Purpose
This paper reviews Bangladesh's socio-economic achievements and failures, examines the policy framework and suggests a way forward. Data used in the text is, unless otherwise specified, taken or computed from Statistical Tables 1-6. The rest of the paper is organised as follows: overview of development outcomes (achievements, past failures and future challenges), the prevalent policy framework, outlining an alternative approach, statistical tables, notes and references.

Development Outcomes
Achievements
There are several aspects in which Bangladesh has made impressive progress.

A significant reduction has been achieved in the population growth rate. According to the Population Census 2001, the rate was down to 1.54 per cent from 2.15 per cent as revealed by the Population Census 1991. The reasons behind this achievement include educational progress, increased awareness and effective family planning programmes. The infant mortality rate per thousand live births was down to 57 in 2000 compared to 92 in 1991. Similarly, under-five child mortality rate per thousand live births declined from 151 in 1991 to 110 in 2000. The maternal mortality rate per thousand births fell to 3.2 per cent in 2000 from 4.7 per cent in 1991. The gross primary enrolment rate increased to 97 per cent in 2000 and further since then, compared to 77 per cent in 1990. Also, there has been a significant increase in the primary completion rate from 40.7 per cent in 1991 to 67 per cent in 2000. The female primary enrolment rate has recorded a faster growth compared to the overall enrolment rate, having risen to 97 per cent in 2000 from 66 per cent in 1991. There has also been a notable progress in the female literacy rate, rising to 40.1 per cent in 2000 from 25.5 per cent in 1990.

Agriculture (crops, livestock and forest) grew at an impressive average annual rate of 4.6 per cent during 1996-2001. Although down to zero or negative in 2001-02, it recovered to an estimated 3.6 per cent in 2002-03. Food grain production (rice and wheat) reached an estimated 28 million metric tons (MTs) on gross basis and 25.3 million MTs on net basis (i.e. after deduction of 10 per cent for seeds, animal feed and losses) in 2002-03. According to the Food Planning and Monitoring Unit of the Ministry of Food, the food grain requirement for 2002-03 was 22.4 million MTs. (MoF, 2003, pp. 54, 56-57). There was, thus, a significant food grain surplus in that year. Bangladesh has, according to official statistics, been food grain self-sufficient or nearly so, on a national basis, for the past several years- a major achievement compared to large deficits since liberation until well into the 1990s. However, food grain imports of certain quantities has continued- both commercial and in the form of food aid. Food aid is used for such purposes as food-for-work, particularly for infrastructure development, and food-for-education. The commercial import part is difficult to understand, since there have been surpluses out of domestic production in recent years¹. But be that as it may, food insecurity continues to stare in the face of a large proportion of the population due to lack of access to land and related facilities for self production (at all or adequately) or lack of purchasing power to buy adequate food. The increased food grain production has been possible mainly as a result of increase in crop intensity, facilitated by expanded irrigation. Increased fertiliser use has also been a contributing factor. Agricultural credit has been an enabling support for many farmers. Above all, it is the ingenuity and hard work of the farmers that kept the agricultural sector moving forward.

Bangladesh has also made notable progress in disaster management, in particular in cyclone and flood management. Cyclone warning and cyclone shelter facilities established in Bangladesh have not only been saving lives and reducing losses in the country, but have also served as examples for other countries to learn from. In the case of flood management, combined responses by the people themselves, the government and voluntary organisations now come into play effectively in response to the onset of a major flood, to provide relief in terms of evacuation and supply of essential foods, other goods, necessary services and medicine during flood. The improvements in cyclone and flood management are indeed praiseworthy achievements in a country which is disaster-prone. Both cyclones and floods visit the country in a moderate way regularly and in a big way from time to time. There has been a significant increase in the country's technical capacity of generating flood forecasting. Improved cooperation with India and Nepal is required for data on run-off and rainfall from more places than are available now and well in advance for further improving the quality of forecast and increasing the lead time. Also, the dissemination mechanisms and outreach need to be improved for timely and effective warning to be provided to people regarding an impending flood. (Ahmad and Ahmed, 2003). Since the early 1990s, macroeconomic stability has been more or less maintained.

Overall budget deficit has been fluctuating between 4 and 5 per cent of GDP since the early 1990s, except for 1993-94 and 1999-00, when it was 5.8 per cent and 6.1 per cent, respectively. Current account balance has been in deficit, fluctuating between 0.5 or so to 2.0 per cent of the GDP from the early 1990s until 2000-01, having been balanced in 1999-00. Over the past two years, it has, in fact, been positive, the magnitude being small though- 0.4 and 0.5 per cent in 2001-02 and 2002-03, respectively. These positive current account balances are largely due to very significant increases in remittances received from Bangladeshis working abroad. In fact, the trade balance has been in the negative, varying from around 5 to 7 per cent since the early 1990s.

The remittances reached US$ 3.062 billion in 2002-03, the largest source of foreign exchange receipts for the country and accounting for about 6 per cent of the GDP in that year. Compared to this, the net export earnings from readymade garments, which account for about two-thirds of the total national export earnings, were between US$ 2.29 million and US$ 2.52 million in 2002-03 (between 50 per cent and 55 per cent of the gross earnings, as import of clothes and other materials account for 45 to 50 per cent) (Ahmad 2004).

The inflation rate has been under reasonable control since the early 1990s and was just over 5 per cent in 2002-03, having been about half of this on average, during the previous three years. In a developing country, an inflation rate of 5 per cent or so is not at all unhealthy. Foreign exchange reserve as of May 2003 was US$ 1.8 billion (MoF 2003, p. 207), accounting for about 2.6 months' imports, which is not too bad, although somewhat larger foreign exchange reserve accounting for about three months' imports is perhaps more desirable.

Failures and Challenges
The average annual economic growth rate during the period since 1996 is somewhat larger compared to that during the period from liberation in 1971 until the mid-1990s. But it is still an uninspiring 5 per cent or slightly more. It is the healthy agricultural growth rate that has been the major contributing factor to the average annual economic growth rate of 5 per cent or so achieved since the mid-1990s. Growth in other sectors, including manufacturing, has been sluggish.

A key reason behind the failure of the acceleration of the overall economic growth is the stagnation in investment. The investment ratio has been virtually stagnant- around 23 per cent of GDP- over the past several years. Private sector investment has slightly increased during these years, but that has been matched by a slightly declining public sector investment. The reasons for stagnating investment include the following:

Domestic savings ratio has been virtually stagnant at around 18 per cent of GDP since 1997, although national savings ratio has shown a slightly increasing trend due to increasing remittances from abroad. Thus, the domestic savings ratio was higher by 0.8 percentage point and the national savings ratio by 1.9 percentage points in 2002-03 compared to 1997-98. As a proportion of GDP, contribution of the official development assistance (ODA) to domestic investment has been of just 2.0 per cent of GDP in recent years.

The export regime remains extremely narrow. Only five groups of items- readymade garments including knitwear and hosiery (RMGs), frozen fish and shrimp, jute and jute goods, leather and tea- amount for about 80 per cent of the total annual export earnings of the country. As noted earlier, RMGs alone amount for about two-thirds of the total. Export expansion, therefore, has remained limited, thereby limiting foreign exchange availability. (MoF 2003, p.51). In fact, trade focused in a major way on import rather than productive investment and export remains the predominant interest in the private sector of Bangladesh.

The response of foreign direct investment (FDI) has been lukewarm to the various incentives provided, which include opening up of almost all sectors to FDI without having to go into partnership with Bangladeshi investors, generous profit repatriation and all the other facilities including tax holiday as provided to domestic industries. Reliable data on FDI are not easy to come by. There is a grey area in relation to registered and actualised FDI. In fact, only a small proportion of the registered FDI seems to materialise in terms of actual investment. Available data suggest that from negligible amounts in the early 1990s, the actualised FDI, largely in gas exploration, reached an annual amount of US$ 280 million in 2000 and US$ 328 million in 2002 (UNCTAD 2003, pp. 42, 251)². The reasons include corruption, bureaucratic hassles and hindrances, political uncertainties, law and order problems, extortionism, underdeveloped infrastructure, underdeveloped capital market and continued failure of economic growth to accelerate.

The government's total revenue collection has been less than 10 per cent of GDP until 2000-01, having marginally topped 10 per cent in 2001-02 (10.2 per cent) and 2002-03 (10.3 per cent, provisional). This is surely a poor performance. The reasons include ineffectiveness and corruption on the part of the revenue collection machinery and tax evasion by many tax payers, false statements and collusion with revenue collection officials.

Other reasons for failure of the acceleration of economic growth include leakages of resources through corruption, wastage of resources due to inefficient and uncommitted public sector management, illegal transfer of resources aboard (via over-invoicing, under-invoicing, hundies), failure to mobilise local people's energies and local resources effectively, and under-utilisation of capacity and low productivity in many sectors. Shortages of skilled managerial and other personnel and workers and a non-participatory social environment are important constraining factors behind low productivity and poor mobilisation and utilisation of human resources and various other resources.

Poverty reduction, computed on the basis of basic needs approach, has registered a slow improvement since 1991-92 of about one percentage point a year. As a result, as of 2000, on basic needs considerations, 50 per cent of the population was poor and about a third extremely poor. Assuming that poverty reduction has continued at one percentage point a year since 2000, 47 per cent of the total population now lives below the poverty line and about 30 per cent is afflicted by extreme poverty. However, in proportional terms, there has been a significant improvement compared to the 1970s and 1980s, when below poverty line population accounted for three quarters or more of the total population. But in terms of the number of people, there has been little improvement as about 64 million people are currently poverty stricken, a number which is not very much less than the total population at the time of liberation.³

The basic needs-based poverty calculation takes into account food requirements to provide 2122 Kcal per person/day and an amount of money to cover such other basic needs as clothing, shelter, basic education and basic healthcare. The measurement of extreme poverty is based on a lower amount of money allowed for basic needs other than food compared to that allowed for the overall poverty group, while food requirement used is the same for both the groups. But, if human dignity is used as the basis of the poverty line, which requires that people must have access not only to the minimum basic needs as enumerated above, but also to amenities of living such as good sanitary and environmental conditions, and equitable access to social, political, market and cultural opportunities, then a much larger proportion of the population (about 47 per cent) is poor.

There has been some improvement but stunting (height-for-weight), wasting (weight-for-height), and underweight (weight-for-age) among children of 6-71 months are still high. Thus, 41 per cent, 12 per cent, and 51 per cent of the children of this age group are below two standard deviations of the norms respectively, having declined since 1985-86 from 61 per cent, 15 per cent, 72 per cent, respectively.

Land ownership pattern is highly skewed. Landownership distribution is available for 1996, which may have worsened since then. About 55 per cent of the rural households own less than half an acre of land each, with 6.4 per cent owning no land at all. Small holders owning 0.5 to 2.5 acres per household account for another 31 per cent, while 14 per cent are medium to large land-holders. Since land is the main source of food and income in rural Bangladesh, 86 per cent of the rural households are in a bad shape, with about half of them in precarious condition⁴. Employment opportunities remain limited, particularly outside agriculture so that the poorer segments of the rural population do not have access to adequate purchasing power to ensure their minimum household food security, let alone seeking an improvement in their living conditions. Many of the desperately rural poor move to urban areas, often to Dhaka and other large cities, looking for opportunities for improving their living conditions, but often end up in slums.
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Poverty is concentrated among the landless and land-poor. Other groups include small artisans, fishermen, urban slum dwellers working as rickshaw pullers or in different casual and low paid jobs, and people living in coastal areas. Also, socio-economic disparity is glaring and increasing. The income share of the bottom 10 per cent of the population declined from 6.5 per cent in 1991-92 to 6.2 per cent in 2000, while that of the top 20 per cent increased from 44.8 per cent in 1991-92 to 52.0 per cent in 2000.

Disparity permeates not only the economic arena but also social and political arenas. Thus, the poverty-stricken people are truly excluded and, hence, deprived of opportunities for enhancing their capabilities through education, training, and healthcare and improving their living conditions through self-employment, wage-employment, ownership of assets and socio-political-cultural participation.

Prevailing Policy
Bangladesh joined other countries around the world in 1987 in implementing economic reform programmes as enjoined by the Washington Consensus (WC). The WC was developed by the World Bank and the IMF with support from USA and other developed countries in the 1970s to promote neo-liberal free market dispensation through privatisation, deregulation, and globalisation. To that end, stabilisation and structural adjustment programmes were designed, which were required to be implemented by all developing foreign-aid seeking countries. Economic growth was once again targeted as the quintessential developmental goal, with poverty reduction and improved income distribution relegated to the background.

The initial economic reforms package was later expanded to include other aspects of society in response to unpalatable experiences generated in many reforming countries, such as non-acceleration of growth, lack of progress in the private sector, domestic market-oriented existing local industrial production suffering in the face of competition from imports, export expansion facing strong disadvantageous reality, widening disparity, social costs in terms of unemployment and the increase in the number of poor people, notably in reforming African countries but elsewhere. Thus, emphasis on social sectors (education, training, health, gender issues, family planning) and institutional, administrative, and legal reforms consistent with a liberalised economy and the establishment of 'safety nets' for the vulnerable people was placed in the reform package. Also, emphasis was shifted to the effectiveness of governance from the earlier unqualified rolling back of the government. Another important element introduced has been environmental protection and enhancement. Poverty reduction, however, remained to be achieved as a consequence of growth and was not considered a direct goal of the paradigm until 1999.

However, in view of mounting criticisms of the paradigm for the failure to reduce poverty substantially, increasing disparity among countries and within countries and persisting limited opportunities for poor people and poor countries to make progress, poverty reduction was included as a direct goal in 1999. In that year, all developing foreign-aid seeking countries were asked by the World Bank and the IMF to prepare their Poverty Reduction Strategy Papers (PRSPs) once again as an aid-conditionality. However, the broad policy framework of privatising not only production and distribution activities but also utilities and services of all types, including electricity, water, telecommunications, railways, education and health, remained the cornerstone of the paradigm. Bangladesh has prepared its Interim Poverty Reduction Strategy Paper (I-PRSP) and is now working on the final version within the same policy framework.

Embarking in 1987 on the WC reform programme, Bangladesh has been pursuing the path enthusiastically since the early 1990s, subscribing to the whole package of reforms as it evolved over the years. As noted earlier, the country successfully achieved and, more or less, maintained macroeconomic stability since the early 1990s. But that success could not be translated into faster economic growth, much less into accelerated poverty reduction. Moreover, the glaring socio-economic disparity has been accentuated further and environmental degradation has continued unabated.

The precipitous reduction of import tariff rates in the early 1990s, the import unweighted average from 89 per cent in 1990-91 to 36 per cent in 1993-94 and the import weighted average from 42 per cent to 24.1 per cent in 1993-94, without allowing time and facilities to local industries to enhance their competitive ability, has put many local industries- particularly in the small and tiny sectors- into severe disadvantage viz-a-viz imports coming from relatively more efficient producers in other countries. The tariff reduction process continued since then, and (import) unweighted and weighted tariff rates were respectively down to 17.13 and 9.73 per cent by 2001-02. The pace and pattern of tariff reductions introduced were out of step with the prevailing realities related to manufacturing and marketing inefficiencies obtained in many domestic industries. As a result, in certain cases, domestic industry had to close down, and, in other cases, possible new units or expansion of existing units could not be established. However, some mitigation in certain cases has been available in terms of supplementary duties and sales tax imposed on imports. It is not argued here that indiscriminate protection is provided to all industries indefinitely. What is argued is that industries with potential for growth and export expansion should be identified and protected as appropriate for a certain period of time. But this has not been done in Bangladesh. It may be possible to find ways of appropriately assisting such industries even now.

Private sector's ability (financial, strategic planning, human capabilities) remains limited in relation to the lead role assigned to it in the ongoing paradigm. The sector is constrained by its trade orientation and persisting difficulties posed by less than efficient banking services and underdeveloped capital market. It is also seriously image-challenged due to the persisting loan default culture.

The efforts aimed at governance reforms have not succeeded much. Lack of transparency and accountability, lack of rule of law, bureaucratic hindrances and procrastination, lack of coordination among various ministries and agencies, lack of political focus on real issues and corrupt practices all around remain pervasive. It seems inherent in the dominant paradigm, which emphasises social division, that the power elites are not genuinely interested in reforms to promote good governance, because that would constrain their ability to seek benefits through abuse of power.

The basic problem with the ruling paradigm is that it is a divider of society. It enables the power elites (economic, political, bureaucratic, military, professional) to acquire more wealth as well as market, political and social power. The poorer segments of society are expected to be either protected by safety net programmes or to benefit from 'trickle-down' effects of economic growth. Trickle-down effects are of little avail, as had been the case in the pre-reform period. In reality, the poorer segments of the population remain deprived and excluded.

An Alternative Approach
The alternative approach aimed at consolidating and building on the impressive achievements in several respects and breaking out of the trap characterised by least development, persisting widespread poverty, and sharp social division has necessarily to be based on the prevailing ground realities. The key ground realities to be addressed include widespread poverty; glaring and increasing socio-economic disparity; social, political, economic exclusion; pervasive corruption and criminalisation of politics and economics; centralised and poor governance; virtually non-existent local government; high rate of illiteracy and low quality of education among people at large; low human capability (in terms of education, training, health and access to resources and various facilities); rampant unemployment and underemployment; low productivity; absence of effective support for small and medium enterprises, which can spread throughout the country involving people of small means; unabated degradation of the environment; and soil quality degradation in the agriculture sector. These realities are either in contradiction to the letter or spirit or both of the ruling neo-paradigm or are so much subordinate to the paradigm's dominant thrusts or the interests of the dominant groups that they are talked about but, by and large, ignored in practice.

In the proposed approach, market is important but balanced roles of market and state are called for. Reforms are essential, but the present reform agenda must be recast based on the prevailing realities on the ground as indicated above and guided by the dynamics of a paradigm shift to sustainable development and participatory democracy.

The concept of sustainable development, places the human being, rather than capital, as is the case in the currently ruling paradigm, at the centre of policies and programmes are undertaken to reduce socio-economic disparity (between the rich and the poor and between men and women) and promote participation of people at large in all processes- social, political, economic, environmental- of social transformation. A crucial galvanising role of the cultural realities in promoting social cohesion is recognised, which are brought into play. Participatory democracy ensures equitable, active participation of people at large in the social transformation processes. To that end, it calls for the institutionalisation of democracy at all levels of society, including through appropriate devolution of political power to each level and promotion of vertically and horizontally coordinated dynamic social capital (policies, institutions, norms, values, ethics linkages) throughout society.

The proposed approach is thus guided by the vision to ensure equitable involvement of all citizens in the social transformation processes, within a participatory democratic framework. Obviously, a core concern relates to the promotion of social inclusion and cohesion to replace the present sharp social division as between the people at large on the one hand, and the power elites, on the other.

It is necessary for this approach that there are effective interactions across macro and micro levels so that macro policies are formulated by taking into account the realities faced by the country from within and outside, and their implications work through different levels of society, central to local/microin such a manner that appropriate activities at the local spaces are properly promoted by the macro framework involving policy, resource, and institutional support. The macro framework in turn should be adjusted on the basis of feedback from the local spaces.
The paradigm shift, as proposed, will create conditions for and facilitate the release of the energies of people at large by opening up opportunities for their capability development and equitable participation in the social transformation processes and benefits, the maximisation of resource mobilisation, and an effective utilisation of both the mobilised human power and financial and material resources at all levels of society, leading to accelerated, equitable, sustainable national progress.

The conceptual basis and directional imperatives of the proposed alternative approach have been outlined above. If the mindsets within the opinion forming, policy making, and policy implementing circles- political, bureaucratic, professional- changed in favour of this approach, the policy, programme and implementation details should not be difficult to formulate and put in place.

(Dr Qazi Kholiquzzaman Ahmad (Q. K. Ahmad), an economist, is currently the chairman of the multi-disciplinary research organisation Bangladesh Unnayan Parishad (BUP) and the President of the Bangladesh Economic Association (BEA), Dhaka).

Statiscal Tables

Table 1 : Bangladesh Macroeconomic Indicators (% of GDP)

Indicator	1991 -92	1992-93	1993 -94	1994 -95	1995 -96	1996 -97
Consumption Public Private Domestic savings National savings Total investment Public Private Total revenue Total public expenditure Revenue exp. ADP*	86.1 4.5 81.7 13.9 19.3 17.3 7.0 10.3 8.3 13.0 6.6 4.7	87.7 5.0 82.7 12.3 18.0 17.9 6.5 11.5 9.1 13.0 6.8 5.0	86.9 4.9 82.0 13.1 18.8 18.4 6.6 11.8 9.2 15.0 6.7 6.5	86.9 4.6 82.2 13.1 19.1 19.1 6.7 12.4 9.8 14.4 6.7 6.6	85.3 4.4 80.9 14.7 20.0 20.0 6.4 13.6 9.2 13.9 7.0 5.9	84.1 4.4 79.7 15.9 20.7 20.7 7.0 13.7 9.6 13.3 6.8 6.0
Other exp. Overall budget deficit (excluding grants) Overall budget deficit (including grants) Total public financing Net foreign financing Grants Loan Repayment of capital Internal financing	1.6 -4.7 -2.1 6.4 4.5 2.6 2.5 -0.7 1.9	1.2 -3.8 -1.3 5.6 4.5 2.6 2.7 -0.7 1.2	1.8 -5.8 -3.7 5.6 3.8 2.1 2.5 -0.8 1.8	1.1 4.6 -2.2 4.4 3.8 2.3 2.2 -0.8 0.7	1.0 -4.7 3.0 4.5 2.8 1.7 1.9 0.8 1.8	1.6 -4.7 -2.1 6.4 4.5 2.6 2.5 -0.7 1.9
Bank credit Bangladesh bank Commercial bank Public loan (net) Import Export Trade deficit Current amount balance Net transfer from abroad GDP growth rate (%) Inflation (%) Population (million)	1.2 -0.4 1.6 0.7 6.3 11.3 -4.9 -0.4 3.4 5.0 4.6 113.0	0.2 0.2 0.0 0.9 7.4 12.7 -5.3 -0.8 4.9 4.6 2.7 114.9	0.6 -0.3 0.9 1.2 7.5 12.4 -4.9 -0.3 6.8 4.1 3.3 116.9	0.0 0.2 -0.2 0.7 9.1 15.4 -6.2 -1.8 6.9 4.9 8.9 118.8	1.0 1.1 -0.1 0.8 9.5 16.9 -7.3 -2.3 4.0 4.6 6.7 120.8	1.2 -0.4 1.6 0.7 6.3 11.3 -4.9 -0.4 3.4 5.0 4.6 113.0
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