Poverty reduction and the need for local ownership

The IDPs' emphasis on local ownership originated in their sad experience with two decades of externally imposed policy reforms on Bangladesh and across the developing world. From the early 1980s, some Bangladeshi economists, as with other commentators around the world, had critiqued the externally driven reform process, both for its inappropriate content as much as for its political unfeasibility.

It however took the IDPs nearly two decades and billions of dollars of aid to realise that reforms could not be imposed on any country without ensuring the reform agenda was acceptable to the people and enjoyed the full political commitment of the government which was to carry out the reforms.

In a recently completed in-depth study of economic reforms across close to 40 developing and transitional economies, carried out under the sponsorship of the Global Development Network (GDN), less than 6 countries could really be categorised as "successful" reformers where the reform process had proved both sustainable and effective. The failure to sustain the reform process was, amongst other reasons, attributed to the weak ownership over the reform process in most countries.

A critical measure of reform "failure" lies in the limited impact of the reforms alleviating poverty. IDPs have, however, attributed this to both lack of local ownership as well as weak governance over implementing reforms. This self-justifying perspective has discouraged the IDPs from any serious introspection over the design of the reforms which could be held responsible both for implementation failures as also its limited impact on poverty alleviation.

This myopia over the reform design and emphasis on policy ownership and governance has impacted on the design flaws of Bangladesh's PPSP, as indeed most PRSPs around the world. Bangladesh's PRSP has, inspite of the emphasis on local ownership, been compelled to incorporate the macro-economic model sponsored by the Bretton Woods Institutions (BWI), the World Bank and International Monetary Fund (IMF), through their structural adjustment reform (SAR) program, into the core of the PRSP.

This has recommitted the GOB to the standard pattern of reforms associated with the SAR from the early 1980s. The Bangladesh PRSP, along with PRSPs around the world, reiterates its support for the SAR package of macro-economic stabilisation, exchange rate flexibility, import liberalisation, privatisation, desubsidisation, financial sector liberalization, and labour market flexibility. This reform package was essentially designed to enhance economic growth and had no pretensions about reducing poverty. The BWI merely argued that if growth was ensured through the SAR reforms then poverty would automatically be reduced.

The BWI approach to poverty reduction was unfortunately flawed both on theoretical grounds and based on empirical evidence. Furthermore, no finance minister could explain to his domestic electorate that poverty would be alleviated by reducing subsidies on fertiliser or privatising all state owned enterprises (SOE). The fact that the PRSP model should expect that aid recipient countries, ranging from Bangladesh to Bolvia, should reiterate their commitment to the SAR process, which had contributed to popular uprisings and electoral debacles for reforming governments around the world, raises some doubts about the credibility of the IDPs' commitment to policy ownership.

If, as has been claimed for the Bangladesh PRSP process, consultations were held with the deprived segments of Bangladesh's population, did our poor farmers, day labourers, workers, and women's group really advise our PRSP authors that they would like fertiliser prices to be raised, imports to be further liberalised, all state enterprises to be privatized, or interest rates to be raised?

If such demands were not articulated in the consultative process or reiterated in discussions with members of parliament, civil society groups, or even local economists, how did these ideas find a place in the Bangladesh PRSP?

Obviously the GOB felt a compulsion to genuflect to the policy compulsions of some of its key IDPs who had offered generous aid packages to support the PRSP.

A further inherited design flaw in the Bangladesh PRSP is it preoccupation with growth targets. A more meaningful form of target setting would have been to set poverty reduction targets to be attained every year and to programmatically link this to the profile of public and private expenditure which would contribute to the poverty reduction. This could give the country a clear idea of how such expenditures would be to targeted to realise the primary goal of the PRSP, the reduction of poverty.

In the current PRSP, the expenditure targets are not causally linked to the poverty targets. Bangladesh has committed itself to targets set as part of the internationally established Millennium Development Goals (MDG) where some expenditure commitments have been made which are designed to realise these goals. A series of policy and programmatic interventions, including measures to improve governance, have been incorporated in the PRSP. Both are positive features of our PRSP.

We need to initiate a discussion on how far the GOB, during an election year is in a position to implement the policy commitments made in the PRSP. Obviously much will now depend on how far the government which is elected to office in January 2007 will not only embrace the PRSP but will politically commit itself to realise its policy perspectives.

This will involve securing the political commitment by both the newly elected parliament and the ruling party, preferably by making the support of the PRSP into a theme of the forthcoming election campaign. It will also demand an overhaul of the governance regime, which has, for some time, been in a state of progressive degeneration. How this transformation in the polity and administration will be brought about remains a challenging question. It is hoped that both the electorate and civil society in Bangladesh will continue to pose such questions during the life of the PRSP.

Rehman Sobhan is Chairman, Centre for Policy Dialogue.