Extra push can erase extreme poverty in urban areas

An additional push can help Bangladesh bring down the number of urban extreme poor across the country by 2021, a leading economist said yesterday.

Bangladesh had 7.7 percent urban extreme poor in 2010, according to the government’s statistical agency.

Binayak Sen, research director of Bangladesh Institute of Development Studies or BIDS, said the number came down to 4.98 percent in 2016, as per his own projection.

“So, urban extreme poverty eradication is around the corner, with a little extra push, before 2021,” he said at a workshop at The Daily Star Centre in Dhaka yesterday.

Urban consumption poverty eradication is also possible well before the UN-set deadline of 2030, as it came down to 14 percent this year from 21.3 percent in 2010, he added.

The sustainable development goals called for eradication of extreme poverty for all people everywhere by 2030; internationally, poverty incidence below 3 percent is considered zero poverty, he said.

“But in a highly populated country like Bangladesh, 3 percent of the total population is a huge number. So, we have to work in both urban and rural areas to bring down the poverty level to zero percent to attain the SDG target on poverty.” Sen, however, said multiple risks persist.

“The issue is not just poverty reduction via temporary poverty escape, but one of permanent poverty escape.”

Apart from consumption poverty eradication, other deprivations in areas such as quality of education, health, nutrition, housing and transport have to be taken into consideration, according to Sen.

“The issue is to transform a middle income country into a middle class country.”

Mihir Kanti Majumder, chairman of Palli Sanchay Bank, said the declining trend of extreme poverty is encouraging.

If the country can reap the benefit of the demographic dividends, develop skills of the youth population, and properly use its resources, Bangladesh would become a developed country, he added.

“So, we need a concerted effort on fronts such as education and health. Agricultural machination is a must as many people are leaving the agricultural sector and engaging in non-farm activities.”

At the workshop, Sen presented an impact of a project run by Dushtha Shasthya Kendra (DSK) with support from the Shiree project funded by UKaid from the Department for International Development and the Bangladesh government.

‘Moving from extreme poverty through economic empowerment’ started in 2009 and worked in several slums such as Karail, Kamrangirchar, Lalbag, Hazaribag, Mohammadpur and Mirpur. The project ended in 2016.

Under the project, a non-refundable fund of Tk 14,000 was transferred to the beneficiaries. They were given training on income generation and were given access to health care facilities, said Masudul Quader, chief executive of DSK.

“There are many people who are not deemed credit worthy or don’t know how to utilise the credit properly, largely because of a lack of capacity. We have identified them. Now they are able to run businesses on their own,” he said.

Under the project, 30,000 households have come out of extreme poverty, said Prof Mahfuza Khanam, vice-president of DSK.

Sen first conducted pilot surveys in the slums in 2011. In December, he carried out a final survey to measure the impact of the project. This time, the number of households was 950, including 200 households under a control group.

The study showed annual income, savings and capital formation and assets have gone up for the beneficiaries compared to the controlled group. Access to sanitation and washing habits also improved.

Beneficiary households registered 24 percent higher income compared to controlled households. The weekly consumption propensity for protein and micronutrient-rich items such as eggs, meat, dairy products and fruits is significantly higher in case of programme members, said Sen.

“The members also have higher aspiration than the non-members for their children.”

Sen said: “It seems that DSK-Shiree should now try to lift their members from moderate poverty given their past success in attacking urban extreme poverty.”

“Yesterday’s extreme poor are today’s moderate poor, and they are already dreaming of becoming a part of the middle class. Can we support their aspiration?”

Mofizul Islam, director general of the Department of Cooperatives, said it is really tough to reduce urban extreme poverty compared to rural extreme poverty, as most poor people live illegally or do informal trades. “DSK-Shiree has done the difficult task.”

Setara Begum, a community leader in the city’s Karail slum, said she has been living in the slum for 25 years after she lost her home in Barguna to river waters.

“I have been given training. I have been given Tk 14,000 as grants, which I used to start a teashop. I also started selling saris with their help,” she said.

“If the government can allocate land to the rich, why can’t it do the same for the poor?”

“But we are always fearful that the slums might be demolished anytime.”

“If the slum is demolished, there will be no place for us to go. We don’t want to become zero from hero.”

Source: Daily Star

The middle class is growing

Abdul Bayes, Mahabub Hossain and ANM Mahfuzur Rahman

Binayak Sen, an eminent economist and a Research Director of the Bangladesh Institute of Development Studies (BIDS), recently completed a research work on ‘Middle Class’ (henceforth MC) in Bangladesh, especially relating to growth trends, drivers and policy implications. He deserves special thanks for invoking an interest in a topic hitherto untouched by Bangladeshi economists. At the moment, Middle Income Country (MIC) is the coin in circulation, not Middle Class population. We all know that Binayak has been a very powerful, if not the pioneer, researcher in poverty-related research in Bangladesh. His motivation in taking up MC reportedly springs from the emerging shift of focus on the ‘Middle Segment of Income Distribution’. According to his views, there are two main arguments for which MC should occupy the front seat in the days to come. The first one relates mostly to growth and employment. MC is considered to be good for inclusive growth – the larger the size or density of MC, the better it is for economic growth. The growth of MC (a) injects more stability into growth process due to less volatility associated with regular (salaried) jobs, (b) helps to accelerate the aggregate growth rate by releasing the domestic demand constraints to growth, and by fostering higher labour productivity, managerial skills and entrepreneurship; and (c) enables reduction of poverty faster than in countries with lower class density. On the other hand, the second arguments mostly apply to governance and risks.

MC has beneficial institutional externalities such as (a) larger size associated with higher institutional quality via demand-driven economic governance channel, (b) improved quality of democracy through better and concerted articulation of democratic aspirations in areas of ‘core governance’. Again, ignoring the role of MC invites significant downside risks. Widespread discontent of middle class – especially among youth -with respect to deteriorating income distribution or mobility could cause political instability and social strife.

To start with, Sen attempted to draw a MC line that embraces economic definition of MC (income-based). Although no unique definition of MC- even of income-based – exists around the world, he adapted various versions in national context to use for estimating the size and growth of the MC. The data for the analysis came from Household Income and Expenditure (HIES) over 1991-2010 when identified four groups (expressed as per person per day in PPP dollar using 2005 PPP) as follows: (a) Poor (below $1.25, (b) Vulnerable non-poor ($1.25-2.00); (c) Middle Class ($2.00-3.00), (d) Upper middle class ($3.00-4.00) and (e) Rich ( $4.00).

The researcher observed a few interesting trends. There has been a significant rise in the share of national MC over the period between 1992 and 2000. Only 9 per cent of the national population belonged to this cohort; the matched figure went up to 20 per cent in 2010. The comparable figures for other regions are as follows: India 24 per cent; China 62 per cent, South Asia (including India) 17 per cent, Sub-Sahara Africa 26 per cent, and East Asia (including China) 59 per cent.

From a static view, Bangladesh falls behind others in terms of the proportion of MC people but ‘doubling the size of middle class is a dramatic success by any measure. If the present trend continues, middle class will comprise 25 per cent of national population in 2025 and 33 per cent in 2030’. Second, as the size of national MC grew bigger, the poverty reduction rate became faster. The author provides no explanation of how it happened although we expect it in detailed discussions. Third, there is a considerable bulge around $1.25 and $2.00 line. This indicates that the potential vulnerability to downward mobility (descent) pressures reign high. Fourth, these estimates need to be re-visited for robustness check in the light of US$ 1.90 line in 2011 PPP adopted by the World Bank for global poverty analysis very recently. “However, there is little doubt that expanding middle class has been good for stability of growth and accelerated poverty reduction in the 2000s…” Again, the process awaits explanations.

Policy implications? The graduation to MC from poor is adducible to post-secondary education (especially English education), salaried jobs in the service sector, ‘digital divide’, access to financial saving institution etc. The growth of MC has been driven by property price appreciation and unequal spread of human capital (post-secondary education). Universalising social protection and health care will help overcome bulging around poverty and middle class lines. Balancing between ‘pro-poor growth’ and ‘pro-middle class growth policies’ is the most pressing policy challenges in defining inclusiveness etc.

In an apparently ‘ambitious’ attempt, we have adapted Binayak Sen’s methodology to determine the growth and size of middle class in rural Bangladesh. The basis of our data is MH Data Base (Mahabub Hossain Data Base) comprising the repeat sample survey of households of 62 villages in 1988, 2000 and 2014. A la Binayak Sen, we wanted to have a glimpse into the growth of rural MC over time. We observe that roughly 7 per cent of rural population was in MC category in 1988. This compares with about 14 per cent in 2000 and 21 per cent in 2014. The rich segment, on the other hand, shot up from 3 per cent to about 18 and 37 per cent respectively during same periods of time. Our findings thus seem to corroborate Sen’s observations about MC growth in Bangladesh.

The growth in rural areas has mostly been greased by remittances – accounting for one-fourths of household income from 6.0 per cent and business – claiming one-fifths from one-tenths of household income. The growth of commercial agriculture in tandem with expansion of non-farm activities – as supported by expanded road communication – could have contributed to the growth of middle class in rural areas. The mundane message is that in the days to come, research on ascent and descent centring MC line would replace that of poverty line.

Abdul Bayes is Professor of Economics at Jahangirnagar University, (late) Mahabub Hossain was Distinguished Professor, BRAC University and Mahfuzur Rahman is Coordinator, Data Management Unit, RED/BRAC.

Source: Financial Express

বাংলাদেশে মধ্যবিত্ত শ্রেণির বিকাশ (Bangladesh’s expanding middle-class)


Prothom-Alo: সাড়ে তিন কোটি মানুষ এখন মধ্যবিত্ত
বাংলাদেশে দ্রুত মধ্যবিত্ত শ্রেণির বিকাশ হচ্ছে। এ মধ্যবিত্ত শ্রেণির বিশাল অংশ চাকরি করে। তারা এখন ফ্ল্যাটে থাকে কিংবা জমির মালিক। তারা ইন্টারনেটও ব্যবহার করে। টাকাপয়সা রাখে ব্যাংক হিসাবে। সব মিলিয়ে বাংলাদেশের ২০ শতাংশ জনগোষ্ঠী এখন মধ্যবিত্ত। ২০৩০ সালের মধ্যে দেশের এক-তৃতীয়াংশ মানুষ মধ্যবিত্ত হবে। এ তথ্য বাংলাদেশ উন্নয়ন গবেষণা প্রতিষ্ঠানের (বিআইডিএস)। গবেষণাটি করেছেন প্রতিষ্ঠানটির গবেষণা পরিচালক বিনায়ক সেন। গতকাল বৃহস্পতিবার গবেষণার এ ফল প্রকাশ করা হয়। যাঁরা দৈনিক দুই থেকে তিন ডলার (পিপিপি হিসাবে) আয় করেন, তাঁদের মধ্যবিত্ত হিসেবে বিবেচনায় আনা হয়েছে। আন্তর্জাতিকভাবে এ হিসাবটি স্বীকৃত। বিআইডিএস এ গবেষণাটি করেছে ঢাকা শহরের ১২টি এলাকায়। গবেষণার নমুনার সংখ্যা ৮০৯। গবেষণাটি নিয়ে যোগাযোগ করা হলে বিনায়ক সেন প্রথম আলোকে বলেন, মধ্যবিত্তের সেই হিসাবটি ২০১০ সাল ধরে করা হয়েছে। অতীতের একই প্রবণতা ধরে নেওয়া হলে ২০১৫ সালে এসে মধ্যবিত্ত জনগোষ্ঠী মোট জনগোষ্ঠীর সাড়ে ২২ শতাংশ হবে। বিস্তারিত ->

সমকাল (Samakal): ২০৩০ সালে মধ্যবিত্ত হবে ৩৩ শতাংশ
দেশে মধ্যবিত্তের হার ক্রমান্বয়ে বাড়ছে। গত দুই দশকে মধ্যবিত্ত জনসংখ্যা দ্বিগুণের বেশি বেড়ে ২০ শতাংশ হয়েছে। এ ধারা অব্যাহত থাকলে ২০৩৩ সালে মোট জনসংখ্যার এক-তৃতীয়াংশ এ শ্রেণীর অন্তর্ভুক্ত হবে। বাংলাদেশ উন্নয়ন গবেষণা প্রতিষ্ঠানের (বিআইডিএস) এক গবেষণা প্রতিবেদনে এমন প্রাক্কলন করা হয়েছে। গতকাল বৃহস্পতিবার রাজধানীর আগারগাঁওয়ে বিআইডিএসের এক বছরের গবেষণা প্রতিবেদন প্রকাশ নিয়ে আয়োজিত সেমিনারে ‘বাংলাদেশে মধ্যবিত্তের আকার ও প্রবৃদ্ধি’ বিষয়ে গবেষণা প্রতিবেদনে এ তথ্য তুলে ধরেন প্রতিষ্ঠানের গবেষণা পরিচালক ড. বিনায়ক সেন। বিস্তারিত ->

Financial Express: BIDS study reveals growing middle class BD’s dramatic success
There has been a significant rise in the share of middle class group in the country over the last one decade (1992-2000). If the trend continues, the middle income class will comprise about 25 per cent of the country’s total population in 2025 and 33 per cent in 2030. Bangladesh Institute of Development Studies (BIDS) Researcher Director Dr Binayak Sen revealed the information while presenting a keynote paper on “Size and Growth of Middle Class in Bangladesh” at BIDS Research ALMANAC, 2014-2015. Read more ->

Daily Star: Bangladesh’s middle-class expanding
One-fourth, or 25 percent, of the total population will belong to the middle-class income category by 2025, thanks to greater access to education, finance and IT services, and private sector employment, a recent study found. At present, 20 percent of the population belongs to the middle-income category in Bangladesh in contrast to 24.1 percent in neighbouring India. Read more ->

Dhaka Tribune: BIDS: Middle-class people to reach 33% by 2030
The middle-class group is expected to stand at 33% of the country’s total population by 2030, says Bangladesh Institute of Development Studies (BIDS). Over the last two decades, the country witnessed a remarkable rise in middle class group, it said, adding that if the trend continues, the country is expected to add 25% of its total population by 2025. It said only 9% of the population belonged to this category decades back and in 2010, this group accounted for 20%. BIDS Research Director Binayak Sen revealed the information in his keynote paper on “Size and Growth of Middle Class in Bangladesh” at the BIDS dissemination event on presentations from the BIDS Research Almanac 2014-2015, at BIDS yesterday. Read more ->

One-third population to be middle-class by ’33
The size of middle class population in the country may soar to one-third of the total population by the year 2033, which is now 20 percent, says a latest BIDS study. The study entitled: ‘Size and Growth of Middle Class in Bangladesh: Trends, Drivers and Policy Implications,’ published on Thursday, considered those in the segment whose per day income is 2 to 3 US dollars. Research Director at the Bangladesh Institute of Development Studies (BIDS) Dr Binayak Sen, who conducted the study, said the middle-class size now more than doubled to 20 percent from 1990 level of 9 percent and it could soar to 25 percent by 2025 and to 33 percent by 2033, according to their assessment. Read more ->

Economy a mix of successes and missed chances: positives helped turn a new leaf

DHAKA, Jan 16: Despite there being a lot of criticism about the successes on the economic front, over the last four years of Grand Alliance rule, the economy, in terms of growth prospects, remains attractive, said noted economist Dr Binayak Sen, research director of Bangladesh Institute of Development Studies (BIDS).

“The economy of the country, when the current government came to power, faced a lot of challenges, given the general health of the global economy. From that situation, the country has managed to post average growth rate of over 6 per cent,” he said, adding, “This has been a commendable success and achievement for the government, over these last four years.”

Dr Sen told this to The Independent, in an exclusive interview taken at his Uttara residence, on Tuesday.

In growth perspective, the economy, in these last four years, has performed better than many of the developing countries, he noted. The government has been able to control volatility in the economy, considering the global financial crisis, and this is a commendable success.

“In terms of per capita income growth during the last decade, Bangladesh ranked within the top-20 developing countries, which is also a decent achievement, and an important indicator for judging the success of the economy,” Dr Sen said, adding, “This success has been shared by the private sector, non-government organisations, and the common people at large.”

He said the government could ensure a stable, enabling environment for the private sector, particularly the ready made garments (RMG) sector, and, for this reason, Bangladesh has now become the second largest RMG exporter in the world. This also counts as a success for the government, in these past two years, he said.

He also appreciated the success of the agriculture sector, saying, “Substantial improvement has taken place in real wage rates for agricultural wage workers, during the last four years. In the 1990s, agricultural workers could purchase only 3 kilos of rice with their daily wage, but, now, they can purchase between eight and 10 kilos of rice, with a day’s wage. This marks a substantial change in the agriculture sector.”

He said real agriculture wage has increased during the last four years. “This also indirectly proves that rural poverty is declining and that there has been a further strengthening of the rural economy.”

All these elements of growth are helping to push down the poverty level, particularly in rural areas, he said, adding, “These growth elements helped to maintain the stability of the economy during the last four years of government. It is a commendable achievement for these past four years.”

However, he said that despite these successes of the government, there is a widespread dissatisfaction, primarily because of the increased expectations of the electorate. The latter is attributable to two factors: first, there has been education, especially among the youth population; and second, there has been a considerable economic mobility of people who were the poor and the poorest even a decade ago. “With mobility comes greater expectations from the government; people now want much better performance from the government than was the case before” he explained.

He further said that with improved people have become more conscious, which is a major reason for dissatisfaction and criticism of the government.

He said that, during the last four years, the government was about to achieve most of the targets of Millennium Development Goals (MDG), including primary education, basic health and poverty reduction.

Identifying the lack of skilled manpower, weak infrastructure, bureaucratic problem, scarcity of energy and power, he said that the pace of foreign direct investment (FDI) has been slow. These problems also explain why the overall investment-GDP ratio has remained rather stable in the last few years. This has been an “area of greatest weakness for the present government along with allegations of corruption and low implementation capacity in aided projects, financial sector and capital market”, he added.

He further said that FDI will increase in coming years. For this reason, human resources and IT sectors have to develop, along with the power and energy sector.

Dr Sen said, “We should set up coal-based and atomic power plants, consistent with international good practices, to ensure uninterrupted electricity for the industrial sector.”

About the target of 8 per cent GDP growth by 2015, in Sixth Five Year Plan (SFYP), he said it will not be possible to achieve the target, due to lack of expected investment in total GDP. He further expressed confusion over turning into a middle income country by 2021, as the country’s economic growth is not accelerating, as expected.

Dr Sen stressed the need for turning Bangladesh into a “social democratic state”, where there would a blend between individual incentives and collective responsibility, between market economy and social responsibility, to become a socially sustainable middle income country. “This would require significant change in the quality of democratic politics”, he added.

7.2pc GDP growth hinges on three criteria

Achieving 7.2 percent economic growth in the next fiscal year is possible if three criteria are met, Akbar Ali Khan, a former caretaker government adviser, said yesterday.

Bangladesh will achieve the GDP growth target if: there is no natural disaster, global fuel prices fall at least 20 percent and the fiscal and monetary policies are managed prudently, Khan said.

Khan’s optimistic remark comes at a time when many economists were sceptical of the high economic growth target.

Addressing a discussion on the proposed budget organised by the Bangla-language newspaper Prothom Alo, Khan said the economic growth will not be in a linear fashion.

“There may be ups and downs, but there should be reasons for them though.”

He is not too supportive of the government’s expansionary fiscal policy on the grounds that exchange rate would shoot up giving way to a higher inflation, which, in turn, would create uncertainty in the economy and have a negative impact on investment and sustainable development.

On the government’s recent agreement with the International Monetary Fund (IMF), Khan is doubtful of whether the targeted economic growth could be achieved or inflation could be controlled.

“But the government should still fulfil the promises it has made to the IMF to get assistance. Otherwise, it will create a big problem for the economy,” he said.

Dependency on fuel import is another big predicament for the economy and the government should take a measured approach over it, he added.

Dr Binayak Sen, a research director of Bangladesh Institute of Development Studies (BIDS), said the 7.2 percent GDP growth mostly depends on private sector growth.

“There is no connection between the economic growth and other components such as investment and export growth prediction.”

A big portion of the annual development programme remains unimplemen-ted every day, Sen said.

“If the central government cannot implement it, then it should be passed on to the local government. ADP implementation through local government will also increase government’s popularity,” he said.

Mustafizur Rahman, executive director of Centre for Policy Dialogue, said if the government wants to achieve a higher economic growth, it needs to bring out more reforms.

“We have seen the first generation reforms such as privatisation, and now it is time for second generation ones such as demutualisation in the capital market and formulation of financial reporting act,” he said.

“The proposed budget mentioned 1,027 projects, of which only 35 are new, while the rest of them are the projects that have been either carried over or need to be conducted in the next fiscal year,” he cited.

From a political viewpoint, implementation of next fiscal year’s budget would be vital for the government itself, he added.

Subsidy zooms, again

Rejaul Karim Byron

The growing dominance of subsidy in budget allocations in recent times has started to worry the finance minister.

In the proposed budget for next fiscal year, subsidy, at 18 percent of the total outlay, yet again stands to become the highest single expenditure for the government.

The allocation for subsidy has been kept at Tk 34,533 crore for fiscal 2012-13, a 14.5 percent rise from this year’s Tk 30,154 crore.

For fiscal 2011-12, the original allocation for subsidy was Tk 20,477 crore, which was then revised to Tk 30,154 crore, making it the highest single expenditure for the year.

The steep increase in subsidy is mostly in fuel, electricity and agriculture sectors, with the upward trend mainly due to soaring petroleum prices in the world market and an increase in fuel consumption by rental power plants.

Extension of support to the jute sector by the government also accounts for the inflated figures. The sector’s subsidy — historically in the range of Tk 200 crore to Tk 300 crore — went up to Tk 2,900 crore in 2011-12. For the next year, the government set aside Tk 1,700 crore.

“Our subsidy payment is spiralling due to lack of sufficient price adjustment to match the increasing fuel prices in the international market,” the finance minister said in his budget speech.

“This is intensifying pressure on the financial sector, government budget and the economy. We must, therefore, cut down on subsidy, especially on fuel,” AMA Muhith said.

Some economists, however, have opposed the proposed move and would like the subsidy carried into the future. Their premise is that the price adjustment will push up inflation which, in turn, will hurt the poor.

On the other hand, Binayak Sen, research director of Bangladesh Institute of Development Studies, would like the subsidy to be reduced for the sake of macroeconomic stability.

“If subsidy pushes inflation up it will not bring any benefit,” he said.

On certain quarters’ demand for equal subsidy to the power and agricultural sectors, Sen said a greater weight must be given to the power sector in the interests of investment and growth.

The government should reconsider its decision on rental power plants if the fuel price continues to spiral in the world market, Sen said. “If the price does not increase further there is no need to assign more subsidies.”

For fiscal 2012-13, the government has allocated Tk 6,200 crore for energy subsidy and Tk 6,400 crore for power.

‘In our economic reality we cannot avoid foreign assistance, at least for now’

Dr. Binayak Sen

Dr. Binayak Sen is a Research Director at the Bangladesh Institute of Development Studies (BIDS). He was lead consultant in the preparation of I-PRSP for Bangladesh and also a Member of the Public Expenditure Review Commission. His main areas of work cover growth, poverty, inequality, labour and governance issues. Here, he talks on the upcoming ADP with A.B.M. Shamsud Doza and Zaheen Zaema Khan of The Daily Star.

The Daily Star (DS): Government has allocated Tk. 55,000 crore for the ADP of fiscal 2012-13. How do you evaluate the upcoming ADP compared with the performance of the current ADP?

Binayak Sen (BS): The low inflow of foreign aid this year and rising fuel prices in the international market are reasons for the current macroeconomic instability. Both are external. We need to convince the donors so that we can get aid for our development budget. That needs political skill and robust economic diplomacy. We need to understand the psychology of the donors. In our economic reality we cannot avoid foreign assistance, at least for now. China also applied for IDA even as late as 1995!

ADP implementation requires foreign currency. It also needs access to concessional source of finance. We are not getting it. For example, we have deficit financing of 5% of GDP, of which 2% is financed through foreign aid, and the rest 3% comes from domestic borrowing. In this fiscal year we had shortfall on account of the former, and hence we had to rely heavily on domestic borrowing. That has created problems in ADP financing. Our ADP implementation is now critically dependent on the availability of foreign assistance. In 2007-08 a similar situation prevailed. The prices of food, fuel and energy were rising in the international market and the government was constrained fiscally. During that time, major donor agencies provided at least 3 major budget-support loans, which helped to ease our problems in ADP financing and also in meeting stresses that built up on balance of payment. Unfortunately, this did not happen in 2011-12, and it may not happen in 2012-13 either. This is the time to recognise fiscal realism as a virtue of good rule. I am trying to draw attention to this aspect of governance so that the government can start addressing the trust deficit between the major donors and the government, between the West and Bangladesh, or at least stop creating new tensions or re-igniting old sore points.

DS: In the next ADP the total number of projects is 1037, of which 1002 is a backlog from the current ADP of 2011-12. It seems that the ADP is burdened with projects while the implementation is poor. What is your view on that?

BS: The quantity of the projects is also a problem in ADP implantation. There are projects that do not have adequate financing. Some are even “token projects” with symbolic allocations of funds, waiting to be funded in some near or distant future. My proposal is to rank the projects in order of priority. Priority should be given to ADP projects that were started but not yet finished. In any case, the whole process of ADP project selection needs to be reformed. It should not be just limited to the judgment of the sectoral ministry. There should be broader consultation, with participation from specialists and civil society representatives on the relevance of a particular ADP project, especially if it is a major project in terms of size and impact.

By March, 2012 only 50-60% resources under ADP were implemented, and the rest will be spent hurriedly by June. This has been the feature for the last two decades. It is very difficult to monitor the implementation from “one centre” in a country with 160 million people. The former Soviet Union failed to manage its economy from “one centre.”

Our economy demands fiscal decentralisation because of our enormous population (population-wise it is ranked 7th in the CIA World Fact Book). Hence, for the speedy implementation of the development budget, at least 10-15% of ADP resources should be earmarked to go directly to the local governments as conditional matching grant. The condition is that local bodies will be given 80% of the local development budget from the centre if they agree to generate at least 20% of that. This is practiced routinely in most developed countries as well in some of the South Asian countries, especially in the Indian state of Kerala where one-third of the budget goes directly to the local governments. The Union Parishads and Pourasavas will be able to make their own ADP according to their local needs. The local physical infrastructures that are not covered by either LGED or Roads and Highways Department can be covered under the local ADP. The ADP budget is inadequate for large number of Union Parishads and Pourasabhas.

There has been some positive experience in Bangladesh in supporting local governments through innovative projects like Local Government Support Project (LGSP); but such projects need to be scaled up across the country with adequate fiscal empowerment, especially with regard to local-level revenue mobilisation. But, for that, we need to reform also a few taxation codes so that the local governments have the legal entitlements to raise local revenues.

DS: In the next ADP, Tk. 33,500 crore of the total allocation is projected to come from domestic resources and Tk. 21,500 crore will come from external resources. Do you think the share of external resources is realistic given the non-availability of external assistance in the current fiscal year following World Bank’s suspension of funding over corruption allegations?

BS: It is not unrealistic, and this I say even after the dismal Padma Bridge affair. But, the government needs to apply more efforts so that all the issues could be settled in a congenial way and without further delay. That is the national priority. I have two points to make. First, the economy should dictate the terms of politics and the nature of our external diplomacy. Economics is the concentrated expression of politics. Even for China, good relationship with World Bank is vital. Considerable efforts are needed here because the domestic resource for financing the ADP will not be enough. Tax collection has increased, but there is a long way to go before we can say that we are self-reliant fiscally. This we realise even more in times of economic slump, which is now happening again worldwide.

Secondly, we cannot rely too much on domestic borrowings because we have already built up considerable internal debt on account of interest payment on government loans from domestic sources. This has become a large component of our revenue budget already. Hence, we cannot go for domestic borrowing infinitely. Besides, there are other implications of this mode of domestic financing for the private sector borrowers.

Finally, the amount of external resource that we currently receive is within our “resource absorption capacity,” i.e. fiscally realistic, but steps must betaken, especially on government’s compliance standards, so that the concerns of the donors are met.

In defence of the current government I would say that sometimes the donors give too much weight to anti-corruption measures than to pro-human rights and democracy measures. In 2007-08, the donors did not pay much attention to the violation of human rights that was taking place then, or that the democracy standard was not always upheld during that period. I always had a debate on this. My point is that anti-corruption, human rights and quality of democracy should be given equal weight in judging a borrowing country’s performance standard. I also maintain that these measures of good life and decent liberal democratic society should not be traded against one another.

My point is that Bangladesh is still maintaining a decent though different democracy, and that it has not derailed to autocracy or to any military driven development, so some positive credit and some pro-active support by way of aid and other economic advantages need to be given to Bangladesh, at least for upholding the standard of liberal democracy. Even on the human rights performance — although the current situation is getting increasingly murkier — I would argue that it is still better than it would have been under autocracy, and that may also be taken into account. Bangladesh has a negative image in relation to corruption, but corruption cannot be discussed without discoursing on largely corruption-driven income inequality concerns, and I agree that this needs to be addressed.

DS: In this ADP, among the 17 development sectors, the power sector gets highest fund followed by communication, education and religion, and rural development and rural institutions in terms of priority. Do you think the prioritisation is reasonable?

BS: I think these are broadly in right direction. As I said, whatever is half-done needs to be fully completed, whether it relates to power sector or to communication. But this applies only in the case of the major ones. One of the key sources of ADP corruption is the small infrastructural road projects, which often tend to be undertaken from political consideration. For instance, some road projects in the ADP may be included because of the requests of the local members of parliament: such projects may not have any national or regional significance so we need to be cautious about it, and strike a balance between what is needed from the national point of view and what is being motivated from a political point of view. This is the last full budget before the next election, and there will be obvious political pressures for undertaking projects from local or national political exigencies. Normally, those projects tend to be of lower quality and need to be discouraged. The ministry of finance is also aware of this and that may the reason why many of those projects have been included under the ADP, but they have not been allocated resources or at most given only token resources “on the book.” This may reduce the political influence on the infrastructural and other projects in the ADP.

DS: It seems that the government formulated the ADP eyeing the next elections. Do you think that political consideration has got priority over economic consideration?

BS: I don’t think that was the major driving force. In the last three to four years’ ADP budget economic consideration drove the ADP selection process and not the usual political consideration. However, in this year’s budget, we apprehend there will be strong political pressure, and some quarters might want to see ADP being flushed by politically “imagined” projects, especially by national or local political functionaries and their cronies. On the whole, I don’t think that the ADP is motivated by political consideration, simply because, if you look at how the public expenditure-GDP ratio has increased over the last several years, you’ll see that there has been only a gradual increase, i.e. there has not been any dramatic increase which would have suggested that there is a spending spree on the part of the incumbent government and spending spree always helps the political contractor. I don’t think, in an analysis of the fiscal expenditure of twenty years, we will find any trend towards fiscal profligacy: the budget deficit was always maintained within the parameter of 5-6%. The inflation rate, until recently, was maintained in the range of 5-7% and the growth was accelerating gradually by half percentage point every five years. I think that has been the record for the last twenty years.

I feel that the ministry of finance and the Bangladesh Bank are more or less insulated from political cronyism. But, there have been disturbing instances of undue influence of politically powerful business groups during successive regimes. For instance, due to pressure of such groups, the government waived all taxes on the profits earned by individuals who had invested in the secondary share market. This year, there is pressure by the big propertied class to remove the provision of “property tax” (imposed in the form of additional 10% surcharge on taxes paid by people owning properties exceeding Tk. 2 crores). There are also implicit financial concessions given to large-scale borrowers/defaulters who pay very little by way of “cash payment” and get away with periodic “rescheduling” of their overdue loans. Those powerful actors who profited from the share market scam of 2010 have not been pursued by the government following the preliminary report on the same by the Ibrahim Khaled Committee. New banks are being allowed to open at a time when the existing banks are suffering from liquidity shortage. These banks are not necessarily bringing any new financial products to the market, say, by addressing the needs of the SMEs and/or addressing any missing social segments not serviced by the existing banks. I am told that the ministry of finance and the Bangladesh Bank are currently under tremendous pressure from politically influential lobbies to allow a few more new banks in the private sector. People with political affiliations with the ruling party have been made “directors” of the nationalised commercial banks (NCBs). That this has been the case in the successive regimes since 1991 does not justify such a decision. NCBs should be run mainly by professional bankers. Why can’t these NCBs get out of the mess of “sick industry” loans and “classified” loans? What happened to the proceeds of privatisation from units that were privatised two decades ago? Why is there no policy talk about privatisation of state-owned enterprises anymore? Is there a chairman of the Privatisation Commission at present? Has one been appointed? In Din Bodoler Pala I think the government said that to reduce losses of the public enterprises many of them will be privatised and divested. What has happened to the mission of privatisation? Why is nobody talking about whether there has been any progress in this respect? These are examples of many unanswered questions. Even the World Bank does not talk about debt default and privatisation anymore. In those areas I find that the progress has been much less than satisfactory.

But this is not all. Not only could we not reform the bad economic institutions, we also managed to undermine the good economic institutions. Thus, a few economic institutions of excellence with sound financial health, proven track record and global recognition have to face unreasonable and unfair interference “from above” — probing through committees, commissions or otherwise, which are perceived widely as being politically motivated — as in the recent probe into Grameen Bank and its subsidiary companies! The unfortunate part of these investigations is not the tension that often persists between the state and the NGOs. It is not about institutional rivalry about the command over service delivery. It is taking the form of an apparent crusade by the state machinery to undermine the fame and the moral authority of Professor Muhammad Yunus.

Our world’s greatest misery is often caused not by the fight between good and evil, but marked by the fight that takes place between two key players on the same side. By that, I mean the liberal-democratic side that took part in the struggle for our independence and for its subsequent development. It is one of the most unfortunate events that I have witnessed in my professional life as an economist.

DS: In the next ADP, 10 projects have been included under PPP though the government has failed to utilise a single penny from the Tk. 3000 crore of the current fiscal so far. What do you say about this?

BS: We need to find out whether these PPP projects did not happen because of lack of interest on the part of private sector or because of the macroeconomic stabilisation concern that the government could not allocate enough resources to play its own part in order to support these PPP projects. We need to find out the real causes. Is it the lack of interest on the part of foreign or domestic private sectors in those projects? Since there are ten projects of Tk. 3000 crore, which means Tk 300 crore on average, that makes them big projects. We need to know what the main cause is behind non-implementation of each of these big PPP projects.

DS: Our ADP implementation rate is poor. This time the Planning Commission has taken initiative to form a body to monitor ADP implementation. How do you evaluate this move? How can we do better in implementation of the ADP?

BS: I have heard about it and the finance minister has been saying that there have been certain institutional changes in this regard, but we need to find out more about what actually took place. I was a member of the Public Expenditure Review Commission in 2001-03, which was led by Mr. Hafizuddin Khan. I recall that we made a number of suggestions with regard to institutional monitoring of major ADP projects. For example, we suggested new institutional mechanism — an improved process for the selection of ADP projects (especially exceeding certain size thresholds) and also how they need to be implemented and monitored. For that, there has to be a civil society, government and academic partnership programme so that these project implementations (especially for large projects) can be monitored. In India, for instance, in the last fiscal year they created an Independent Evaluation Office outside the orbit of their planning commission to monitor a selection of major central government projects every year. The idea is that the Planning Commission needs to be supplemented by evaluation office that would run very much like the evaluation offices in international agencies such as World Bank or ADB.

Our own version of IMED in the Planning Commission is not up to this task for a variety of reasons (it is actually used as a dumping ground for the civil servants; the IMED has been provided with very little incentives and resources, and is also deficient in evaluative skills). I strongly suggested earlier that a similar office as in India needs to be created here as well. In fact, we could go further than that.

There is a need to have an independent evaluation commission — similar to Human Rights Commission and Information Commission — which would be a permanent set-up for monitoring the implementation of ADP projects and testing the rationale for a particular ADP project in consultation with specialists, media and the civil society. It will perform a very important role in ensuring the quality of ADP projects and can be chaired by a fiercely independent minded person, as should be case with other commissions. Such an institutional body can perform very important development functions. Unfortunately, as I said earlier, reform has become an ugly word for the present government, which has apparently lost its appetite for institutional reforms. So, even though my proposal may carry economic rationale, it is likely not to be accepted. As Paul Krugman once put it, we are actually passing through an “age of diminished expectations.”

Rabindra Utshab 1419: Chhayanaut holds two-day programme

A group rendition by young artistes of Chhayanaut (top); Sharmila Banerjee led the dance performance to live music. Photo: Mumit M. Zahangir Alom

To celebrate Rabindranath Tagore’s 151st birth anniversary, his works and philosophy, Chhayanaut held a two-day ‘Rabindra Utshab’ (festival) at the main auditorium of Chhayanaut Sangskriti Bhaban in Dhanmondi, Dhaka. The festival began on May 8. Leading and upcoming Tagore artistes of the country as well several cultural organisations participated in the event.

This is the fourth ‘Rabindra Utshab’ by Chhayanaut. The organisation was founded in 1961, on the occasion of the Tagore birth centenary.

The festival began with a song-and-dance presentation by the young artistes of Chhayanaut. Several dancers performed to a live rendition of the song “Momo Chittey Niti Nritye”.

Dr. Binayak Sen presented as essay, titled “Bhinno Mot-er Rabindranath: Chithi Potrer Shakkho”, on the opening day. President of Chhayanaut, Dr. Sanjida Khatun, welcomed and thanked all at the event.

Dr. Binayak Sen meticulously pointed out the excerpts of the constructions of alternative that Tagore created, especially in his letters written to several litterateurs, his friends and family members including Priyonath, Sudhindranath Dutta, Buddhadev Bose, Amiyo Chakraborty, Sanjay Bhattacharya (editor of Purbasha), Kadambini Devi, Indira Devi and Hemanta Bala Devi.

“We find Tagore’s viewpoints on political, social, economic, agricultural and theological opinions and philosophies in his letters. The bard was absolutely a free thinker and was never stuck to certain ideas. He had even gone against the societal customs too. Sometimes, he clarified his visions with a hint of ambiguity but never leaving out humanity. Tagore’s love for entire humanity was his unique religion,” said Dr. Binayak Sen in his essay.

A cultural programme followed the presentation. The event featured dance performances, poetry recitation and rendition of choral and solo songs.

Artistes of Chhayanaut performed “Kothao Amar Hariye Jawar Nei Mana” that seemed to reverberate with the presentation of Binayak Sen, in tune.

Noted dancer and teacher Sharmila Banerjee, her daughter and also a Chhayanaut teacher Sudeshna Swayamprabha, and four other artistes of Chhayanaut danced to a Tagore song “Bajey Bajey Romyobeena Bajey” at the event. Chhayanaut artistes, Rafia Sultana and Sonia Rashid, also presented a duet dance.

A number of Chhayanaut and several guest artistes including Swati Sarkar, Nilotpal Shadhyo, Chhaya Karmakar, Fahmida Khatun, Jhuma Khandakar, Elora Ahmed Shukla, Pratik Endo (Sylhet), Samapti Roy (Faridpur), Kanchan Mostafa, Tania Mannan, Saikat Mukherjee, Shusmita Ahmed Borna and Suman Chowdhury and others staged solo performances. Artistes of Jatiyo Rabindra Sangeet Sammilan Parisad (Dhaka City) also performed a group song at the event. Meer Barkat and Israt Jahan recited at the programme.

Almas Ali on violin, Asit Biswas on esraj, Iftekhar Hossen Shohel on keyboard, Pradip Kumar Roy on mondira and Enamul Haque Omar, Swarup Hossain, Gautam Sarkar and Iftekhar Alam Prodhan Dollar on tabla accompanied the singers.

The curtains came down on the opening day of the festival with a rendition of the national anthem. Dance performances, poetry recitation, and renditions of songs by leading and upcoming Tagore artistes marked the concluding day (May 9) of ‘Rabindra Utshab 1419’ that drew a large number of Tagore enthusiasts. Mobile phone operator Robi assisted the programme while ATN Bangla was the media partner of the festival.

Economists warn govt of banking problems

An economist yesterday warned the government of “uneasiness” in the banking sector.

“It seems the banking sector is facing some uneasiness, particularly nationalised commercial banks,” said Binayak Sen, research director of Bangladesh Institute of Development Studies (BIDS).

“For them, problems are piling up,” Sen said. “We have to be cautious right now. The cash recovery of NCBs is low. In most cases, the recovery is being shown through rescheduling. The operating profit exists only in books.”

Sen urged the government to be stringent about issuing permission for new banks.

He spoke at a seminar that focused on socio-economic development in the first three years of the grand alliance in power, organised by the ruling Awami League at the auditorium of the Bangladesh Medical Association in Dhaka.

Sen said it was not wise to allow banks to get involved in the capital market. It was a wrong decision, he added. “A limit has been enforced now, but it should have been done earlier.”

He said tax exemption for large investors was not proper in respect of social justice and growth.

“I still think that proper steps should have been taken against people who were found guilty in the report submitted by the Ibrahim Khaled-led panel after an investigation,” Sen said. “There should not have been any compromise on the issue.”

Sen said the country’s tax-GDP ratio should be increased by mobilising resources from domestic sources to take the investment-GDP ratio to 32 percent from 24 percent now.

“Otherwise, we will not be able achieve 8-8.5 percent economic growth to take Bangladesh to a middle-income country,” he said.

“Steps have been taken, but they are not sufficient. Bangladesh has still the lowest tax-GDP ratio in South Asia,” Sen said.

Keynote presenter Mashiur Rahman, economic affairs adviser to the prime minister, said it would not be possible to run the economy without long-term accountability.

“In the past, our economic policies addressed only immediate and short-term challenges. We have now made mid-term and long-term policies. We should not deviate from this.”

He said it is a matter of pride that the country’s reliance on foreign aid is on the wane. “But the government has to borrow from the banking sector to finance the budget deficit, which can squeeze credit flow to the private sector.”

“We have to look at whether we are failing to spend foreign aid due to our limitation in implementation,” Rahman said. “We cannot borrow from the banking sector or the central bank excessively.”

“The government should enhance its capacity to use foreign aid,” Rahman said.

Finance Minister AMA Muhith said the economy of Bangladesh reached a level different from 2008.

The government was unable to spend much of the $14 billion foreign aid in the pipeline, he said.

“We could spend only $2.5 billion. If we can spend more, our investment will go up. However, the capacity of spending of our ministries has increased 30 percent.”

Bangladesh’s exports might grow by 14 percent in the current fiscal year, Muhith said. “If it is 14 percent then I would say it is still commendable, given it is based on the high growth of 40 percent we achieved in the last fiscal year.”

Moazzem Hossain, editor of The Financial Express, said Bangladesh would not be totally immune to the persisting global economic crisis, as 40 percent of the country GDP is linked with international business and trade.