January 31, 2012
Photo: Kibae Park/Sipa Press
Bangladesh has made some remarkable strides in development and poverty reduction since independence. Yet the country is, in many ways, a paradox of success combined with often-weak governance. For Bangladesh to achieve its goal of middle-income country status by 2021, governance will have to improve. This article explores the paradox and examines the road ahead.
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In 1975, just four years after its independence, Bangladesh was deemed a country in crisis with a struggling economy and a fear that it might slide into anarchy. It was portrayed as having a future without hope, destined to remain in fear of the next natural disaster. “Nature, not man, is in charge of the situation in Bangladesh”, was one description used.
Bangladesh remains vulnerable to natural disasters to this day. Located at the delta of a major river system and with 80 percent of its area comprising floodplain, the country often features in the campaigns of international non-governmental organizations (NGOs). In 2007, heavy monsoon rainfall and tropical cyclone Sidr led the Disasters Emergency Committee, an umbrella organization of 14 humanitarian NGOs, to launch a public appeal that raised GB£9 million (US$13.8 million).
As a low-lying country, Bangladesh is at the forefront of the climate change challenge. Yet despite nature’s periodic attempts to take charge of the country’s destiny, Bangladesh has made enormous strides since independence.
Bangladesh is a development success story. Per capita GDP increased by 1.5 percent per annum during the 1980s, with this figure rising to 3 percent in the 1990s, according to government data, and by nearly 6 percent per annum in the 2000s, according to World Bank estimates.
Impressive reductions in poverty have occurred alongside economic growth, with a poverty incidence of 59.0 percent in 1991/92 declining to 31.5 percent in 2010. Economic growth has remained stable despite flooding and cyclones. Indeed, disaster management and preparedness are a key component of Bangladesh’s success. A cyclone in 1970 in East Pakistan (becoming Bangladesh the year after) killed nearly a half-million people. In 2008, a cyclone of similar strength killed only 3,000 — a remarkable feat, especially given the much larger population today.
At the national level, Bangladesh has consistently achieved its target of self-sufficiency in rice production since the turn of the century through investments in agricultural research and extension, including the promotion of high-yielding rice varieties. No nationwide famines have hit the country since 1974 and “monga” (seasonal hunger) — previously experienced throughout northern Bangladesh — is now confined to a few districts in the northwest of the country, thanks to economic diversification away from agriculture.
In 2003, Bangladesh entered the medium Human Development league according to UNDP’s “Human Development Report”, where it remained until 2009 (in the 2010 and 2011 reports it is classified near the top of the “low human development” category, a result of the thresholds being updated). It is on target to achieve the Millennium Development Goals (MDGs) for infant and child mortality and gender parity in education.
Clearly, there is still scope for improvement. Bangladesh will not achieve the MDG on maternal mortality by a significant margin. In addition, there remain failings in terms of household-level food security. These shortcomings, though, should not negate the massive strides forward made by the country over the past 40 years.
What makes this success even the more remarkable is that it has been achieved in the context of generally weak governance. This is often referred to as the “Bangladesh paradox”. How has a country, which during the first half of the 2000s featured repeatedly at the bottom of Transparency International’s corruption perception index, experienced such economic and social progress?
Bangladesh has successfully made the transition from an authoritarian regime to a democracy. For the last four elections though, power has alternated between two prominent families. Rather than building institutions to ensure effective governance, the overall aim of the ruling party is to squash the opposition, in ways that often go far beyond what is normal party politics. As a result, Bangladesh is one of the most centralized countries in the world. The central bureaucracy is responsible for the delivery of most public services while local government expenditures have never been more than 4 percent of overall public expenditure, according to World Bank estimates.
Nevertheless, running alongside these structural problems associated with weak governance has been a set of policies that have protected sustained economic growth. The macroeconomic situation has been stable with low inflation, thereby encouraging a buoyant domestic private sector.
Macroeconomic stability is one factor behind the success of the ready-made garment industry that comprises almost three-quarters of export earnings, accounting for US$11 billion in 2009. Moreover, the government has encouraged the international migration of Bangladeshi workers. Remittances — estimated at US$9.6 billion in 2009 by the World Bank — provide considerable inward flows and amount to around 12 percent of the GDP. They vastly exceed aid flows, with official development assistance comprising 2.5 percent of GDP in the same year. Remittances and the garment industry are now the main drivers of the economy.
Acknowledging an inability (or unwillingness) to deliver basic services, governments have by and large allowed NGOs to operate freely — a major driving force behind remarkable progress on several of the key MDGs. And Bangladesh’s NGOs and their approaches have become something of a model for the rest of the world. Microfinance, pioneered by the country’s Grameen Bank, is modelled throughout the world.
Since the 1990s NGOs in Bangladesh have increasingly focused on the delivery of services, particularly microfinance, health and education. NGOs shifted their activities towards microfinance because of donor concerns about their financial sustainability. As donor funding decisions became based on technical criteria, including cost-effectiveness and the provision of particular outputs, so NGOs switched from social mobilization to service delivery.
NGOs in Bangladesh remain wary of social mobilization activities that aim to push the government to adhere to its responsibilities to its citizens (India’s NGOs have been more vigorous on this). The escalation in tensions between the government and Mohammed Yunus, Nobel Prize-winning head of Grameen Bank, are widely viewed as a response to his announcement to form a political party in 2007 (plans that he later abandoned). Clearly the long-standing political parties do not regard it as acceptable for NGOs to exceed their service provision mandate.
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A documentary from the OurWorld2.0 Resilient Bangladesh series
If Bangladesh is to achieve and sustain medium Human Development, there are numerous challenges ahead. The government has to tackle the rising power deficit. One example is the Coal Policy that has been delayed for years as leaders decide whether, and how, to tap into known reserves after the negative environmental impacts of an existing operational coal mine. Meanwhile, alternative sources of energy have not been developed (though recently Bangladesh is reported to have signed an agreement with Russia to build two nuclear power plants).
Bangladesh also needs to accelerate infrastructure investment, not least to adapt to climate change. But weak governance and corruption bedevil such investments, despite some recent improvement: over the past five years the country has risen up the corruption perception index of Transparency International, but progress is slow.
Bangladesh is entering a phase of rapidly rising inequality. In its 2005 Poverty Reduction Strategy Paper, the government notes that particularly worrying is the increasing gap between the poorest and the rest of society. The west is lagging behind the east, and investments in infrastructure are important to ensure geographically balanced development.
Redistribution of wealth through effective taxation is an essential component of the social contract between the state and its citizens. The government is starting to address this, such as through two tax “funfairs” held at the end of 2010 where people went to voluntarily pay their income tax, but this needs to be a priority. Bangladesh’s tax to GDP ratio is a mere 9 percent, one of the lowest in the world.
Urbanization is also an increasingly important agenda. With around 15 million people, the capital Dhaka is already one of the world’s mega cities. Natural increase and the sustained movement of people to towns and cities will continue. And the urban areas will need to adapt to climate change in ways that protect poor people as much as the cities and towns themselves.
The reduction of urban poverty poses different political challenges than that of rural poverty. NGOs are less willing to make investments in areas where there is no legal claim over the land and projects are less suitable to delivering services at such scale. Reducing urban congestion and urban poverty requires strengthening local and municipal governments, and making them more accountable to citizens. Successive governments have been unwilling to do this. The winning of Dhaka’s mayoral position by the opposition party in 1994 was seen as a major contributor to decline of the ruling Bangladesh Nationalist Party, which lost power in the next election. A recent UNU-WIDER working paper by Nicola Banks explores further the urban poverty issue in South Asia.
It is not just in urban areas where the decentralization of power has been limited. In 2009 the country had the first Upazila Parishad (sub-district) elections since 1990. However, a revision to the Upazila Parishad Act means that elected officials at this level of government must act according to the advice of their member of parliament, which undermines any intentions to devolve authority.
Governance remains weak. Good governance, including effective, decentralized institutions and an ability to deliver basic services and infrastructure improvements, are essential both for continued economic growth and poverty reduction and to enable Bangladesh to adapt to changes in climate.
The environment is undeniably important to the development of Bangladesh and the lives of people there. Increasingly, international attention on the country is focused on climate change. Bangladesh’s National Adaptation Plan of Action (NAPA) notes that much of the future vulnerability due to climate change will not necessarily add any new climate hazards beyond cyclones, flooding and drought, but will enhance the frequency and intensity of these. Predictions of greater storm activity and rising sea levels will have knock-on effects, including on food security through the salination of cropland as well as migration.
However, an image of Bangladesh as helpless in the face of nature does not do justice to its development achievements so far, particularly in terms of disaster risk reduction. It also diverts attention away from key governance challenges that are central if the country is to adapt to changes in climate.
The precise changes in climate that will occur in particular areas of the country are uncertain. Clearly there are many obstacles to successful adaptation. Technical fixes comprise one component of adaptation. Research by the Bangladesh International Rice Institute into salt-tolerant and flood-tolerant varieties are examples of this. “Climate proofing” of infrastructure is another. However, equally important is ensuring that institutions have the flexibility, information and resources to respond effectively to changes in local conditions. To be resilient, a nation needs strong governance.
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This article originally appeared as a two-part article, “Resilient People, Fragile Governance: The Success of Bangladesh so Far” (November 2011) and “Resilient People, Fragile Governance: Bangladesh Achieving Middle-Income Status” (December 2011) in the WIDER Angle newsletter.
Working papers on the Bangladesh development experience will be published in 2012, within the UNU-WIDER project Foreign Aid: Research and Communication (ReCom), running from 2011-2013 and funded by the governments of Denmark (Ministry of Foreign Affairs, Danida) and Sweden (Swedish International Development Cooperation Agency — Sida). The main objectives of this project are to reveal what works and what is achieved within development assistance, and communicate this to the wider public.