Examination of Witnesses (Questions 110
- 119)
TUESDAY 1 DECEMBER 2009
MR PIERRE
LANDELL-MILLS
AND DR
THOMAS TANNER
Q110 Chairman: Welcome and thank
you very much for coming to this evidence session. You obviously
heard the earlier evidence and I am sure you can embellish on
it. For the record, I would ask you to introduce yourselves.
Mr Landell-Mills: Pierre Landell-Mills.
I am a Principal of The Policy Practice and President of the Partnership
for Transparency Fund.
Dr Tanner: I am Tom Tanner from
the Institute of Development Studies at the University of Sussex.
Chairman: We had a very useful session,
although we did not expand on everything we could have done, and
you may well be able to add to it. I am going to ask John Battle
to take the first question.
Q111 John Battle: Just on the general
overall economic position of Bangladesh, someone said to me, "Bangladesh,
you might as well forget it, because China will hoover up all
manufacturing halfway through this century." We visited a
furniture factory that was making furniture that was quite an
interesting supported project. Where do you see the economy of
Bangladesh going? Can it get beyond garments and shrimps to higher
technology? Will it hold its own against China? What can donors
do to help expand the international linkages for a market economy
that would help them sell their products?
Mr Landell-Mills: The economy
of Bangladesh has always surprised people. It is remarkably resilient.
It has been remarkably innovative in meeting its challenges. The
fact that it has been growing 4 or 5% consistently over a long
period of time—and with the population growth rate declining
per capita incomes have been growing even more rapidly over time,
over 3.5%—it is certainly above the norm for poor countries.
IDA[3]
countries have an average of 1.8%, and Bangladesh is over 3%,
so I think one should be reasonably confident that the Bangladeshi
economy can respond to challenges. When the Multi-Fibre Arrangement
came to an end, it was expected that this would be a dramatic
challenge for Bangladesh and that they would be overwhelmed by
competition from Vietnam, in particular, because we are looking
at the very lowest end of the production chain, but in fact they
have maintained their market share and they are doing quite well.
The evidence is that Bangladesh could substantially increase its
rate of economic growth if it could only address the governance
problems that we have been talking about and the bottlenecks to
growth which result from that. For example, a completely dysfunctional
port at Chittagong; energy crises because they have not been addressing
the very serious management issues in the energy sector which
are not technical—the technical solutions are there—but
are managerial and governance again. We always come back to the
governance issue. I would say with regard to the previous discussion
that if we remember that the most significant way of drawing people
out of poverty is faster economic growth, and if you look at the
very substantial reduction, the halving almost, of people in poverty
from the time of independence, it is largely due to economic growth,
if we could only get the economic growth rate up from 4 or 5%
to 6, 7, 8%—which is totally feasible, given the potential
and the inefficiencies in the system, if you could get the inefficiencies
out of the system. One of the challenges is not to get bogged
down so much in the detailed discussions on livelihoods and to
say: "Why can we not help raise the growth rate of Bangladesh
from its present level another two or three percentage points?"
That would, I think, make Bangladesh a middle-income country in
the space of 10 or 15 years, and I would propose that one should
focus on that. How could DFID contribute to that? What is it in
fact that is preventing this move from the current highly inefficient
management of the support for development and allow the private
sector, which has demonstrated its vitality, to deliver?
Dr Tanner: I have less expertise
on the economics side, but this paradox of Bangladesh, that despite
all the constraints you have significant growth and poverty reduction,
is worth bearing in mind when we think of China potentially hoovering
up the garment trade. You have seen these kinds of challenges
before, and despite that there is an incredible resilience. We
see that through the resilience to climate shocks and stresses
as well. But I would add, on top of Pierre's comments, that I
am not a firm believer that economic growth is the only way: I
think there is a strong role for redistribution, as has been mentioned
by the other witnesses here, about increasing the taxation system
and the state providing for social protection and welfare in the
country, and, also, considering the environmental sustainability
of those actions. We have seen the garment industry, in particular,
having severe environmental consequences which then had knock-on
effect particularly on the poor and most vulnerable, particularly
in terms of water quality and air quality.
Q112 Chairman: One of the first visits
we made in Dhaka was to the Scope School in Mirpur. It was a technical
college, effectively, vocational training, I would say, comparable
to the best I have ever seen anywhere, including here in the UK
and better than some. We were told that it was providing skills
in the usual things that technical colleges do, like electricians,
plumbers, joiners and so on, and they were guaranteeing 95% employment
take-up for the graduates of that school. The point was also made
to us that they were providing skills which were imported from
around and about, so that if you needed your fridge repaired or
your car repaired, the chances were it would be imported labour
that was doing it. Is that the way forward? Is that not a classic
area where there could and should be public/private partnership,
because the beneficiaries of these skills are mostly private sector
companies?
Mr Landell-Mills: Absolutely.
One of the tragedies in the past was that so many good projects
were started and then 10 years later had succumbed to bad governance
or wider dysfunctional societal cultural factors that Geof so
well described. I hope that that school will continue to do good
work, but the challenge is to continue to try to keep these kinds
of institutions functioning properly.
Q113 Chairman: One of the Members
of our Committee said that, just looking at it, it was a no-brainer
and DFID was putting in a substantial amount of money. It was
extremely efficiently run by a retired brigadier, so the discipline
was clear. The point to make is that the Bangladesh government
was not supporting it. If you are arguing that what you need to
look at is how you raise the growth rate by 2 or 3% per year,
is it not the simple fact that if the government would support
those kinds of institutions, that would be a simple way of helping
to achieve that?
Mr Landell-Mills: It depends how
the government supports them. If they take it over, you may find
that it starts to function like a government institution and does
not function in the way that you have described. Bangladesh is
littered with wonderful examples of wonderful things that have
been done by different people, private initiative or individual
initiative or even within government. Occasionally individuals
have done wonderful things, but the trouble is that they are islands
in a much larger dysfunctional government.
Q114 Chairman: That may be a cultural
point. When you walk into a place like this particular school,
you can see the benefit that Bangladesh gets from the skills provided,
you see the benefit the private sector gets from the availability
of those skills, and yet neither the government nor the private
sector is making a contribution. How do you break that cycle?
Mr Landell-Mills: It is a very
short-term perspective that people have. The businessmen could
provide a very strong lobby for governance reform. Yet all the
businessmen are integrated into these cultural networks, political
networks, and reform is perceived as taking a long time. A businessman
wants his customs clearance next week. It is much easier to pay
somebody to get that done than to mount a programme of reform
of the customs organisations. There has to be some kind of reconciliation
between the short-term interests of businessmen and the longer-term
perspective; and the issue is how to create that longer-term perspective.
One of the ways—and this is a surprising area of neglect
by all the donors—is to build institutions in civil society—and
I do not mean that of NGOs, because NGOs are just one part of
civil society—to build up chambers of commerce and industry,
to build up professional associations, to build up the media,
to help the accountancy profession to perform correctly. There
are odd examples of that being tackled, but generally there is
no strategy for dealing with strengthening the institutions of
civil society. The only way in which governance is going to be
improved is that pressure comes internally from a broad spectrum
of stronger civil society institutions that infiltrate, as it
were, the whole political culture.
Chairman: We have a few questions that
are going to follow that up.
Q115 Andrew Stunell: Bangladesh has
very low rates of revenue collection which means obviously it
cannot really pay for services. We were quite struck by a story
we were told that MPs are now all paying tax—but, on the
other hand, they get a coupon to re-claim it, so it is not a very
effective system. Do you see this as mostly a question of administrative
capacity or is it political will? Where are the barriers? What
would be an effective route for DFID or other agencies to take
to improve the situation?
Mr Landell-Mills: The barriers
are those that Geof described. It is the whole society that is
embedded in a cultural system that does not make that very easy.
How can DFID or the donors generally make an impact? They can
do so by a very long-term persistent effort, working with government
on reform. There has to be a very clear sense that this is not
a short-term issue because they are long-term issues. There has
to be a clarity of purpose which the donors have never had that
takes the reform programme forward over 10, 15, 20, 25 years,
and keeps trying to strengthen that system. A very good example
is DFID's support for the accounting system which was initiated
in the mid-1990s: a very successful programme, but one which in
the end did not deliver anything like the results that were expected
because it was not continued into phase 2, phase 3, phase 4, phase
5. Once you start an institutional reform in a country like Bangladesh,
you have to recognise that you are in it for the next 10 or 20
years if you really want to get results. If you think you can
do it in five or six years or you have evaluation systems that
say that if you have not finished the job in five or six years,
you move on to something else, you are undermining the very basis
on which change takes place.
Q116 Hugh Bayley: What can you tell
us about the level of corruption in Bangladesh? What proportion
of the state budget is currently diverted away from purchasing
public goods? What is DFID doing about this and what is it not
doing that it ought to be doing?
Mr Landell-Mills: The estimates
would be wildest guess estimates. Almost every transaction somehow
has a corrupt element to it. While I was there—and it may
have changed since: I spent five years as the country director
for the World Bank—a minister of public works was "selling"
regional engineering director positions for half a million dollars.
Q117 Hugh Bayley: The budget of a
regional engineer during the period—
Mr Landell-Mills: It would have
been a number of millions, but he would only get a part of whatever
he collected because he has to distribute it around the whole
system. I would think that you should be thinking of 15 to 30%
is getting siphoned off.
Q118 Hugh Bayley: It is staggering.
What is DFID and the Bank perhaps doing to address the problem
and reduce its own vulnerability for the problem? What more could
be done?
Mr Landell-Mills: There are various
ways of reducing it. You obviously can make sure that your own
operation ostensibly does not have any corruption in there, in
the sense that you track every transaction, you make sure that
the accounting system is good, but the fact of the matter is that
anyone who bids for a contract knows that he is going to have
to pay off people and so everyone will include an element for
that in their bid, otherwise they will find out that they cannot
carry out the contract. If you take something like the construction
of the Jamuna Bridge, one of the largest projects ever undertaken
in that part of the world, there was an enormous effort to make
sure that that was not corrupt, but everyone knew that payments
were going in all sorts of different ways. The formal system would
say there was no corruption, because there was competitive bidding,
the contracts were coming in as expected, they were being delivered
as expected, but the fact is that everyone had taken account of
that in making their bids.
Q119 Hugh Bayley: If you had that
level of corruption in an African country, other than possibly
in the mineral extraction sector, you would get no foreign investment
at all because it would be more trouble than it was worth to work
in that kind of economic environment, and yet Bangladesh does
attract inward investment. Why?
Mr Landell-Mills: You get investment
if you can make a profit. You take account of the fact that there
is corruption involved in transactions. There is much activity
going on and it is obviously profitable activity. I think that
is a problem. If you take the recent surveys, the 2005 surveys
which were done on investment climate, nearly 80% of the people
said that they would expect to make payments in order to do business.
3 International Development Association, the development
arm of the World Bank Back
|
