Speech at the Bangladesh Poverty Reduction Strategy Implementation Forum 2005

Implementation, Good Governance, and Harmonization

Honorable Prime Minister, Begum Khaleda Zia,
Honorable Finance Minister, Mr. Saifur Rahman,
IMF Head of Delegation, Mr. Thomas Rombaugh
Managing Director of Asian Development Bank, Mr. Young Hoi Lee
ERD Secretaray, Mr. Zabihullah
And honorable guests,

It is always a pleasure to visit Bangladesh, and this is my third visit in the past five months. I know many of our development partners have traveled far to attend this event. Their commitment to Bangladesh is greatly appreciated. It echoes the commitment that staff of our respective agencies in Dhaka exhibit on a daily basis.

As most of you know, I was here last with the Bank’s President, Paul Wolfowitz in August. I’d like to share a small but vivid snapshot from that short visit. We dropped in at a BRAC school where bright-eyed youngsters demonstrated that indeed they were being taught and engaged by caring teachers. Their young voices rang out for us in a song about all the countries in the world. As they worked through America, Bangladesh, Bharat, France, Zambia, I thought of them as young citizens of the world and wondered how they would regard their country one day as they grew up to learn more and to judge. I wondered what opportunities awaited them.

During that visit, Bangladesh was revealed to the Bank’s new leadership in all the complexities and contradictions we have come to know if not fully understand. This country of 140 million people is among only a handful on target to meet key Millennium Development Goals; it is home to the most effective NGO/civil society network in the world; it is reducing poverty by 1 percent each year; and has achieved growth of more than 5 percent a year since the 1990’s. All this and yet among the poorest with sharp challenges of governance, equity, law and order, and political stability.

This Forum marks an important occasion, the first meeting of its kind organized by government and chaired by the honorable Minister of Finance. It is important too that this Forum focuses on issues of country ownership, country leadership and harmonizationImplementation, Good Governance and Harmonization—all strongly grounded in the Poverty Reduction Strategy Paper (PRSP) recently released by government under the able leadership of Minister Saifur Rahman. The PRSP is truly a Bangladeshi document laying out Bangladesh’s poverty reduction priorities. Its strategic focus on areas such as health and education—as well as on infrastructure, decentralization, and governance—reflects our collective priorities. I will come back to these three areas later.

Many segments of society were consulted in the formulation of the PRSP. The next period in Bangladesh will benefit from a deeper understanding and internalization of the PRSP by civil society, parliament, the private sector, academia, and the wider community. The World Bank is committed to doing our part in translating the PRSP into action on the ground, and we call upon Bangladesh’s development partners to align their support to the strategic priorities identified by Bangladeshis.

The country faces many challenges which are outlined in the PRSP. Before talking how we as development partners can help address them, we should also acknowledge progress. Bangladesh is no longer deeply aid dependant and has shown impressive achievements in economic and social development. Under the stewardship of Minister Rahman, the economy has shown steady growth with low inflation and stable domestic debt, interest, and exchange rates. Per capita GDP in the 1990s rose three times faster than in the1980s, and poverty declined one percentage point a year—an impressive 9 percent in the 1990s. At the same time, Bangladesh has achieved gender parity in primary education, brought fertility rates down, and achieved near universal primary school enrollment. Overall, the country has performed quite well in comparison to developing country standards.

These outcomes and results did not occur by happenstance. Bangladesh has delivered on consistently good policies and sensible economic management. It is making progress on trade liberalization with substantial tariff reduction. Customs duty has been further lowered, and almost all quantitative restrictions have been eliminated.

In addition the regulatory powers of Bangladesh Bank have been strengthened and banking reform is progressing with the Rupali Bank now on the point of divestment.

Government financial management is also improving through more strategic budgeting practices and the consolidation of recurrent and capital budgets in four ministries.

So we meet here today to talk about the implementation of the PRSP. It will not be easy. The document sets Bangladesh on an ambitious path and capacity to chart this course will be challenged.

As development partners, we can be helpful by respecting this country-led process and focusing on the PRSP development agenda. We need to set our sights on goals achievable within the next 12 months as important steps toward the more substantial, longer-term goal.

While we organize our support under government leadership, it would be helpful to explore new sector-wide approaches. In recent years the international donor community has been challenged to coordinate our assistance more effectively. Bangladesh has long been at the forefront of what we call the harmonization effort. The country is an active participant in the OECD-DAC harmonization initiatives, and the earliest sector-wide programs were undertaken here in health and education. Importantly, while I trust government finds the inputs of the donor community valuable, it is now chairing this forum which I believe to be much more than just a symbolic step in the right direction. We in the donor community need to find ways to support government leadership of aid coordination on a sustained basis, and, if we can achieve this, next year’s forum will be even richer.

But even our best efforts will take us into difficult times ahead. Apart from a tough and unpredictable external environment with global energy prices remaining high, domestic challenges will inevitably focus around elections. If we see a period ahead during which Bangladesh’s reform priorities become a responsible part of election campaigning—a period during which the electorate is engaged in understanding these reform challenges and choices—then ideas articulated in excellent plans like the PRSP stand a chance. If over the next 15 months opportunities are held hostage by hartals and violence and by petty partisan advantage, the PRSP and all aspirations like it will be hollow. And the international community would have no choice but to review its support.

As I say this I can’t help but think of those bright-eyed BRAC kids. When they sang about all the countries of the world, I wondered where Bangladesh would stack up in that world—their world—a decade from now. Today’s actions—and choices in the months ahead—will determine the answer to that question. What are these actions?

What the PRSP envisages are tough reforms by any measure. I’d highlight three areas as deserving special emphasis to include: infrastructure, local government support, and good governance.

I believe it is safe to say that one of Bangladesh’s biggest challenges is infrastructure, most especially with respect to power. Unless this country can address its power needs in the near term, growth will stagnate; power will be the binding constraint. We have agreed with government on the need to formulate and adopt a least-cost generation development plan for investments in the power sector and to ensure that all proposed generation investments are consistent with this plan. Government will also adopt a Generation Financing Plan which will define its financing strategy for these investments including the role of the private and public sector. And all procurement of generation capacity will be in line with the Public Procurement Regulations. Government has agreed to issue a bid package to pre-qualified private investors for at least one new power plant in the near future. For the Small Power Plant program, government will make all procurement of power both transparent and competitive.

Another critical area deserving emphasis is local government. The people of Bangladesh simply must receive the services they need, whether education, health, rural roads, or sanitation. The first results of government’s initiative to provide cash grants at the Union level have been encouraging. We know that making government accountable at the local level can improve quality of life and decrease poverty through better allocation of resources, better service delivery, more accountability, and reduced corruption.

Last but not least for my choice of special emphasis is governance. It is fitting that this issue has a prominent role in the PRSP. Five focus areas for the strengthening of governance include improving implementation capacity, promoting local governance, tackling corruption, reforming the criminal justice system and enhancing access to justice for the poor, and improving sectoral governance. These are the right priorities. And this is where it all hinges. If government can make progress in these areas, it will make a real difference for poverty reduction. If not, Bangladesh’s important human development gains of the past could well see reversals.

Governance and corruption are subjects we have difficulty speaking about openly in fora like these. The debate is often cast as a polarized argument between government and the donor community. In my view both sides want the same thing, the right thing. Neither this government—nor any government—wants its country at the bottom of a corruption index, even a perception index. And donors find it extremely difficult to support Bangladesh’s critical development challenges under the kinds of pressure brought to bear by this issue, this elephant in the room. The PRSP recognizes the issue and plans to tackle it; this will take time, and some gains will be small before they can accumulate to significance. The donor community fully supports the government’s articulated plan, but, to succeed, we must find the voice to speak openly and courageously about this. If we go sincerely to this sustained fight, we have no choice but to support each other frankly and in public. Indeed, the public’s confidence would grow dramatically, I believe, if we were all seen united in the battle—and delivering results.

Just some of these to which our Country Assistance Strategy—prepared jointly with Japan, DfID, and the Asian Development Bank—is strongly committed include a list of things we believe can make a difference and on which we, as development partners, can bring our differing expertise. One is to strengthen public expenditure and financial management, procurement, revenue administration, and civil service reform.

Another is to provide support for key oversight institutions and “guardians of accountability” such as Bangladesh Bank, Controller and Auditor General, the Public Service Commission, and Bangladesh Bureau of Statistics, as well as support procurement reform and financial management.

Strengthening court administration, judicial training, improving access to justice, and improving access to legal aid are all in the basket of the kinds of governance reforms that should make a demonstrable difference for ordinary Bangladeshis. As too, of course, is strengthening the accountability of the lowest tiers of government by supporting core local government capacity, improving community monitoring, and assisting to expand the block grant program.

Finally, reform of NBR is a must. Unless revenue efforts and tax administration are improved, revenues will be insufficient to implement the PRSP and fund pro-poor expenditures. A low revenue effort also restrains government from paying civil servants a living wage or allocating adequate resources for operations and maintenance, thus creating huge opportunities for corruption and poor service delivery.

And of course none of these commitments to support the governance agenda would mean much if we were not looking equally at our own programs and addressing fiduciary and corruption risks inside our own house. With this range of actions, we aim to help Bangladesh meet its governance goals while also improving implementation of programs funded by the World Bank. We deeply appreciate the support given by other development partners in supporting good governance in Bangladesh, and we are working closely with several of you.

This is a complex agenda, and we will not achieve everything overnight. I would like to suggest there are three specific areas of which we might take stock when we meet 12 months from now. The first is procurement reform. It is one of the weak links in governance, where most leakage occurs and where blatant corruption may take place. Government’s planned procurement law—soon to be presented to Parliament—establishes a good framework, but implementation will be key. Second is deepening reform of the National Bureau of Revenue which has a poor reputation for corruption, where taxpayers face rent seeking and where management is weak. Third, the least cost generation plan should be implemented with all procurements, large and small, following the public procurement regulations, and/or the soon-to-be approved procurement law.

I wish I had thought earlier to invite those schoolchildren I described to come here today and share their global song with you. Government faces a tough agenda, and we as its partners are challenged to support them; together we are challenged to find one voice with which to address this. We need a sharp reminder and what better voice than that of the children. For all Bangladeshi children to sing of a world in which Bangladesh is listed with hope, opportunity, and respect among all countries is the scale of the task at hand.