BANGLADESH CAN GROW LIKE CHINA
REJAUL KARIM BYRON AND MD FAZLUR RAHMAN
Ellen Goldstein, who recently completed her assignment in Bangladesh as the World Bank’s country director, talked with The Daily Star before her departure. She shared her views on various issues such as the Bank’s contribution to Bangladesh, the country’s macroeconomic situation, infrastructure deficiency, investment climate, corruption and Padma bridge financing. Here are the excerpts from the interview.
What is your overall contribution/impression about Bangladesh’s economy?
I feel that my term here was on balance a pretty positive one, as the World Bank was able to achieve many of the things we had set out to do, that contributed to important development results in Bangladesh.
We have a portfolio of more than $5 billion in total commitments now in over thirty different operations.
In areas like rural transportation, rural water supply, local governance, community-driven development, girls’ education, health and nutrition outcomes, we have massive scaling up of the WB’s resources. At the same time, we can measure and see the results on the ground and how it is changing people’s lives.
Is Bangladesh moving up the ladder on social indicators?
Most of Bangladesh’s social welfare indicators have shown improvement over the past 20 years. This is a tremendous credit that can be attributed to successive governments and many other stakeholders such as non-government organisations and community organisations.
There has been a consistent focus across different governments on improving social welfare, health, education, nutrition, social protection and family planning.
What is your comment on corruption, efficiency of infrastructure and bureaucracy issues?
I first came to Bangladesh in early 1990s. When I came back here again in 2009 for the current assignment, I saw a remarkable transformation of Bangladesh’s economy and society over this 20-year period.
There has been amazing transformation, and a lot of that is underpinned by a relatively good macroeconomic management which is a kind of hallmark for Bangladesh.
At the same time, I do not think that we have seen a huge progress on some areas that would allow Bangladesh to jump from the current relatively good performance of 6 percent growth a year and falling poverty rates.
But, if the country wants to grow like China with 8 percent to 10 percent GDP growth, Bangladesh has the potential to do that.
What areas can help achieve higher economic growth?
The big opportunity for Bangladesh is to take advantage of the most competitive labour market in the world. The country has a demographic dividend with a huge number of young people. More educated young people are entering the labour force than before. In order to take advantage, there should be additional structural reforms in the areas of infrastructure development and investment climate.
What is your comment on infrastructure deficiency and investment climate?
For large scale infrastructure, Bangladesh needs to embrace public-private partnership (PPP) model. Not all infrastructures can be built through public sector money. There has to be a much more diverse market for providing the needed infrastructure. And we are talking about a whole range of infrastructure — telecom, port, roads, inland water transport, etc.
The other related area is investment climate in terms of the regulatory environment and the processes and procedures around investing, starting or operating businesses in Bangladesh.
What are the development challenges of Bangladesh?
Remarkable progress on human development has been made which is a triumph for Bangladesh. The number of women in workforce or the number of girls in school demonstrates a huge social transformation.
But one area related to human development as well as to investment climate, that now needs focus is skill development. Bangladesh needs to have more skilled labour force both in the country and outside. For that, a significant focus on the quality of education is needed going forward.
There is allegation against the WB of slow fund release. What do you say?
First of all, we need to work on the facts, not on the allegations.
The WB has a total commitment of around $5 billion and about $3.4 billion which is currently committed but not yet disbursed. We have to remember that when a donor commits for a five-year project, in the first year almost fourth-fifths of the money will not be disbursed. The minute the money is committed it will not go out of the door. The WB’s yearly disbursement is higher than other development partners. In recent years, we have disbursed from less than $400 million to well over $500 million. In the first half of the fiscal year, we have already disbursed $350 million. Hopefully, we will continue the same pace and the full years’ disbursement will be more than $600 million.
Why is Bangladesh not getting budgetary support from the WB?
Under the current country assistance strategy, we thought there might be scope for budget support. While considering a poverty reduction support credit, some deterioration was seen in the overall governance environment in the country. You can remember back at that time, there were problems with the management of capital market, issues in the telecom sector such as renewal of telecom licences, and issues with public debt management. As a result, we saw a decline between fiscal year 2010-11 and 2011-12 in the Country Policy and Institutional Assessment or CPIA. This is an indicator that we use to assess how the government is doing on many different aspects of policies and institutional development.
Let me say that the strategy pursued in the power sector did in fact help to keep growth moving which is very important. This is not meant to be necessarily a criticism. But what it did mean is that there is a tremendous increase in subsidies in government spending. This led to greater domestic borrowing by the government that led to the tendency to crowd-out borrowing by the private sector. Along with this, there was deterioration in the quality of public spending in some areas.
Was the way the WB handled the Padma bridge issue a bit high-handed when no money changed hands? Is it a zero-sum game in the end?
You have raised a very important question for everyone working in development. And that is a question of how do we do business in a weak governance environment. How do we balance the need to avoid corruption risk, which takes money out of the hands of poor Bangladeshis? How do we minimise those risks and still try to contribute to development results? This is a very fundamental question and it is unlikely to be answered today.
The people of Bangladesh win if a stance is taken against corruption. I think most Bangladeshis are tired of thinking that money meant to be used to improve the lives of the poorest in the country may not be used for that purpose. It frustrates people tremendously. They deserve the money that is made available by the international community to be used for more long-term development purposes.
What are the improvements that make you proud?
We have made a lot of progress in supporting and strengthening Bangladesh’s own systems. And in the end, through this strengthening, Bangladesh will be a more dynamic country.
I was thinking in particular about improvement in the public financial management. We are working together to improve the programming and oversight of the budget. The parliament and the Office of the Comptroller and Auditor General need to be strengthened to be more efficient and more transparent, so people can see how the public money is being spent.
We have had also incredibly good progress on public procurement reforms. All of the drama around the Padma bridge project is because of a procurement issue.
Is the WB responsive?
We scale up in areas where we see results. We see results and we scale up to get more results.
We also tried to be a more responsive WB. There have been many instances where the government has had a sudden or important problem to deal with. Despite the reputation of slow bureaucracy, the WB tried to respond in an innovative, flexible and quick manner.
Will the Padma bridge episode have any adverse impact on the relationship between the government and the WB?
We have a wonderfully long and productive relationship between the government and the WB. I think our relationship can withstand this kind of discussion. It has its moment of stress and people get frustrated. I believe that we have been through so much together as partners and that our relationship is going to come out of this very strong.
The fact that many people in Bangladesh have understood and appreciated why the WB has taken this decision, I think the public still see us as a very valuable partner to the country both in the terms of the money that we bring and the projects we have done.
February 13, 2013