Countries and Regions

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p. 2 of 4 BACK | NEXT I. Current Development Trends and Issues II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Assistance Levels

Country Strategy and Program Update 2003-2005: Bangladesh

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II. Implementation of the Country Strategy and Program

A. Progress under the Poverty Reduction Partnership Agreement

7. Faster progress in poverty reduction remains the central development challenge in Bangladesh. The PPA specifies both medium-term (2005) as well as long-term (2010) targets for reduction of income poverty as well as human poverty. In the PPA, the medium-term target is a 25% reduction in the proportion of people below the poverty line by 2005, and the long-term target is a 50% reduction by 2010. To achieve the PPA goals for income poverty reduction, the proportion of people below the poverty line will need to decline by about 2.5 percentage points per year during 2000-2010 compared with only a one percentage point per year decline in income poverty over the decade ending 2000. The declining trend in the annual population growth rate seen in the 2001 census, if continued, can be expected to have a positive impact in helping attain some of the PPA targets. Recent data indicate that the accomplishment of PPA targets² in the education sector in terms of enrollment and gender equality is feasible; however, targets for some of the health indicators seem ambitious.

8. Sustained progress in poverty reduction will also depend not only on a higher rate of economic growth but also on the type of growth, on institutions, and on policies. The growth needs to be broad based so that substantial benefits can accrue to the middle and lower income groups, and above all the poor. The Government has progressed in preparing its interim poverty reduction strategy, which is expected to provide the basis for its new development plans and policies within a clear poverty reduction framework.

9. Taking into account the need to make progress on PPA targets, the Government's development plan, and other development partners' assistance, the lending program for 2003-2005 has been developed providing for greater focus on core poverty intervention (CPI) and poverty intervention (PI) projects followed by growth-oriented projects with a pro-poor bias. With a view to monitoring PPA progress, ADB will continue to undertake studies in specific areas and provide advisory assistance to carry out progress review.

B. Progress in the Country Strategy and Program Focus Areas

1. Governance

10. Weak governance constrains the economy in achieving faster economic growth and major development objectives. Key challenges for the Government in this area are curbing corruption, improving law-and-order and security, and enhancing the quality of public services. Soon after coming to power, the Government appointed five secretaries' committees to prepare reports on administrative reforms, improvements in law-and-order, poverty reduction, human resources development, and monetary management. Some of the important recommendations that have been accepted by the Government are mapping of educational institutions, an action plan for reducing SOE losses, issuance of new policy guidelines for supplier credit, addressing money laundering, and monitoring poverty reduction projects. The new Government has enacted a Money Laundering Act in April 2002 and separated auditing from accounting effective 1 July 2002. It has also initiated actions toward appointing an ombudsman, creating an independent anticorruption commission, separating the judiciary from the executive, and decentralizing administration. The Government has also recently introduced a merit-based promotion system for senior officers in the civil service. It is also scrutinizing a series of recommendations made by the Public Administration Reform Commission for implementation.

11. ADB will continue to provide specific interventions toward improving governance in various sectors including energy, finance, social infrastructure, and the development of adequate legal and judicial services. In view of the Government's commitment, assistance will be provided to help enforce specific areas of the Public Administration Reform Commission's recommendations.

2. Private Sector Development

12. Achieving the poverty reduction targets requires strong and broad participation from the private sector in the development process. The environment is still somewhat restrictive and poses constraints to private sector development, although the private sector drives economic growth in the country.

13. A Telecommunication Regulatory Commission, set up under the Bangladesh Telecommunication Act 2001, has been vested with the authority to regulate and monitor activities and operations in the telecommunications sector in a competitive environment where the private sector will play the key role. The privatization policy has been amended, removing major obstacles to the process of privatization. The Privatization Commission has been empowered to identify, in consultation with ministries, enterprises for privatization; sign contracts and agreements with buyers; and hand over enterprises. The Commission has identified an additional 46 enterprises for privatization in March 2002.

14. ADB's assistance program contains an advisory technical assistance (ADTA), which aims at improving the climate for private sector development and mobilizing private sector resources for faster economic growth. The Privatization Commission will be assisted to help implement and expedite the SOE privatization program.

3. Gender and Development

15. Bangladesh has made progress over recent years in bringing about women's greater empowerment. While the gender gap is closing in many social indicators, women and children remain subject to various forms of violence and abuse. The new Government has shown strong commitment to improving the social and economic conditions of women and children. It has recently increased maternity leave for public sector female employees from 3 to 4 months; the Cabinet has approved ratification of the South Asian Association for Regional Cooperation convention on combating trafficking of women and children, and has developed an action plan to curb such activities.

16. The technical assistance (TA) pipeline contains an ADTA under which ADB will, in particular, support socially marginalized women and children through generating access for them to legal aid, shelter, skills support, and other socioeconomic opportunities.

4. Regional Cooperation

17. ADB is exerting considerable efforts to promote subregional cooperation among Bangladesh, Bhutan, India, and Nepal in South Asia through the South Asia Subregional Economic Cooperation (SASEC) Program. Several high-level meetings have recently been held in SASEC countries, indicating their growing interest in subregional cooperation. In recognition of Bangladesh's role in chairing the SASEC committee on energy, a project preparatory technical assistance (PPTA) for a regional power project has been programmed to share regional energy resources and promote subregional cooperation. Similarly, a Regional Rail Traffic Enhancement scheme is included in the lending program to help promote subregional cooperation. Assistance will be provided to strengthen Bangladesh's economic cooperation with countries under the Kunming Initiatives, namely Bangladesh, India, Myanmar, and the People's Republic of China in helping promote interregional initiatives on trade and economic activities.³

5. Sectoral Priorities

a. Agriculture and Natural Resources

18. Sustainable development of agriculture and natural resources is critical for addressing extensive rural poverty and fostering pro-poor economic growth. The Government (with assistance from the Food and Agricultural Organization of the United Nations) has prepared a draft National Action Plan for implementation of the National Agriculture Policy formulated in 1999. As a follow-up activity of the National Water Policy adopted in 1999 and the Guidelines for Participatory Water Management prepared in 2000, the Development Strategy for the Water Sector was prepared in June 2001. Subsequently, the Government has prepared a draft National Water Management Plan (NWMP). The NWMP, which is expected to be approved in 2002, will formulate the long-term water management program up to 2025.

19. In agriculture and natural resources, several projects have been proposed in the assistance program toward supporting poverty reduction, human development, labor-intensive growth, and sustainable management of water resources.

b. Social Sectors

20. Despite notable achievements in terms of enrollment and gender equity, the quality of education still requires much improvement, due mainly to the poor quality of teaching. For improving the quality of education, with ADB's assistance, a model has been developed by the Government for accurate monitoring of teaching and learning practices at the classroom level and their outcome. In addition, a restructuring plan for professional strengthening of the National Curriculum and Textbook Board has been approved. Actions have also been initiated to develop a policy for privatization of printing and distribution of secondary school textbooks, and to address the necessary reforms in the secondary school examination system, teacher training programs, and overall management of the subsector.

21. Notwithstanding impressive results in terms of declining infant mortality and total fertility over the last few decades, the majority of the population continues to suffer from poor health. Through a policy development, ADB's assistance helped introduce structural reforms to change the role of the Government in the delivery of primary health care services in urban areas.

22. One of the important targets under the PPA is a 20% reduction in the proportion of malnourished children under 5 years of age by the year 2005. ADB will address malnutrition and continue its assistance to primary health care programs in urban areas in line with its current operational focus on the health sector.

23. The urban sector is one of the priority sectors, which presents a greater opportunity for both pro-poor economic growth as well as targeted poverty reduction, particularly at the secondary towns level. The envisaged interventions in the urban sector will contribute towards improvements in urban governance (municipal management and local resource mobilization), the environment, and overall living conditions.

c. Finance

24. Weak governance, a pervasive government presence, and the lack of an enabling environment for the private sector characterize the country's financial sector. The Government has undertaken several new measures to address these issues, including the reconstitution of the Board of Nationalized Commercial Banks (NCBs), issuing new guidelines on the roles and obligations of NCB management, giving boards of NCBs greater autonomy, rationalizing loss-incurring branches of NCBs, and taking steps to develop a secondary bond market. The Government has also constituted a committee to address the banking sector issues including the problem of nonperforming loans. Further policy reforms are needed to deepen the financial system so as to promote faster private sector-led economic growth. ADB will support the development of the domestic financial markets through appropriate assistance in policy, legal, regulatory, and institutional reforms.

d. Physical Infrastructure

25. The Government has drafted a National Land Transport Policy covering roads, ports, and railways. This policy will define the strategic thrusts and integrate and optimize intermodal arrangements among these three subsectors, and provide guidelines for private sector participation for the development of these modes of transport.

26. Although the road network is satisfactory, many stretches are in need of urgent maintenance and rehabilitation. Many of the primary routes are experiencing rising congestion. The focus of interventions will be on integrated road network development, improved subregional linkages, institutional reforms, and mitigating urban transport pollution. Although Chittagong Port holds a strategic importance to the country as well as to the subregion in terms of promoting international trade, it is technologically outdated and inefficiently managed. Assistance for the port's container terminal will be subject to greater private sector involvement in the port's operation. A project on regional rail traffic will be subject to the implementation of agreed structural and organizational reforms of the Bangladesh Railway.

27. In Bangladesh, only about 20% of the population has access to electricity and about 10% to natural gas. As conditions of ADB loans, the Government increased electricity and gas tariffs by about 5% in January 2002. In addition, the power tariff slab has also recently been rationalized to benefit the poorer sections of the population. With ADB's assistance to the sector, there has been good progress in several other areas, including tariff rationalization for the power and gas sectors, enactment of electricity and gas acts for the creation of an energy regulatory body, the creation of corporate entities in the power sector, and the restructuring of gas sector entities.

C. Highlights in Coordination of External Funding and Partnership Arrangements

28. ADB maintains extensive coordination with multilateral and bilateral development partners in operational and sectoral matters to strengthen complementarity in the proposed interventions. Coordination with the World Bank and International Monetary Fund (IMF) has been further strengthened, in particular, on macroeconomic issues and in the poverty reduction strategy process. Two small scale TAs (Public Expenditure Review, and Poverty Assessment) have been implemented in close coordination with the World Bank. In 2001, Department for International Development (DFID) cofinanced Post Literacy and Continuing Education Project, and the Netherlands Government cofinanced the Small Scale Water Resources Development Project. Kreditanstalt für Wiederaufbau (KfW) has expressed interest in cofinancing the Rural Infrastructure Improvement Project (2002 loan). Several potential areas for possible collaboration with development partners were identified: transport [Japan Bank for International Cooperation (JBIC), Japan International Cooperation Agency (JICA), and DFID]; water resources management (Netherlands Government); agribusiness (World Bank); health, nutrition, and arsenic mitigation [German Technical Cooperation (GTZ), JICA, DFID, and UNICEF]; SME development and export expansion [GTZ, JBIC, Swiss Development Cooperation (SDC), DFID, International Finance Corporation (IFC), World Bank, and United State Agency for International Development (USAID)]; education (World Bank, JICA, Netherlands Government, and DFID), energy and power [JBIC, Canadian International Development Agency (CIDA), KfW, DFID, and Netherlands Government], agriculture [Danish International Development Agency (DANIDA), USAID, and JICA]; and portfolio management (World Bank). In support of its overall thematic priorities for Bangladesh, ADB will also continue to pursue both official cofinancing opportunities (particularly from grant and concessional sources) for public sector projects and commercial cofinancing opportunities (including the use of guarantees) for commercially viable private sector projects.

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