Bangladesh: Bolstering Economic Growth to Reduce Poverty

Overview

Bangladesh has sustained an impressive track record for growth and development. In the past decade, the economy has grown at nearly six percent per year despite frequent natural disasters and the fuel, food price and global financial crises. In the past two decades, poverty was reduced by nearly one-third whereas life expectancy, literacy and per capita food production have increased significantly..

Challenge

Bangladesh is among the most densely populated countries in the world. While poverty in both urban and rural areas declined by an impressive 19 percentage points in the last decade-and-a-half, the absolute number of people below the poverty line remains significant. Bangladesh’s geographical position makes it one of the most vulnerable countries to climate change and natural calamities. Sustained growth in recent years has rapidly increased the demand for energy, transport and telecommunications services. However, insufficient planning and investment have now resulted in severe infrastructure deficits.

The country has severe power generation shortages. Against a peak demand of 6,500 megawatt (MW), current supply is only about 4,500 MW. Frequent power cuts, especially during the hot summer days are a common phenomenon. Rural areas are hardest hit since they get the major share of power cuts. Additional financing for the project in 2009 added a demand-side management component for large-scale deployment of energy efficient CFLs in exchange for incandescent lamps.

Approach

International Development Association (IDA) assistance spans across different sectors. Through long-standing support to education, health and family planning, successive governments have made the most of well-established connections between education for girls and lowered population growth. A recent Millennium Development Goal (MDG) assessment for Bangladesh notes that support for rural infrastructure (specifically roads and electricity) also seems positively correlated with health and education results. IDA commitments to Bangladesh have grown rapidly in the past five years, topping US$1 billion for the first time in fiscal year (FY) 2009. The World Bank’s present portfolio in Bangladesh amounts to US$4.8 billion and includes 28 projects. The 2011 fiscal year is expected to be a peak year, with new commitments of over US$2 billion, including a record US$1.2 billion for the Padma Multipurpose Bridge Project.

Results

In the past two decades, Bangladesh has experienced significant poverty reduction and profound social transformation with the widespread entry of girls into the education system and women into the labor force. The country is on track to meet the MDGs for infant and child mortality and has already met the goal for attaining gender parity in education.

• Education: Ninety-eight percent of girls are enrolled in primary school today. Enrollment of girls in secondary schools has also risen to over 6 million from 1.1 million in 1991.
• Health: Assisted deliveries have helped reduce maternal mortality rates by 40 percent in the past decade. Today, nearly 90 percent of Bangladeshi children receive Vitamin A supplements and over 80 percent are vaccinated, contributing to an impressive reduction in infant and child mortality by more than two-thirds since 1990.
• Rural Infrastructure: IDA has contributed to the improvement of rural connectivity in 21 districts with improvements and maintenance of more than 2,500 kilometers of rural roads. An impact study shows that female
employment increased by 50 percent, the share of farmers’ nonagricultural assets increased between 25 - 50 percent, and the poverty reduction rate almost doubled in the project areas.
• Energy: IDA has supported public-private partnerships in small power plants as well as the construction of two large-scale independent power plants that account for 20 percent of Bangladesh’s installed capacity and up to 30 percent of power generated in the country. Moreover, 630,000 rural homes are connected to the national grid while more than 750,000 households in remote rural areas have installed solar home systems.

Voices

We used to eat only once a day. Now we can eat three times a day, and I can afford to educate my two children.

— Shyamoli Rani Pal

Partners

IDA’s aid coordination in Bangladesh is a crucial function, given the very large number of donors working in the country. The main mechanism for in-country donor coordination is the Local Consultative Group (LCG), composed of 32 bilateral and multilateral donors and the External Relations Division of the Ministry of Finance. The LCG’s goal is to ensure effective and efficient use of external aid in line with the government’s Poverty Reduction Strategy Paper. IDA also collaborates closely with donors on joint funding of large sector programs in health and education, as well as transformative investments in infrastructure, such as the Padma bridge.

Toward the Future

The World Bank’s Country Assistance Strategy for FY11-14 is supporting the government’s vision of rapid poverty reduction and middle-income country status through accelerated, sustainable and inclusive growth, underpinned by stronger governance at the central and local levels. To ensure better outcomes, the World Bank’s strategy seeks to scale up on-going operations with demonstrable results, engage in larger, more strategic interventions with a transformative impact and innovate through small pilots with strong country ownership.