PRSP and the proposed budget

The conceptual psroblem with PRSP
The draft PRSP entitled "Unlocking the Potential: National Strategy for Accelerated Poverty Reduction" is a well-written, comprehensive document, and the authors deserve congratulations for their work. However, the critical question is: would the strategy work? Would it accelerate the rate of poverty reduction? I have grave doubts. My skepticism is founded on the fact that the draft document employs the same growth-oriented, trickle-down approach which we have been using, rather unsuccessfully, within the structural adjustment policies prescribed by The Work Bank and IMF since the 1970s. The premise of the trickle-down approach is that, given macroeconomic stability and other incentives for production, growth will be stimulated -- which will, in turn, increase employment and consequently reduce poverty.

The trickle-down approach has not worked in Bangladesh, and experts doubt whether it worked anywhere at all. Despite generous incentives and fairly stable macroeconomic conditions, there appears to be, at best, stagnation in our industrial sector. For example, during the past five years, the Gross Domestic Investment share of GDP has increased by the negligible rate of 0.3 percent. The performance of public investment is even more dismal. In fact, Bangladesh continues to be an under-invested country, with its gross savings rate (26.49 percent) higher than the gross investment rate (24.43 percent) for the current fiscal year. This is caused by the disenabling environment that exists due to corruption, security concerns and bureaucratic hassles. Some experts are even claiming that we have been going through a gradual process of de-industrialisation. Not only were many large manufacturing enterprises such as Adamjee Jute Mills closed down over the years, so were also many small enterprises. A survey by Midas in 2003 showed that nearly 564,658 micro, small and medium sized enterprises folded in the previous 5 years.

Tap here to add The Daily Star as a trusted source

More importantly, the effect of GDP growth on poverty reduction in Bangladesh has been modest at best, despite the many efforts of the government and non-government organizations and despite the spending of enormous sums of our own and donor money. The average rate of poverty reduction has been roughly 1 percent, despite a 4.8 percent increase in GDP in during the 1990s. During the same period, the rural poverty on the average declined by only 0.4 percent and urban poverty by 0.9 percent. The preliminary report of the Poverty Monitoring Survey 2004 indicates that the rate of poverty reduction during 2000-04 was rather dismal, only 0.52 percent per year.

Not only has the trickle-down approach failed to accelerate the rate of poverty reduction, it has produced inequality of income and opportunities as a serious (hopefully) unintended consequence. For example, according to government statistics, the income share of the poorest 5 percent families of our country declined from 1.03 percent in 1991-92 to 0.88 percent in 1995-96, and then to 0.67 percent in 2000. During the same period, the income share of the richest 5percent families increased from 18.85 percent in 1991-92 to 23.62 percent, then to 30.66 percent. Thus, the rich-poor income disparity increased from 18 fold in 1991-92 to 46 fold in 2000. The disparity has, unfortunately, continued unabated in recent years. Thus, in spite of rhetoric claiming otherwise, we seemed to have followed a strange strategy of further enriching the rich in the name of reducing the poverty of the poor. This growing disparity has, in essence, created two homes -- one for the rich and other for the poor -- in the same soil under one flag, thus threatening the very future of our society.

In view of the growing disparity resulting from the past blunders, the draft PRSP used the rhetoric of pro-poor growth. The experiences of Bangladesh and elsewhere show that growth has never been pro-poor, and perhaps it will never be as long as the trickle-down approach reigns. Only by changing our approach to a peoples-centered development strategy -- a strategy to empower people to become authors of their own future -- will there be an opportunity for economic growth to significantly benefit the poor.

The implementation problems
Serious problems also exist with the implementation, or lack thereof, of PRSP. The implementation problem arises for three principal reasons: first, the lack of seriousness on the part of the government; second, the decline in the implementation capacity of the government; and third, the lack of good economic governance.

Let us take the issue of local governance to show the government's demonstrated unwillingness to take actions to strengthen local bodies consistent with the PRSP policy recommendations. Strengthening local governance, designed to establish participatory, decentralised governance, is a core strategic agenda of PRSP. Similarly, it is an important election commitment of the ruling BNP. In its published manifesto prior to the last parliamentary election, BNP made the commitment: "In order to achieve administrative decentralisation, Upazila and Zila Parishad will be formed and they will be made, in a planned manner, the centre of all development activities. Special measures will be taken to make Union Parishads effective, dynamic and self-sufficient ... In order to take local governance to the grassroots level and create competent leadership at the village level, Gram Sarkar system will be reintroduced and invigorated."

Nevertheless, Zila Parishad and Upazila Parishad elections were not held. It must be noted that the failure to hold Zila and Upazila Parishad elections is a clear violation of the Constitution and the Bangladesh Supreme Court directive. Article 59 of the Constitution mandates the creation of elected autonomous local government bodies at each declared administrative unit, namely the Zila, Upazila and Union. In Kudrat-E-Elahi Panir vs Bangladesh, the Appellate Division of the Bangladesh Supreme Court, the guardian of our Constitution, in 1992, directed the government to hold local body elections at relevant administrative units within six months. This is a directive which has so far been totally ignored. This defiance of both the Constitution and the Supreme Court directive, and the violation of the party's own manifesto are clearly to cater to the vested interests of Members of Parliament.

However, a non-elected Gram Sarkar system was established in 2003 at the UP ward level, although wards are not declared administrative units. Unfortunately the Gram Sarkar is now being touted by the government as a decentralisation measure, even though it does not represent democratic decentralisation, if decentralisation at all. Furthermore, the Gram Sarkar is beset with many difficulties, including constitutional and corruption issues; even the Gram Sarkar system under President Zia did not work. Thus, it appears that the goal of poverty reduction and even our constitutional mandate and Court directives have become hostage to the coterie interests of our MPs.

Not only has the government ignored its constitutional obligations, defied the Supreme Court order and violated its own election manifesto by not establishing elected local bodies at the Zila and Upazila levels, it has also greatly neglected, contrary to the recommendations of PRSP, the elected City Corporations, Paurashavas and Union Parishads in its budgetary allocations. For example, the total block grants for these three elected bodies increased by less than 3 percent -- from 360 crore in 2004-05 to Tk. 370 crore for the coming year -- even though the proposed ADP allocation has been increased by 20 percent. However, despite this very modest increase, the total block grant allocation for the three bodies has remained an insignificant share (2.12 percent) of ADP, which is even less than the average (2.67percent) for the last 15 years. These allocations in no way reflect the stated commitment of the government toward elected local bodies. Furthermore, the proposed block grant allocation for the Gram Sarkar, which has been emerging as a parallel body for the Union Parishad, has increased by 50 percent to Tk. 60 crore in the new budget, while the proposed allocation for UPs increased by only 20 percent to Tk. 120 crore. It must be noted that the Union Parishad, which is the oldest elected local body closest to the people, is already in bad shape because of the multiplicity of bureaucratic controls and undue intrusions of MPs. In fact, the very future of UPs is now at stake.

It must be pointed out that the draft PRSP rightly emphasised the need for strong local governance for accelerated poverty reduction. The day-to-day challenges the people face in the areas of health, education, nutrition, sanitation, environment, women's status, family planning, law and order etc. are local and must also be solved locally. The UP representatives, as local elected leaders, can awaken and mobilise people for solving many of these problems locally. For example, if the people are mobilised to initiate a social movement against mistreatment of women, dowry, early marriage, drug addiction, hooliganism, and the necessary habit and behavior changes, these social problems will get rather automatically solved through the creation of what is called "social capital". Similar positive results can be expected if UP representatives take stands for marriage and birth registration, cleanliness, good sanitation etc.

Experiences show that social capital can complement economic capital and, with the solution of social problems, the ways and means for solving many difficult economic problems also emerge. The elected UP representatives can play an all important catalytic role in their solutions. Thus, strengthening of the grassroots-level local government bodies with the necessary power, authority and resources is an essential prerequisite for ushering in a peoples'-centred development approach and, ultimately, the accelerated eradication of poverty. Nevertheless, the government has so far taken no serious initiative, budgetary or otherwise, to make the local bodies effective.

The implementation capacity of the government has been greatly shrunk by the growing problems of graft, corruption and inefficiency within the central bureaucracy. This problem has been accentuated by the breakdown of long-held norms of neutrality and discipline fuelled by the extreme partisan behaviour of political masters in handing out rewards and punishment. The implementation capacity of the government could be significantly enhanced and also more resources made available to the poor by increased allocation to local bodies -- an idea to which our Honourable Finance Minister has no interest.

Another serious challenge faced by the implementation of PRSP is the deteriorating quality of our economic governance. It is alleged that many projects are included in ADP not because of their true contributions to poverty reduction, but primarily to give patronage to vested interest groups. Given the impending parliamentary elections, this tendency has only worsened. Thus, the transparency of the budget making process is now a crying need of the day. Furthermore, increased allocation is no doubt important for poverty reduction, but the quality of spending is at least equally important.

Conclusions
Although the proposed budget is intended to implement the draft PRSP for accelerated poverty reduction, it is unlikely to be successful. The growth oriented trickle-down approach, which underlies the PRSP and also the proposed budget, has not worked in the past to significantly reduce poverty, and is unlikely to be successful in the future. More importantly, the government does not even seem to be serious about implementing the recommendations of the PRSP. Other issues impeding its implementation are the reduced capacity of the government functionaries and the deteriorating quality of economic governance. In addition, much of the allocations for poverty reductions are in the form of transfer payments, which does not permanently reduce poverty.

In order to achieve accelerated poverty reduction, we clearly need a new development strategy, a people-centred strategy. The strategy should be designed to unleash the people's productivity and creativity in order to help them become the authors of their own future. Such a strategy would stimulate "production by the masses" along with mass production and truly unlock the potential of our nation. This would obviously require a radical change in the mindset of our policymakers, a radical restructuring of the government machinery and a radical change in resource allocation. This cannot be achieved by thinking "within the box".

Dr. Badiul Alam Majumdar is Global Vice President and Country Director, The Hunger Project-Bangladesh