r[cis - --122993 W O R L D B A N K OPERATIONS E V A L U A T I O N DEPARTMENT AUTUMN 1 9 9 9 NUMBER 191 Bangladesh Progress Through Partnership D\ ITURING ITS Tl ONG INVOLVEMENT WITH THF d cvelopnm nt effo t in B aglaxdesh, the International Developnueit Associationi (IDA) has carircd out more than 90() projccts aiid a .1 assive xvolume of economic and sectol work, as x' ai s - Oan on ioKI i po,I d ialo(uc xxvith thc povCrnmclnt 011a nelrly al[ aspects ot thc counti vrx CCconomic anld social lifc. During the past twvo decadcs, IDA has fin.aniced about a quarter of all foreign alid commitments to Banglleadesh. Overall, IDA's assistance has been cftective: g)od progress has bccn made in health, primary edLucatioIn, adult literac,,- fertilitv redLictioll, and food-grain sel f-sL tfiCienIvC. Dcspite thesc achitevemcnts, concerns remain reC Lrdlliiig ftood securitv, thc protectionl of fragile ecosystems, aid dep endency, and the reformi-i of public sectol institutions. Background The most densely populated country in other countries, such as village banking the world, Bangladesh has limited natural and oral rehydration therapy for children. resources and is highly vulnerable to natu- The fundamental weakness of the ral disasters. Famine is an ever-present Bangladesh economy has been the low rate danger-well over half the population has of investment and domestic saving. Depen- experienced extreme food shortages. The dence on foreign aid has been high: in the per capita annual income is about $250, country's first 3 years of independence, it and half the population, 80 percent of received more aid than in all its 24 years as which is rural, lives below the poverty line. East Pakistan. Aid reached over US$1.6 As it emerged from a bloody civil war billion annually by 1993, or about US$15 in 1971, many doubted the capacity of for each person in the country (see table I Bangladesh to survive. But it has sur- for commitments by sector). vived, and has made notable progress in Many observers, both foreign and economic and social development. Since domestic, have been concerned that the independence, the economy has grown by volume of foreign aid has infringed on l an average annual rate of about 4 per- national sovereignty and undermined self- cent, and Bangladesh has been a pioneer reliance in the development process. It is in initiatives later adopted successfully by clear that aid did indeed fund budget defi- World Bank Operations Evaluation Department country has been transformed, and this has been achieved in a very difficult political climate. But progress has not been uniformly good, largely because of deeply entrenched governance issues and powerful vested interests that seek to maintain the status quo. To deal with these issues, OED recommends that future assistance be more clearly focused on reforming state institu- tions and redefining the role of the public sector, to create an environ- ment more conducive to private sector-led economic development. IDA should ensure that the govern- ment is politically committed to the reforms inherent in individual lend- ing operations, and should design those operations with monitoravble progress indicators. cits and inefficient state-owned enterprises, and perhaps reduced the pressure to improve efficiency and cost recov- Evolution of the Country Assistance Strategy ery in public utilities. Nevertheless, it is unlikely that pub- The World Bank has been involved in the economic liC sector institutions would functioi more efficiently in the development of Bangladesh since independence. To absence of aid. And without external support, many of the appreciate the evolution of Bank involvement in programs and projects that have made a difference in Bangladesh, it is helpful to break it down into develop- Bangladesh would have proceeded more slowly-if at mental stages. 0 all-which would have had serious economic ramifica- tions and severe social costs. Examples abound, including T7c, 1 9 ZOs the population program, child immunization, minor After achieving independence in 1971, the first govern- irrigation development, and primary education. ment nationalized most of the industrial, financial, and larger commercial sectors and espoused a strong, direct Challenges Remain public sector presence in the development process. Rela- Overall, IDA assistance to Bangladesh has been effective, tions with the World Bank were colored by fundamental and the partnership forged with the government has led to differences regarding the country's policy framework some notable successes (see table 2 for a summary of and the proper place of market systems. It was not until social indicators, table 3 for the relevance of IDA assis- 1974 that IDA began to become involved in lending, tance, and table 4 for macroeconomic performance). The policy advice, and donor coordination. Table 1: IDA Commitments by Sector, 1 980-95 Millions of US$ Percent of total Sector All loans Adjustment All loans Adjustment Agriculture 1,188.6 20 Education 411.6 - 7 - Power 636.3 177.3 11 4 Industry and finance 677.8 438.4 1 1 7 Multisector 1,237.0 1,141.0 21 19 Oil and gas 453.0 - 8 - Population, health, and nutrition 239.8 - 4 Telecommunications 35.0 - 1 - Transportation 815.7 - 14 - Urban development 47.6 - 1 - Water supply and sanitation 50.0 - 1 Other 173.0 - 3 - Total 5,965.4 1,756.7 100 30 Source: Financial database. Pr&is 191 3 Table 2: Social indicators ~~~~~~~ ~~~~~1981 1986 1990 1994 Infant mortality (per 1,000 live births) 111.5 116.0 94.0 77.0 Life expectancy (years) 54.8 55.2 56.0 58.1 Fertility per woman 3.2 3.3 2.9 2.4 Percent of population with daily calorie intake below 2,122 73.2 51.7 47.5 46.0 Percent of population with daily calorie intake below 1,805 50.1 21.7 28.0 n.a. n.a. Not available. Source: World Bank data. Ear/v 1 9S'(s political involvement in all aspects of civil adminis- When a civilian government was elected in 1979 and put tration, public enterprises, and the banking system. forth overly ambitious development plans (for example, * Improve the country's social indicators. In addition to aiming to reduce fertility to replacement levels and financing a family planning and health care network eliminate food imports within six years), IDA's strategy and supporting primary education, IDA's strategy rec- was to encourage the government to establish more ognized that labor-intensive export production offered realistic goals. The first comprehensive program of good potential for employment generation. To take assistance was designed to achieve the following: advantage of this opportunity, economic and sector work and the policy dialogue focused on improving * Expand the production of food grains. Because the trade regime and developing an environment that of the country's severe food shortages, 40 percent of was friendlier to the private sector. the assistance was directed to agriculture. Projects focused on increasing food-grain yields and the pro- In evaluating the relevance and efficacy of this early ductivity of agricultural labor, with strong emphasis strategy, OED found that the focus on increasing food- on low-cost minor irrigation, the use of fertilizer and grain production had been appropriate, although it took high-yield seed varieties, and upgrading the rural almost a decade to fully liberalize agricultural input flood control and drainage infrastructure. trade. But the fundamental weakness of the IDA assis- * Improve domestic resource mobilization to help the tance strategy, which negatively affected the outcomes country overcome the structural imbalance in its external of many operations, was the assumption that the govern- accounts and its massive public debt. During the first half ment would commit itself fully to removing the struc- of the 1980s, Import Program Credits, which were sup- tural and institutional bottlenecks to economic growth. posed to bring about macroeconomic policy change, The government made only tentative progress toward accounted for 25 percent of IDA's lending program. enhancing domestic planning. The Bank came to realize * Improve project execution by persuading the govern- that a core constraint in the economic development ment to correct institutional weaknesses and lessen process was the public sector itself. Table 3: Relevance of IDA's Country Assistance Strategy Period 1980-85 1986-90 1991-96 Sensitivity to political economy and governance issues 1 2 4 Awareness and appreciation of institutional constraints 1 1 3 Identification of key development issues 3 3 4 Identification of solutions to constraints 2 2 2 Prioritization of assistance in accord with constraints 3 3 3 Appropriateness of instruments proposed 1 2 3 Accuracy of strategy reflecting experience 2 2 3 Realism of outcome projections 1 1 3 Realism of risk assessment 1 1 3 Adequacy of monitorable progress indicators 1 1 3 Average score 1.6 1.8 3.1 Rating System: 4 - Highly satisfactory 3 - Fully satisfactory 2 - Marginally satisfactory I - Deficient. Source: World Bank data. 19S6 to 1991 As the 1980s unfolded, it became clear that heavy donor Eio-nCif lzbt apelPg financing of public institutions in the absence of a sern- resEio:ColnMctn ous commitment to reformn was counterproductive, and that Import Program Credits were ineffective in bringing GahcDsg:KtySrus tn etn about policy change. With this understanding, the strat-Asitt:uiyQrshHq egy was shifted toward specific sector adjustment opera- tions that incorporated more sharply defined changePRCSODRFM parameters and implementation procedures. Lending to ~ risaevilbeatnocagbycnatgth state-owned industrial enterprises was discontinued-in QDHl ek e:1224847 rfxtefr the absence of government commitment to restructuri'ng, blwt:1225232.Yucnas -alyu this had been deemed futile. At the same time, however, reus o ln~ orldbank.org there was increased focus on the state-owned oil and 'aithsfrto gas enterprises, in an effort to reduce the country'sPriOE K,Wldan dependence on imported energy and accelerate develop- 188I Set,NW ment of its gas reserves. IDA also continued its assistance in health and edu- Wsigo,DC 03,USA cation, and carried out an urgent adjustment operation in the ailing financial sector. The performance of the QuniyTitle Pre's government-owned development finance institutions, however, did not improve. The strategy reduced the emphasis on agriculture in the late 1980s because of the country's lack of absorptive capacity and the large number of ongoing proj)ects, ~ Pes d ynm oteP'i aln it many of which were behind schedule. In its assessment of IDANs strategy during this period, Nae________________________ OED found that some lessons from the early 1980s had Address_____________________ been incorporated, but that others had been ignored. IDA was correct, for example, in emphasizing family City_______________Sae_________ welfare and primary education programs; theirPotlCdCotr relevance had been demonstrated by their good out- comes. IDA was also correct to stop its lending to ineffi- Tephn cient public industrial enterprises in the absence of a commitment to reform. However, IDA failed to appreci- ~ .o ag res laecnatteWrdBankinfoS ate the real nature of the governance problems within hpatl -015-44 a:1225210,o the central administration, including corruption andthoge-altbok wdbnkor poor accountability. It continued to plan projects as if p~Ti n te E ulctosaeon theInernet, at minor administrative adjustments in government agen- htp/wwordnko/hm/e cies would improve project execution. These problemis _ pervaded the projects in the energy sector, which focused *-To orderbou-r boos please ontact: exclusively on state-owned enterprises. Th ol akFliletCen ter 1991 to 1996 Hrdn A21206)USA IDA's strategy for the early and mid-1 990s reduced TeI1736118 adjustment lending to 15 percent of the proposed lendingFa:1736-50 program, and new operations were pursued only whereInenthp/wwwrdak.g there was strong government commitment to adhere to Frm the WorldBak homepage selec pbictins quantifiable performance benchmarks and to targets fore-a:bok@ rlbnor policy actions. The strategy emphasized the need for strong DSLAMRQEPri aepoudbyteWldan and sustained improvement in the environment for privt OprtosEalainDprtet atershisad sector development and for overcoming deficiencies in infrastructure, particularly power-a sector where proj'ect KnwegGrp(OD ),utacadDismnio conditionalities required government commitment to Ui.Teviews in this paper aretho6se ofthe Oprations improve cost recovery and to reduce system losses. This Eauto tf n dtr n hudntb trbtdt period also saw an enhanced program of support for teWrdBn,isaflae raiain,o t xctv primary health care; a continuation of support for popula- Drcos tion control and primary education, with more emphasis P&s11 ~ nIds:Pors hog atesi OED Publications 5 Recent OED Pr6cis on the education of girls; and a continued focus on the 190 Transport in Indonesia rehabilitation of rural infrastructure. 189 Health Care in Brazil: Addressing Complexity Recognizing that fundamental reform of the civil 188 Health Care in Mali: Building on Community Involvement service structure was unlikely, IDA's approach to foster- 187 Health Care in India: Learning from Experience i ing institutional change was to promote more private 186 Global Health: Meeting the Challenge participation in activities traditionally carried out by the 185 Aid Coordination and Post-Conflict Reconstruction: public sector, including work in power and infrastruc- The West Bank and Gaza Experience ture. IDA also promoted the decentralization of 184 Land Administration and Rural Development: responsibilities in the lower levels of government. Two Cases from Thailand There was also increased emphasis on direct poverty 183 Monitoring and Evaluation Capacity Development in Africa alleviation efforts during this period, with a focus on 182 Sub-Saharan Africa: Lessons from Four Sectors absolute poverty. IDA began to channel funds to 181 Grassroots Pastoral Organizations in Mauritania non-governmental organizations (NGOs) to design and 180 Capacity Building in the Agricultural Sector in Africa 179 Yemen: Forging a New Consensus (available in Arabic) implement poverty reduction projects, including a highly 178 Municipal Development Projects: Building Institutions innovative microcredit operation that could be extended and Financing Local Development to other sectors. 177 Nongovernmental Organizations in World Bank-Supported In addition, IDA carried out an active dialogue with Projects the government on natural resource management, 176 Meeting the Health Care Challenge in Zimbabwe provided inputs into the government's National Environ- 175 Development Effectiveness, 1998: mental Action Plan, and worked to strengthen the Oppontunities in a Volatile Environment capacity of local environmental institutions to monitor 174 Disaster Assistance 174 DiSasptefor ASistallerEncerpriseenvironmental degradation. Future investments in flood 173 Suport for Smaller Enterrsescontrol and drainage will be in the context of a strategic 172 PCR: El Salvador cnrladdang ilb ntecneto taei 171 PCR: Uganda framework of national land and water planning. 170 PCR: Bosnia & Herzegovinia OED found that the strategy for this period was 169 Post-Conflict Reconstruction (PCR) much more relevant than earlier approaches. There was Precis a ussi disponible en francais a greater understanding of governance issues and a will- @ http://www.worldbank.org/htrnlloed ingness to take a less compromising position with Precis en espaniol tambien dispoinible regard to policy reform and project implementation- @ http://www.worldbank.org/heml/oed perhaps because the balance of payments and food secu- OED Study Series rity situation was, by this time, less critical. Lending 1998 Annual Review of Development Effectiveness was thus better able to address the root causes of a Developing Towns and Cities: Lessons from Brazil and the number of problems, in keeping with one of IDA's Philippines central principles. The OED evaluators also noted that Evaluation and Development: The Institutional Dimension the continued emphasis on population and primary (Transaction Publishers) education, and the new focus on working with NGOs to Financial Sector Reform: A Review of World Bank reduce absolute poverty, was entirely appropriate. Assistance India: The Dairy Revolution Lessons for the Future Investing in Health: Development Effectiveness in the Health, To improve the effectiveness of future IDA assistance in Nutrition, and Population Sector Bangladesh, and to accelerate the pace of economic Pronjects O development and the reduction of poverty, two questions The World Bank's Experience with Post-Conflict Reconstruction must be addressed to develop a guiding vision for the OED Multilingual Series next decade: Assessing Development Effectiveness: Evaluation in the World 1. What should-and can-the government do, and what Bank and the International Finance Corporation should be done by the private sector and NGOs? Appreciation de J'efficacite du developpement: 2. How can the services provided by the public sector be L'evaluation a la Banque mondiale et a la Societe financiere md mor r o v the need of the sehors? internationale made more responsive to the needs of the stakeholders? Determinar la eficacia de las actividades de desarrollo: La evaluacio en el Banco Mundial y la Corporacion Financiera How these questions are answered in each sector Internacional and for each activity should determine IDA's assistance Cote dIvoire Revue de P'aide de la Banque mondiale au pays strategy and the kind of lending and economic and Philippines: From Crisis to Opportunity sector work to be done. Outlined below are more Filipinas: Crisis y oportunidades generic lessons that cut across all sectors, and can serve Rebuilding the Mozambique Economy: as a guide to future assistance. Assessment of a Development Partnership Reconstruir a Economia de Mocambique 6 World Bank Operations Evaluation Department * Refine the Role of the Public Sector. There is scope for recurrent expenditure requirements for operations and the private sector, NGOs, and local government to be maintenance, cost recovery, and institutional struc- involved in the provision of services. Greater effort must tures or implementing agencies and organizational be made to encourage an expanded role for local and frameworks. Policy reforms should be sought that are municipal governments in all aspects of infrastructure difficult to reverse or undermine, that will produce development and maintenance, as well as in education tangible benefits quickly, and thereby establish a and primary health care. Government involvement in constituency of beneficiaries with a strong vested commercial activities must be reduced. interest in the sustainability of the initiatives. * Increase Emphasis on Accountability of Systems. * Improve Project Monitoring and Evaluation. The Project design must provide improved accountability emphasis is often on the physical completion of civil of those responsible for providing a service or com- works or other such quantifiable targets, but more pleting a project. Project design must involve all thought needs to be given to explicit outcome indica- stakeholders, to define the parameters of accountabil- tors, and these should be included as part of the ity and to set a framework for enforcing it. As a project design. general principle, accountability is enhanced by * Recognize Ownership Issues. Many projects in decentralized participation in decisionmaking, Bangladesh show signs of incomplete ownership and finance, and organization. Organizational reforms commitment to project objectives. More of an effort is have been tried in all sectors in Bangladesh, and they needed to strengthen the political commitment to have largely failed, because unit performance has not needed institutional change, and solid indicators been made accountable to the community served, and should be sought to gauge this commitment. there has been no penalty for deficient performance. * Define Crucial Objectives and Limit Goals. In a * Pay Greater Attention to Sustainability Issues. country that has manifested continual problems in Increased focus is needed on sustainability during project implementation, it may be useful to limit project design. No single approach will work in all project objectives to a small number of crucial policy cases, but much more emphasis must be given to changes and development impact objectives. Table 4: Macroeconomic Performance 1981-85 1986-90 1991-95 GDP growth (percent) 3.80 3.9 4.4 GDP composition (percent) Agriculture 42.30 37.6 31.4 Industry 13.40 14.3 17.4 Services 44.30 48.1 51.2 (Percent of GDP) Consumption 98.70 96.7 92.3 Private 91.00 83.8 78.2 Public 7.70 12.9 14.0 Investment 13.20 12.5 14.6 Private 7.00 6.3 7.9 Public 6.20 6.2 6.7 Gross domestic savings 1.30 3.3 7.7 Gross national savings 4.30 6.8 12.1 Current account balance of payments -9.20 -6.2 -2.9 Exports 7.50 8.6 13.5 Imports 19.90 17.4 19.9 Foreign reserves (months of imports) 1.75 3.0 5.8 Consumer prices (annual, period average) 11.20 9.6 3.4 Source: World Bank data. 1 This Precis is based on the Country Assistance Review Bangladlesh: Iliogr-css Throu-1i Partnership by Roger J. Robinson, 1999, ISBN 0-8213-4293-2. Available from regional information service centers and the World Bank InfoShop. vww.wor1dbank.org/html/oed