Countries and Regions

	Table of Contents
p. 5 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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IV. ADB’s Strategy

A. Summary of Key Development Challenges

53. Medium-term economic growth must accelerate to 7-8% per annum if MDG income poverty targets are to be attained. This requires increased private investment, both domestic and foreign, in all sectors; agricultural diversification and increased agribusiness activity; and increased efficiency in the industrial and service sectors. Enhanced access to irrigation, finance, and new technologies including ICT, rural electrification, and improved local transport and market infrastructure can help to raise farm productivity and boost off-farm employment. A stable macroeconomy; stronger institutions; robust Government, private sector, NGO partnerships; and a gender-sensitive policy framework and budgetary process will be needed to underpin higher pro-poor growth. Progress on these fronts, together with efficient public investment in essential infrastructure and services, will be needed to bolster investor confidence and expand opportunities for subregional trade and investment.

54. Notwithstanding Bangladesh's significant progress in fostering social development over the past decades, the quality and efficiency of basic services, such as education, health, and water and sanitation, remain poor. Key priorities are to improve quality of primary and secondary education, make vocational education more relevant, and ensure that madrasah education empowers students with marketable skills. Faced with rapid and unplanned urbanization, improvements of basic municipal services are urgently needed, with a priority for providing primary health care to the poor, clean drinking water, and improved sewerage and sanitation services.

55. Reform of institutions and the implications for governance has become an urgent priority. Poor law and order, weak law enforcement agencies, ineffective judiciary, and rampant bribery and extortion in the public sector cast a shadow across all development activities. Governance reform and capacity building are required in all sectors, and in the political, executive, and judicial spheres to help build investor confidence and to increase returns to public sector interventions. Local governments need to be empowered, and the poor accorded a voice in local decision making if limited resources are to be used in a way that best addresses local needs.

B. Country Strategy and Program Strategic Focus

56. In line with the NPRS strategies and priorities, the country strategy and program (CSP) aims to assist Bangladesh in addressing critical constraints to broad-based economic growth, social development, and good governance. Specifically, the strategy is built on (i) improving the investment climate for private sector-led growth and employment, (ii) advancing the social development agenda to empower the poor so that all benefit from growth, and (iii) addressing key governance issues on a sector and thematic basis as a crosscutting enabler. The joint strategic approach with DFID, Japan, and World Bank enables ADB to be more selective and focused, to build on experience and sector strengths and available resources, and to make a judicious choice of lending and nonlending instruments. It also enables ADB to strengthen engagement with the Government and other stakeholders in sectors where reforms are difficult but are fundamentally essential to growth and poverty reduction (e.g., power, port and railways).

57. ADB will play a major role in supporting policy and institutional reforms to improve sector governance and increase sector efficiency in energy, transport, education, urban health and urban water supply and sanitation sectors. In other areas, such as agriculture (i.e., agribusiness), water resource management, and the financial sector (including small- and medium-sized enterprise development), ADB will play a supportive role to initiatives led by other DPs. Consistent with the CAPE's recommendations, ADB will provide capacity building for capital market development, and only provide major support when the Government is prepared to proceed with key reforms. A sector approach will be considered for the railway subsector, jointly with the World Bank and other DPs, to ensure that institutional reform and investment requirements are addressed in a comprehensive and integrated manner. Compared with the 1999 country operational strategy (footnote 9), ADB in the new CSP period will scale-up its assistance in improving sector and local governance, and play a catalytic role in addressing core governance issues including measures aimed at combating corruption, improving access to justice, and building governance management capacity in cooperation with other DPs.

58. Building country capacity and ensuring community participation (especially by women and disadvantaged groups) in designing and implementing projects will remain a key feature of ADB operations. In line with lessons learned from the ongoing portfolio, the CSP emphasizes designing projects that are better prepared for implementation, i.e., less complex; have a high degree of preparedness in terms of needed Government approvals, advanced stage of recruitment of project consultants and finalized procurement plans; consider capacity constraints; and include covenants that are realistic, focused, and properly sequenced. ADB's private sector operations will be aligned to complement public sector operations, and to play a catalytic role in attracting private investment, both domestic and foreign. Disaster mitigation, regional cooperation, and environment will be addressed as crosscutting thematic concerns.

59. ADB will no longer provide support for activities in biodiversity, forestry, land administration reform, standalone crop diversification, livestock development, rural livelihood development, clean fuel development, and early childhood development. Working in close cooperation with the other DPs, careful attention will be given to ensure that the benefits of past investments are not compromised by the withdrawal of ADB support from any sector or area.

60. The CSP's strategic focus is based on (i) extensive stakeholder consultations; (ii) a careful assessment and alignment of assistance with the development partners; (iii) a specific joint results framework with DFID, Government of Japan, and World Bank based on the development outcomes drawn from the NPRS; and (iv) ADB's experience and sector strengths. Figure 1 presents the strategic framework, illustrating the conceptual linkages between ADB interventions and the NPRS strategic goals and objectives. A process of joint monitoring and managing for results with the Government and the DPs has been agreed to, and will help maintain the momentum and spirit of harmonization and alignment to support poverty reduction in years to come.

61. ADB will draw on its full range of lending and nonlending instruments (including its recent pilot financing instruments and modalities being considered under the innovation and efficiency initiative such as the multitranche financing facility), TA, economic and sector work, policy dialogue, private sector operations, and DP coordination to contribute to the delivery of the results targeted in the NPRS. The CSP gives special emphasis to the sector development program modality, by combining programs of incremental reform with capacity building and investment support, to foster an integrated and long-term approach to sector needs and enhance ADB's leverage for promoting policy and institutional reforms. The choice of assistance instruments will be made as part of the design and delivery of the program. Strategically, ADB assistance will be integrated with that of other DPs to maximize synergies, build and foster use of country systems, and encourage ownership and participation in designing and managing the program.

62. Sustainable Economic Growth. ADB will assist the Government to improve policies and institutional capacity to support broad-based, private sector-led growth. This catalytic process will build upon, increase, and deepen reforms initiated through long-standing programs of support to key sectors (Box 1). Specifically, ADB will contribute to the achievement of the Government's pro-poor economic growth strategy by (i) developing and upgrading strategic transport corridors (including Dhaka-Chittagong) by modernizing management and catalyzing private sector investment, and facilitating cross-border trade and investment flows; (ii) increasing access and improving quality of energy supplies by fostering competitive, impartially

Figure 1: The Strategic Framework

regulated, and financially sound power and hydrocarbon entities; (iii) connecting the southwest region to the balance of the country, and linking national and regional economies by developing the Padma Bridge; and (iv) complementing support by the International Monetary Fund (IMF) and World Bank for improving the soundness and depth of the financial markets, particularly to enhance SME access to sustainable financial markets.

63. ADB will help the rural poor to boost productivity, diversify production, and stimulate off-farm activity by (i) strengthening farm-to-market linkages; (ii) expanding access to irrigation and associated flood protection through command area and small-scale water resource management; and (iii) improving the enabling environment for agribusiness, with particular emphasis on initiatives by women and other excluded groups.

64. Social Development. ADB will continue to play a leading role in providing support for social development. To build the skills base of the next generation and to facilitate access for the poor, women, and excluded groups, key priorities will be to improve the quality and relevance of primary and secondary education, and technical and vocational training. Complementing the initiatives of the other DPs in rural areas, ADB will support the Government's efforts to target the provision of maternal and child health care services to poor women and children through public-NGO partnerships in service delivery in urban areas. This will be done in conjunction with support for initiatives to improve infrastructure in urban slums, and improve the delivery and management of water supply and sanitation services in a financially sustainable manner in urban areas, including Dhaka.

65. Good Governance. The cumulative effects of decades of poor governance cannot be overcome immediately or on all fronts at once. Selectivity, recognition that a long time frame will be required to forge progress, and greater attention to transforming organizations and building local government capacity is required in light of the range and severity of issues that need to be addressed. Recognizing its key comparative advantage, ADB will continue to play a major role in improving sector and local governance; this will be complemented by catalytic support to address critical constraints to core governance. In close cooperation with other DPs, ADB will support measures aimed at combating corruption, improving access to justice, and building governance management capacity. Good governance will be advanced by encouraging the Government to play a more effective regulatory and policy-making role; widening scope for private sector, NGO, and community-based organization provision of essential services; improving financial management; modernizing procurement practices; and promoting the spread of e-governance facilities. ADB will support improved local governance by focusing on decentralizing and strengthening local government; improving local resource mobilization, planning, and management capacity; and supporting the involvement of communities (including women and other excluded groups) and the private sector in planning and delivering local services.

66. Disaster Mitigation. A full complement of regional and national initiatives is needed to improve Bangladesh's ability to prepare for and manage risks arising from floods and other natural disasters. ADB will work with other DPs to ensure that the best international approaches to the development of early warning systems and disaster mitigation technology are adopted. At the global level, United Nations agencies are best poised to lead the effort to develop early warning systems and protocols for disaster preparation and management. At the regional level, ADB will support and complement global initiatives by assisting the Government to tap best regional practices and develop regional planning, cross-border resource management, and risk-mitigation capacity. At the country program level, ADB, in close cooperation with other DPs, will support public policies aimed at better preparedness, and adjusting and adapting to regular flooding, rather than intervening to alter the natural hydrology, with the exception of selective support for flood control structures in major urban centers. Disaster-risk considerations will be mainstreamed by ensuring that flood risks are assessed during project preparation; designing projects that can withstand anticipated flooding; and including site-specific flood control measures into ADB-supported investments, such as rural irrigation facilities, whose performance hinges on mitigating the risks of major floods.

67. Capacity Building. This is one of the key results of a well-harmonized external assistance effort. Institutional capacities in the key ministries and agencies where ADB is involved will be strengthened by supporting tailor-made approaches to enhance governance in these front-line organizations. Project design and implementation will increasingly rely on local experts to build country capacity and a skills base that can be relied on after projects conclude. Participatory development will be encouraged to build the capacities of local communities to lead local development initiatives, safeguard natural resources, and deliver services efficiently and effectively on a sustainable basis. To help prepare for progressive devolution of responsibilities to local governments and communities, special emphasis will be accorded to building local government (and agency) capacity to plan, finance, operate, and maintain specific social and economic services; and to fostering community participation in development activities.

68. Private Sector Development. Better infrastructure, public policies, regulatory regimes, governance, and improved law and order will be needed if higher rates of private investment are to materialize. ADB's public and private sector operations will work in harmony to improve the enabling environment to make Bangladesh more attractive to FDI; and to widen opportunities for public-private partnerships in energy, transport, social, and financial sectors. More specifically, private sector development will be supported by easing key infrastructure bottlenecks to growth; building the basic education, skills, and health foundation for a more productive labor force; fostering public-private partnerships to provide essential infrastructure and services; nurturing a vibrant SME sector; improving private financial governance; facilitating the restructuring and privatization of selected SOEs; and assisting the Government in improving the policy and regulatory environment for private sector development.

69. ADB, through its public sector operations, will help the Government improve the climate for private sector development through a combination of investments and technical support for policy, institutional, and regulatory reform in key sectors where ADB operates. Complementing its public sector operations, ADB's private sector operations will be designed to introduce innovative models and approaches to catalyze private sector investment, through equity participation, lending, and introduction of new instruments and contractual arrangements for managing private sector investment risk. Support for key infrastructure development and financial sector reforms will be the main focus of ADB's private sector operations.

70. Gender. ADB's gender strategy will continue to focus on empowering women and narrowing gender gaps through policy dialogue, and by incorporating measures aimed at fostering women's effective participation in all projects and programs. Mainstreaming gender considerations will involve (i) promoting women's participation in ADB-sponsored projects at the planning, implementation, and monitoring stages, in line with project-specific gender action plans; (ii) reducing gender-based wage gaps in ADB-supported activities; (iii) building capacity of local government institutions and other partners in gender-sensitive policy and program planning; (iv) providing support for sector studies to identify opportunities to close gender gaps; (v) helping the Government to mainstream gender considerations in the activities of various ministries/agencies; and (vi) developing detailed monitoring mechanisms involving women's groups to track and report on progress in overcoming gender discrimination. ADB will also support development and implementation of the national action plan for women's advancement and other gender promotion measures identified in the NPRS.

71. Regional Cooperation. ADB recognizes economic cooperation as an important means of achieving more efficient use of regional resources; making economies more complementary; and promoting the orderly expansion of foreign trade, in particular, subregional and interregional trade. Improving connectivity, facilitating trade and investment, developing regional tourism, facilitating cooperation in energy to meet growing regional energy needs, and promoting private sector cooperation are the key strategic objectives of ADB's RCSP for South Asia (footnote 7). Through its country program, ADB will assist the Government to reform the external trade regime, to participate actively in subregional cooperation initiatives by providing regional TA and knowledge products aimed at building the capacity to respond to cross-border challenges (e.g., trafficking and disaster management), and by establishing an integrated subregional transport and energy network to enhance Bangladesh's position as a transport and transhipment hub. Key investment priorities expected to have important regional integration payoffs include (i) upgrading and developing key transport corridors, including Dhaka-Chittagong, and building capacity at the Chittagong port to facilitate trade; (ii) improving the network and management of strategic transport links, including highways, the Padma Bridge, rail system, and ports to better integrate Bangladesh's multimodal transport with neighboring states; and (iii) providing the knowledge and expertise needed to improve public policies and institutional arrangements to support regional energy trade.

72. Environment. Environmental management considerations will be incorporated in all ADB operations because of the fragility of the natural resource base, Bangladesh's extremely high population density, and the strong link between poverty and resource degradation. ADB will mainstream environmental concerns in its operational program. Toward this end, ADB will help the Government promote improvements in water and air quality, mitigate arsenic contamination, promote environmentally benign interventions in energy and transport, foster sustainable agriculture development, and raise knowledge and awareness of environmental management in Government and society as a whole.

73. Improving Implementation. External assistance can only generate results if implementation improves. To help address key implementation constraints, future ADB assistance will focus on fewer sectors, project designs that are less complex, and policy and institutional reform support well-sequenced keeping in view the country context. To reduce the project burden on the public sector, ADB will strive to better harmonize its assistance with that of other DPs. Building effective partnerships to deliver services will be supported by (i) promoting private sector and civil society, including NGO participation in delivering infrastructure and other services; (ii) increasingly relying on local experts to design and implement projects in the Bangladesh context and to build country capacity in the long run; (iii) ensuring transparency and accountability in the flow of funds and implementation mechanisms; and (iv) involving civil society in the monitoring and evaluation of ADB operations. To accelerate implementation of ongoing projects, intensive reviews and constant monitoring and follow-up will continue following the agreed project- and sector-specific actions plans and results framework. In addition, an assessment will be undertaken jointly with the Government to seek greater harmonization between the DPs' procurement guidelines and the Government's 2003 public procurement regulations, aiming to reduce delays in procurement-a serious impediment to project implementation. Greater delegation of project supervision responsibilities to the resident mission will facilitate more intensive project monitoring and help accelerate decision making to improve project implementation.

74. Harmonizing Assistance. The Government is leading the harmonization process by actively promoting greater cooperation between the DPs and improving alignment of their assistance programs with the NPRS. Coordination of external funding is accomplished through the local consultative group (LCG), which comprises 22 active sector and/or thematic working groups, and provides a forum for exchanging views on development and policy issues. ADB plays a lead role in supporting a coordinated assistance response to the Government's reform initiatives in the transport, energy, education, and urban sectors, and chairs the local consultative group subgroups on transport, energy, and urban sectors. Sector approaches have been adopted in primary education (Box 2) and health. Practically, all of the large-scale infrastructure projects will be cofinanced by several partners; and several agencies will provide direct budgetary support to the Government. ADB, DFID, Japan Bank for International Cooperation, and World Bank have started to hold regular portfolio reviews with the Government. The DPs are making a coordinated effort to assist the Government in addressing generic issues that hamper development effectiveness, such as delays in the use of funds, concerns about the efficiency of fund use, and uncertainty about project effectiveness.

C. Country Strategy and Program Strategic Results Orientation

75. This CSP signals ADB's intention to manage assistance activities to achieve better development results. It is results-based in that it (i) identifies the poverty reduction results sought by the Government to which ADB will contribute; (ii) identifies what outcomes are expected over the short- to medium-term; (iii) provides a management framework that links strategic development goals, outcomes that are directly influenced by ADB's program, key results that are necessary to reach those outcomes, with the proposed mix of ADB support; and (iv) provides a basis for monitoring and evaluating the success of this CSP (Matrix 1). The results orientation is designed to help ADB, the Government, and other DPs more effectively monitor and manage development assistance to ensure that it effectively contributes to meaningful development results. Specifically, Matrix 1, which focuses largely on specific sector/project indicators, will assist the Implementation, Monitoring, and Evaluation Division (IMED) of the Ministry of Planning to track sector reforms and the physical progress of project implementation under various ministries, with a greater focus on sector impact.

76. The monitoring framework of the CSP relies on coordinated activities at two levels. The joint result matrix by the four strategy partners (Matrix 2), which covers a wide spectrum of both macro and sector issues relating to investment climate, inclusive social development, and governance improvement as set out in the NPRS, will be the basis for assessment by the General Economics Division (GED) of the Planning Commission on the overall progress in poverty reduction and delivery of key results under the NPRS. The results framework will be periodically updated to ensure its continued relevance as adjustments are made to the strategy and programs to achieve desired results. Capacity building of both government institutions (i.e., IMED and GED) and strengthening their functional linkages will be supported to ensure effective tracking of progress.

77. ADB's contribution to the achievement of intermediate outcomes in the next 4-5 years will primarily depend on its ongoing projects and programs. More timely and effective implementation of ongoing operations, therefore, will be central to achieving development results. Regular portfolio reviews will assess progress made in achieving targeted results. The results framework also serves to link ongoing operations to indicators of their key expected outcomes for review and update during the CSP update and the annual portfolio review jointly conducted with DFID, Japan Bank for International Cooperation, and the World Bank.

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