House of Commons - DFID's Programme in Bangladesh - International Development Committee

DFID's Programme in Bangladesh - International Development Committee Contents

6 BECOMING A MIDDLE-INCOME COUNTRY

123. Bangladesh aims to become a middle-income country by 2021. Despite poor governance, witnesses have expressed confidence that this is an achievable goal. For example, Professor Hulme commented:

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Pierre Landell-Mills, a former World Bank Country Director in Bangladesh, was also optimistic about Bangladesh's economy. He thought that it exhibited the capacity to respond to challenges. It had already made progress in reducing poverty levels and had maintained steady and reasonable growth rates over a long period. He thought that, if the economic growth rate could be raised to 6-7% per year, it would be feasible for Bangladesh to become a middle-income country.[182] DFID thought the goal was achievable in 20 rather than 10 years.[183]

124. Potential obstacles to increased growth rates include Bangladesh's capacity to move from traditional exports such as garments, towards more high-tech products; whether growth continues to be fairly egalitarian so that it has a positive impact on poverty reduction; the impact of climate change on Bangladesh; and energy and infrastructure problems.[184] The IMF has also pointed out that the global economic recession is beginning to impact on the economy, threatening Bangladeshi exports and remittances from abroad.[185] The World Bank has warned that the long-term impact of the financial crisis could mean five years of lower economic growth for developing countries as they struggle to obtain foreign investment.[186] The combined effect of these factors means that the achievement of the goal will be challenging. Moreover, without the necessary governance reforms discussed in chapter 2, the state will not be able to direct the economy in the desired direction, or mitigate the impact of external forces such as climate change or the global economic downturn.

Private sector development

125. While the state has an important role to play, the private sector has been the driver of Bangladesh's continuous economic growth rates. Despite political turmoil, prudent macro-economic management has allowed the private sector to flourish and power the economy.[187] In particular the industrial and service sectors have grown as a share of the economy relative to the agricultural sector. The service sector now accounts for 50% of GDP and the industrial sector 26%. The ready-made garment sector has been the main source of manufacturing growth.[188]

126. Private sector-led growth is a focus of DFID's new Country Plan.[189] DFID support is focused on helping to create jobs for the poorest, a more enabling business environment, better access by small enterprises to finance and improvements to the banking system for remittances.[190] Some progress has been made. For example, DFID reported that the Bangladesh Investment Climate Fund has simplified licensing procedures for export-oriented companies, resulting in a net saving of over £1,000 every year for each firm.[191] DFID is spending £15.5 million on Growth and Private Sector Development in 2009-10 and this will nearly double to £30.2 million in 2010-11. The increase is primarily to fund its work on creating an enabling business environment.[192]

127. Mr Landell-Mills thought that businessmen should be playing a larger role in creating a better business environment for the private sector to flourish but said that they were often part of entrenched political networks and viewed reforming these as a long and difficult process. He suggested that donors should be thinking about building the institutions of civil society in a more strategic manner:

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When we asked DFID about this we were told that donor coordination was improving in terms of exchanging information but that operations were fragmented with different donors operating separate and unconnected programmes.[194]

128. On the outskirts of Dhaka we visited a furniture factory, part of a larger furniture association, which was trying to improve the quality and design of furniture made in Bangladesh in order to export to the international market. It was receiving help from a production consultancy company and the government's Export Promotion Board to encourage it to build links with the furniture sector. DFID was also supporting the association. We were impressed with the quality of the furniture being produced in the factory and hope that the efforts of the association to tap into new international markets meet with success.

129. Creating effective producer associations is an important way of linking smaller producers and creating a larger constituency to lobby for help with marketing or general improvements in the investment climate. This type of assistance is also a very practical example of aid for trade. We support DFID's efforts to assist such associations as they seek to create a more dynamic private sector in which small businesses can flourish and contribute to poverty reduction. However we have seen little evidence to suggest that donors have a coordinated plan for strengthening such commercial associations. We accept that demand for change must come from Bangladeshi society but consider that donors can and should work to encourage the creation of more producer and professional associations in a more strategic and coordinated manner.

Reducing corruption

130. Bangladesh could do better economically if the investment climate was made more attractive by reducing corruption. Bangladesh ranks 139^th out of 180 countries on the 2009 Transparency International Corruption Perception Index.[195] This is a significant improvement on its 2008 ranking during the period of the Caretaker Government. Nevertheless its score remains below the acceptable threshold indicating a pervasive level of corruption across all levels of society. Mr Landell-Mills told us "almost every transaction somehow has a corrupt element to it."[196] Corrupt practices reduced efficiencies:

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He estimated that 15% to 30% of every contract was lost to bribery. In the construction of the Jumuna Bridge, for example, efforts were made to ensure there was no corruption. Nevertheless all the contractors took account of expected bribes in their tenders so that, while the formal system would look as though there was no corruption, in fact it had been built into the project.[198] The extent to which corruption permeated society was also made clear to us in Dhaka during our discussion on strengthening public administration.

131. Tackling corruption involves a long term commitment to building better and more accountable institutions. We discussed the importance of this in chapter 2. Transparency International said that the improvement in Bangladesh's score was related to the change in government in December 2008, with the new government pledging to stop corruption as part of its election manifesto. The Executive Director of Transparency International Bangladesh noted:

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132. We are pleased to learn that Bangladesh has improved its ranking on the Transparency International Corruption Perception Index since 2008. This is a positive development but the score indicates that there is still room for significant improvement. Tackling corruption robustly is important. Current corruption levels are creating inefficiencies in the economy which will thwart Bangladesh's desire to become a middle-income country. In its dialogues with the Government of Bangladesh and the private sector DFID should emphasise the importance for Bangladesh of challenging corrupt practices and the need to put in place more effective measures to deter it.

Working with Bangladeshi communities

133. There are approximately 500,000 British Bangladeshis in the UK.[200] In our public meetings in Birmingham and London we asked about their views on DFID's programme in Bangladesh and ways in which the Bangladeshi diaspora here might make a contribution to the poverty reduction effort in Bangladesh. The most frequent comment made to us was that Bangladeshi people in the UK did not know about DFID's programme in Bangladesh. In addition it was felt that DFID had not harnessed the desire of the diaspora to contribute to development projects in Bangladesh.

134. Written evidence from Christian Aid said:

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Subsequent to our meeting in London the International Forum for Secular Bangladesh wrote to us saying:

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When we asked the Minister about this, he assured us that the Department did engage with the Bangladeshi population here and that it did make an effort to send out information about its programme and to meet with representatives of the Bangladeshi diaspora in the UK.[203]

135. It is clear to us that, despite its efforts, DFID is not reaching the Bangladeshi public in the UK effectively. We believe that the Bangladeshi population in the UK can make a useful contribution to DFID's work in Bangladesh. More importantly the Bangladeshi population in the UK wants to maintain links with Bangladesh and to help improve the situation there. We recommend that DFID support this by reassessing its communications strategy for its Bangladesh programme and that it make or strengthen links with local councillors and community leaders here.

136. As well as a lack of awareness of DFID's programme in Bangladesh among the UK Bangladesh community, witnesses have expressed the view that it is difficult to meet with DFID Bangladesh staff and that they seem overstretched and unable to get out and see what is going on outside their project areas. Naomi Hossain told us that:

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She also thought that DFID's reputation in Bangladesh had suffered as a result of its decreasing visibility.[205] Professor Hulme commented on the high turnover of DFID staff and said:

Staff reductions and budget increases mean that the average "spend per adviser" has increased. This means that advisers cannot allocate time to the innovative low spend/high impact initiatives that "improving governance" programmes often need.

At the public meeting in Birmingham a contributor said he had tried unsuccessfully to meet with DFID Bangladesh over a four week period to discuss a proposal for training village doctors. Others commented that there was no evidence of DFID working in Sylhet, the region from which most UK Bangladeshis originated and where they still had family connections. Sylhet is also one of the areas which has been experiencing the benefits of economic growth.

137. The DFID Bangladesh team comprises 80 Bangladeshi and UK staff based in Dhaka.[206] It is managing a steadily rising budget and the UK is now the largest bilateral donor.[207] We had been told that DFID staff were working to full capacity and that staff reductions coupled with budget increases placed pressure on the management of time-intensive programmes.[208] This issue has been raised with us on a number of occasions and we remain concerned about the impact of staff reductions on a Department with a rising budget.

138. DFID argues that "a joint British High Commission and DFID Bangladesh Communications Team offers novel opportunities for strong cross-HMG working and presentation of UK's partnership with Bangladesh"[209] It told us that visits were important for all its staff, even at administrative level and that 200 days of visits outside of Dhaka had taken place in 2009. In an office of 80 this only means about two and a half days of visits per person. DFID did point out that most of its work was in Dhaka since it had relationships with the different line ministries.[210] It also told us that Bangladesh was one of the trial countries for the new DFID logo—UKaid—and that this should help to improve the visibility of DFID in Bangladesh.

139. DFID needs to have a greater visible presence in Bangladesh, in towns and villages outside of Dhaka, and perhaps especially in Sylhet, from where the majority of Bangladeshis in the UK originate. The new "UKaid" logo may improve matters but it is also important that key DFID staff get out of Dhaka regularly to visit programmes and talk to those who benefit as well as those who do not.

181 Q 30 Back

182 Q 111 Back

183 Ev 72 Back

185 IMF, Bangladesh: Semi-annual economic update, April 2009 Back

186 "Five years of weak growth for poor nations", The Daily Telegraph, 21 January 2010 Back

187 Ev 72, Q 12. See also World Bank, Poverty Assessment for Bangladesh, p 18 Back

188 World Bank, Poverty Assessment for Bangladesh, p 5 Back

189 Ev 67 Back

190 Ev 68 Back

191 Ev 72 Back

192 Ev 72 Back

193 Q 114 Back