Countries and Regions

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p. 3 of 7 BACK | NEXT Executive Summary I. Current Development Trends and Issues II. The Government’s Development Strategy III. ADB’s Development Experience IV. ADB’s Strategy V. ADB’s Assistance Program VI. Risks and Results-Based Monitoring and Evaluation

Country Strategy and Program Update 2006-2010: Bangladesh

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II. The Government’s Development Strategy

A. Development Goals and Strategy

32. The Government's national poverty reduction strategy (NPRS)⁸ reaffirms that reducing poverty and accelerating the pace of social development are the most important long-term strategic goals. Fully consistent with the MDGs, the NPRS aims to halve the number of poor people by 2015, and to achieve substantial improvement in all aspects of human development (Appendix 3, Table A3.2). The NPRS builds on past achievements, aims to prevent slippages in areas where progress has been made, addresses weaknesses in implementation, and includes a vast number of targets and benchmarks to enhance the results-orientation.

33. Building on the policy triangle of growth, human development, and governance, the NPRS aims to make progress in (i) employment generation, (ii) nutrition, (iii) maternal health, (iv) quality of education, (v) sanitation and safe water, (vi) criminal justice system, (vii) local governance, and (viii) monitoring of results. The NPRS emphasizes that progress requires (i) providing an open and competitive environment that is conducive to private investment, with an emphasis on exports and rural development where 85% of the poor live; (ii) raising poor people's capabilities to participate more fully in the growth process through access to better quality education, health, safe water, and nutrition; and (iii) fostering good governance by improving government capacity, promoting local governance, tackling corruption, enhancing access to justice for the poor, and improving security and public order.

34. Private sector development is a central theme of the NPRS. To stimulate pro-poor growth, the NPRS accords priority to (i) accelerating growth in rural areas and developing agriculture and nonfarm economic activities led by the private sector; (ii) assisting SMEs; (iii) improving rural infrastructure (e.g., irrigation, rural roads, and electrification) including measures to reduce natural and human-induced shocks; and (iv) better access to ICT. With prudent macroeconomic management and steady improvement in the enabling environment for private sector investment, economic growth is forecast to increase from 6.3% in FY2004 to 7% in FY2008. Growth is expected to continue to accelerate, ultimately averaging 7-8% per annum by 2015. Medium-term macroeconomic forecasts will be revised annually to ensure that poverty reduction efforts are underpinned by a stable financial framework. The FY2006 budget corresponds to the first year of the NPRS, and seeks to operationalize its strategic elements through ensuring broad-based people's participation, good governance, improved service delivery, and environmentally sustainable development. The Government introduced a medium-term expenditure framework in four ministries effective FY2006; this is to be extended to another 11 ministries in FY2007.

35. Access to primary education has increased at a tremendous rate over the past decade; however, its quality and relevance remains a major concern. The NPRS aims to foster social development by increasing education quality by improving delivery, management, finance, and assessment systems. Particular attention is accorded to developing skills, boosting access, and fostering community participation in the management of education and training services. In the health sector, the NPRS accords priority to improving maternal and child health care; strengthening nutrition programs; controlling communicable diseases; and reorienting health care assistance, finance, and governance to better serve the poorest groups. Women's advancement will be fostered by enhancing women's access to banking services over and above microfinance, combating violence against women, and assisting female migrants.

36. Good governance is to be fostered by reforming the criminal justice system, strengthening public administration, combating corruption, promoting local governance, and improving public expenditure management. This will be complemented by fostering partnerships between government, private sector, and civil society organizations to improve service delivery. Environmental management is an integral component of the NPRS. The NPRS includes specific measures to address the problems of air and water pollution in Dhaka and secondary cities and towns, reverse land degradation and salinity, preserve biodiversity, promote afforestation, and mitigate arsenic contamination of the groundwater supply.

37. The NPRS envisages periodic stocktaking of progress in poverty reduction to guard against slippages in implementation. A key challenge to implementing the NPRS is to design and adopt a results framework that can be used at the project, sector, and country levels to establish measurable links between interventions and outcomes, and establish clear mechanisms to reassess and calibrate interventions to achieve intended outcomes.

B. Resource Mobilization and Investment

38. The NPRS envisions an increase in gross domestic investment from 24% of GDP in FY2004 to over 26% in FY2008 to support the target growth rates. The Government aims to increase public investment by increasing domestic revenues, reducing SOE losses and subsidies, and increasing external borrowing. The tax-GDP ratio will be increased from 8.1% of GDP in FY2004 to 9.9% in FY2008 by expanding tax bases, minimizing exemptions and exclusions, reducing evasion, and implementing procedural and administrative reforms. The private investment will be substantially boosted, and greater inflows of FDI are to be facilitated by improving infrastructure and governance, reducing tariffs, and deregulating.

C. Role of External Assistance

39. Between 1972 and 2004, Bangladesh received $42 billion in foreign aid, of which $19.3 billion was in the form of grants, and the remaining $22.7 billion in concessionary loans; ADB, World Bank, and Japan provided approximately 60%. During the past three decades, ADB provided almost one fifth of Bangladesh's total project aid. External assistance has contributed substantially to the implementation of nearly all of the major public sector development projects. Over the years, the share of foreign aid to the nation's total resource requirements has steadily declined. From nearly 6% of GDP in the second half of the 1980s, net foreign financing fell to 2.6% in the second half of the 1990s, and to less than 2% between 2000 and 2004. Domestic financing has increased in importance, with Government domestic borrowing providing financing for close to two thirds of the annual development program.

40. Bangladesh will continue to require substantial external assistance in the decade to come, given the low tax effort, and limited extent to which private sector resources can likely be mobilized for infrastructure, services, and other poverty-reducing investments. In the future, due to limited availability of concessionary resources, Bangladesh will need to tap both concessionary and nonconcessionary sources of external assistance to close the domestic savings-investment gap, and to avoid preempting the private sector from domestic sources of savings. Steps taken to boost aid mobilization, especially of concessionary resources, will need to be matched by improvements in the efficiency, integrity, and effectiveness with which external aid is utilized, in mobilizing domestic resources, providing an enabling environment for private initiatives, and encouraging growth in exports and remittances.

D. ADB's Assessment of the Government's Development Strategy

41. ADB, DFID, Government of Japan, and World Bank jointly assessed the NPRS. The four joint strategy partners agree that it has the requisite ingredients of a sound poverty reduction strategy, i.e., an insightful poverty diagnostic, a wide-ranging consultative process, short- and medium-term poverty reduction and sector development targets, and a comprehensive set of sector and thematic strategies underpinned by a consistent medium-term expenditure and macroeconomic framework. The NPRS provides an excellent analysis of the magnitude and causes of poverty; correctly stresses the links between investment, growth, job creation, and poverty reduction; and clearly identifies key areas in which reforms are needed, public investments required, and policy process needs to be strengthened. The goals and targets of the NPRS are consistent with the MDGs, and a large number of monitorable reforms, socioeconomic targets, and indicators make the strategy results oriented.

42. Achieving the NPRS's projected increase in investment will require a significant acceleration in the pace of structural reforms and a substantial improvement in domestic resource mobilization. The extent to which ambitious reforms can be achieved in the next 2 years is highly uncertain given intense political divisions, escalating violence, and upcoming national elections.

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