By Syed Sajjadur Rahman, Visiting Professor, School of International Development and Global Studies, University of Ottawa
This essay, along with the ones by Yiagadeesen (Teddy) Samy and by Stephen Baranyi and Alicia Dobson, arose out of the Bangladesh: Out of Fragility symposium held at the University of Ottawa on November 26, 2013.
The Bangladesh economy grew at an average rate of 6% over the past decade, compared to a rate of 2.3% in the early 1980s. This growth has resulted in a significant increase in per capita income to US $840 in 2012 (and the Bangladesh government claims income grew to over $1000 in 2013). It has also brought about a lower percentage of people living under the poverty line.
Bangladeshi analysts suggest that for poverty reduction to be sustained, and for Bangladesh to graduate to the middle-income country group by 2021, the growth rate needs to go up to about 8%. Bringing about this increased growth is challenging but not impossible, and will require addressing three development needs and vulnerabilities:
Development efforts must become more inclusive, involving many different sets of actors to address a single issue.
1. Continued economic growth is essential, and will require employment-intensive private sector development and movement up the value chain. This in turn will require enterprise growth at all levels—small, medium and large. Other major constraints for Bangladesh’s economic growth include poor infrastructure and an energy gap.
2. Stable governance is critical given that parliamentary democracy is now working in fits and starts, with a culture of street politics rather than parliamentary debates being used to resolve political issues. Bangladesh is marked by corruption, which must be curbed. There is a need for accountable, supportive governments. Poverty reduction oriented budgets are essential, as are redistributive fiscal policy reforms.
3. Environmental/climate change mitigation and adaptation is necessary for physical viability. The impact of global warming needs to be reduced, floods and natural disasters controlled, and man-made disasters (e.g. pollution) regulated.
External organizations such bilateral and multilateral donors, INGOs and philanthropic organizations can continue to be useful development partners for Bangladesh in addressing these needs and vulnerabilities. However, given the marginal impact of international assistance (currently 1.3% of GDP), such partnerships cannot be expected to work miracles. Managed wisely, international cooperation can serve as an important lever for change. Partnership possibilities exist in a number of areas:
1. Targeted poverty reduction: So far, donor efforts have concentrated on basic human needs (e.g. health and education) through SWAPs and NGOs. These efforts have paid off, and social indicators have improved significantly. Now the government must pick up its responsibilities and others support its effort. Parallel service provision needs to be reduced; and employment-intensive growth promoted. Addressing the plight of the absolute poor—whether in the monga affected areas of the north or in urban slums—will require stronger social welfare systems.
2. Enterprise support: Support must move beyond microcredit to address the ‘missing middle’ (i.e. providing access to financing for those with limited collaterals). Partners should help nurture the growth of modern large-scale enterprises and infrastructure development.
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3. Stable governance: This needs to be approached with care, since it is unclear whether external agents can affect fundamental governance changes in the absence of internal champions. Partners can help build the governance institutions (preferably those promoting accountability at the parliamentary as well as the administrative levels), but only when asked. In the meantime, partners should be steadfast in support of pluralistic, representative governments; this is more of a foreign policy than an aid issue.
4. Environment/climate change actions: These will have to be part of a global (or at least a multilateral or multi-donor) effort rather than individual programs.
The funding mechanisms for these partnerships can consist of grants for targeted poverty reduction, climate change issues, and flexible mechanisms to support governance reforms. They can also take the form of concessional funding to address the ‘missing middle’, support large enterprise development and promote private financial flows
Development efforts must become more inclusive, involving many different sets of actors to address a single issue. For example, Development Finance Institutions are important for encouraging private sector development. Private investment firms specializing in frontier and emerging economies are also new actors who should be engaged. Finally, emerging donors such as China and India will occupy increasingly important spaces.