target group—to maximise the poverty-reducing impact and explore the synergies. These are much harder set of reforms demanding innovation and commitment. Currently, some of the advanced NGOs are experimenting with various innovative ideas listed above in responding to some of the emerging “second-generation” challenges. Two types of programs have emerged in recent years within the MFI market, one to specifically address the problems of the extreme poor (as with the case of PKSF and BRAC’s ultra-poor program), while the other responds to the needs of the ‘middle poor’ and ‘vulnerable non-poor’ through micro enterprise loans. These programs would receive special attention in the poverty reduction strategy.

C. Fostering Human Development of the Poor

5.60 In the medium term, policies that have a direct bearing on the basic capability and human development of the poor will be emphasized. Three main elements of human development will be targeted: education, health and nutrition.

5.61 The development of human capital has strong poverty reducing effects in Bangladesh. Several aspects of human development will be given priority. First, while there has been considerable quantitative expansion of education, health and nutrition remain relatively neglected. Within the health sector, although some success has been achieved in preventive health care, a small proportion of poor people has access to public health care services. In short, addressing the pro-poor concerns in health remains an unfinished task and the sector needs to be given the priority it deserves. Developing a pro-poor agenda within the rubric of a sector-wide approach to health represents the biggest institutional challenge in this regard.

5.62 Second, the control of communicable diseases and improved maternal and child health to reduce high child and maternal mortality remains the highest public priorities. The main causes of avoidable deaths in the low-income countries including Bangladesh are tuberculosis, childhood infectious diseases, maternal and perinatal conditions, micronutrient deficiencies, and malaria and tobacco-related illnesses. The epidemiological evidence from Bangladesh and elsewhere conveys a crucial message: the vast majority of the excess disease burden is the result of a relatively small number of identifiable conditions, each with a set of existing health interventions that can dramatically improve health. The problem is that these interventions do not adequately reach the poor. A package of essential health interventions with enhanced programs of family planning catered to the needs of the poor would have strong poverty reducing effects as the improvements in health would translate into higher quality of children, lower income erosion due to health shocks, higher productivity, and higher economic growth. Implementation and access of current essential service package (ESP) under the sector-wide approach need to be ensured with special focus on the health needs of the poorest and the most vulnerable both in rural and urban areas. Even though the priority focus is currently on communicable diseases and maternal and perinatal health, non-communicable diseases (NCDs) are also of great significance. Many of these non-communicable diseases, including cardiovascular disease, diabetes, mental illnesses, and cancers, can be effectively addressed by relatively low-cost interventions, especially using preventive actions relating to diet, smoking, and lifestyle. The coverage of current ESP needs to be broadened to include some of the key NCDs as well. Subsidized provisions in the supply of birth-control technologies especially for the poor women would be continued Emerging public health problems such as arsenic and dengue would receive priority attention in the medium term period. Adequate measures would be taken to check the prevalence of HIV/AIDS as well as enhance the capacity to address the problem. Enhancing the capability of the public health sectors to address past slippage and manage new threats to health of the population would be a crucial part of the new strategy. A new policy statement on the health sector for the next phase of health sector development is currently underway.

5.63 Third, such a re-orientation towards wider coverage of the poorest as well as broadening of the scope of essential health package will have considerable resource implications. According to the recent estimate by the WHO Commission on Macroeconomics and Health 2001 the set of essential interventions costs, on average, about $34 per person per year, which is much higher than the current level of public spending of around $5 recorded for Bangladesh. The huge resource gap in financing the health needs of the poor cannot be met without additional resource mobilization from external resources. The key recommendation of the WHO Commission on Macroeconomics and Health is that the world’s low-income countries, in partnership with high-income countries, should scale up the access of the world’s poor to essential health services, including a focus on specific interventions. This issue merits consideration under the proposed poverty reduction strategy. A plea for higher resource allocation for the health sector should, however, accompany strong commitments to substantially improve the present level of health sector governance within the shortest possible time. Generic prescription for good governance may not be good enough for the poor unless a more disaggregated view is taken of the handicaps of various groups (especially of the chronic poor as well specific health needs of as women) among them. In addition, major program interventions in the form of decentralized service delivery, increased local participation, particularly of the poor and women, access to modem health services, increased inputs for dealing with diseases and adverse health conditions that make the poor most vulnerable, and adequate capacity would be designed and implemented. The NGOs can emerge as an important actor in this regard by delivering high-quality health care services, especially at primary and secondary levels (see Annex 7 for strategic issues in health sector development).

5.64 Fourth, malnutrition in Bangladesh remains high despite some improvement in the last decade. Such a high degree of undernourishment has adverse implications for future poverty reduction. The introduction of NNP to address the malnutrition of children under two as well as pregnant and lactating mothers through the provision of food supplements, nutrition and health counseling is a positive step to address the problem. These programs will be strengthened institutionally, with special focus on poor areas and communities. Existing food-targeting programs such as VGD and RMP (Rural Maintenance Program) will also be used to reach the poorest and the most vulnerable with nutrition-support package.

5.65 Fifth, even in basic educational indicator such as enrollment, the country is yet to achieve complete enrollment at the primary level. The combined dropout and non-enrollment rate is estimated at 35 per cent at the primary level, with poverty being the most proximate cause. Incentives that are currently provided for enrollment of children from the poor households as well as for girl’s education will be strengthened in the future. Special emphasis will be given to technical and vocational education of women.

5.66 Sixth, the issue of quality cuts across all the above components of human development. As for education, this implies that mere graduation from the primary level would not give the desired results on the skill level. At the secondary level, more emphasis will be given to vocational and technical education, including dissemination of improved agricultural practices. The quality of tertiary level education also needs to be improved given the rising demand for higher order skills in the context of globalization. A high-quality educational system at all levels will also have additional resource implications. The current pattern of public spending on education in the order of 2.2 per cent of GDP appears inadequate in the light of suitable international comparisons and merits increase to at least 4.5 per cent by 2010, as has been suggested by the National Education Policy 2000. However, desired progress in raising the quality of education can be achieved provided a radically improved system of governance (including the reform of the examination system) within the education sector is in place. Addressing the issue of widening “quality divide” in education between the rich and the poor as well as ensuring the enhanced access of the poor to various levels of education represent two critical areas where much improvements need to take place under the proposed poverty reduction strategy. NGOs can be involved in providing high-quality education in the country along with the government and private sector.

5.67 Seventh, the mis-match between the development needs of the society and basic form, content and orientation of the education system is obvious from the fact that even a large section of the educated people is unemployed. The success rate in the combined result of all public examinations held in 2000 was about 41.6 per cent (SSC 41.1 per cent, HSC 39.6 per cent and at the tertiary level 46 per cent) indicating a colossal system loss of around 58 per cent in the education sector. Further, 35 per cent of the enrolled students at the primary level do not complete the full cycle and less than 2 per cent of those who complete pass the relevant competency test. Thus a realistic estimate of system loss in the education sector will be much higher because the weight of students at the primary level is greater and failure to complete the full cycle and pass the competency test is quite high. It needs to be realized that education is both a process and a system. The inputs of one stage are fed into the next and completors of a certain stage of education get involved as providers of knowledge for earlier stages. The unsatisfactory performance of primary education vitiates the whole education system and contributes to the colossal system loss in the education sector as a whole. For Bangladesh, the priority need to be given to improving the quality of primary education and making it universal, and then prepare adequately to expand secondary and tertiary education by substantially increasing investments in these levels.

D. Women’s Advancement and Removing Gender Gaps

5.68 The strategy has attempted to factor the gender concerns into both diagnostic and prescriptive modules concerning economic growth, poverty reduction and social development. To this end, gender concerns have been identified both at sectoral and sub-sectroral levels. This section provides the salient summary points of the proposed strategy as applied to the specific development objective of promoting gender equality.

5.69 The burden of poverty continues to fall disproportionately on women. The underlying factors are low literacy rate, low nutrition, low income with discriminating wage differentials compared to men, low life expectancy, and high morbidity. Empowering the women is crucial both for its intrinsic value as a development goal and as instrument for bringing about favorable social and economic change. Bangladesh has made considerable progress to bring about greater women’s empowerment, which, in turn, led to significant development effects. Most of the micro-success stories of Bangladesh are associated with the pronounced role of women in economic and social spheres. The strengthening of these measures would further contribute to decline in fertility rate, improvement in child and maternal nutrition and greater welfare for the women themselves. Improvement in the well-being of women and children will have wider beneficial effects for the society as a whole.

5.70 While the gender-gap is closing in Bangladesh for most social indicators, the overall level of empowerment measured in terms of literacy, work force participation, property rights, and credit access leaves much to be desired. A related institutional issue is to increase the political voice of women, especially poor women, which will further enhance their agency role and hence, contribute to faster progress in the well being of children and women. Several areas of critical importance will be emphasized for furthering women’s advancement. These include: policies and institutional actions to combat continuing negative sex ratios, violence against women, high maternal mortality, restrictions on women’s employment and economic opportunities, policies to ensure formal equality, supporting affirmative actions at all levels and in all spheres, creating women-friendly institutional environment, and generating gender-disaggregated statistics.3

5.71 In light of the above, programs and projects will be considered under the strategy and the TYRP which would include, but not be restricted to, the following: (a) reviewing existing policies and institutional measures, which have influenced entitlements and undertaking priority projects to improve entitlements, (b) setting up of women producer’s marketing centers from the grassroots to the national level, (c) enhancing and easing women’s access to banking services; (d) developing micro enterprises training, production and networking centers, (e) establishing linkages and enhancing capacity of women entrepreneurs for the export market, (f) establishing employment information and skill development network centers for the urban migrant female labor and international migrant female labor. Specific affirmative measures such as child care and safe transport facilities will be initiated for sustaining and supporting women’s employment.

5.72 The Government would actively promote policies for increasing women’s participation in all spheres of development under the poverty reduction strategy. These policies outlined earlier in various chapters of this paper (including the ones described in Annex 8 which detail out the major concerns and thrusts of the strategy and should be seen as an integral part of the strategy) would be further concretized in the context of preparing the full-blown strategy and the TYRP.

E. Strengthening Social Protection

5.73 Four sets of policies would be emphasized for the poor to cope better with various income (consumption) shocks. These policies would help increase the crisis-coping capability and form important risks-insurance policies for the poor. Besides, a significant aspect of Bangladesh’s growth process, which will be given greater attention in poverty reduction, is the continuing gap between employment creation and increase in labor supply. While anti-poverty and employment-oriented growth that increases income opportunities for the poor in both rural and urban areas would be given priority, direct interventions will be used to make the process more employment friendly in the short run. By addressing the critical needs, well-executed and well-targeted direct interventions would be used to significantly improve the welfare of the poor.

5.74 The first set of policies will focus on the social safety net for the poor through works and income transfer programs. These include various food-assisted and cash-assisted programs such as VGD/IG-VGD, FFW/TR, old-age pension schemes in rural areas, support for the female destitutes, and traditional relief programs. There is a critical need to address the specific problems of chronic poverty and socially disadvantaged groups (street children, elderly poor, the disabled population, to name a few). The second set of policies will address the vulnerabilities of the ‘new poor’ like the retrenched workers. This will form an increasingly important component of the social protection policies in the backdrop of privatization, labor restructuring, market reforms and globalization. The third set of policies will put emphasis on the development of social solidarity. This is a relatively new area but would be used as an increasingly important route for social interventions. The newly set up umbrella support organization such as the Social Development Foundation (SDF) will play an important role in fostering social capital formation by promoting CBOs and local associations in building and maintenance of small-scale community infrastructures. Encouraging the bonding and bridging across self-help groups under GOs and NGOs at the local level will be an important area of intervention. The fourth set of policies will relate to risks insurance. Policies for preventing and/or mitigating risks will cover four categories. First, providing access to credit to the poor in times of emergency to ease the burden of shocks, reduce distress sales and “negative” methods of coping. Second, ensuring good public health services to reduce health hazard related income and consumption shocks. This would be particularly relevant in the context of emergency health care provisioning (as in the case of health hazards due to injuries and accidents) as well as major public health problems such as arsenic and dengue fever. Third, strengthening disaster preventing and mitigating mechanisms to enhance the coping capability of the poor in times of natural disasters. This is important from the perspective of averting large-scale entitlement failure, which may result in as a consequence of severe natural disasters (including river erosion). The GO-NGO-local community collaboration can play an important role in enhancing disaster management capacity and reduce the adverse effects of such disasters on the poor (as evidenced from the experience of the 1998 flood). Early warning system needs to be further strengthened through better topographical mapping and effective information sharing between the neighboring countries. Fourth, the poor, especially women, often suffer more from violence and personal insecurity. Costs of coping with such shocks impose enormous burden on the poor. Counterveiling measures will be adopted through a broad-based action program including improvement of law and order, accountability of police administration, ensuring better human rights, decentralizing and democratizing the functioning of state institutions to reduce harassment and transaction costs, simplifications of rules and procedures, legal and judiciary reforms to reduce high coping costs involving legal/ court expenses, supporting citizen actions against gross violations of human rights, and ensuring the freedom of the press and the media.

5.75 Reduction of vulnerability to natural disasters would be an integral aspect of the national strategies for poverty reduction. The major policy thrust would be strengthening of the coping mechanisms of the poor through enhancement of community resilience and empowerment. This task can be achieved through a comprehensive approach that unites the government, the communities, NGOs and the private sector in a joint strategy for effective risk reduction. Marginalised groups would be specifically targeted with a view to minimising the personal negative consequences of disaster impacts. The importance of a comprehensive approach that encompasses all aspects of vulnerability reduction and risk management will be emphasized under the strategy. Disaster risk management would be integrated within the mainstream development planning and program/project design validation processes.4

F. Supporting Local Government and Broadening Participation

5.76 Policies and institutional measures for broadening participatory governance and enhancing the “voice” and “influence” of the poor would involve several actions. The policy and institutional measures would mainly relate to strengthening the system of good governance, especially decentralization at the local level. Decentralization and devolution of power will be regarded as an essential pre-condition for good governance. Policy consultations on poverty reduction strategy at the grass-roots level have unequivocally favored the creation of a multitier ensemble of effective local government bodies at union, thana, and district levels. The consensus view emerging from the consultation supported the idea of a strong (with adequate financial and administrative power) and popular (elected with people’s mandate) local government. Local government was seen as one of the key instruments for ensuring improved quality and enhanced accountability of public services both in rural and urban areas. The local bodies would be given adequate budget allocations on a matching grant basis keeping in view the poverty ranking of the area. There would also be emphasis on capacity building at the local level. Measures would be taken to ensure women’s effective participation in local government bodies.

5.77 An additional group of measures would emphasize building grassroots level initiatives—outside the domain of local government—to create a demand-driven receiving mechanism “from below” to act as a pressure mechanism on the quality of governance. To this end enabling environment needs to be created for the development of local-level democracy through the promotion of grass-roots organizations of men and women as well as fostering community activities that encourage greater social solidarity. Functioning local level democracy will help combat the negative influence of special interest groups as well as minimize the risks of ‘elite-capture’ of local level bodies and development activities.

G. Policies and Institutions for Reducing Inequality

5.78 Along with economic growth, policies would be emphasized to promote improved distribution of assets and income in favor of the poor, including women. Just preventing any serious worsening of income distribution to ensure poverty reduction as average income increases would not be enough for meeting the MDGs set out in the strategy. For the purpose, one important avenue would be to ensure broad-based asset access to the poor. While traditional asset (e.g. land) distribution has limited scope in Bangladesh, other measures for reducing inequality will be emphasized. The poor can get access to land through the tenancy market and benefit considerably through enforcement of better terms and conditions for tenancy. Moreover, the problem of reducing inequality will be addressed in terms of a broad asset framework. Since the access to physical capital is technically constrained by limited availability, access to other assets on the part of the poor will be considered. Notwithstanding the limited availability of re-distributable land, several aspects of more equitable land-use pattern would be encouraged. First, special emphasis will be given to effective distribution of khas (state-owned) lands and ponds to the landless families. This will require considerable social mobilzation and support from the grassroots and class organizations of the poor, especially landless and women, with support from the national level CSOs and NGOs. Second, land would be allocated for supporting a pro-poor rural housing policy, possibly on the model of compact cluster housing. Third, the urban land-use policy would be reviewed to stop indiscriminate utilization of public lands for private housing purposes. This would be an important area of intervention as public lands earmarked for spaces such as low lying areas, lakes, parks, and playgrounds are increasingly being illegally brought under the private housing plan, leading to environmental problems and low quality civic life. Fourth, measures will be undertaken for ensuring tenurial security, especially for the poor farmers. Fifth, measures would be taken for substantive improvements in the prevailing system of land administration including computerization of the land record system thereby reducing the endemic burden of land disputes, with adverse implications for the poor.

5.79 Providing access to human assets such as basic education and higher level of skills will help the poor to access better employment and income. Similarly, ensuring expanded access to financial assets via microcredit would help the poor to undertake income-generating activities. Access to natural assets such as common property resources would help the poor in mitigating risk in times of distress. Access to social assets will be expanded by building grassroots organizations of the poor at the village level, leading to better networking capacity and act as a risks-insurance mechanism. Finally, the access to political assets—greater empowerment—would help the poor to ensure a fair share in public resources and benefits of development.

5.80 Further, the efforts would emphasize policies to further democratize and strengthen the organizations for the poor (such as NGOs and CSOs) as well as the organizations of the poor (such as CBOs). This will create an environment whereby social entrepreneurs can play a role. Social entrepreneurs will include a range of actors including NGOs/CBOs, corporate bodies, trusts with social charity initiatives, and individuals with philanthropic motives. This will also include socially motivated class of managers specialized in serving the organizations of the poor. The purpose will be to involve the NGOs/CBOs into a permanent collaborative framework with the government in all relevant spheres of poverty and vulnerability reduction which will not be limited, as at present, to the traditional roles of delivery agents in the sphere of microcredit and safety net.

5.81 As the economy expands under the open market system, there is a general risk that the poor would be left out on the margin unless appropriate and effective public policies are targeted towards them. The policies would be directed to developing institutional capability of the poor for making the agencies accountable to the poor. All pro-poor agencies including large and small NGOs/ CBOs would be encouraged to remain accountable to the poor much the same way that corporate bodies are accountable to their shareholders. A faster pace of poverty reduction would require greater voices of the poor.5 Greater voices would be ensured through moving beyond the narrow domain of micro-empowerment measures such as access to credit. For greater agency role of the poor, measures would be taken for building institutions for the poor at sectoral, sub-national and national levels with emphasis on developing new institutional ways and means for their collective empowerment. This would be needed not just for catalyzing the active pressure group function of the poor, but also for increasing their aggregate claims in the distribution of overall benefits of economic growth and social progress.

5.82 Measures would be taken for removing existing legal and institutional barriers for free entry and effective functioning of social entrepreneurs and the organizations of the poor. Fostering social entrepreneurialism and developing institutional capability of the poor would be promoted through changing the “institutional rules of the game”, e.g. enacting appropriate legal and institutional reforms.

H. Caring for Environment

5.83 The link between environment and poverty can hardly be overemphasized. Factors influencing poverty like inadequate access to physical asset bases, preponderance of risks, uncertainties and vulnerabilities and spatial problems affecting livelihoods and crisis coping capacities do indeed originate from environmental factors and one can, therefore, find certain linkages between the two. The more visible environmental problems are mostly associated with regenerative resources, which are in danger of exhaustion from excessive use. These resources include not only animal, bird, plant and fish populations, but also land, water and air. They can complement other goods and services and can also supplement income at time of stress. So depletion of many of these environmental resources can make some categories of people destitute even when an economy is growing. That there is an intimate relationship between environmental degradation and an accentuation of destitution is recognized under the strategy. Women and children are particular victims of environmental degradation and the poor are not necessarily polluters. They are mostly forced to face an adverse environment (e.g. shrinking opportunities of gathering water, inadequate access to local commons) with significant implications for deprivation. Their workload goes up and sources of income dwindle. They then suffer from malnutrition and ill health with further impact on income erosion.

5.84 degraded environment implies that there are less resources available not only for the present but also for the future generations meaning greater risk of unsustainability. It creates adverse impact on both production and consumption activities of the poor. Bangladesh is still an agrarian country and the livelihoods of the poor depend largely on agriculture, forests, and fisheries. Indeed around 80 per cent of the total population depend to some extent on the utilization of natural resources or on processing of the resultant products which can be categorized as environmental resources. So the policies would strike a realistic balance between the existing livelihood requirements of the people and sound environmental resource management that can ensure sustainability. A special emphasis will be given to addressing the problems of river erosion affected areas.

5.85 Under the strategy, environmental conservation would be integrated into national poverty alleviation strategies. Given the large number of environmental problems across various ecological zones, some target groups of people are always at high risk of exposure to poverty and environmental degradation. They would be identified clearly. The nexus among poverty and environment as well as with development and population policies would then be understood in a holistic manner. Isolated poverty alleviation strategies will not be effective if these are not environmentally sound, participatory in nature and focused on building local and national capacities for self-reliance. Incorporating people’s knowledge, perception and attitudes in planning and implementation will be taken as vital for environment friendly development. The environment strategy will draw upon the Environmental Policy 1992, the Dhaka Declaration 2000, the National Environmental Management Plan (NEMAP), and the Declaration of the World Summit on Sustainable Development 2002 with support from national CSOs and NGOs working in the area of environment.

I. Summary Points

  • There are five main avenues of the poverty reduction strategy. These are: pro-poor economic growth for increasing income and employment of the poor; human development of the poor for raising their capability through education, health, nutrition and social interventions; women’s advancement and closing of gender gaps in development; social protection measures for the poor, especially women, against anticipated and unanticipated income/consumption shocks through targeted and other efforts; and participatory governance for enhancing voice of the poor and improving non-material dimensions of well-being including security, power and social inclusion by improving the performance of anti-poverty institutions and removing institutional hurdles to social mobility.

  • Policies and institutional actions delineated under the poverty reduction strategy will be designed to reach out to the poorest and the remote rural areas, which are vulnerable to adverse ecological processes (including chars and river erosion affected areas) and those with high concentrations of socially disadvantaged and marginal ethnic groups. Special attention will be given to the development problems of the hill people of CHT and tribal population residing in other parts of the country.

Chapter 6 Medium Term Macroeconomic Framework

6.1 To facilitate the implementation of the strategy, a Medium Term Macroeconomic Framework (MTMF) has been specified. The framework has been worked out on the basis of the estimated values of FY03 as the benchmark. The purpose is to enable the tracking of relevant indicators and monitor the progress based on key intermediate outcomes. As a first step, key macroeconomic fundamentals have been specified which provide the policy outcome targets. Obviously, designing such a framework is part of a continuous process of preparing the strategy, which will be updated and adjusted periodically on the basis of actual outcomes and developments.

6.2 The macroeconomic framework integrates in a consistent manner the national accounts, balance of payments and monetary and fiscal accounts. A detailed budgetary expenditure framework indicating the public resource envelope and expenditure pattern required to achieve the desired growth and poverty reduction targets has also been worked out.

6.3 The framework envisages a stable macroeconomic environment during the period. It seeks to achieve an accelerated growth rate of GDP in real terms rising from 5.5 percent in FY04 to 6.5 percent in FY06. The target rate of growth has been set to ensure a real breakthrough in poverty reduction in the medium term. The economy’s average growth rate in the recent past, excluding that of FY02, has been higher than the historic trend growth rate of 4 percent. Because of the adjustment policies already taken by the Government it is expected that the growth momentum will be regained in FY03, which will provide the basis for a new era of higher growth from FY04.

6.4 As high and variable inflation inhibits growth, worsens income distribution and the poverty situation, the framework envisages low and stable rate of inflation in the economy. A tight rein will be put on inflation so that the positive impact on poverty reduction achieved through higher growth is not frustrated. The rate of inflation is expected to to 4.0 per cent in FY05 and remains stable afterwards.

6.5 By the 1990s, Bangladesh has made a transition from a situation of low saving and investment ratios to moderate saving and investment ratios. It is expected that the trend will continue and saving and investment rates will increase further in the coming years. Moreover, the poverty reduction strategy would require higher growth which can be achieved through higher investment. Better management of public capital and more efficient provisioning of infrastructure leading to better utilization of private capital would be ensured such that the productivity of capital is enhanced and higher growth is achieved.

6.6 Accelerated poverty reduction would require higher amount of government revenue which can be spent on programs benefiting the poor. The revenue/GDP ratio as well as the tax/GDP ratio are still low in Bangladesh compared with similar ratios in other developing countries. The Government plans to mobilize larger amount of domestic revenue so that the revenue/GDP ratio would rise from 10.6 per cent in FY03 to 11.9 per cent in FY06 and the tax/GDP ratio from 8.3 per cent to 9.7 per cent during the same period. The government has already implemented some short term measures for increasing domestic resources in FY02. Several additional measures have also been proposed in the FY03 budget which have started to yield positive results. The government has also been rationalizing the prices of public goods and services to improve non-tax revenue collection. Future measures to increase revenue collections will focus on further reforms in the revenue system.

6.7 A significant increase in public expenditure is needed to reduce the incidence of poverty at a faster rate. Within the medium term framework, total government expenditure as a proportion of GDP will increase from 15.2 per cent in FY03 to 16.4 per cent in FY06. The rise in expenditure/GDP ratio would largely reflect the additional public expenditures required to finance new poverty reduction projects. The size of ADP will grow from 5.8 per cent of GDP in FY03 to 6.9 per cent in FY06 indicating expanded and improved absorption capacity of the key sectors in utilizing additional development resources.

6.8 A shift in priorities of public expenditure proposed in the poverty reduction strategy will be reflected in the expenditure program for the medium term. This will mark the beginning of the transition from the business-as-usual policy stance to the changed agenda of the strategy.

6.9 The budget deficit will be kept under control in the neighborhood of 3.8 to 4.0 per cent (4.5 to 4.7 per cent excluding grants) of GDP and will be financed by both domestic and foreign resources. It is expected that increased volume of foreign resources will be forthcoming to finance the poverty reduction agenda under the strategy. Consequently, net foreign financing excluding grants as proportion of GDP would increase from 1.6 percent in FY03 to 1.8 percent in FY06.. Net domestic financing has been projected at 1.9 per cent of GDP in FY06. The monetary and credit program for the medium term has been designed to ensure higher growth of GDP as well as price stability. Broad money growth rate would decline from 12.5 per cent in FY03 to 11.9 per cent in FY06. The reserves money will be used as an operating target to keep broad money growth within reasonable limit.

6.10 The balance of payments (BOP) situation would also improve during the program period. The assumption underlying the projected behavior is the steady growth of exports along with enhanced inflow of multilateral and bilateral inflows to finance new poverty reduction programs. The gross official reserves would increase from US$2.0 billion (2.1 months import equivalence) in FY03 to US$ 3.3 billion (3.2 months import equivalence) in FY06.

6.11 Exports are likely to increase from US$ 6.13 billion in FY03 to US$ 7.87 billion in FY06, implying an annual growth rate of nearly 9 per cent during the period. During the same period, imports are expected to increase from US$ 9.10 billion to US$ 11.62 billion. The import projections have been made considering enhanced import requirements to sustain higher investment and economic growth and for financing the broad ranging poverty reduction programs.

Table 5

Medium-term Macroeconomic Framework: Key Indicators

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Note:

Consists of other capital, net lending and food accounts (including check float and discrepancy)

Grants are considered as above the line item)

Considering grants as financing item and a below the line item

A. Policy Matrix for National Poverty Reduction Strategy

6.13 A broad outline of the major policy initiatives necessary to implement the poverty reduction agenda is given in Table 6. Several of these measures have been elaborated in the text as well as in accompanying annexes. These will be further elaborated as the process moves towards preparing a full-blown poverty reduction strategy. The logic of the policy matrix has been to identify an appropriate macroeconomic framework consistent with the challenges at the present stage of development of the country. For the purpose, four central blocks of policies have been identified. These are: (a) macro and trade reforms, (b) governance reforms, (c) sectoral reforms and (d) reforms to ensure social protection.. However, the proposed policy matrix does not include all possible reforms needed to take the economy to a higher stage of development. Here, the focus is mainly on the ‘triggers’ and the ‘drivers’ i.e. measures that are critical to address the most pressing development challenges. In the context of preparing the full-blown strategy and the three-year rolling plan, the policy matrix will be further disaggregated to provide sectoral/ sub-sectoral policies and programs and projects along with their detailed costing.

Table 6

BANGLADESH MEDIUM-TERM POLICY MATRIX

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Chapter 7 Monitoring and Evaluation

7.1 The success of the poverty reduction strategy would require a systematic approach to monitoring and evaluating the progress in implementing the strategy. To ensure that the targets set in the strategy are met, a comprehensive poverty monitoring system will be used to help the policy makers to monitor progress and adjust the actions to make them more effective and efficient. This will also be used as a system of dissemination of poverty data to relevant stakeholders thus contributing to fuller participation of the civil society in poverty reduction efforts. For the purpose, a list of core indicators required to track trends in poverty and the institutional framework for monitoring and evaluation of the strategy would be worked out.28 The framework will be further elaborated based on consultations to serve as the guiding mechanism for poverty monitoring in the country. Existing survey instruments such as HIES, LFS, CNS, DHS, CMI, VRS to name a few, would be strengthened further for periodic generation of data and appropriately re-designed to facilitate the monitoring of national targets under the poverty reduction strategy. One of the key outputs of the system will be an annual Report on Poverty Reduction and Social Development, which will provide an overview of progress in achieving economic growth, human development, poverty reduction, gender equality targets and analysis of factors behind the observed trends and their policy implications.

7.2 For ensuring effective development of the system, several information and data gaps would have to be filled in through appropriately designed baseline surveys, studies, assessments and evaluations. This would also require adoption of adequate benchmarking and selection of internationally comparable data set on relevant indicators. Along with specifying the sources and streamlining the mechanisms to generate reliable data on all indicators of the monitoring system, poverty-focused surveys and assessments would be required on a regular basis for analyzing the impact of policies and programs and identifying the causal relationships. This would call for a sustained effort of capacity building both within and outside the government.

7.3 The indicators of the system will serve multiple actors providing information on changes in poverty and causes behind the outcomes. The Government will use the information for informed policy and decision-making, re-set priorities, and guide the implementation of the strategy. This will ensure that the country is on track to achieve poverty reduction targets. For the people and the civil society, this will help in assessing how effective and accountable the Government is in reducing poverty.

A. Institutional Mechanisms

7.4 A Poverty Focal Point would be created in the General Economics Division (GED) of the Planning Commission for effective poverty-monitoring and tracking progress in implementing anti-poverty policies and programs envisaged under the national strategy for economic growth and poverty reduction. The focal point will be designed such that it can grow and function as an institutionally effective and technically competent Poverty Monitoring Unit with strong inter-Ministerial linkages and interactions with various types of stakeholders outside the Government. Participatory consultations will be an integral part of the work of the Focal Point both before and after the preparation of the full-blown strategy. The Unit will also act as the key agency in the preparation of the full-blown strategy and periodic revision of the medium term agenda within the framework of the long-term vision set under a Perspective Plan. This would require measures to equip the Unit with adequate capacity and incentives to undertake its stipulated functions and carry out poverty reduction strategy related research and monitoring and evaluation activities.

7.5 A National Poverty Reduction Council (NPRC) chaired by the Prime Minister with participation of Ministers and the Secretaries of the relevant Ministries as well as representatives from the private sector like FBCC1, women’s groups, academia and research institutes like BIDS, NGOs and the civil society will be formed. Since the implementation of the strategy is the central task, the key objective of the Council would be to address comprehensively the problems of implementation. The Council will also address the strategy and policy-related issues arising out of the monitoring and evaluation work of the Poverty Focal Point. The Focal Point will act as the Secretariat for NPRC. The Council would meet at least quarterly.

7.6 One of the key tasks of the Unit would be to monitor progress in the implementation of the national poverty reduction strategy and outcome indicators. The poverty diagnostics, drawing on qualitative and quantitative information, would be used to set medium and long-term outcome-oriented targets for the country. These targets would be linked to macroeconomic, structural and social policies that together comprise a comprehensive strategy for achieving these outcomes. Setting clear targets in line with Millennium Development Goals (MDGs) would add transparency to the process of allocating resources and provide a benchmark against which to monitor the progress.

7.7 The Poverty Monitoring Unit would engage in regular consultations with the civil society including the poor and the women at suitable levels of social and regional disaggregations as part of participatory poverty assessment (PPA) in tracking progress in the implementation of national poverty reduction strategy as well as for identifying new areas of anti-poverty interventions and/or corrective actions.

7.8 The poverty reduction monitoring initiative, however, will not be restricted to the efforts on the part of the Government alone. Civic initiatives for monitoring poverty—similar to the Social Weather Station in the Philippines—would be supported for getting an independent assessment of trends in poverty as well as effectiveness of poverty reduction policies. Such a group of concerned citizens will act not only for poverty-monitoring, but also function as an advocacy group for influencing policy. The activities of the group would help trigger collective action in respective sectors for reducing poverty and vulnerability.

B. Monitoring Indicators

7.9 The matrix of proposed poverty reduction tracking and monitoring indicators is given in Annex-11. A central aspect of poverty and social development monitoring would be to collect information on a wide variety of socially-differentiated, sex-disaggregated and regionally differenced poverty indicators. Evidently, the institutionalization of a comprehensive and efficient mechanism to ensure timely monitoring will require capacity building and coordination among the relevant agencies and departments. The details of the requirements will be worked out along with technical assistance requirements for meeting the needs. A sustainable poverty reduction strategy requires an effective system of managing the macroeconomy. Annex 12 provides a detailed description of tracking and monitoring indicators for macroeconomic management.

C. Road Map to Full Strategy

7.10 The national strategy for economic growth and poverty reduction, as outlined in this paper, may be considered as the equivalent to what is often termed as the Interim Poverty Reduction Strategy Paper (1-PRSP). Three important elements will be considered in transforming Bangladesh’s current approach to anti-poverty policy making into a full-blown poverty reduction strategy: (i) continuous and effective interaction and consultations with all stakeholders to make it ‘dynamic’ with capability to address on-going development and emerging priorities along with consensus to guide and pull poverty reduction efforts of all actors including the Government, NGOs, civil society and development partners in an integrated manner; (ii) devising and implementing specific policies and programs and time-bound action plans to support the strategic thrust of the strategy; and (iii) installing an effective institutional mechanism to monitor the progress and provide regular and timely feed back to articulate actions needed to achieve the proposed targets.

7.11 The poverty reduction strategy, as delineated in the present paper, provides the broad (e.g. national) directions for achieving the poverty reduction goals. The efforts will be to move towards disaggregated targets to facilitate the formulation of specific programs/ projects and detailed costing and its financing by the time the full-blown strategy is designed (Table 7). These sectorally disaggregated targets will be set not only by social and regional distinctions, but also made sensitive, as far as possible, to the emerging gender dimensions. During the period, the institutional framework and monitoring indicators along with their sources, benchmarks, and mechanisms for ensuring regular information flows will also be finalized such that an adequate monitoring and evaluation method becomes operational. The civil initiatives for regular monitoring of poverty and progress towards achieving the goals would also be developed during the period.

Table 7

Time Line for Full Strategy

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Bangladesh: Interim Poverty Reduction Strategy Paper
Author: International Monetary Fund