Report No. 24299-BD Bangladesh Poverty in Bangladesh: Building on Progress December, 2002 Poverty Reduction and Economic Management Sector Unit South Asia Region, World Bank Document of the World Bank and Asian Development Bank CURIRENCY EQUJgS Taka (Tk.) US l.0=Tk. 57.9 utiuc 2002) GOV-.FRNM:3;zS§_IM'sG f.m July 1 -June 30 ACRONYMiVS AiN iiD A '2:wD ADP Annual Development Program hAtI Intcrnational Monctary Fund ABC Assessment of Basic Competency MlvlR Infant Mortality Rate BANBEIS Bangladesh Bureau of Educational I-PRSP Interim Povetty Reductcion Strategy Paper Information and Statistics iYS abor Force Survey BBS Bangladesh Bureau of Statistcs LGFA o nacl Government Engineering Department BDHS Bangladesh Demographic and iM DG MIillennium Developmr nt Goals Health Survey MM M1icro aijan c Institutions BHD)R Bangladesh Human Dcvelopmcnt Report IMR Material Mortality Rate BHDR BeneftlIncidence Hum anDcvelopment ReptWCA Ministry of Womcn's and Children's Affairs BIA Benefit Incidence AnalYSis ;sIM&L Moniioring and Evaluation BINP Bangladesh Integrated Nutrition program NA National Accounts BRAC Bangladesh Rural Advancement Conmittee NCB National Commercial Bank CBN Cost of Basic Needs NEC National Economic Council CDF Credit Development Forum NGO: Non-Goverrnmcntal Oraanizations CMIR Child Mortality Rate NIPORT National Institute of Population research CNS Child Nutrition Survey and trainrlg CPD Center for Policy Dialoguc PA loverty Assessment DHS Demographic and Health Services PAC Publuic Affairs Center ESP Essential Services PackagePARC. Public Administration Retform Commaission ESP Essential Services Package pC,4t Per Capita Expenditures ERD Extemnal Relations Department PER Public Expenditure ReviLw FFE Food For Education PETS Public ,,penditure Tracling Survey FFW Food For Work PF1DS Public Food Distribution System F;MRSP- Food Management and Research Support PICSF Palli (arma Sahayak Foundation IFPRI Project -Intemational Food Policy PMED Primary arid Mass Education Divison Research Institute PPRC Power and Participation Research Center FSS Female Secondary Stipend Rl) Ruald Developinent GDP Gross Domestic Product REB Rural EJectrification Board GIE Gini Income Elasticity Pr c\P Rural Maintenance Program GOB GoverniInmentof Blanglas RNF Rural Non-l arn GOB Government of Bangladesh SMt. School Management Co.mmittee GR Gratuitous Relief SOE State-Owned Entcrprise HES Household Expenditure Suivey SSC Scconidary School Ccrtificate HIES Household Income and TNO Thana Nirbahi Of fleer Expenditure Survey TR T'est Reiief HKI EHelen Keller International UIJ)(; Union Disaster Commiitce HSC Hiigher Secondary Certificate UNDP' ittited Nations Development Program IFPRI International Food Policy UP UnJion Paushlad Research Institute *lVGI) Ulniorn Parishad Vulnerable Group Development RGVGD Income Ge nearatio Vulnerable Group VGD Vulnerable Group IDcvilopment IGVGD Income Generation Vulnerable Group VGF Vulnerible Group Feeding Development WIP World Food Program IMED Implementation Monitoring and WHTO World Healtlh Organization Evaluation Division Vice Fzesidc,n. MieRko jNishi-nlizu SARVP Country D:iictof: Frederick E Teimple, SACBD 3ectot Dh:Qecto0L! SaciLq Ahmed, SASPR §ecti Managew: Sanjay Thradlluan, SASPR tFa.En ~'kc>c_1: rr Salmai. Zaidij {inku Murgai, SASPR CONTENTS EXECUTIVE SUMMARY ............................................................... i 1.PROGRESS IN POVERTY REDUCTION DURING THE NINETIES: .............................................................. 2 1.1.INTRODUCTION AND OVERVIEW: ...............................................................2 1.2.TRENDS IN THE ECONOMY ..............................................................3 1.3. TRENDS IN CONSUMPTION-BASED POVERTY AND INEQUALITY MEASURES: ..................................4 1.4. TRENDS IN NON-INCOME MEASURES OF LIVING STANDARDS: ..........................................................9 1.5. PR OFILE OF THE POOR: .............................................................. 14 2. ACCELERATING GROWrH: THE ROLE OF KEY PRIVATE AND PUBLIC ASSETS .................. .................... 18 2.1. PROFILE OF SOURCES OF INCOME AND ASSET PORTFOLIOS: ............................................................ 19 2.2. LABOR EMPLOYMENT AND EARNINGS: .............................................................. 21 2.3. LAND AND COMMON PROPERTY RESOURCES: .............................................................. 26 2.4. IMPROVED A CCESS TO CREDIT: .............................................................. 30 2.5. OVERALL ECONOMIC ENVIRONMENT AND COMPLEMENTARY PUBLIC ASSETS: ............ ............. 33 3. INVESTING IN HUMAN CAPITAL: EDUCATION, HEALTH, AND CHILD NUTRMTION .............. ................ 44 3.1. OVERVIEW OF RECENT PROGRESS IN EDUCATION: .............................................................. 44 3.2. BENEFIT-INCIDENCE ANALYSIS OF EDUCATION EXPENDITURES: ................................ .................. 48 3.3. OVERVIEW OF RECENT PROGRESS IN HEALTH: .......... .................................................... 51 3.4. BENEFIT-INCIDENCE ANALYSIS OF HEALTH EXPENDITURES: ......................................................... 54 3.5. CHILD MALNUTR ON: .............................................................. 56 4. REDUCING VULNERABILrIY: PUBLIC SOCIAL SAFETY NET PROGRAMS ................................................... 66 4.1. RECENT PROGRESS IN REDUCING VULNERABTY: ......................................... ..................... 66 4.2. MAIN SOCIAL ASSISTANCE PROGRAMS IN BANGLADESH: .............................................................. 67 4.3. TARGETING EFFECTIVENESS OF FOOD-ASSISTED TRANSFER PROGRAMS: ................ .................... 70 4.4. ASSESSMENT OF LEAKAGE FROM FOOD-ASSISTED TRANSFER PROGRAMS: ................................... 75 4.5. IMPROVING THE IMPACT OF THE PUBLIC SAFETY-NET: .............................................................. 78 5. SCORING PROGRESS: .............................................................. 84 TECHNICAL APPENDIX: .............................................................. 92 APPENDix TABLES AND FIGURES .............................................................. 95 REFERENCES .............................................................. 110 List of TebRea Table 1.1. Trends in CBN Poverty Measures ...................................................................4 Table 1.2. Regional Trends in Poverty ....................................................................5 Table 1.3. Total Number and Distribution of Poor in Bangladesh: 2000 HIES .................. ......................6 Table 1.4. Trends in Inequality: Gini Coefficients ....................................................................7 Table 1.5. Trends in Various Indicators of Malnutrition ................................................................... 10 Table 1.6. Literacy Rates in Bangladesh ................................................................... 11 Table 1.7. Percentage of Children Currently Enrolled in School ................................................................ 12 Table 1.8. Poverty Incidence by Level of Education of Household Head ................................................ 14 Table 1.9. Poverty Incidence by Occupation of Household Head .............................................................. 15 Table 1.10. Rural Poverty Incidence by Land Ownership .............................................. 15 Table 1.11. Housing Condiions by Sector and Poverty ................................................................... 16 Table 2.1. Gini Decomposition by Source of Income .................................................................... 19 Table 2.2. Trends in the Labor Market, 1991-2000 ................................................................... 21 Table 2.3. Unemployment and Under-employment .................................................................... 23 Table 2.4. Rice Market Participation Status, Rural Areas .................................................................... 28 Table 2.5. Farrn Size and Degree of Crop Diversification .................................................................... 29 Table 2.6. Distribution of Loans by Financial Sector, Rural Areas ............................................................. 30 Table 2.7. Main Source of Finance for Setting-up Family Business ............................................................ 31 Table 2.8. Per-capita Expenditures & Community Infiastructure .............................................................. 36 Table 2.9. International Comparisons of Selected Infrastructure Indicators ............................................. 37 Table 2.10. Percentage of Households with an Electricity Connection ..................................................... 38 Table 3.1. Percentage of Children Currently Enrolled in School ................................................................ 44 Table 3.2. Percentage of Population 11-19 that has completed Grade 5 ................................................... 45 Table 3.3. Distribution of Public and Private Expenditures on Education ............................................... 49 Table 3.4. Patterns of Self-Reported Morbidity and Health Care Use ........................................................ 51 Table 3.5. Choice of Provider for Peri-natal Services ................................................................... 52 Table 3.6. Choice of Provider for Immunizaton Services ................................................................... 53 Table 3.7. Choice of Provider for Curative Care ................................................................... 53 Table 3.8. Utilization Rates of Government Health Care Services ............................................................. 54 Table 3.9. Average Distance to Health Facilities: 1995-96 and 2000 .......................................................... 54 Table 3.10. Distribution of Public and Private Expenditures on Health ........................... ........................ 55 Table 3.11. Malnutrition Rates by Infant Feeding Practices ................................................................... 59 Table 3.12. Malnutrition Rates by Mother's Education, Marital and Work Status ................................... 60 Table 3.13. Malnutrition Rates by Prevalence of Illness and Type of Curative Treatment ..................... 61 Table 3.14. Malnutrition Rates and Presence of Government/NGO Programs ...................................... 64 Table 4.1. Social Safety Net Programs Under Government Budget 2001-02 .......................................... 68 Table 4.2. Allocations to Food-Assistance Programs 1999-2000 ...................................................... 68 Table 4.3. Inter- and Intra-Village Decomposition of Targeting Performance: FFE and VGD ........... 72 Table 4.4. Program Outlays Versus Survey Estimates .................................................................... 75 Table 5.1. Bangladesh and South Asia: Comparison of Selected Indicators of Child Nutrition ............ 84 Table 5.2. International Comparisons of Selected Development Indicators ............................................. 85 List of Boxes Box 2.1. BRAC's MELA Program ........................................................ 32 Box 2.2. A New Wave of Change: UP Elections in Bangladesh .................................................I:. 39 Box 3.1. Bangladesh Integrated Nutrition Program (BINP) ................................................ 60 Box 4.1. Description of the Main Food Assisted Workfare Programs ........................................................ 69 Box 4.2. Description of Main Food-Assisted Development Programs ...................................................... 71 Box 4.3. Description of the Main Food-Assisted Relief Programs ......................................................... 73 Box 4.4. Smart Cards ......................................................... 77 Box 4.5. Selected Tools for Improving Monitoring and Evaluation ......................................................... 78 Box 4.6. Managing Risk: The Modular Approach to Social Safety Nets .................................................... 79 Box 5.1. Reform of the Statistical System in India ......................................................... 89 List of Figures Figure 1.1. Sectoral Composition of GDP and Growth over the Nineties .................................................3 Figure 1.2. Contrasting Progress over the First and Second Half of the Nineties ......................................6 Figure 1.3. Growth Incidence Curve for Bangladesh, 1991-92 to 2000 .......................................................8 Figure 1.4. Rural and Urban Growth Incidence Curves 1991-92 to 2000 ...................................................9 Figure 2.1. High Dependence of the Poor on Daily Wage Income .......................................... ........... 19 Figure 2.2. Agricultural Versus Non-Farm Sources of Income, Rural Areas ............................................ 20 Figure 2.3. Composition of Assets: Importance of Livestock & Financial Assets for the Poor ............. 20 Figure 2.4. Activity Status of Women 15 and Older .................................... 22 Figure 2.5. Activity Status of Men aged 15-29 ................................... 24 Figure 2.6. Average Years of Schooling ............................................................. 24 Figure 2.7. Gains from Land Ownership ............................................................. 26 Figure 2.8. Share of Agricultural Income from Livestock ............................................................ 27 Figure 3.1. School Attendance Profile by Age ............................................................ 45 Figure 3.2. Activity Status of Children aged 10-14 ............................................................ 46 Figure 3.3. Child Malnutrition rates, 1999-2000 ............................................................ 57 Figure 3.4. Malnutrition Rates Among Children aged 6-71 months, 1985-2000 ...................................... 57 Figure 3.5. Cumulative contribution of Different Areas to Number of Severely Stunted Children in Bangladesh, 2000 ............................................................ 58 Figure 3.6. Child Malnutrition Rates by Per Capita Expenditure Quintile ................................................. 58 Figure 3.7. Child Malnutrition Rates Among Children Aged 6-71 Months, by Village Electrifcation Status, 2000 ............................................................. 63 Figure 4.1. Allocation to Food Assistance Programs (in metric tons) ........................................................ 67 Figure 4.2. Average Participation Rates by Income Group ............................................................ 70 Figure 4.3. Marginal Odds of Participation by Income Group ............................................................ 76 PREFACE AND ACMJOWLED$ 5EN'S This Poverty Assessment (PA), prepared simultaneously with a companion paper, the Public Expenditure Review, has been carried out jointly by the Asian Development Bank and the World Bank, with full participation of the Government of Bangladesh. While preparation of this PA started in the Fall 2001, the report is part of a long-term capacity-building effort initiated in late 1994. The World Bank and Asian Development Bank have worked with staff at the Bangladesh Bureau of Statistics (BBS) to help expand and enhance the information base on poverty. Extensive technical assistance and grant funding has been provided to help strengthen the National Accounts system as well as to enhance BBS's Household Expenditure Survey (HES) series. The HIES, labor force, and child nutrition surveys have provided the primary database for much of the analysis presented in this report. The findings of a number of background papers - on which this report draws heavily - have been discussed at a workshop in Dhaka in November 2001 attended by GOB staff, members of the I-PRSP preparation team, and academics and researchers. In addition, two seminars have been scheduled in May and June 2002 in Dhaka and Washington respectively to share the main findings of this report with the extended country teams working on Bangladesh with the view to improving the effectiveness of Bank operations. A conference in Dhaka is planned with a wide range of stakeholders in the fall of 2002 to discuss and disseminate the main findings of this report. This report has been prepared by Salman Zaidi and Rinku Murgai, Economists in the Poverty Reduction and Economnic Management (PREM) unit of the World Bank's South Asia Region, under the guidance of Kapil Kapoor, Lead Economist, and Sadiq Ahmed, Sector Director and Chief Economist The team from the Asian Development Bank comprised Zahid Hossain, Rezaul Xhan, and Omkar Shrestha. The report draws on contributions from Martin Cumpa (sources of income), Elena Glinskaya (benefit-incidence analysis), Wahida Huq (decentralization), Zahid Hussain (Education), Hanan Jacoby (detemiinants of wages), Quentin Wodon and Corinne Siaens (poverty projections, determinants of poverty), and, as well as on background papers prepared by Anil Deolalikar (nutrition) and Claire Salmon (labor). At various stages during the preparation of the report, Martin Ravallion, Shekhar Shah, Fred Temple, and N. Roberto Zagha provided invaluable comments and advice. Alfred Friendly edited the report, and Oxana Bricha, Joyce Mormita Das, Mehar Akhter Khan, and Thelma Rutledge helped in handling all arrgements for the workshops and with processing the report. The peer reviewers for this report were Peter Lanjouw (DECRG) and Kalanidhi Subbarao (AFTHD). The team also received useful comments from Nilufar Ahmed, Harold Alderman, Robert Anderson, Eric Bell, Subrata Dhar, Charles Griffin, Margaret Grosh, Trina Haque, Emma Hooper, Chingboon Lee, Syed Nizamuddin, Zaidi Sattar, Luis Valdivieso, Tara Vishwanath, as well as from participants from various sector units that attended the PA review meeting. The report benefited greatly from colLaborative work with the BBS core team led by Faizuddin Ahmed (Project Director, BBS), and comprising Taheruddin Ahmed, Jafor Ahmed, Shamsul Alam, Ashim Kumar Dey, Sabila Khatoon, Abdul Latif, Abdul Matin, and Abdul Hadi Mollah. The World Bank team was headed by Syed Nizamuddin, and included Sharmila Haq and Juan Munoz (consultants), Rinku Murgai, and Salman Zaidi. This collaboration took place under the guidance at various stages of the Secretary, Statistics, Division, Messrs. Waliul Islam, Mamun ur Rashid, Syed Tanveer Hussain, and Anil Chandra Singha. In addition, we would like to thank Messrs. Manzur Ahmed, Nasiz Farid, Jobdul Haque, Robert Hynderick, Wahiduddin Mahmud, M. A. Mandal, Mustafa Mujer, Ghulam Rabbani, Rushidan Islam Rahman, Binayak Sen, Hussain Zillur Rahman, as well as the participants of wozkshops in Dhaka in November 2001 and October 2002 for very helpful discussions and comments. Executive Summary Introduction As with a glass that is simultaneously half full and half empty, Bangladesh has made significant, recent progress in reducing poverty but still faces the reality that roughly half its citizens, some 63 million people, live in deprivation. Of the poor, two out of three are caught in hard-core or extreme poverty, as measured by their consumption of food and other basic needs. This report examines the heartening record of advances during the 1990s, major challenges still to be overcome and priority measures to accelerate poverty reduction. Using very recent data for the most part, it presents an up-to-date portrait of poverty and of Bangladesh's resolute but sometimes deficient efforts to overcome it. The successes have been measurable. They have also, though, been'partial.'The report suggests ways to build on what has been achieved and, through changes in emphasis, in practices and in policies, to realize healthy economic growth designed to benefit the rural poor as well as more rapid, sustained movement toward greater social justice. Dramatically lowering the incidence of poverty requires significantly higher levels of economic performance, but it also requires that growth reaches the poor and expands their opportunities. They, in turn, must have the assets -literacy, sound health, access to credit, among others - to capitalize on expanding options. Further, like all citizens and like entrepreneurs in particular, the poor need to have confidence in the integrity and efficiency of the country's political and administrative institutions - in the honesty of the police, for instance, and the accountability of officials at all levels. Such confidence is now conspicuous by its absence. Bangladesh is in the midst of preparing the Interim Poverty Reduction Strategy Paper (I- PRSP) that will guide its efforts in the years ahead. At its core are comrnitments to expand the scope of growth that favors the poor and to improve the quality and reach of basic social services as well as the efficacy of safety-net programs to activate in times of trouble. On the political side of the development equation, the evolving strategy also looks to a future in which citizens generally secure greater opportunities to take constructive part in public affairs and the poor gain a more decisive voice in the decisions that shape their lives and prospects. Translating this ambitious strategy into concrete and effective actions is no small challenge. Implementing it consistently and promptly will require determination and imagination not only inside Bangladesh but also from supporters and well-wishers abroad. As a contribution to that collective effort, this analysis brings together new data on poverty and, drawn from those findings, fresh perspectives on resource and reform policies to indude in the mix. Progress ... But Reducing Poverty Almost every one of Bangladesh's impressive accomplishments in bettering the life of the poor during the last decade of the 20th century has to be qualified by recognizing the size and scope of the work that remains to be done. Thus, for example, poverty in Bangladesh shrank from 1991-92 to 2000 by a creditable 9 percent, with the decline occurring in both urban and rural areas and touching all of the poor, even the poorest of the poor. But because of population growth, Bangladesh entered the new millennium with the same absolute number of poor among its people as ten years earlier. One change - a drop of 2.7 million in the count of hard-core poor to 42.5 million in 2000 - undoubtedly stemmed in part from relatively broad-based growth in rural areas. However, 80 percent of the country's population and 85 percent of the poor continue to live in the countryside. Declining poverty rates ...... but little chongs in numbsr of poor 70- 59 1991-92 0 2000 i22 62.7 60 - 50 _ 20 0 Upper poverty line Lower poverty line Upper poverty lin e Lowar povertyl ine Headcount Rate (Percent) Absolute Number (mrlion) Vulnerability Government safety net programs have worked to shield the neediest from destitution and from the consequences of the natural disasters to which Bangladesh is particularly prone. The record shows impressive progress on both counts. Various food distribution programs, for instance, not only appear to reach the clients they should serve but also to underwrite a number of needed public works and to stimulate the education of children from poor families. The massive flooding of 1998 tested disaster relief readiness and found it by and large up to the challenge, especially in delivering record amounts of staple foodgrains to inundated communities and households and - partly because of liberalization of imports - in keeping the price of rice relatively stable. The basic performance, including targeting, of the safety net seems adequate, if we ignore that the cost is wildly inflated by leakage - a euphemism for theft - that diverts filly 75 percent of the volume of commodities involved in the Food for Education program before they reach any intended benefciary. Population Bangladesh is not only the eighth most populous country in the world and one of the poorest, but, among major states, it also has the highest population density - nearly 950 people per square kilometer. Bringing the population growth rate down to an annual average of 1.5 percent during the 1990s (ower than India's 1.8 percent level and much lower than Pakistan's 2.5 percent) is a major social achievement. But unless the average fertility rate (now holding steady at around 3.3) drops further, Bangladesh will be home to more than 180 million people in 2025 and to 208 million in 2050. It cannot afford to relax in its efforts to manage population growth. Land and landlessness In the year 2000, among the poorest of the poor - the poorest 20 percent of the population - four out of five owned less than half an acre of land. Not only did many own no acreage at all, but landlessness has been increasing in rural Bangladesh along with the number of small and marginal farms. The 2000 HIES found nearly half (48 percent) of the country's rural population to be effectively landless, owning at most 0.05 acres. Roughly three-fifths of all households in the two poorest quintiles fell into that category. Job Creation Again, Bangladesh has done well in adding jobs for about one million new entrants to the work force every year since 1990-91. Many of them, moreover, have been filled by women, notably in the buoyant textile and apparel industries that have profited from reforms in the late 1980s and early 1990s reducing the once-strong bias against exports and positioning Bangladesh to compete in global markets. The country's economy has done well in another sense: the services sector has been the main source of new jobs, growing at 4.2 percent a year. But it must do better over the coming years to provide productive and gainful employment opportunities for the vast number of underemployed people as well as for the expanding workforce. Education. Literacy and Child Labor In educating the workers of tomorrow, at least, Bangladesh appeared to be gaining ground during the nineties. More than doubling its (low) level of government spending on primary education, it managed to enroll nearly equal proportions of boys and girls and of urban and rural children. It raised the percentage of the population that completed Grade 5 from 44 percent in 1991-92 to 56 percent in 2000. National literacy rates for Bangladeshis 7 and older grew only from 26 to 32 percent between the censuses of 1981 and 1991, but by 2000, 45 percent of Bangladeshis were considered literate. Not only were rural gains greater than urban ones, literacy among women also spread faster than among men. But these apparent successes are matched or over-matched by grim realities. At the end of the decade, 55 out of every 100 citizens from the age of 7 up could neither read nor write. Moreover, an unwelcome surprise, primary school enrollments as a percentage of the relevant age group actually fell somewhat in the last half of the 1990s; an estimated quarter of 6-10-year-olds who should be in class are not. Their absence may reflect the low quality of teaching imparted in schools given the low level of spending per pupil, but also other factors such as a household's perceived need for the earnings of its younger members. Despite progress during the 1990s in lessening the number of child laborers - from 5.6 million in 1995-96 to 4.3 million in 1999-00 - fully one-fourth of children 10-14 years of age are estimated to be working rather than studying. Health Finally, Bangladesh's record in improving public health is a composite of heartening achievements balanced or outweighed by grave shortcomings. Halving population growth rates over two decades - from 3 percent in the 1970s - is a cause for justified congratulation. For the great majority, in addition, drinking and cooking water now come from tubewells rather than from less sanitary surface water, and Bangladeshis' access to sanitation - though available still to just 35 percent of the population - is more than twice as extensive as in India. Similarly, infant mortality rates have dropped by nearly a quarter, from 87 to 66 per 1,000 live births, between 1989-93 and 1995-99. More than 92 out of every 100 children under 5 years have received at least one vaccine, poor youngsters almost as frequently as the non-poor. Poor children remain seriously vulnerable to malnutrition and their mothers to death in childbirth. Two recent surveys found between 13 and 19 percent of Bangladeshis from the ages of 6 months to 6 years to be severely underweight or stunted in their growth. Such levels are among the highest in the world, exceeded only by North Korea (in the proportion of underweight youngsters) and by North Korea, Bhutan and Cambodia (in terms of stunting). The fight against malnutrition has, in fact, advanced strongly in the last decade, but with the world's second highest (after India) rate of underweight newborns, Bangladesh cannot rest on its laurels. Nor can it neglect the reality that over 60 percent of children are stunted in the poorest 20 percent of its households. The maternal mortality rate, estimated at 392 deaths per 100,000 live births, is among the highest outside sub-Saharan Africa, and the vast majority of infants are born at home. Ttained health workers attend only 12 percent of births. Even though the percentage of women seeking pre-natal consultations doubled during the 1990s, at least one mother in three gives birth without ever having seen a health practitioner. Like all the countries that have subsctibed to the Millennium Development Goals, Bangladesh aims to have skilled staff attending the vast majority of births by 2015. Time is short. BANGLADESH AND THE MLLENUM DEVELOPMENT GOALS MDG I3ANGLADESH'S POSITION, AN LOOLMNG IEYOND THE GOALS Progress, with poverty rates dedining from 59% to 500/o over the last decade. Poverty rates and absolute numbers still very high; considerable urban-rural and regional ERADICATE EXTREME disparities; GDP growth at 6-8% needed to cut incidence significantly. POVERTYAND Progress in reducing child malnutrition, with prevalence of stunting wasting and HUNGER underweight reduced by 20-25% over decade. Significant chaUenges remain: close to half the children stunted or underweight Integrted approach across sectors needed to l_________________ maintain rate of progress. This should indude creating knowledge of health practices. Large increase in enrollment rates in 80s-90s. However, survey-based estimates show stagnation in enrollment during second half of 90s. Need to improve quality of ACI EvE UNIESAL education; problems of governance continue to plague the system. I PRIMARYEDUCATION 12.5 percentage points improvement in litemcy over the last decade, but the lteracy PRlmARYEDUC-ATION rate continues to be extremely low (45% among 7+ years). Universal coverage of primary education important tool to boost rates; adult literacy programs need better delivery system. Ratio of girls to boys in primary and secondary school dosc to or above parity. Decline ROMOTrE GENDER in boys' (aged 6- 15 years) enrollment indicated by recent surveys is cause for concem. EQUALErY AND Progress in increasing women's participation in public life and in the formal labor IEMPOWER WOMEN market, but female labor force participation continues to be quite low. REDUCcE CHLD Drop in IMR from 87 in 1989-93 to 66 in 1995-99. Decline in CMR from 133 to 94 MORTALTY over the period. However, large disparities persist across income groups. At 392 per 100,000 live births, MMR among highest outside Sub-Saharan Africa. IMPROVE MATERNAL Cross-sectoral approach needed (induding behavioral change and massive training of HEALTH midwives, given that 95% deliveries occur at homc) to lower mortality rates. Births attended by skilled staff extremely low, around 120/o in 1999-00. Remarkable progress achieved in access to improved water sources by spreading tube- ENSURE wells virtually universally. Rapid urbanization poses new challenges. Arsenic ENVIRONMENTAL contamination threatens gains achieved. SUSTAINABILIrY Energy use the lowest among South Asian countries. Only 30% of the population has access to electricity. Structural reforms in the energy sector needed. Sources: Bangladesh Demographic and Health Surveys, Household Income and E:rpenditure Surveys, Education Watch Study, Bangladesh Human Development Report, World Development Reports. The Jimpact of Growth The decline in poverty in Bangladesh stems in large pare rom strong, decade-long economic growth. The economy's expansion during the 1990s - an average, annual GDP increase of almost 5 percent - meant a rise in real, per capita GDP of 36 percent or twice the average rate of other low- and middle-income countries in the same decade. This impressive performance was fueled by the 86 percent jump in real GDP in the expanding industril sector where the output of export-oriented, ready-made garment (RMG) enterprises grew by double-digit increments. Even in agriculture, whose share of GDP dropped even though it remained the country's main source of employment, aggregate production reached approximately 25 million tons in FY 2000, when the country also attained self- sufficiency in food grains. In 2000, not only were there fewer people living in extreme poverty as compared to the start of the decade, but the poor were on average better-off compared to previous decades. Fewer people were in extreme poverty, but inequality increased durng the decade. Real per capita expenditures grew annually by 1.9 percent during the nineties, but incomes grew much faster for some households than for others. Had growth been more broad-based, the cumulative decline in poverty would have been much greater than the 9-percentage-point drop observed during the decade. The contrasting experience of rural and urban areas in Bangladesh is instructive in this context. Although the yearly average rises in rural and urban per capita expenditures - 1.7 percent iv and 2.3 percent, respectively - differed markedly, growth in rural areas was more broad-based and resulted in an equivalent decline in poverty. Rural and Urban Growth incidence curves, 1991-92 to 2000 4 4 .5 3.5 3.5 3 3 CIrowth in _ t m ,2.5' 2.5 2E Grwt in w___ 2_= - E 1.5 - - ofgowthrates 1.5 got- 0.5 0.5 0 0 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 Rural Arm UrbAras % of population ranked by per capita expenditures The fuel for rural economic expansion came from both farm and non-farm activities, a mix that will have to continue to achieve sustained poverty reduction in coming years. The non-farm rural economy - composed of trade, transport, manufacturing, processing, retail sales and services and the like - holds significant potential for further, strong growth. Accordingly, poverty-reduction policies will need to capitalize on that growth potential. The trouble is, though, that growth may be slackening. Early indications are . that Bangladesh's economy will expand by less than the previous annual 5 percent average in 2002. Slower progress on structural reforms, rising fiscal deficits in recent years, the shaky condition of many government-owned financial institutions and of many more state-owned enterprises combine to threaten both government budgets and national economic growxth. Poverty Projections under Alternate Growth Scenarios s50- 45 0'- 40 ~~ - ~-_ e r Poverty ~Line 40 30 I ' OA'-'1 25 2" 'O20 " Lower Povert Lie- -- - ---- 10 .. '0A 5 ~ ~4.5% growth - - - - 6.0% growth . ------ 7.5% growth O . . . 2000 2005 Year 2010 2015 v Stronger, not weaker economic expansion is essential to dose the gap between Bangladesh's current status and the heights it hopes to reach by 2015. To have the resources to meet the MDG target on poverty in 2015, the Bangladesh economy must grow faster than it ever has. Multi-year projections are, at best, approximations of the future, but such extended estimates indicate that Bangladesh will need to achieve an annual average 6-percent GDP growth to bring the current 50- percent incidence of poverty down to 25-percent over the nest dozen-plus years. That seems like a tall order, but it has been filled elsewhere. Bangladesh's not-so-distant neighbor, Vietnam, where per capita GDP equals that of Bangladesh, where population growth is not much higher and where urbanization is somewhat lower is one example. There, from 1992 to 1998, yearly GDP growth averaged 8.4 percent a year, and poverty decreased by 21 percent. Accelerating and Makng the Most of Growth Broad-based accelerated economic expansion can effectively propel scores of millions of Bangladeshis out of poverty in the next dozen years or so. The momentum must reach levels the country has not consistently recorded before, but the momentum of the 1990s set records as well. How best can Bangladesh meet the twin challenges of accelerating the rate of growth and maximize its potential for poverty reduction by ensuring that it is more broad-based? For economic growth to embrace and strengthen the poor, the policies designed to stimulate growth must focus on letting the poor maximize the value and earning power of their current assets and on enabling them to increase their holdings. Devising strategies to achieve this objective requires knowledge of the main activities and sectors from which the poor derive their livelihoods. Inventorying the various forms of capital that the poor possess or lack, as well as exploring their main sources of income, show that o While income eaming strategies are heterogeneous across households, even among any single income decile, one of the marked differences distinguishing tie income eaming strategies of the poor from the rich is their tremendously high reliance on daily wage income. o Labor markets offer significant premiums to education. The greater the number of years spent in school, the higher is income. Bangladeshis in the top decile of per capita expenditures average 7 times as many years of schooling as those in the bottom decile. o Land ownership is out of reach of most Bangladeshis living in hard-core poverty in rumral areas. Yet even households that own up to half an acre average per capita expenditures 7 percent higher than those of their landless neighbors. o Poorer households hold a greater share of their asset endowment in relatively more liquid assets such as livestock and financial assets, and relatively less in land, other farm assets, or family- owned enterprises. o Natural and common property resources in Bangladesh are an important source of livelihood for poor households. In communities where villagers have access to such common property as khas land, expenditures are 2-3 percent above less fortunate locales. o Non-farm employment offers significant premiums relative to agrcultural daily work. Employment for men in manufacturing or other non-agicultural occupations provides a 25-34 percent premium compared to daily wage work in agriculture, even after controlling for differences in education and other individual and locational characteristics. o Non-farn activities in small and medium-sized household enterprises hold high promise of growth with direct impact on rural poverty, already employing some 1.7 million people. Yet in vi roughly three-fourths of such enterprises, the main source of financing to establish the enterprise was household savings or inheritance. By contrast, NGO micro credit and lending from agri/commmercial banks was the main source in only 4 and 1 percent of the cases respectively. Data on labor force employmnent patterns shows, somewhat predictably, farming, raising livestock and fishing t,o be the primary occupations for 61 percent of working men and 56 percent of working women in the countryside. Less expectedly, however, trade, transport, manufacturing and other non-farm work provide the chief source of employment for about 40 percent of the rural labor force whether poor or non-poor. Bangladesh's rural poor are adapting to a significant extent to a changing economic setting. Daily wage income and salaries provide dose to half of the total income of the poorest fifth of the population, but even for the poorest tenth 40 percent of total income comes from non-agricultural sources. Among the rural poor, from one-fifth to one-third of income derives from non-agricultural activities either as wages or self-employment earnings, anid the percentage rises at. higher income levels. The familiar concept of the rural poor as tied to relatively unskilled cultivation-may therefore be a stereotype that somewhat misrepresents an emerging reality. It also misses the rise in labor force participation rates of women working outside their home from 14 percent in 1990-91 to 23 percent in 1999-00. Of that growing number, more than two million earn wages. in manufacturing, half of them in the textile and apparel industries as migrants, in many cases, from impoverished villages and rural households. Agriculiural versus Non-Farm Sources of Income, Rural Areas 100% -. it . 90% 0 Wr;. 80% ' , , - , - 'o . - .:.I,,u, _ 70% - Seladernpoor llt 50%t p m aig ow n agricultureJ war 30% T 10% 0% 1 2 3 4 5 68 9 10 AgrWicutue: Sinice 85 percent of Bangladesh's poor live in rural areas where agriculture is the predominant activity, accelerating growth in agriculture through raising productivity of existing crops and diversification will be crucial With the poor being predominantly landless, improvements in the operation of land-markets, including tenancy and sales, are necessary to help them strengthen their position in the rural economy. The continued development of livestock and fisheries - which are important assets for the landless - as well as better management of common property resources in environmentally sustainable ways that benefit them rather than better-off households would be of particular importance to the poor. In addition, purposeful outside assistance can help the agricultural sector improve the yield from crops, especially rice; diversify into cultivation of crops that bring notably higher per-acre revenues than rice and wheat; and through greater attention to research and improving markets. Micro-Credit: For the poor to gain equitably from economic growth in the off-farm sector, they need more than the ability to trade places - from rural to urban - or to practice an off-farm trade. They need assets beyond their labor to invest in widening opportunities. Financial assets in the vui formn of micro credit are more available to the rural poor than land, thanks to successful innovations adopted by various non-governmental organizations in Bangladesh. However, despite tremnendous progress in this area, there is still considerable scope to extend the reach of micro credit financial institutions and of formal-sector lenders, as evidenced by the high dependence of small household- based enterprises on inheritance, savings, and other prsonal sources to set up their businesses. NGO micro credit and lending from agri /commercial banks represents only a small share of the needed funds and unless their market shares rise, the rural credit market itself is not likely to be a powerful enough engine of non-farm growth and poverty reduction. Humwa Capitai: Given that the chief asset for the poor in Bangladesh is their labor, the need to invest soundly in building human capital is dear. Basic education is critical to ensure that everyone can participate in and benefit from growti. Government policies and budgetary allocations have rightly focused on human development, and spending on pimary education, child care, and pre-natal care have benefited the poor the most. On the other hand, public spending on secondary and higher education and on curative care is less equitably distibuted. While allocating public resources to priority sectors such as child nutrition, education and health is important, higher resource allocations in and of thernselves are not enough: how these resources are used is also of crucial importance. Better targeting of nutrition interventions and emphasis on fostering behavioral change through communication will be necessary - indeed critical - to shrink the incidence of malnutrition among children. Encou Ing vesement: The overarching poverty-reduction challenge in the decade ahead is to ensure that higher nationwide economic growth liberates the poor, especially in the countryside, to build productive assets. The range and variety of those private and public assets is large, even if - taken separately - a fifth-grade education, a nearby all-weather road, half-ownership of an irrigation pump, a reliable dairy cow and a flock of chickens, or a sewing machine seem like very limited capital. To ensure that economic growth embraces and strengthens the poor, the policies designed to stimulate growth must also focus on lettng the poor maximize the value and earning power of their current assets. While relatively little attention has been devoted to this topic in the past, the government's responsibility for creating and maintaining an enabling environment plays a crucial role in influencing the level of returns to private assets. If farms and firms cannot operate profitably because of macroeconomic instability, poor infrastructure, or bureaucratic harassment, facilitating the accumulation of private assets will bring only limited benefits. Priorting Use of Govemental Resourwes: Correcting the deterioration that has taken place in government finances in recent years and imposing strong discipline on the many wasteful state-owned enterprises would do much to help restore fiscal order and macroeconomic stability. Inprovement in fiscal management during FY02 as well as GOB's decision with regard to Adamjee Jute Mills have been bold corrective measures undertaken in response to these policy imperatives. The government also needs to address various infrastructuze deficits - roads, electricity, water transport facilities, etc. - that add costs to transactions of all sort Local public infrastructure is important both in the development of a modern agricultural sector as well as in spurring growth in the non-farm sector. The analysis presented in this report shows strong correlations between availability of infrastructure and per capita expenditures, even after controlling for various individual characteristics. Improvements in infrastructure will be necessary to accelerate growth, emphasizing upgrading and maintaining existing infrastructure along with selectivity and investment in strategic areas so as to correct geographic imbalances and complernent new directions of the economy. viii Improving Governance: A final set of high-level official responsibilities falls under the seemingly amorphous heading of "governance". In practice, the problerns to be addressed are very reaL For instance, the findings of a recent nationwide study on governance point to breakdown of law enforcement in the country as the top concern for both rank-and-file citizens and entrepreneurs alike. Similarly, extensive reform of the state-owned financial institutions is needed to make them better conduits of credit to the poor. To respond to their needs, the formal banking system needs to respond with flexibility, outreach, and energy. Likewise, another specific area where improvements in governance are urgently needed is to reduce the level of leakage from the various food assistance programs. In order to minimize losses, a number of specific measures are proposed in this report, ranging from emulating the design features of programs with lower system losses, piloting new initiatives such as smart cards, to institutionalizing other monitoring tools (e.g. survey-based assessments, public expenditure tracking surveys, citizen report cards, etc.) to improve accountability. In preparing its PRSP, Bangladesh encounters an unprecedented opportunity to draw on widespread backing for the process of devising a long-term comprehensive strategy for poverty reduction. Not only are various domestic agents of change such as the government, civil society, and the academic community resolutely engaged; the entire international community has also pledged full support to the process. Following the recent parliamentary elections, there is a strong political impetus for change. To ensure that economic growth embraces and strengthens the poor, the policies designed to stimulate growth must focus on letting the poor maximize the value and earning power of their current assets and on enabling them to increase their holdings. That is easier said than done, but it can be done, and Bangladesh, building on what it has done, can do more. ix Chapter 1: Prgress in Pove1y Reduction_ - - t -. J S t jl_ ' ,___ _ __ _ Trends in the Economy Good growth performance during the 1990s: GDP growth averaged about 5 percent per year, with per- capita GDP increasing by about 36 percent over the decade, twice the average for low and middle income countries over the same period. Industry was the fastest growing sub-sector, with 86 percent aggregate increase over the decade. Output in the services and agriculture sub-sectors increased by 50 percent and 33 percent respectively during this period. Tlends in Consumption-based Poverty and Iuequality Meearges The headcount poverty rate in Bangladesh declined from 59 percent in 1991-92 to 50 percent in 2000. Although the poverty gap and squared poverty gap yardsticks also show decline in poverty over the decade, some evidence - conflicting with other data - shows the great bulk of poverty reduction coming in the first half of the 1990s. Progress in reducing poverty incidence was equal across urban and rural areas, with rural areas performing better in lowering the depth and severity of poverty. Dhaka division had the largest decline in poverty over the decade; poverty rates stagnated in Chittagong division. Income inequality in Bangladesh rose considerably over the decade. Though all income strata gained, growth benefited the poorest and relatively affluent more than the middle class. Growth in rural areas appears to have been more broad-based than in urban areas. There, faster rates of growth were accompanied by a considerable rise in inequality as a result of which the magnitude of the overall decline in poverty matched that in rural areas. Significant net rural-urban migration over the decade may also have contributed to comparatively lower rates of poverty reduction in urban areas. Tirends in Non-Encome Measres of lLving Standards Data on food consumption patterns confirm the fall in poverty during the nineties. Anthropometric data from various household surveys indicate good progress in reducing child malnutrition, and significant improvements in infant and child mortality, as well as in associated measures of life expectancy. Bangladesh's achievements in reducing fertility have been substantial, though there are indications that the total fertility rate may have plateaued in recent years. Progress in increasing literacy and school enrollments duting the nineties has been less encouraging, with the quality of education provided in the schools generating considerable and rising concern. Bangladesh has made commendable progress in reducing vulnerability on several fronts, especially with regard to enhanced food security, and in strengthening disaster coping mechanisms. However, various types of risks of deprivation continue to face the country's population and to pose significant challenges. Profile of the Poor The poor in Bangladesh tend to have low levels of education, havc limited access to land, and are highly concentrated in low paying, physically demanding, and socially unattractive occupations as casual wage laborers. In both urban and rural areas, where the poor lack much access to modem amenities and services, they also tend to live in houses of inferior quality. Wlhile poverty rates do not appear to be strongly correlated with religion or gender of household head, those female-headed that are widowed, divorced or separated have a considerably higher incidence of poverty relative to others. 1. PROGRESS IN POVERTY REDUCTION DURING THE NINETIES 1.1 INTRODUCTION AND OVERVIEW: 1.1 As is now widely acknowledged, poverty encompasses deprivation in well-being, not just as measured by income or consumption poverty, but also inferior outcomes in areas like education and health, and in vulnerability and powerlessness as well. This report takes this broader view of poverty, both in asking how it has evolved in Bangladesh in recent years, and in discussing measures to tackle it. Following a brief assessment of trends in economic growth in different sectors, this chapter examines trends in consumption-based poverty and inequality as well as non-income measures of well-being. Despite recent achievements, the analysis reveals that the magnitude of development challenges facing the country is daunting. 1.2 There is consensus in Bangladesh on the important developmental priorities and challenges confronting the country. Among the major issues that different stakeholders identified during consultations recently commissioned by the government induded: "lack of physical infrastructure, law and order, organized crime, extortions and economic violence, lack of effective local government and decentralization, quality of education, health, and other social services, lack of coordination among development agencies and institutions, lack of remunerative employment and economic opportunities, lack of social capital at the community level, resulting in low-level of collective action, and lack of democratization of political process.", 1.3 Officials are currently preparing the country's Interim Poverty Reduction Strategy Paper (1- PRSP). The Government's evolving strategy to accelerate poverty reduction focuses on five broad thrusts: (a) expanding the scope for pro-poor economic growth, (b) fostering human development of the poor, (c) support women's advancement and dosing of gender gaps in development, (d) providing social safety nets against unanticipated shocks, and (e) strengthening participatory governance and enhancing the voice of the poor (GOB 2002). As discussed at length in this report, the strategic principles underpinning this strategy are sound and appropriate to the development challenges facing Bangladesh. However, the ultimate test for GOB will be its effectiveness in translating these strategic principles into concrete, productive actions, and in developing mechanisms to monitor the results. The central purpose of this report is to help inform the preparation of the- PRSP by synthesizing the main findings of analytic work on poverty recently commissioned by the, World Bank and Asian Development Bank 1.4 The analytic framework used in the report follows that presented in the 2000/2001 World Development Report.2 The work of poverty reduction has several dimensions. Its aim is to employ the best possible means to assist people to build their personal assets and maximize their return on them through complementary inputs and a supportive overall environment that shields both assets and owners against volatility and risk. Chapter 2 provides a profile of the main sources of income and assets of households in Bangladesh, mainly with a view to identifying the key assets and income sources of particular importance to poor households. The analysis highlights selected strategies and actions that would help build assets for poor households and raise the level of returns to those assets by mobilizing complementary public actions and support and by constructing an enabling environment that helps accelerate growth. Chapter 3 discusses human capital, in particular education, I Memorandum for the Bangladesh Development Forum 2002-2003, Ministry of Finance, Government of Bangladesh. 2World Bank. 2001a. WorldDevelpmentRiport2000/2001:AAttackin.gPo",t. Washington D.C. Chapter 1: Prgrs in Povern Redytio health, and child nutrition. Along with an overview of recent progress in these areas, the chapter also assesses the main challenges ahead as well as some actions that could help the country meet them. The Government of Bangladesh has in place a wide array of social safety net programs designed to help households cope with volatility arising from income shocks or the impact of natural disasters and to help build key private and public assets for the poor. Chapter 4 provides a brief introduction to GOB's main social safety nets, weighs their success in reaching the poor, and discusses measures to imnprove their targeting and effectiveness. Chapter 5 condudes with a discussion of how Bangladesh's progress compares to other countries and the need for irnproved monitoring and evaluation systems to better track and improve upon this progress. 1.2: TRENDS IN THE ECONOMY: 1.5 ]&ngladesh achieved a good growh pedobnece dadqm the ninedes. Between 1991 and 2000, real GDP in Bangladesh increased by 52 percent, averaging a growth rate of about 5 percent per year. Combined with the country's notable success in reducing the population growth rate over the past two decades, this economic performance resulted in real per capita GDP's rising by 36 percent over the decade, twice the contemporary gains of low and middle income countries (World Bank 2001 a). Figre 1.1: SectoraR Composition of GDP? end Growth over the Nimeties 100% 83% t A, v- re: 25% 80% SeM es: 49% _ 50% 1 3 40% 33% Overal 520A 201%- stry. 26% : ~~~~0% _ --_ Compositon: FY0O tita: FV81FC83 1.6 Economic growth was most robust in the industrial sector, which increased in importance from 21 percent to 26 percent of GDP, with its real GDP rising by an impressive 86 percent during the nineties (Figure 1.1). The export-oriented ready-made garment (RMG) sector recorded double- digit annual growth. The share of the services sector remained unchanged at about one-half of GDP, while agriculture - the slowest growing of the three sectors - declined in importance firom 29 percent to 25 percent of GDP. Even within the agricultural sector, however, notable achievements marked the period. The country attained food grain self-sufficiency in FY2000 and estianted aggregate production reached approximnately 25 million tons. Despite its declining importance, agriculture continues to be the main source of employment in Bangladesh. 1.7 The impressive growth performance over the nineties can be attributed in large part to prudent macroeconomic management, as well as to wide-ranging reforms introduced in the 1980s and reinforced in the early 1990s. These reforms induded steps to remove excessive direct controls on economic activity, liberalize foreign trade, deregulate the investment climate, and generally introduce more market-oriented policies to create a more supportive policy environmnent for the private sector. Rapid integration with the global economy saw the ratio of Bangladesh's trade to GDP more than double while domestic inflation remained at low levels throughout the decade. 3 Bangladesh: PovertyAssessment 1.3: TRENDS IN CONSUMPTION-BASED POVERTY AND INEQUALiTY MEASURES: 1.8 Consistent with the growth performance, survey-based consunption poverty estimates confirm that the rineties were a period of deciningpovery. This report uses the cost-of-basic-needs (CBN) method for estimating poverty, whereby any household with real per capita expenditure below a given poverty line is considered as poor.3 Analysis of various Household Expenditure Surveys (HES) conducted by BBS during the decade shows that the incidence of poverty, as measured by both the upper and lower CBN poverty lines, has fallen considerably (Table 1.1 and Background paper 1). In 2000, 50 percent of the country's population was poor (as measured by the upper poverty line), compared to 59 percent in 1991-92. Similarly, the extreme poverty rate (below the lower poverty line) declined from 43 percent in 1991-92 to 34 percent in 2000. Thus, according to both measures, the incidence of poverty in Bangladesh declined by about 9 percentage points over the nine-year period. Table 1.1: Trends in CBN Poverty Measures Upper Poverty Line Lower Poverty Line 1991-92 1995-96 2000 1991-92 1995-96 2000 hEADCOUNT RATE (Po): National 58.8 51.0 49.8 42.7 34.4 33.7 Urban 44.9 29.4 36.6 23.3 13.7 19.1 Rural 61.2 55.2 53.0 46.0 38.5 37.4 POVERTY GAP (PI): National 17.2 13.3 12.9 10.7 7.6 7.3 Urban 12.0 7.2 9.5 4.9 2.6 3.8 Rural 18.1 14.5 13.8 11.7 8.6 8.2 SQUARED POVERTY GAP (P2): National 6.8 4.8 4.6 3.9 2.5 2.3 Urban 4.4 2.5 3.4 1.5 0.7 1.2 Rural 7.2 5.3 4.9 4.3 2.8 2.6 Source: BBS and World Bank staff estimates. 1.9 The poverty gap (P1) estimates how far below the poverty line the poor are on average as a proportion of that line. The squared poverty gap (P2) takes into account not only the distance separating the poor from the poverty line, but also inequality among the poor. Trends in these measures broadly mirror observed changes in the headcount rates, suggesting that even among the poor, a greater share of people are now doser to the poverty line than they were at the beginning of the decade.4 It is also worth noting that these distributionally sensitive poverty measures (P1 and P2) declined relatively more rapidly that the headcount rate. 1.10 Although the progress is heartening, the overall incidence of poverty (50 percent) remains very high. In terms of the total number of individuals living below the poverty line, the picture is sobering. The total population living below the upper poverty line in 2000 remained virtually unchanged (at about 63 million) compared to 1991-92, and the number of Bangladeshis living below the lower poverty line declined only modestly from 45.2 million in 1991-92 to 42.5 million in 2000. 3 The methodology used to derive the consumption agregates and poverty lines on which the various poverty measures are based, and a description of the various poverty measures, is presented in the Technical Appendix. 4 A range of alternative poverty lines yield similar trends in poverty. Appendix Figue A1.1 shows the cumulative distributions for monthly real per capita expenditures (PCE) in Bangladesh (national, urban, and rural, respectively) for the three years. First-order stochastic dominance of the cumulative distributions of real PCE in 2000 over the 1991-92 distributions in both urban and rural areas confirms that trends in poverty during the decade would be similar over the range of virtually all possible poverty lines. 4 Chapter 1: Progrrss in Poverty Reductio __ 1.11 iProgress in reducing poverty incidence was equai across vrbao and rua areaGs but the tter did better in reducing the depth and severtr af.,; S -y J Although average per capita expenditures increased much faster in urban areas,5 the oveal decline in poverty incidence during the decade was roughly equal across the two sectors.6 Howevcr, trends in the P1 and P2 measures suggest that rural areas experienced greater reductions than urban areas in the depth and severity of poverty, which in turn is probably due to growth in rural areas being more pro-poor than in urban areas (see related discussion later in this section). 1.12 A sectoral decomposition of the change in national povert incidence into intra-sectoral changes and inter-sectoral changes due to migration suggests that the rural sector, with 80 percent of the population, contributed 78 percent of the total decrease in national poverty estimates between 1991-92 and 2000. The urban sector contributed about 13 percent of the national poverty decine (Background paper 2). Migration from rural to urban areas where poverty is lower also decreased the national poverty rate, accounting for about 10 percent of the decline. 1.13 In addition to sectora! vardaon, povcrty incidence ad progrsess also dvfe across regions. Aside from the tendency of urban households to be better off than rural ones, large differences in poverty incidence also occur across regions and between urban and rural areas within those regions. For instance, Dhaka administrative division has a much lower incidence of poverty than Rajshahi. Progress in poverty reduction was also unequal across regions, with rapid progress in Dhaka and virtual stagnation in Chittagong division (Table 1.2). The rapid reduction in poverty in Dhaka division is not surprising, given Dhaka's importance as the administrative, political, and financial center of the country. In fact, one of the reasons why poverty in Dhaka did not decline even more may have been the influx of poor mnigrants from other parts of the country. T'able 1.2: Regional Tzends in LPovezy lEleadeount Rate (%) Aipnunl GroItla ea iam 1991-92 ZGGS Chbange r All Divisions S8.0 49.$ -9.0 2.4 Chittagong 46.6 47.7 1.1 1.5 Dhaka 59.3 44.8 -14.5 3.2 Khulna* 59.6 47.0 -12.6 2.1 Rajshahi 71.9 61.0 -10.9 2.4 I Lncluding Barishal division Source: BBS and World Bank staff estimates. 1.14 Despite better progress in rducing etraeme povZyil aReas, moste of the poor contnue to reside in such a rroundings. By all consumption-based measures, poverty in rural areas continues to be higher than urban poverty, and the rate of severe poverty remains twice the urban rate - 19 percent in 2000. Combined with the fact that four-fifths of the total population resides in rural areas, so does an overwhelming share of the poor: 85 percent in 2000, somewhat lower than the 89 percent share in 1995-96. The largest number of the pooz live in Rajshahi, followed by Dhaka and Chittagong divisions (Table 1.3). Mounting a sustainable attack on poverty must ensure that achievements in the future translate into robust economic growth in rural areas. 5 The HES data show real per capita expenditures to have increased by 27 and 16 percent respectively in urban and rural areas between 1991-92 and 2000. 6 During the 1990s, the overall decline in poverty in Bangladesh as a whole (9 percent) vwas greater than in either urban (8.3 percent) or rural (8.2 percent) areas because (i) the urban share of population increased significandy during the period, and (u) the incidence of urban poverty was considerably lower than in rural areas. 5 Bangladesh: Povery Asessment Table 1.3: Total Number and Distribution of Poor in Bangladesh: 2000 HIES URBAN RURAL OVERALL Number of % of Number of % of Number of % of Poor ('000) Total Poor ('000) Total Poor ('000) Total All Divisions 9,263 15% 53,478 85% 62,741 100% Chittagong 2,470 4% 13,455 21% 15,925 25% Dhaka 3,652 6% 14,064 22% 17,716 28% Khulna* 1,359 2% 9,756 10% 11,115 18% Rajshahi 1,783 3% 16,203 26% 17,985 29% * Including Barishal division: Source: BBS and World Bank staff estimates. 1.15 Did the pace ofpoverty reduction slow over the second half of the nineties? While the overall magnitude of poverty reduction during the decade has been encouraging, some troubling signs suggest that the pace of poverty reduction may have slowed over its latter half. The HES data show poverty nationwide to have fallen by almost 8 percentage points between 1991-92 and 1995-96, but then only by one percentage point between 1995-96 and 2000. Rural poverty declined throughout the nineties, though at a considerably more rapid rate during the first half than afterwards (6.0 points drop vs. 2.2 points, respectively). In urban areas, the HES series show poverty to have fallen a spectacular 15.5 percentage points up to 1995-96, but then to have increased by about 7.2 percentage points through 2000. 1.16 The pattern of decline in poverty over the two halves of the decade indicated by the HES series is quite different from that suggested by other data sources. While the HES and National Accounts (NA) estimates are fairly consistent with regard to growth in per capita expenditures over the nineties as a whole, the two series present differing snapshots of the pattern of growth in the two halves of the decade. The HES series shows most of the increase in PCE to have taken place in the first five years, while the NA series indicates a very similar magnitude of change over the two periods. According to the HES series, nominal per capita expenditures increased by 39 percent between 1991-92 and 1995-96, but by only 15 percent between 1995-96 and 2000. The NA, by contrast, show per capita private consumption to have increased first by 28 percent and then by 31 percent. (Figure 1.2). Figure 1.2: Contrasting Progress over the First and Second Half of the Nineties 90% 80% 80% 76% 70% 62% 68>% 70% 590 60% i 50% 39% 37%/ 40%- 40% - 31 3% %29% 30% 20% 1020% 15 10% 10% 7 0% ~~~~~~~~~0% 1991/92to 1995/96to 1991/92to 1991/92to 199596to2000 1991/92to2000 1995/96 2000 2000 1995/96 c3 Survey PCE n NA Priv. Cons. O NA GDP per capita [C Urban PE m manutac. Wage a a FRra PCrE * AgrL Wage 1.17 Which of the two - the HES or the National Accounts - gives the correct picture? In the absence of clear evidence in support of either set of findings, it is difficult to make a definitive assessment. On the one hand, trends in rural per capita expenditures reported by the HES are consistent with trends in the agricultural wage index over the same period. However, it is difficult to 6 Chapter 1: Pnigess in Povety Reicon__ reconcile the 62 percent and 3 percent increases respectively in urban per capita expenditures during the first and second periods reported by the HES with trends in the manufacturing wage index or with sectoral GDP growth rates. This mismatch would suggest that the HES series may overestimate growth in urban per capita expenditures between 1991-92 and 1995-96, while underestimating the increase that took place between 1995-96 and 2000. 1.18 An extensive investigatioh of possible hypotheses that might account for this discrepancy did not identify any single factor.7 A comparison of trends in welfare using other (non-HES) data sources also presents a mixed picture of how improvements during the nineties were distributed between the two halves. However, regardless of which data source or yardstick is used to assess changes in living standards, evidence of substantial povezty reduction is overwhelming. The remainder of the chapter therefore focuses on the entire decade in assessing changes in living conditions in the country. 1.19 Income inequality in 3Eagladesh rose considermbiy durIgP the decEde,, pnrdc&dgF7in uzban area. The HES data suggest that inequality in the distribution of private per capita expenditures, as measured by the Gini coefficient, increased from 0.259 in 1991-92 to 0.306 in 2000 (fable 1.4). Most of the observed increase in inequality took place during the first half of the nineties.8 In part, the rise in inequality over the decade reflects increased fragmentation and inequality of landholdings, as well as higher premiums enjoyed by the segmnent of the population fortunate enough to have relatively better skills and education. Other impotant factors may also have been at play in causing income inequality to rise during the nineties. Urban inequality increased much more than rural inequality during this period. Decomposing the national Gini coefficient by sector suggests that the increase in the national Gini was due not only to rising inequality within sectozs, but also to rising inequality between the urban and rural sectors (Background Paper 2). Table 2A: Tzends in Inequsa&r: Gini oleff iento Uppa lBoverty Lire lLawer I?oventLne n9911092 1995-96 26" R92-92g n"°5-9 2e National 0259 .302 30 0.2172 G.315 s 03118 Urban 0.307 0.363 0.368 0.311 0.369 0.370 Rural 0.243 0.265 0.271 0.251 0.267 0.275 Note. The Gini coefficients are defined for the distributions of real per capita expenditures. The upper and lower poverty line estimates refer to the use of the corresponding poverty line as the regional price index for deflating nominal per capita expenditures. Soumm: BBS and World Bank staff estimates. 1.20 In sum, measures of estimated consumption-based poverty illustrate substantial progress against poverty in both urban and rural areas, but the underlying process of growth appears to have been very different Urban areas had much higher growth in average incomes, but also considerable increase in inequality, and such growth was largely concentrated among the relatively affluent What 7 Alternative hypotheses investigated in depth ranged from concerns that HES datasets were not comparable across years, that the poverty trends may be an artifact of the approach used to estimate poverty lines, that household composition effects may contaminate poverty trends, and that consumption-based poverty estimates may not be capturing trends in well-being accurately. Robustness checks and sensitivity analyses related to these hypotheses are detailed in Background Paper 1. Possible explanations for the puzzle were also discussed extensively both in a Poverty Assessment Workshop organized in Dhaka in November 2001 and in bilateral discussions with the governmient, researchers, and NGOs in Bangladesh. No clear story emerges to explain the discrepancy between the HES and the National Accounts series. s The Lorenz curves describing the income distributions for 1991-92 and 2000 do not cross, indicating that by most measures, inequality unambiguously increased over the decade. However, the Lorenz curves for 1995-96 and 2000 lie close to each other and cross around the 80th percentile, suggesting that inequality changes between 1995-96 and 2000 cannot be ranked unambiguously, and are sensitive to the type of measure used to measure inequality. 7 Bangladesh: Povety Assessment made a similar rate of poverty reduction possible in slower-growing rural areas was a growth process that was relatively more broad-based and pro-poor. 1.21 One way to assess whether growth was pro-poor is to examine the "growth incidence curve" for Bangladesh over this period, showing the growth rate of real per capita expenditure for different groups ranked by level of income (Ravallion and Chen, 2001). Decomposing the observed rate of growth in mean consumption to the constituent growth rates experienced by different income groups allows for a more detailed examination of how aggregate growth in the economy was distributed across different income groups (Background Paper 2). 1.22 During the nineties, all segments of the population experienced growth in incomes, but gro wth benefited the poorest and relatively affluent more than those in the middle-class. The growth incidence curve for Bangladesh for the period 1991-92 to 2000 lies strictly above zero, which shows that all segments of the population experienced growth in incomes over this period (Figure 1.3). However, growth rates varied considerably across the expenditure distribution. The growth incidence curve is U-shaped, indicating that the lowest as well as higher income groups benefited relatively more than the middUe class.9 Annual growth in real per capita expenditures was lowest (1.1 percent) for those in the 30-50th percentiles. The bottom 20 percent of the population fared better, with annual growth rates of about 1.5 percent By contrast, the top 20 percent of the population experienced growth rates in excess of 2.5 percent'O Figure 1.3: Growth Incidence Curve for Bangladesh, 1991-92 to 2000 4 3. 5 2.5 g 2 Grwth in mean 1.5 - ----------- ............... ... 0 10 20 30 40 50 60 70 80 90 100 % ofpopuation ranked by per capita expenditure 1.23 Growth in rural areas was broad-based while urban growth mainly benefited the relatively affluent. Even though average gtowth in mean per capita expenditures over the decade was lower in rural areas than urban ones (1.7 vs. 2.3 percent per annum), it was much more evenly distributed across income levels (Figure 1.4). As a result, poverty declined by an equivalent magnitude (about 8 percentage points) in both locales. In contrast to rural areas, the difference in 9 Note that phrases such as "higher income groups" or "relatively affluent' are relative concepts in Bangladesh, as even among the top fifth of the population ranked by levels of consumption, average per capita expenditures were around 1,800 taka per person per month, or a litde over US$1 per person per day (prevailing exchange rates, not PPP-adjusted). 10 Note that the mean of growth rates across centile groups (1.6 percent) was lower than the growth in the mean (1.9 percent) of PCE. This simply reflects the fact that the growth rate of mean PCE can be a misleading measure of how pro- poor growth has been since it accords a higher weight to individuals with higher PCE. 8 Chapter 1: Progrems in Poveny Reduction_ growth rates across the income distribution in urban areas is stsiking. the average growth rate for the bottom 20 percent was less than one-third the rate for the top 20 percent of the urban populaton (0.8 percent vs. 2.9 percent per annum). Figure 4. Ruzal and Urban Gzowth incidemce curves, 199292 to 2012 4 4 3.5 3.5 3 3 2.5 2.\ 5 _ = v t X 2 GrowGwthxvin hnan 1.5 1.5 M inof s 0.5 0.5 0 0 0 10 20 30 40 50 60 70 80 90 1c0 0 10 20 30 40 50 9 70 80 93l1IO R Ass -% of population tanlked by per capita izpetures 1.24 Virtual stagnadon in poverty rates in CWetqgong don is raeid to boeh alowax growt and an underlying growth process that mainly beneBted te sick Comparing growth incidence curves in administrative divisions shows why poverty levels have stagated in Chittagong. Not only did incomes grow at a slower pace in this region, growth in Chittagong was concentrated among the relatively affluent, with the bottom three-tenths of the population recording negligible growth rates over the decade (see Appendix Figure A1.2). 1.25 Did graltion contibute to lowgrowh observed ff the aeban poor? Examining the growth incidence curves for urban Dhaka and Chittagong reveals that the average growth rate for the bottom-fifth in these two cities is only a meager 0.3 percent per annum. Preliminary results from the recent population census suggest that the urban population of Bangladesh has grown roughly four times as fast as in rural areas. Higher average incomes in urban areas along with better (on average) provision of services may have attracted large numbers of the rural poor to migrate to large cities, thus contributing to the low observed rate of growth among the urban poor. Even though their incomes in their new homes are low by urban standards, they may still consider themselves better-off in their new residence. Further analysis is needed to understand the nature and causes of migration trends in Bangladesh. 1.4: T]RENDs EN NoN-JNComE MIEASURES OF LIvxNG STAMADAE2OS: Food Consumption and Nutitiion Xndicators: 1.26 Other non-income measues of liing stanndas isro sggest de ¢in the 19.90s. The considerable improvement in income poverty measures over this period is corroborated not only by rising incomes, but also by significant improvements in the composition of the food bundle consumed by the population. Analysis using HES data on the average quantities of different 9 Bangladesh: Poverty Assessment food items consumed reveals that per capita consumption of virtually all major food groups (with the notable exception of rice and wheat) increased substantially during this period. For instance, between 1991-92 and 2000, per capita consumption of fish increased by 9 percent, of meat by 48 percent, of poultry by 120 percent and of milk by 55 percent. While per capita consumption of wheat declined substantially and rice consumption dropped marginally (3 percent), consumption of potatoes increased by 25 percent during the 1990s. Similarly, the 13 percent decline in consumption of pulses is probably also due to substitution favoring higher-value sources of protein. Furthermore, these improvements are not confined to upper income groups: consumption of fish, meat, poultry, and milk and other such relatively high-value items by the poor increased considerably during this period in both rural and urban areas (see Appendix Figure A1.3). Table 1.5: Trends in Various Indicators of Malnutrition BBS Child Nutrition Surveys Bangladesh DHS Nutrition Status Indicator (% Children 6-71 months) (% 0-59 months) 85-86 89-90 . 1992 95-96 2000 96-97 99-00 Stunting (height-for -age) % below 2 std. deviations 69 66 64 51 . 49 55 45 % below 3 std. deviations - - 33 24 19 28 18 Wasting (weight-for-height) % below 2 std. deviations 15 15 17 17 12 18 10 * below 3 std. deviations - - 2 3 1 4 1 Underweight (weight-for-age) % below 2 std. deviations 72 67 68 57 51 56 48 % below 3 std. deviations - - 25 18 13 21 13 Soum: Various CNS and BDHS reports 1.27 Anthropometric data from various household surveys conducted during the nineties suggests that there has also been good progress on child nutrition. For instance, stunting, wasting, and underweight indicators derived from various Child Nutrition Surveys (CNS) conducted by BBS and the Bangladesh Demographic and Health Surveys (BDHS) show considerable improvement, particularly in contrast to the relatively small improvement observed during the eighties (Iable 1.5). Yet much remains to be done in this area: child malnutrition (as measured by prevalence of underweight for under-5 years children) is still among the highest in the world. This topic is taken up in more detail in chapter 3. Mortality and Health Indicators: 1.28 As with indicators of malnutrition, data from a number of surveys as well as other sources suggest significant improvements in both child (CMR) and infant (IMR) mortality rates, as weLl as in associated measures of life-expectancy. Various rounds of the DHS surveys spanning the nineties show a steady decline in mortality,"t findings that parallel estimates of considerably improved IMR and life-expectancy published by BBS.12 Through a collaborative framework that has induded public agencies, NGOs, and other civil society institutions in Bangladesh, immunization programs have been implemented covering major childhood diseases, and communicable diseases such as leprosy and polio have been eLiminated or reduced. If current progress continues, Bangladesh and the Maldives will be the only countries in South Asia to achieve their Millennium Development Goal in the area of infant and child mortality rates. II The BDHS series report a decline in IMR from 87 in 1989-93, to 82 in 1992-96, to 66 deaths per 1,000 live births in 1995-99. Corresponding declines in under-five mortality (i.e. CMR) are from 133 to 116 to 94 respectively. 12 BBS IMR time-series show a modest decline from 102 in 1980 to 94 in 1990, but then a sharp drop to 67 in 1996. Similady, estimates of life-expectancy at birth published by BBS fluctuated around 54-57 years during the 1980s, but then rose steady to 60 years by 1999-00 (cited in Bangladesh Human Development Report, 2001). 10 Chapter 1: Progress in Poverty Reduction_ 1.29 Bangladesh's achievements in reducing fertility have also been substantial. Data from the latest population census indicates that the population growth rate during the nineties averaged less than 1.5 percent per annum. However, given the population momentum of high past rates of growth as well as the extremely high population density in the country, curbing population growth further remains an irnportant priority. The total fertility rate in Bangladesh has now leveled off at around 3.3, and since contraceptive use in Bangladesh is already quite high (53.8 percent), there is a need to broaden efforts beyond traditional family planning. Since gids continue to get manried at a very early age, public policy might prove most effective in curbing further population growth if it seeks to influence the age at which women marry. In this area of behavior, Bangladesh needs to improve performance to be on par with other South Asian countries (Bongaarts and Amin, 2001). 1.30 Primary health care services provided by the govemnment are doing a fairly good job of reaching the poor (Background Paper 6). However, as noted in the 2000 Bangladesh Human Development report, ensuring access of the poorest groups, communities, and areas to effective health care, as well as improving the state of reproductive health care, remain the most pressing concerns in the health sector. The maternal mortality ratio appears to have fallen somewhat in recent years, but at 392 maternal deaths per 100,000 according to the 2000 BDHS, it remains one of the highest outside of sub-Saharan Africa. 1.31 Further, new health challenges are emerging for the public health delivery system. A public health response to the nationwide contamination of tube-wells with arsenic is urgently needed to prevent serious long-term consequences of large-scale poisoning. Similarly, though HIV prevalence rates are low, factors that have led to HIV epidemics in other countries are present in Bangladesh, and urgent action is needed to prevent a major outbreak. Finally, it is important to note that, notwithstanding trends in improvement in aggregate mortality and morbidity indicators in Bangladesh, access to effective health care by certain group of the population continues to pose significant challenges. For instance, children in poor households continue to have considerably greater risk of mortality compared to those in richer households.13 Similarly, as examined in more detail in chapter 3, factors such as income, lack of access to safe water, sanitation and health facilities, mother's education, and poor feeding practices help explain considerable variation in child nutrition indicators across different population groups. Literacy and School Enrolments: 1.32 Progress in incresing litecy and school enzolirne2ts dwdqgf the ninedes has been less encourging. While a definitive assessment of the rise in literacy rates during the 1990s in Bangladesh will have to await release of the 2001 Population Census literacy estimates, results from the 2000 HIES (Table 1.6) suggest the rise in literacy during the nineties has been considerably higher than in the previous decade.14 Even so, only 45 percent of the population 7 years and older is literate, a proportion that would place Bangladesh in the unenviable position of near-parity with Pakistan, and considerably behind both West Bengal (69 percent) and India as a whole (65 percent).lS 13Fighting Pov.t: Bngladesh Human Developmeat Report 2000. Bangladesh Institute of Development Studies. 14 According to the population censuses conducted in 1981 and 1991, literacy rates for the population aged 7 years and older rose from 26 percent to 32 percent Is Comparable figures for Pakistan are not available, but according to the 1999 Pakistan Integrated Household Survey, 42.5 percent of the adult population aged 15 years and older was literate. Literacy rates for West Bengal and India are from the 2001 Population Census of India. I1 Bangladesh: Povert Arsessment Table 1.6: Literacy Rates in Bangladesh Population 7 years and Older National Rural Urban Both Sexes: 2000 HIES 44.9 40.9 60.2 1991 Census 32.4 27.9 49.8 Change: 12.5 13.0 10.4 Male: 2000 HIES 49.5 45.5 64.9 1991 Census 38.9 34.4 56.3 Change: 10.6 11.1 8.6 Female: 2000 HIES 40.1 36.1 55.3 1991 Census 25.5 21.5 41.8 Change: 14.6 14.6 14.5 Source: 1991 Population Census Results (BBS web-site) & 2000 HIES Preliminary Report 1.33 To make a significant dent in illiteracy, further increases are needed in the proportion of children enrolled in school. However, the 2000 HES estimates show little or no improvement in enrollments compared to 1995-96: one-quarter of the age-group 6-10 years, and one-third of those 11-15 years old are currently not enrolled in schools (Table 1.7).16 Table 1.7: Percentage of Children Currently Enrolled in School % Children aged 6-10 years % Children aged 11-15 years National Rural Urban National Rural Urban Both Sexes: 2000 HIES 75.1 75.0 76.2 65.3 64.9 66.7 1995-96 HES 80.1 80.0 80.5 63.7 63.0 67.3 Change: -5.0 -5.0 -4.3 +1.6 +1.9 -0.6 Male: 2000 HEES 74.0 73.9 74.9 59.4 58.4 63.6 1995-96 HES 80.5 80.2 81.3 61.6 60.6 66.7 Change: -6.5 -6.3 -6.4 -2.2 -2.2 -3.1 Female: 2000 HIES 76.4 76.1 77.5 71.5 72.0 69.7 1995-96 HES 79.7 79.7 79.8 66.2 65.8 67.9 Change: -3.3 -3.6 -2.3 +5.3 +6.2 -1.8 Soamr: 1995-96 HES Summary Report & 2000 HIES Preliminary Report 1.34 The failure of the surveys to pick up any rise in enrollment in the country presents something of a puzzle since government records indicate that the number of primary schools in Bangladesh increased by more than 63 percent, from 47,000 in 1990 to 77,000 in 2000. While the increase occurred mostly outside the public sector, government schools account for about 70 percent of total primary enrollment. In contrast to the HES numbers, Primary and Mass Education Division (PMED) statistics indicate that primary school enrollment increased by 47 percent, from 12 million in 1990 to more than 17.5 million in 2000, and gross enrollment in 2000 was 96 percent. 1.35 The quality of education provided remains a serious concern. A 1999 Education Watch study that assessed basic competencies through testing children aged 11-12 years found that fewer '6A household survey conducted for the 1999 Education Watch study, covering 42,500 households throughout the country, also reported that 23 percent of the children aged 6-10 years were currently not enrolled in school, data which suggests that the HES results are uh&likely to be far off the mark. On the other hand, the 2001 Education Watch study reports a net enrollment rate of 80 percent, i.e. about 5 percentage points higher than the 2000 HIES. 12 Chapter 1: Pnogrss in Povert Reductio___ than one-third finish primary-school with some meaningful learning. Rural children lag behind their urban counterparts by one academic year, and gender and strata differences in learning persist Despite the increase in funding available for primary education over the past two decades, governance problems continue to plague the systern. For instance, although textbooks axe supposed to be supplied free of cost to primary students, the Education Watch study found that three months into the school year, one in ten children had not received their allotted books, indicating that the problern of delayed distribution needs priority atttention. 1.36 Significant progress has been achieved in imzpro~Yng gender eqriry AT educadsS. Notwithstanding problems of enrollment and quality, according to BANBEIS records as well as survey-based estimates from the latest HES and Education Watch household surveys, the gender gap in enrollment at the primary and secondary level has been virtually eliminated. This is particularly heartening news given that significant disparities continue to persist elsewhere in the region - in India, Pakistan, and Nepal. Vulnerability, Natuzal Disastets, and Pezsonal Secuity: 1.37 On account of locational and climactic factors, Bangladesh is among the most disaster-prone countries in the world. During its relatively short history, it has been subject to a number of shocks such as floods, cyclones, river bank erosion, and droughts. Apart from such covariant risks, poor people in Bangladesh are also vulnerable to such idiosyncratic shocks as ill health, economic shocks, and violence. 1.38 Over the course of the ninedes, there has been. ; v un Sreducing V&nMillM on severl fronts, especially related to enhancing food securyO. Since the 1974 famine, Bangladesh has been successful in averting further famines. This is a testament to achievements on several fronts: freeing of import restrictions on irrigation equipment, a measure that boosted agricultural production; development of rural infrastructure; reforms to the public food distribution system and safety-net programs; and consolidation of the micro-credit network over the nineties (Rahman, 2000). 1.39 Disaster-coping mechanisms are also much st¢rD7oge as evidenced by the reduced impact of the 1998 floods relative to previous natural disasters. The 1998 flood that inundated over two-thirds of the country, leading to widespread crop loss and displacement in affected areas, was unprecedented in its duration, especially in the central part of Bangladesh. Despite the scale of damage, this was the first major flood after which agricultural output increased, food prices remained stable (albeit slightly higher), no major shortages of food items were reported at any time, and households were by and large able to maintain consumption levels. Several factors were at play: household food security was strengthened as a result of rapid and massive scaling-up of government and donor-supported food tansfer programs;17 of large private sector rice and wheat imports, aided by government policy;18 of improved transport infrastructure that enabled distribution of relief supplies to flood-affected areas; and of credit provided by NGOs to flood-affected households. 17 Del Ninno and Dorosh (1999) report evidence that food transfers through the Vulnerable Group Feeding and Gratuitous Relief programs were fairly well-targeted to poor households. 18 Dorosh (1999) argues that it was largely private sector imports, rather than government interventions in the markets for food grains, that kept rice prices at import parity and buttressed food supply in the months following the floods. Private sector imports were encouraged by gover=nent policies (e.g., removal of import tariffs, limitations on open market saes, expedited dearance through customs, etc.) introduced as part of the tradc liberalization of the late 1980s and early 1990s. Food aid also played an important role, not so much by augmenting supplies, but by providing purchasing power to poor households who had lost the capability to acquire sufficient food. 13 Bangladesh: Poverty Assessment 1.40 There is evidence of reduced vulnerability in coping with fluctuations in food prices. Since poor households spend a large part of their income on food, even small price increases can severely affect food intake. Data from the 2000 HES show that while there is some seasonal variation in prices of rice and wheat, there is no evident September-November peak, traditionally thought to be one of the lea'n seasons. Moreover, rice consumption appears to be stable throughout the year, with no significant temporal variation, even for the poorest households (Background Paper 5). 1.41 These are impressive achievements, but tremendous challenges remain. Even with the 1998 flood when a major food security disaster was averted, repercussions were far-reaching, since households lost or sold their productive assets, forcing a long-term cost for short-term benefits (del Ninno et al., 2001). Inadequate risk coping mechanisms still compromise nutrition in poor households, particularly among children. A study of child nutrition status shows that wasting - an indicator of recent or current under nutrition - is still highly seasonal, tending to peak in June-August of each year (Helen Keller International, 2001). While food security has certainly improved for much of the population, there are groups such as children, distressed female-headed households, and the elderly, for whom current household mechanisms for dealing with such risk are far from sufficient. 1.42 Other types of deprivation and vulnerability stem from the inability of poor people to influence decisions that affect their lives. This may be manifest in the ineffectiveness of state institutions for the poor, compounded by a feeling that redress is not possible.19 Domestic violence and crime and an overall sense of insecurity are also growing concerns. Deteriorating law and order is a concern cited not just by the poor: A Power and Participation Research Center (PPRC) perception survey on Dhaka citizens identified insecurity as the foremost worry voiced by nearly ninety per cent of the population (Rahman and Islam, 2001). 1.5: PROFILE OF THE POOR: 1.43 A profile of poverty constructed using the 2000 HIES data reveals that poor households in Bangladesh do not look much different from the poor in other parts of South Asia. They tend to have low levels of education and limited access to land and to be highly concentrated in low-paying, physically demanding, and socially unattractive occupations. In both urban and rural areas, the poor have less access to modern amenities and services and also commonly reside in houses of inferior quality. However, unlike other parts of South Asia, poverty in Bangladesh does not appear to be strongly linked (at least -in the aggregate) with social identity or religion: the incidence of poverty is more or less the same among the muslim (50 percent) and non-muslim (46 percent) population. Likewise, poverty rates are virtually identical for male and female-headed households (50 percent vs. 48 percent respectively), Among female-headed households, however, those that are widowed, divorced or separated (about 60 percent of all female-headed households) have a considerably higher incidence of poverty (56 percent) relative to others. 1.44 Education is a key dimension of welfare in Bangladesh (Table 1.8). Close to three-quarters of the poor population lives in households where the head is illiterate. The incidence of poverty declines as household heads are progressively more educated, such that the incidence of poverty falls by half in urban households whose heads completed primary school and by almost one-third in similar rural households as compared to those headed by illiterates. Table 1.8: Poverty Incidence by Level of Education of Household Head 19 Nabi et al 2002 in Vois of the Poor: From Many LJnds. 14 Chapter 1: Pro,gyss in Povety Reduction Highest educational incidence of Poverty Percentage of: Attainment of Head Urban Rural Overnll Po"Pulation Pcar Not literate 64.2 64.0 64.1 57 73 Less than Primary 40.6 41.5 41.3 5 4 Completed Primary 31.1 43.6 40.9 15 12 Completed Middle 22.4 34.1 30.7 9 6 Completed Secondary 12.5 29.0 24.0 6 3 Completed Higher level 2.8 13.2 8.2 7 1 Overall 36.6 S3.0 4% l 2 3%3% Sohmre.: 2000 HIEIS 1.45 Poverty and Occupational status: Involvement in casual wage labor is also a very strong correlate of poverty in Bangladesh (Table 1.9). In both urban and rural areas, the incidence of poverty is considerably higher (67 and 75 percent respectively) where the head of household works as a casual wage laborer. Close to half the total number of poor in rural areas and more than one-third in urban areas reside in households where the main occupation of the head is casual wage employment. Of-course, the relationship between poverty and occupation is more complex than that indicated here. Not only do different household members (iLe. other than the head alone) carry out different types of work, but also the same individuals themselves engage in multiple and diverse activities over the course of the year. The relationship between poverty and different sources of income of the household is explored in more detail in Chapter 2. Table 1.9: Poverty lHncidence by Occupatiom of EHousehold Head Rura A9reas UJrban Ares Occupation of Poverty Percentage oC: Poverty Percentage cf: Household head incidence Po9pl'n Poor inc5dence PopPn PoF9or Casual wage employment 74.9 33 46 66.9 20 36 Salaried employment 35.1 9 6 24.1 30 20 Self employed - non-agriculture 44.6 18 15 32.2 32 28 Self employed - agriculture 43.3 31 25 47.9 5 7 Unemployed / not working 42.9 10 8 25.9 13 9 Overall 53.0 100% 2100% 35.6 ROD1% 100% Somrme: 2000 HIES 1.46 Poverty and access to lagnd: Poor households typically own less land than the non-poor (Table 1.10), and are highly represented among the functionally landless (i.e. those owning less than 0.05 acres). Moreover, variation in land quality is of particular importance as access to irrigation is far from universal. Therefore, while the incidence of poverty is dearly the highest among the landless and marginal land owners, there remains about 22 percent of the population at risk of poverty even in the largest landowning category. Table 1.10: Rural Poverty JEncidence by Lazd Ovmehihp IPoverty ArnL Of Land owned _ Incidence Percentag of: Population Peor Non-Poor Less than 0.05 acres 64.7 48 59 36 0.05-0.49 acres 59.4 13 15 11 0.50-1.49 acres 47.6 17 16 20 1.50-2.49 acres 35.7 9 6 13 2.5 + acres 21.8 12 5 21 Overall 53.0 ROD% ROD% H10% Sorure: 2000 HIES 15 Bangladesh: PoverytArssesment 1.47 Housing conditions for the poor in Bangladesh are also generally worse than for the rest of the population and in rural as compared to urban areas (Table 1.11). While 7 percent of overall population has access to tapped water supplies in Bangladesh, only 2 percent of the poor had access to this drinking water source. The vast majority of the rural population relies on tube-wells for drinking water supply. Only 38 percent of the poor lived in dwellings with proper toilet facilities compared to 71 percent of the non-poor. Poorer access to drinking water supply and sanitation in turn make it more likely that the poor suffer from worse health than the non-poor. Somewhat surprisingly, the 2000 HIES data do not show any difference in propensity to be sick across poor and non-poor households, though this in turn could be because less wealthy households are less likely to report illnesses. Objective anthropometric measures of health status detived from the HIES data show dear differences in children's health outcomes across income levels (Chapter 3). Access to services and amenities such as electricity and phones is much lower among the poor compared to the non-poor, as well as among rural residents compared to those in urban areas. Table 1.11: Housing Conditions by Sector and Poverty Amongst the Population Amongst the: Housing Characteristic Urban Rural Overall Non-Poor Poor Average number of rooms in dwelling: 2.4 2.3 2.4 2.8 1.9 Average size of dwelling (sq. feet):* 419 364 375 462 287 -Population with supply water for drinking 32% 0.3% 7% 11% 2% Population in dwelling with hard roof:** 93% 78% 81% 90% 72% Population with proper toilet facilities:*** 83% 47% 55% 71% 38% Population living in electrified dwelling: 81% 20% 33% 48% 17% Population living in dwelling with telephone: 8% 0.3% 2% 3% <0.1% Notes: * Exduding bottom and top one percent of the population. ** ie. cement, corrugated iron sheets, wood, tiles, etc. * ie. exduding those using temporay latrines or open fields. Sourre: 2000 HIES 16 Chapter 2: -Acelerating Grwvth I --- K* Y FikDiNcs AND Cok4NCTJSIi s _____,___O-- ___________ Labor Employment and Earings Labor force trends show growth of formal private sector Wage analysis reveals that complementary actions on employment and decline in the share of unpaid family several fronts - education, physical and financial labor, as well as increased participation by women. infiastructure - will help to improve the returns to Among lagging groups are (a) women, who are more labor, reduce the incidence of under-employment, likely not to partcipate in the labor force, or be under- and draw women increasingly into the labor force. employed, and (b) urban, well educated but unemployed young men. Measures are needed to better align public sector Significant wage premiums attach to educaion, to non- wages with market wages in the private sector, farm employment, and to public sector employment, particularly among lower-level govt. functionaries. Land and Common Property Resouzces Significant disparities in land ownership separate the Better defined property rights for land and poor and non-poor, with tenancy a main route for the regulations on common resource management are poor to access land. Common property resources are an needed to raise returns on these assets and promote important source of livelihood for the poor, but access equitable access. Overall policy focus should be on to them is also increasingly a source of conflict. measures to foster change in three areas: improving Promoting agricultural growth by improving land productivity of existing crops, diversifying crop productivity will affect the poor mainly via its irnpact on production, and expanding non-crop agriculture. food prices, agricultural wages, and linkages with the non-farm sector. Access to Credit NGOs have pioneered innovative mechanisms to deliver Continued public support for micro-credit programs credit to the poor, leading to a dramatic increase in the is justified. The formal financial sector is in need of importance of the semi-formal financial sector as a substantial improvements, beginning with source of such credit. By contrast, the formal financial improvements in governance, discipline, and the sector remains effectively on the sidelines, delivering its legal framework. The government and MFIs must services mainly to the non-poor. Small landowning find ways to mobilize rural savings and to reach entrepreneurs, currently excluded from both micro-credit borrowers who are currently ineligible for micro- and the formal sector, fall between two stools. credit but who, at the same time, also lack access to forrnal credit. Economic Environment and IPubic Assets Prudent macro-economic management and trade Continued consolidation of GOB's fiscal position liberalization have yielded benefits - low inflation, faster and curbing the hemorrhage from the SOE sector is agricultural growth, smaller fluctuations in food prices, a policy imperative. Completing trade reform by increasing employment and productivity of export removing the anti-export bias will help the country sectors. However, GOB's fiscal position . deteriorated realize further gains. considerably in late 1990s (with some improvement in FY02), and a substantial anti-export bias remains. Access to infrastructure is important to the development of both modern agriculture and a robust non-farm sector Upgrading physical infrastructure - electricity, roads, and for poverty reduction. Communities with better inland waterways, and ports - and correcting access have higher incomes, greater marketed surplus geogaphical imbalances is a priority concern. even for small farmers, and better developed non-farm sectors and credit markets. 17 2. ACCELERATING GROWTH: THE ROLE OF KEY PRIVATE AND PUBLIC ASSETS 2.1 With half of Bangladesh's population living below the official poverty line, the scope for direct government action against poverty through transfers to the poor or other direct welfare prograrns is limited. This is especially true, given that the government collects one of the lowest levels of tax revenues in the world (under 10 percent of GDP in FY01). The main impetus for poverty reduction, therefore, must come from higher growth. 2.2 Looking ahead, given the relationship between growth, inequality, and poverty reduction during the 1990s, it is possible to extrapolate the growth rates necessary to reach future poverty reduction targets. Simple simulations based on the net elasticity of poverty to growth calculated from the HES data suggest that even with an average growth rate of 6 percent per annum - faster than at any other period in Bangladesh's history - the country would barely succeed in halving the incidence of poverty by 2015 (see Appendix Figure 2.1 and Background Paper 2)1 Moreover, analysis of the relative importance of growth and inequality in poverty reduction shows that worsening income distribution during the 1990s reduced the extent of poverty reduction.2 Had the observed rate of growth during this period been distribution-neutral, poverty would have fallen by 17 percentage points, or alrnost twice the actual observed rate (Background paper 2). 2.3 The implication of this analysis is that as respectable as Bangladesh's economic growth has been, it will have to be raised to at least 6 percent per year on a sustained basis to achieve poverty reduction objectives. GOB's recently announced antipoverty strategy, which lists pro-poor economic growth as its first pillar, recognizes clearly that if the pattern of growth can be made more pro-poor, Bangladesh will get a greater poverty reduction impact from the expansion it achieves (GOB 2002). 2.4 Devising strategies to accelerate pro-poor growth requires knowledge of the main activities and sectors from which poor people derive their livelihood, both to help them build key assets needed to raise their incomes as well as to provide the enabling environment to help raise returns to these assets. The section 2.1 profile of the main sources of income and assets of Bangladeshi households using data from the 2000 HIES shows labor to be the main asset and income source for poor households. Section 2.2 presents a more detailed profile of labor employment and earnings and examines factors underlying differences in returns to wage labor in the work force. Section 2.3 discusses how best to increase returns to land and common property resources, while section 2.4 examines policies to improve access to credit to facilitate the accumulation of productive assets by poor households. Finally, section 2.5 concludes with a discussion of complementary public assets and overall environment needed to help raise returns to private assets. Policies and actions to help build and enhance the quality of human capital - the single-most important asset from the standpoint of the poor - are taken up in more detail in Chapter 3. I The elastidty estimates are presented in Appendix Table 2.1. An important caveat to bear in mind is that these projections assume a constant elasticity over time, a somewhat unrealistic assumption given that the elasticity is likely to fall as the rate of poverty comes down from its currently high level. This in turn means that Bangladesh may need even more than an average 6 percent per annum growth rate to halve poverty by 2015. See also IMF 2002 "Growth Requirements for Poverty Reduction in Bangladesh". 2 In order to separate the effects of growth from inequality, changes in poverty can be decomposed into growth and redistribution components, where the former measures the effect of the change in mean income at a given income distribution and the latter indicates the effect of the change in income distribution at a given mean income. Chapter 2: Accelerating Growth 2.1: PROFILE OF SOURCES OF INCOME AND ASSET PORTFOLIOS: 2.5 Sources of Income: Comparing sources of income across the income distribution shows that households in Bangladesh pursue a broad range of activities to earn their livelihoods (Figure 2.1). Even within any single income decile, not only do earning strategies vary extensively across households, but even in the same household, different members engage in various diffcrent activities over time and across seasons.3 Clear differences in the importance of alternative income generation strategies also mark the behavior of rich and poor. The starkest difference is in the tremendously high reliance on daily wage labor among the lower income groups and by contrast, the negligible share that such work contributes to income among the relatively better-off. Figure 2.1. High Dependence of the Pooz on Daily W7age Xncome 100% - 90% - Other 80% S1 70% employment 60% 50% Agricul - 40% 30% lj; 20% 10% 0%___ 1 2 3 4 5 6 7 8 9 10 2.6 For the poorest-fifth of the population, daily wage income and salaries account for close to half of total income. Agricultural income also provides a greater share of income for the poorer groups. Differences in the relative importance of each income source for the rich versus the poor can be encapsulated in the Gini income elasticity (GIE). The GIE decomposition shows the contribution of each source of income to overall income inequality.4 As shown in Table 2.1, daily wage labor income contributes more to reducing income inequality than any other income source. Agricultural income also has a similar effect. Table 2.1. Gini Decomposition by Source of Income Income share Gini income elasticity Daily wage labor income 0.145 -0.218 Salaried employment income 0.162 1.247 Non agricultural income 0.271 1.448 Agricultural income 0.169 0.717 Other sources of income 0.251 1.264 Total per capita income 1.000 W _ -_ Sourre: 2000 HIES 3 The 2000 HIES is the first survey by BBS that contains extensive modules on total earnings from different income sources as well as the main assets owned by houscholds. Total income carned has been classified into income from daily wage work, salaried employment, agriculture (including fishcries and livestock), non-farm self-employment activities, and "other" income (remittances, rental of property, investments, etc.). 54 pcrcent of houscholds get income from more than one source, defined broadly as agricultural wages, non-farm wages, family business, and agricultural self-employment. Among houscholds for whom agricultural or non-farm wage labor is the main source of income, about 40 percent also derive some income from non-wage agriculture. 4 The GIE of each income component is defined as the impact of an increase of one taka, distributed as a constant percentagc change in the distribution of income from that particular component, on overall income inequality. If the GIE of a particular component equals one, a marginal increase in income from that source will not affect the overall income Gini, while an elasticity less than one indicates that an increase in income from that source will decrease the overall Gini. 19 Bangladesb: Poverty Assessment Figure 2.2. Agricultural versus Non-Farm Sources of Income, Rural Areas 900% 90% - Otherl 80% Non-ag Self 70% employment 6°0% b- . Non--ai 450%/ -W~ wages 40% 30% 20% , 10% A. . .. . - . - 1 2 3 4 5 6 7 8 9 10 2.7 Another noteworthy feature in the income profile is the importance of the non-farm sector (all economic activities except agriculture, livestock, fishing, and hunting) as a source of income for households in Bangladesh, including in rural areas and for the poorest income groups. The share of income derived from agriculture declines steadily with income. However, even for the poorest 10 percent of the population in rural areas, about 40 percent of income is derived from non-agricultural sources, either as wages earned in the non-farm sector, family business income, or remittances and other income (Figure 2.2). 2.8 Remittances are an important source of employment and income in Bangladesh. An estimated 3 million workers of Bangladeshi origin work overseas,5 with the annual average outflow of migrants averaging about 210,000 per annum (Background Paper 8). Data from the 2000 Labor Force Survey shows that out of the 26.3 million households in Bangladesh, around 0.4 million (1.5 percent) received remittances as the main income source, with the number rising to 0.9 million (4 percent) if one were to also include those who receive remittances as a complementary income. Even amongst the latter group, remittances constituted an important source of income support and investment, accounting for about 35 percent of total annual household income.6 Aggregate workers' remittances account for a sizeable share of foreign exchange inflows to Bangladesh, and in recent years have averaged the equivalent of about 30 percent of total export earnings. In FY01, data from Bangladesh Bank shows that official remittance inflows amounted to almost US$1.9 billion, a figure that is likely to underestimate total inflows given the widespread use of informal transfer channels by overseas Bangladeshi workers. 2.9 Asset Portfolios: Differences in income levels in Bangladesh in turn reflect severe disparities-in asset endowments across households. 2000 HIES data indicate that the distribution of the taka value of various personal (e.g. consumer durables), financial (savings, investments, etc.) and productive assets (agricultural land and implements, business assets etc.) has an overall Gini of 0.7, far higher than either per capita incomes (Gini 0.4) or per capita expenditures (Gini 0.3). Regardless of the type of physical or financial asset, poorer households invariably tend to own less of it than the more affluent. Not only do the poor own less, they also have substantially different asset portfolios from richer households. In particular, poorer households hold a greater share of their asset 5 This figure may be an underestimate in so far as it does not include many migrants who work illegally in other countries. 6 Average remittances for such households (i.e. those for whom remittances are the main or complementary income source) amounted to Tk. 48,302 per annum. It is worth noting that this amount would be sufficient to place even a 6-person household above the poverty line. For more information on Bangladeshi workers abroad, please see Background Paper 8. 20 Chapter2: Accelerating Growth_ endowments in relatively more liquid form such as livestock and financial assets (Figure 2.3).7 The poor are much less likely to own business assets. These differences in portfolios reflect not only differences in access to investment opportunities (e.g., due to credit constraints), but also the compulsion on poor households to seek safer but lower-returns, to refrain from profitable but non- divisible investments, and to rely on costly strategies for smoothing consumption (e.g., through distress sales of liquid productive assets). Figure 2.3. Composition of Assets: Importance of livestock & financial assets for the Poor Rural Areas Urban Areas 90% Non-operated land or property No n-perated land or property ao% - 80th 70% \ -70t% 60o% \ Other farm assets % Family businessassets 50% h / % 40% av;na _Family business asse 40- 20% e3ok v 20esf=.i-,til 4 1 2 3 4 s 6e 7 8 9 1o 1 2 3 4 5 e 7 8 9 10 Wostih Docifo Wnalth OcctbI 2.10 The varied range of income generation strategies and asset holdings has several implications for designing an effective poverty reduction strategy. First, it emphasizes that no silver bullet will cut poverty. Rather, development interventions need to take different contexts and classes of households into account at the same time that they bolster an environmnent that opens opportunities to the poor and lets them turn their own specific endowments and circumstances to advantage. Secondly, it is precisely because of this heterogeneity in the context of asymmetric information between households and the government that decentralization and participation - which enable people to reveal their demands for intervention and hence shape the development process - are important. And finally, heterogeneity illustrates why growth in itself may not assure poverty reduction. Growth will always be a precondition for the elimnination of poverty, but policymakers need to also take into account the nature of growth and the variegated potential of households and individuals to participate in and benefit from an expanding economy. 2.11 The sections that follow discuss key assets - labor, physical assets, financial assets, and common property resources - from the standpoint of the poor. Each section presents key features of the distributions of asset ownership and returns and examines the main public policies and actions that can help asset accumulation. Finally, section 2.5 takes up a discussion of the requisite enabling conditions to help increase the rate of return on these assets and accelerate growth. 2.2: LABOR EMPLOYMENT AND EARNINGS: 2.12 As noted above, labor, particularly among the poor, is the most important and abundant household asset. Trends in employment and wages, therefore, have an important bearing on the pace of poverty reduction. In which sectors are the poor most likely to work? What is the relationship between poverty and unemployment? What are the main determinants of wages in Bangladesh? This section uses data from recent labor force (LFS) and household expenditure surveys to address such questions.8 7 The figure excludes owner occupied housing and agricultural land, which are by far thc most important assets for households across the wealth distribution. 8 A more detailed discussion of labor markets in Bangladesh is available in Background papers 4 and 8. 21 Bangladesh. PovertyAssessment Table 2.2. Trends in the Labor Market, 1991-2000 1990-91 1995-96 1999-00 Labor Force Participation Rates (%): Extended definition 70 65 66 Usual definition 49 48 49 Employment Status -- % employed persons in: * Self-employed 27 29 32 Employee 12 12 13 Day laborers 14 18 18 Unpaid family helpers 47 40 .37 Other I -- -- Sector of Employment -- % employed persons in:J'* Formal, Public ' 4.2 4.5 Formal, Private 8.8 14.4 Informal 87.0 81.1 Soure: Various LFS reports. Noter. * Extended definition of the labor force, 10 years or older. ** Extended definition, labor force 15 years and older. - indicates less than 1% Labor Force Participation Rates and Sectors of Employment: 2.13 Consistent with improvements in living standards during the nineties, trends in the labor force show the formal private sector growing as a source of employment. During the nineties, the Bangladeshi labor force has grown by about 1.9 percent per year, increasing at an average annual rate of about 1 million from 51 million people in 1990-91 to 60 ndillion people in 1999-00.9 In 1999-00, the vast majority (81 percent) was engaged in non-formal activities (rable 2.2). Numbers of formal private enterprise and public jobs have been rising in importance, accounting for 13 percent of the labor force in 1995-96 and rising to 19 percent of employment and 24 percent of total hours worked by'1999-00. Since the public sector share has remained stable at roughly 4-5 percent of the employed population 15 years and older, hiring by private firms has produced most of - the growth in formal sector employment. '2.14 Agriculture is the main employer, but the non-farm sector is also an important source of work in rural areas for both men and women. According to the 1999-00 LFS data, 50 percent of the employed population works in the non-agricultural sectors. In rural areas, agriculture remains the primary source of employment for men (61 percent) and women (56 percent).10 Non-farm ac'tivitdes (mainly manufacturing, trade, transport, and community services), while the tnain source of jobs for about 40 percent of the rural labor force, also provide secondary employment for both men 'arid women and, according to the 2000 HIES data, equally so for the poor and non-poor in rural areas. The non-farm sector, it seems, has been rising in importance, a trend reflected by the increased return to certain key non-farm occupations (Background Paper 3). Preliminary analysis of the HIES data indicates that the share of income derived from the non-farm sector varies considerably across different geographic regions (World Bank 2002e), suggesting that a better understanding of regional constraints to growth of this sector could play an important role in developing a regionally 'differentiated strategy for poverty reduction. 9These numbers pertain to the economically active population 10 years and older, according to the extended definition that includes in the economically active population any person above a certain age who was either employed for pay or profit, or unemployed (seeking/available for work) during the reference period. It indudes household economic activities such as care of poultry and livestock, threshing, preservation and processing of food etc. The 'usual definition' of economically active excludes own household activities. 'Z0If the extended definition is used to measure labor force participation CQ.e., if household activities such as care of livestock are also induded), the importance of agriculture as the primary source of employment increases considerably. 22 Chapter 2: Acceleratin,g Growth 2.15 Participaton by women in the labor force haes increed duzing the decnde. Femae labor force paticipadon and sector of employmenet ae stFonglyinked go income levels. The LFS "extended definition" that shows labor force participation rates for women falling firom 58 percent in 1990-91 to 52 percent in 1999-00 is somewhat misleading. The definition dassifies almost three-quarters of women in the labor force as working as "unpaid family helpers" (Appendix Table A2.2). Based on the "usual definition" - which ecxdudes own household activities - labor force participation rates of women have increased lsuv t. Acvtr PSRtuo of woonmn n ord oldor steadily from 14 percent in 1990-91 to 18 355 .5 percent in 1995-96 and 23 percent in 1999-00. 300 . -- 2000 HIES data show that participation rates 255. among women vary considerably across per . - capita expenditure deciles (Figure 2.4). 'Te rates are relatively higher in both the richest and 15- poorest deciles, though the women tend to be 10- employed in very different types of activities. SV. The majority in the poorest decile work for 00 ,, wages in agriculture or in manufacturing or on 1 2 3 4 5 6 7 8 9 10 family enterprises. By contrast, over 85 percent Dcaci of women in the richest decile hold white-collar jobs, predominantly as teachers or health care workers. 2.16 This finding coimports with female education pattems. Completed schooling of all worling women tiken together is lower on average than for their non-working counterparts (2.2 vs. 2.8 years). Yet, educational attainment of women in white-collar jobs is considerably higher (6.6 years). This apparent "wealth effect" of women from better-off households spending less time in the labor force goes together with a "substitution effect" that shows highly educated (largely urban) women being more likely to work. 2.17 A noteworthy development or women has been the boom in thextdle and apparel industries over the last decade. This sector, in which 85-90 percent of the employees are women, has provided jobs for over one million of them. About 18 percent of employed women work in the manufacturing sector, with more than half of them employed in the dothing and textiles industries, as compared to about 30 percent of the male manufacturing sector workforce (Appendix Table A2.3). Garment industry jobs that tend to be concentrated in areas around Dhaka and Chittagong have attracted many migrant workers from rural areas, often from relatively poorer households (Hewett and Amin, 2000). For such women, factory work has meant not only better pay, more status and more responsibility relative to other work available in their home towns but also a sense of pride and empowerment at being able to provide for their families (Kabeer, 2001). In part because of the opportunities afforded by this sector, working women in urban areas are also much more likely to be salaried employees (38 percent) rather than day laborers or unpaid family helpers, as compared to rural areas, where only 10 percent of working women are saladed. 2.18 The wage differential between agriculure and othr secitors in FBangcdesh vddened durin the neties. The question ofhoswmuch real wages actullyincreased over this pe.iod depends crucialy on the rate assumed for ination. Analysis of wage data compiled by BBS indicates that the gap in wages received by unskilled industrial or agricultural workers has increased: with industrial workers receiving 1.7 times the daily wage rate of agricultural workers in 1997 as compared to 1.4 times in 1990 (Background Paper 8). The composition of employment has also shifted toward the services sector - the main source of employment growth (4.2 percent per year) 23 Bangladesb: Povety Assessment during the nineties. The question of what has been happening to wages in Bangladesh during the past two decades necessitates deflating wage data over time from nominal to real terms, which in turn requires the choice of a suitable price index for this purpose. In the case of Bangladesh, however, this issue is complicated by the fact that different available price indices do not give the same picture of inflation. For example, depending on the index used, one can either conclude that between 1992 and 2000, agricultural wages declined by around 6 percent or increased by 9 percent (Background Paper 8). However, with the exception of agriculture (where the conclusion depends on the particular index used), wage analysis suggests that real wages have increased in all sectors since 1980. Since the beginning of the nineties, the strongest growth has been registered by real wages paid by the small and cottage industries, followed by the real wages paid to unskilled manufacturing workers." Unemployment and Under-employment: *2.19 Visible or open unemployment rates are not very high in Bangladesb, but under- employment is a concern, especially among women. Although unemployment has increased slightly during the 1990s, remaining low at 3.7 percent (Iable 2.3), the rate is a misleading indicator of the degree of slack in the Bangladeshi labor market. If individuals employed as unpaid family helpers and working fewer than 15 hours per week are also treated as unemployed ("proposed" unemployment rate), the percentage rises to 11 percent. The perception of the labor market changes radically if under-employment (share of employed persons working less than 35 hours during the reference week) rates are examined. In 1999-00, 35 percent of the labor force was under-employed, even though the trend has been downward since the beginning of the nineties. Under-employment is -high in the agricultural sector (46 percent), and is particularly acute among women (72 percent). This is, likely to reflect a combination of factors - induding fewer opportunities in professions that offer full-time employment, as well as a greater burden of household chores and child-care activities that lower women's propensity to seek full-time jobs. Table 2.3. Unemployment and Under-employment 1990-91 1995-96 1999.00 Unemployment 1.9 2.5 3.7 Proposed Unemployment 18.3 16.5 11.0 Under-employment 43.0 34.6 35.3 Sowm. 2000 LFS. Extended definition of the labor force, population 10 years and older 2.20 Unemployment, while high among young males (age 15-29 years), particularly in urban areas, is evidendy not linked to poverty. Though not a serious problem overall, unemployment tends to be concentrated among younger age groups, particularly those aged 15-29 years. It is more common among young urban males (9 percent) than rural ones (6 percent). The urban-rural disparity and the problem within this group is even more stark if activities (i.e., enrolled in school, employed or neither) are compared; the percentage of young men who are neither employed nor enrolled in school is 21 percent in urban areas compared to 12 percent in rural areas. 11 The pros and cons of using different price indices, and the implication that this has for trends in real wages in different sectors, are discussed in more detail in Background Paper 8: Peformamv of the Ban Lduah LborMarket Dwin,g th Ninehu. Part 3f the reason for the discrepancy between the official CPI and inflation -estimates from other sources may be because, the .weights for the CPI in Bangladesh have not been revised since 1985-86, and may hence be out-of-date in relation to current consumption pattems. Given the widespread use made of the CPI in Bangladesh (as in any other country), updating these weights merits serious consideration by BBS (Background Paper 1). 24 Chapter 2: AcceleratigGroG th_ 2.21 Figure 2.5 reveals that unemployment among young males is fairly steady across per-capita expenditure deciles, thus evidently not lisiked to poverty (either as cause or consequence). Indeed, the large observed decline in employment rates across deci4es is duz to the fact that younsg men from wealthier households tend' to stay in school ;- . . . - . .^ - . , .S. ruail atr 9 ol c j,) longer. Mote6ver, utiiempoyed nzen have mote 1- - - " education than their enloyed counterparts in the same age gfoup; ang 20-29-year Qid men, eoln most of whom had alreadyEwished school, the 7m' unemlployed had 7.4 years Qf conipleted d schooling- oh average, compa.td tA.0 years for - all their cont,rporadoes.2 In stun; unemployed young mef in Bangladesh are. mt particulary ' poor and cetirl ny':o.t lacking educ:aton, though MY they do tend to be concefitrated id Wban areas. '---- ,- . .. 2Detemninants of WYages: 2.22 With labor the mai aist 4f the poor in Bang'rt'3b, prevaing wages have consideable bearing on-'teir standa:ds of living. 'From estimati sepamte re yessions for employed men 2ad women using 2000 FIES, drtt s4vezal noteworthy indings emeigz about main detezminants of wages. Besides age, educnroa, gtid urhant/rurl location, *th mtwiiivatrate manaysis included controls for sector of employment, typie of contract (daily wage oa satry), and whether the employer was a government organization. -' Z23 . FEar both mXeh aad wamoenX lboi m=.r artr ogTh -. - u r rs zo ~d ado. Even after controlling for observable individual and job characteristics, the anysis iaeveals substantial pfeniiums -associated with higher education (8 percent per yezr of schooling for women, 5 percent per'year for men). Part of the teason women get higher retuixs to educ4tion could be diue to the higher resetvation -wage of better educated woirien, wvho can afford to spend more time looking for better employment opp6dtunities.because their families can support them. In additioh, since average schooling levels for women are lower, their marginal retuarns to education may be higher. 2.24 The 2000 'IES data show considerable disparties wvithin the population in the highest educational' attainment among the popi*ation aged 15 years and older rinked by pqt-capita expenditures (Figure 2.6). Individuals in tlie top' decil . , , . ~~~~L,A-3re 2.6. kve=e yemz oT sc hoolE have, on average, 7 times as many years of education as ' individuals from the lowest decile..This sharp. gradient in educational attainment by income levels is one of the reasons why there is a large observed dispersion in wages, with the poor receiving on average tmuch lower tetums to 3 3.3 their labor than other employed individuals. Investing in ' P3 improving coverage and quality' of education could have a 1.1 high payoff, both for its intrinsic value as well as for its high instrumental value in raising incomes. I a s a13u 4 7 i a o 12 These figures computed from the 2000 HNIS are corroborated by the 2000 LFS data that shovw the unemploytnent rate of people with SSC/HSC education (10 percent) to be signifiantiy higher than the aveage uncrmployment rate. 13 The regression results are reported in Appendix Table A2.4. Since not everyone in the labor force worlks for vwges, the estimates control for selection bins in the wage regression. 25 Bangladesh: PoverAssessment 2.25 Non-farm employment offers signifcantpremiums relative to agncultural daily-wage work. Employment for men in manufacturing or other non-agricultural occupations provides a 25- 34 percent premium compared to daily wage work in agriculture, even after controlling for differences in education and other individual and locational characteristics.'4 Clearly, for those daily- wage workers fortunate enough to find such employment, the non-farm economy offers a promising route out of poverty. However, non-farm activity in rural Bangladesh embraces a wide and varied range of work and is marked by clear differences in the types of activities in which the poor and non- poor engage. The types of activities range from manufacturing jobs, white collar jobs (which include professional, administrative, clerical, sales, and service wotkers), and other wage-earning activities (mainly construction) to self-employment in non-agricultural enterprises. As one might expect, relatively better-off men have a greater propensity to be self-employed or to have a white-collar job, while the poor are more likely to work for wages in manufacturing, construction, or transportation. 2.26 Location bas a significant effect on wages. Both male and female hourly wages are, on average, much lower in rural areas, at least in part reflecting the differences in cost-of-living between urban and rural areas and a strong metropolitan dominance effect, as well, on pay. In particular, distance from Dhaka has a very significant negative impact on wages (see Background paper 4). For each 100 km closer a community was to Dhaka, rural wages rise by an estimated 5 percent These findings suggest that Dhaka (perhaps along with other large cities), rather than the smaller regional centers, plays a pivotal role in rural wage determination. Evidently, rural workers benefit from competitive demand for labor from urban-based manufacturing and white-collar employers. 2.27 Although daily-wage workers do not receive lower hourly wages, their total earnings are significantly below those of salaried workers. The regression results indicate that while men paid on a daily basis do not receive lower hourly wages than salaried workers, their comparative yearly earnings (hours worked as well as wages) come to about 14 percent less over the year on their principal job.'5 Evidently, salaried jobs provide more hours per year, while daily-wage work - the main source of income for the poor - leaves the poor under-employed.16 2.28 Public sector jobs pay an extremely high wage premium. Even after controlling for individual characteristics such as education and experience (as proxied by age), the wage premium in public sector jobs for men is estimated to be 31 percent and for women 66 percent Clearly, those who are fortunate enough to get government employment receive considerably higher wages than their otherwise observationally equivalent counterparts in the private sector. Assessing the types of jobs that the majority of public sector employees were doing, these wage premiums turn out to apply mainly to middle and lower level government functionaries, rather than to senior civil servants. Among men, 39 percent were clerical and related workers, 16 percent were service workers, and 12 percent teachers. Among women, nearly 80 percent were working as nurses and in jobs related to health, education, or as clerical workers. This suggests that the identified wage premiums are mainly with reference to middle and lower level government functionaries, rather than to senior civil servants. 2.29 Given this premium, considerable rationing of government jobs is to be expected. Also revealing is that the, average government worker is 8 years oUler than his counterpart in other wage 14 It is worth noting, however, that while the wage regressions did control for selection bias in participation, they did not explicitly account for occupational choice decisions. I5 The log-wage regression controls for sector of employment-the vast majority of agricultural workers, for example, are paid on a daily basis.. 16 These findings are consistent with the recent Consudtafions with the Poor study, where the most common perception of well- being expressed by the poor was to have employment opportunities throughout the year (Nabi and Chakrabarty 2000). 26 Chapter 2: Acceleratin,g Gnwth employment, and on-average has more than 6 additional years of schooling than non-government wage workers. It may be that men, particularly those in urban areas where such jobs are concentrated, wait several years for the chance at government employment, a delay justified by the reward of much higher-than-market wages. This job queuing may explain why unemployment among young educated men in Bangladesh is higher than in the population overall. It suggests that the government should take steps to better align public sector emoluments with prevailing market salaries for workers with comparable skills, so as to reduce any adverse incentives to lobby or queue for public sector jobs. 2.30 PoAicy Implicadona: The analysis of the employment patterns and determinants of labor market returns in Bangladesh has some important implications for designing a pro-poor growth strategy. First, the snapshot of broad employment patterns and trends shows that the main source of employment is the private sector, where formal activities have been growing in importance over the past decade. Following a strategy to accelerate private sector-led growth, particularly through small and medium enterprises that generate off-farm employment in rural areas, must be part of a pro-poor growth strategy. Second, as the analysis of determinants of wages in Bangladesh reveals, labor markets in the country offer significant returns to education. Investments in building and enhancing the quality of human capital the subject of chapter 3, are thus likely to play a very important role in accelerating the pace of poverty reduction. Third, the analysis helps put into perspective the relatively limited role the government plays as a direct employer in the economy -fewer than 5 percent of workers are employed by the formal public sector in Bangladesh. But, despite its relatively small, direct role, the governrnent's indirect actions, such as its provision of complementary infrastructure and its influence on the overall investment climate, can have profound effects on labor markets through encouraging greater labor market participation and reducing under-employment. These indirect actions are discussed in more detail in section 2.5. 2.3: LAND AND COMMON PROPERTY RESOURCES: 2.31 Chapter 1 spelled out the strong negative 31gire 2.7. GainLs From Lond tOwvnersaMp association observed in Bangladesh between land Rural ownership and poverty. Regression estimates based on the 2000 HIES data indicate that compared to a landless rural household, a household with less than half an acre o)s5 ac.es o mm 1_1~ ~~~~~~~ 01-50-2-49 ccres has expenditures 7 percent higher, and a household with _30.50-149 ac more than 2.5 acres - 44 percent higher per capita Urban 0<0.50 c=ms expenditures (Figure 2.7).17 Expenditure gains in urban areas also rise with the size of the landholding, but as expected, the rate of increase across different landowning categories is not as sharp. Above 1.5 acres, households have 27 percent higher PCE than the landless. 0 10 20 30 40 SO % beCnonge An Aocome 17 In order to ascertain the relationship between per capita expenditures and assets (both ownership of private assets and access to public assets), separate regression models were estimated for rursl and urban areas using data from the 2000 HIES. The multivariate analysis included controls for household composition, rdigion, age, education, and sex of the household head, land ownership, ownership of non-agricultural business assets, access to natural assets (e.g., kols, hwas land), and community infrastructure (e.g., electricty, phones, distance to bus stop, presence of banks and co-operatives). Differences in village characteristics in the urban sector regression were accounted for by including village dummies rather than village characteristics themselves, since the community survey was not administered in the urban sample. AU subsequent references to asset retums in this chapter pertain to these regressions. Full regression results are reported in Appendix Table Z5 (for details, see Background paper 3). 27 Bangladesh. PovertAssessment Figure 2.8. Share of Agricultural Income 2.32 The high returns to land ownership, from Livestock particularly in rural areas, reflect increasing scarcity. Nearly all-available arable land in Bangladesh is already 40% 37% 05aress under cultivation, and competing claims from 35% 00.50-lA9 acres agricultural and non-agricultural sectors have generated 309 - Ql.50-2.49 acrcs rising pressure on a finite supply. Over the years, land 25% - *2.50 acres or more ownership distribution has also been changing toward 20%- 15% growing landlessness and an increasing number of 15% - 0% small and marginal farms (Appendix Table A2.6). At 10% 1 8 the same time, property rights are poorly defined and 0% _ so frequently disputed that over four-fifths of rural Land Ownership litigation is related to land and ownership disputes (Rahman, 1998). 2.33 For those with no farm land, income from livestock accounts for a large share of agricultural incomes (Figure 2.8). Further, as evidenced by the 1998 flood, liquidation of livestock assets can provide an important means to ride out natural disasters or idiosyncratic shocks. 2.34 As with land, there is a negative association between poverty and access to common property resources such as kbas land. Average per capita expenditures of people living in communities with access to these assets are between 2 to 3 percent higher than those in less advantaged settlements. While these assets are not as strongly correlated with expenditure levels as land ownership, the poor perceive them as an important source of livelihood (Nabi and Chakrabarty 2000). Not only is over-exploitation a mounting risk, however, these commons are also increasingly a source of conflict, as for exarnple between poorer farmers and fish traders. 2.35 Better defined property rights for land and regulations on common resource management are needed. With pressure on land and common property resources rising, government has an important role to play in defining property rights and dearer regulations on common resource management. The poor are predominantly landless, and improvements in the operation of land markets, including tenancy as well as sales, are necessary to enable them to strengthen their position in the rural economy. Clear, enforceable property rights are a fundamental requirement for well-functioning land markets, for using land as collateral in financial markets, and for creating incentives for landowners to undertake long-term investments to improve land quality and productivity. Establishing dearer property rights as through the proposed issuance of ownership certificates is clearly a step in the right direction, though as noted in the recent Center for Policy Dialogue task force report (CPD 2001a), the main challenge will lie in actualy implementing reform. 2.36 Given poor people's limited land ownership, the better management of common property resources in environmentally sustainable ways that benefit them, rather than better-off households, is also important. Forest cover has been declining at a rapid rate (3.3 percent per year between 1980 and 1990) and production of river and estuarine fisheries has also decreased by about one-fourth during the past 15 years. Equitable access is threatened by lack of transparency in sales of rights to such public resources and by capture of the commons by rich farmers. Sustainable and equitable exploitation of natural resources requires improvements in their management and productivity, increased participation in relevant decision making (induding through decentralization of authority to local governments and community-based management approaches), and improvements in governance, especially through greater transparency in the allocation of natural resources (World 28 Chapter 2: Accelemting Growth Bank, 2001d). These reforms should be carried out in parallel with a streamlining of land records, tenancy acts, and land use policy. 2.37 Policy should focus on improving ldproducdvi. The scope for redistributing land to the poor, or of bringing more land under cultivation is limited. Rather, the policy should stress measures to improve land productivity - in order to foster the agricultural growth that has led in the past to higher rural wages to the benefit of the poor (Mujeri, 2001) - as well as to promote rural non- farm activities. Increasing agricultural growth is important not only for daily wage laborers, but also for the poor who rely on the non-farm sector for their livelihoods. Because of the numerous forward and backward linkages between the non-farm sector and agriculture, the two sectors can have a pronounced impact on each other. Three areas for promoting growth - (a) raising productivity of existing crops, particularly rice, (b) diversifying crop production, and (c) expanding non-crop agriculture - are discussed below.18 2.38 Raising product44ivi of eisting crops, pagdiculady-doe. Rice production alone accounts for 50 percent of the total value-added in agriculture and nearly thee-quarters of gross cropped area. It has made impressive gains, led by both input growth and increase in total factor productivity. During the period 1975-97, input growth accounted for four-fifths of output growth, and total factor productivity (IFP) for the remaining one-fifth able 2.4: 2e lMare1 larnepdation St&tus, (Ahmed, 2001). Over the same period, the LRunS Az real price of rice in Bangladesh declined considerably, to the benefit of the poor who , % SD F 201 are mainly buyers rather than sellers of rice Poorest 18 24 58 (Table 2.4). The progress is testament to the 2 23 29 48 liberalization of markets for agricultural inputs 3 30 28 41 and to investments in rice research that 4 38 26 37 Richest 42 22 37 spurred the rapid spread of private tubewells TOW 30 26 44 for irrigation, fertilizer use, and new varieties. Se: 2o0 HISES 2.39 Bangladesh could continue to increase its rice production. With limited prospects for expanding land area under rice cultivation, growth must increasingly rely on fiuther shifts from traditional to high-yielding varieties and on improved management and technology to increase the productivity of existing tesources and inputs.d9 Intensification will require more balanced use of inputs of higher quality and better soil and water management practices to guard against soil degradation.20 Reform should encompass changes in fertilizer policy (to correct the imbalance in N:P:K application) and in seed distribution (to spur private sector entry) as well as shift the emphasis of rice research and extension towards aromatic tice and improving cultivation practices. Table 2.5. Faem Sie and Degree of C¢ op Jiverciiczado:n Size of land PercentMPe cuRivanM the Cro~ IHolding Rice Wheat Tubers Cash cres S3ilc PuIsas Oilswds Vegeazhles (Gfken Landless 94 59 8 10 7 6 5 16 2 Up to 0.5 83 56 10 16 10 6 5 22 2 0.S to 1.5 97 71 17 22 17 a 7 23 2 18 For a more detailed discussion of specific policy measures to improve land productivity, see Baqglk;sb: A Pfvpsod RmI DeuwopneestS&ratV (Wodd Bank 2000a). 19 Average yields in Bangladesh are still low compared to Indonesia, China, and other East Asian countries, leaving much scope for improvement (Dorosh 2000). 20 More than half the total land area is nutrient deficient, subject to depletion of organic matter, or both. 29 Bangladesh: Povefly Assessment 1.5 to 2.5 98 69 23 29 26 1 1 14 25 2 2.5+ acres 96 74 30 31 36 21 22 35 .5 Soune: 2000 HIES, rural sample 2.40 Diversifyng crop production: In the medium to long term, food grains are unlikely to lead agricultural growth given low income elasticities for cereals and increasing urbanization. Moreover, evidence suggests that several crops - e.g., potatoes, vegetables, onions, cotton - yield economic and private returns as high as, or higher than HYV rice (Ahmed et al., 2000). The 2000 HIES data corroborate this view, showing that net revenues per acre from cultivation of crops such as tubers, spices, and vegetables are considerably higher than from rice and wheat (see figure). However, small and marginal farmers are considerably less likely to cultivate these crops as compared to large farmers (rable 2.5), and rice still dominates crop production. 2.41 There are several reasons why diversification into other crops, particularly by small farmers, has been minimal. In addition to the higher price risk associated with marketing these crops, existing on-farmn water management systems do not permit cultivation of both rice and non-rice crops on the same service unit (Mahmud et al, 2000). Other constraints indude lack of adequate technology and knowledge about post-harvest handling and processing of non-rice crops; protection of some crops, which reduces incentives for diversification; and lack of marketing and credit infrastructure. 2.42 While agricultural diversification should be a market-driven outcome, the government can advance the process by purposefully releasing some of the constraints to diversification. It could (a) redirect research and extension to non-cereal crops (e.g., horticulture, vegetables) (b) withdraw ,protection from oilseeds and sugarcane - both negative value-added crops in Bangladesh (Mahmud et al, 2000) and (c) reduce price risks by improving marketing infrastructure and institutional credit facilities for private traders. Given the competing demands on scarce government resources, policymakers also need to consider the relative merits of spending on agricultural research, infrastructure investments, and the fertilizer subsidy. 2.43 Expanding non-crop agriculture holds considerable potential for growth - even, with the right institutions in place, for pro-poor growth. Given that livestock (induding poultry) are among the most important productive assets and sources of income for the poor, improving livestock ,productivity will have 'a directly beneficial impact on both the assets and income of the poor. Fisheries have also been a source of emnployment for the poor, but ill-defined property rights and poor management of the commons restrict potential for pro-poor growth. Non-crop agriculture has had a good growth record in recent years with fisheries achieving the most outstanding record: production 0 NetRevenueperAcre (Tk) increases of 8.7 percent per year between 1995 and 2000. Annual growth rate of GDP from forestry (4.5 percent) 20000 was also faster than for crops (3.7 percent) or livestock (2.6 l .i percent) during this period.21 The fisheries and livestock -SpiCE sectors, moreover, each provide significant shares (6 ' percent and 3 percent respectively) of -total foreign [egetab es exchange earnings. The main policy issues, aside from those related to property rights, relate to the facilitating role 0 crop that the public sector can play in generating research and S"r. Stffes imtes, 2000 HIES taking on market-oriented functions (for details, see World 1 ID l999-00, the crop sub-sector accounted for 70 percent of agricultural GDP, fisheries 11 percent, livestock 10 percent, and forestry 9 percent 30 Chaper 2: Aak*irg8 Gr__th Bank, 2002a). For growth, it is recommended that the National Agricultural Research System redirect its emphasis and intensify research efforts on these sectors.22 Public sector involvement should focus on market-oriented functions such as disseminating information, overseeing the process of quality control, and monitoring farm input quality. 2.44 In order to ensure that the poor participate in and benefit from gowth, NGO initiatives and Govemnment-NGO partnerships in training and marketing services merit support and encouragement Bangladesh has the advantage of drawing upon the experience of several on-going initiatives. For instance, the Bangladesh Rural Advancement Committee's (BRAC) program of providing integrated services in the poultry sector has enabled landless women to participate in the growth of this sector. 2.4: IXlROvED ACCESS TO CREDIT: 2.45 Access to financial markets is important for households and micro-enterprises. Credit that helps households smooth consumption during hard times also provides capital to create or expand micro-enterprises, reducing vulnerability and diversifying sources of income. But financial markets, because of problems of asymmetic information and transaction costs, often serve the poor badly. 2.46 Some of Bmangadesh l Banks and NGOs hAve be ionee in deaigninff &naovndve mechanisms Xo delivex credit to the poor. The Grameen Bank and NGOs such as BRAC are world-renowned for their group lending methods that use joint liability and peer selection, rather than physical collateral, to overcome infornational constraints. Other models for NGO micro- finance institutions (MFIs) indude those that are not registered as banks but collect savings and make loans and rely on the wholesale functions of rural banking networks (e.g., Proshika, Association for Social Advancement). Others that do not handle funds instead facilitate the fornation of member groups and their linkage with banks (e.g., Rangpur-Dinajpur Rural Services, Swanirvar). Bangladesh is rich in alternative MFI models that differ in the degree of involvement in providing financial services and in their dependence on rural banking institutions, gender of the target groups, the range of financial and non-financial services offered, and the eligibility criteria for membership. In 2000, an estimated 16.5 billion taka of loans was disbursed by 582 NGOs to invest in various sectors of the rural economy: small business (14 percent), livestock (21 percent), crop production (13 percent), and food processing (7 percent) (Credit and Development Forum, 2000). Tlaible 2.6. Distibutidon of Loans by Financid Secto, aRura Areae Dismrbution 8setdr (%) Lean Count Formal 8.6 2.4 Semi-Formal 59.4 81.2 informal 32.0 16.3 Tota Amount Disbursd Formal 33.9 5.2 Semi-Formal 43.8 75.1 Informal 22.4 19.7 Se: 1991-92 and 1998-99 BIDS-World Bank Survey. VThe research budgets are focused to a great extent on crops. Between 1995-2000, crop research accounted for 80 percent of ADP expenditures on agricultural research and 88 percent of the current research budget 31 Bangladesh: Poveny Assessment 2.47 By contrast, penetration of formal financial institutions in rural areas remains relatively weak. In addition to the semi-formal NGO-based MFIs, rural financial markets in Bangladesh also contain formal institutions (commnercial and specialized banks and credit cooperatives) and a range of informal financial intermediaries (e.g., local moneylenders, traders in agricultural inputs and outputs markets, shopkeepers, landlords, friends, and relatives). The importance of formal financial institutions appears to have declined dramatically in the past decade (Table 2.6). In 1998-99, formal credit accounted for 2.4 percent of rural credit transactions of 500 taka or more compared to 81 percent from semi-formal and 16 percent from informal lenders.23 Although informnal-lending has declined in importance, it continues to account for nearly 20 percent of the total amount disbursed. 2.48 Access to credit in Bangladesh is segmented, reaching households at the lower and upper ends of the income distribution. The Anissingmiddle' -- small and medium farms and non-farm enterprises - are currendy underserved. The financial sector in Bangladesh is highly :segmnented, with the formal banking system mainly providing services to the relatively affluent, and IvMFIs' targeting the.poor (typically those with less than 0.5 acres of land). Small and middle farmhers and enterprise owners - those who are "too rich" to avail of MFI credit but not rich enough to access the formal banks - face a dearth of options in seeking to obtain credit services from the formal/semi-formal sectors. Data from the 2000 HIES suggest that credit plays a relatively minor role in helping households set up businesses (Table 2.7). A large share of business assets tends to be inherited, thus perpetuating disparities across generations in asset ownership between the poor and -non-poor.24 Two factors are at play. First, access to credit appears to be inadequate; two-thirds of the households operating-family businesses cite inadequate capital or credit as the primary constraint they -faced. Second, the prevalence of self-employment using mainly family capital also suggests the lack of good savings institutions providing alternative opportunities for investment and pooling resources in rural areas (Lanjouw and Lanjouw, 2001). Table 2.7. Main Source of Finance for Setting-up Family Business 1st Reported Source 2nd Reported Source Main Source Assets < Assets 5- Assets > Assets < Assets 5- Assets > 5,000 100,000 100,000 5,000 100,000 100,000 Inheritance 14% 21% 40% 4% 6% .11% Own-savings 59% 61% 48% 25% 28% 35% Relatives or friends 9% 6% 6% 30% 32% 23% Agri./Comniercial Bank 1% 1% 2% 1% 2% 6% NGO Banks 4% 4% 1% 11% 7% 2% Sale of Assets 1% 3% 1% 3% 2% 4% Money Lender 6% 1% 1% 8% 3% 2% Other 7% 2% 2% 18% 20% 16% Sourc: 2000 HIES 2.49 Access to credit can play a vital role in improving poor households' economic well- being, as well as leading to social improvements. Various studies have found positive impacts of MFI programs on food consumption (both in quantiy and quality), health, education, and savings 23 An irnportant caveat is that the 1998-99 data correspond to the period following the floods, when semi-formal credit was scaled up. Data after this period would be needed to check whether semi-formal institutions have continued to account for the overwhelming share of loans made in rural areas. ..,7:Not surprisingly, households that had business assets worth one hundred thousand taka or more had much higher per capita expenditures (almost three times as high) than those in the first group (with assets less than 5000 Tk). 32 Chapter 2: Acceltin,g Growth behavior. These institutions have been especially inportant for women and households headed by women, who often have difficulty getting credit. Studies find that such access to credit has strengthened the women's bargaining position with their husbands and increased their physical mobility, their self-confidence and their participation in public life (Zeller et al. 2001, and citations therein). 2.50 Public support for the ezpansion of lMFs AnJs .d plb payofM and should be continued. The Palli Karma Sahayak Foundation (PKSF-), which acts as a wholesaler of credit to small and medium partner organizations (PO) that on-lend these funds to their clients, has established itself as a highly success ful apex organization supportng MFIs of all sizes as well as facilitating cross-learning and dissemination of best-practice examples. Varous guidelines and policies designed by PKSF, with active support of POs and stakeholders, have had a profound impact on operations, portfolio quality, accountability, and sustainability of the micro-finance industry in Bangladesh (World Bank 2001b). Improved interaction and exchange of information has led to increased focus and debate among different MFIs currentdy operating in Bangladesh on how best to serve the so-called "hard-to-reach" poor. 2.51 Formal financial sector functoning needs tos be aubs9wallff7y Ampovveo. The public sector financial institutions have had a poor record in terms of savings mobilization and outreach to the poorer segments of the rural population (Zeller et. aL, 2001). Commercial and agricultural banks lend mostly to households with large farms (Khandker, 1998). Improvements, though, will not be possible without removing handicaps that plague the entire banking system. Several recent World Bank reports (summarized in World Bank, 2001e) have highlighted problems of under-capitalization, non-performing loans, and excessive political interference, shortcomings that are similar to those emphasized by the government-appointed Bank Reforms Committee. Improving governance and financial discipline, and strengthening the legal framework in the banlkng sector is important, if the agricultural and commercial banks are to become effective intermediaries for nrual entrepreneurs. ; - -. - - I . RAC's M .LA l:'rgram "13RAC launchel NMicro Enterprist I arrlidog and Assistance (MFJ A) program in Der,-rniher 1996 with a % iew !,I providing Ioants cr, existing micro ernerpiises with higii potential for growth. This secton of the market, usua1ll rfeerred tD-as th miss!ng rmtddlc rrrnr% g pilcad- i'Sefrcd- both h rmILro-fir,ar,,L and commcrcial banks. Yet, 'he growthof such enterpnse! can hawc 'npornailI o ert alleviattiJn .fcctsc Lhoug1 drekt .cploymerit gencratdoo and / or consurnprion limkages A MIEL A loan is betw^mn TLS$ 400-4,D0 (Tk. 20,000 - 2J0.000 Aus if Elet cmhbe, O000. dihnprogram hau 7,665 iJorr-vwei .-Td ; Jl! i; ;,f- 124 m iion (Th 720 millionu fias haLrj drshuured o Lhemrr Thx cdstarOding starids al US . 5.8 million (Ti. 29)Q ji;i11Jn) i'iELA LS seIVing a Rew cE am AcNt ec-gnxeu and pno k.. 'e.ig 1 -T.i services provision wu ihis market is retadvely less de-iilop.cd itr Tniad.sh. Te lenriding i-chn,Ilog-, rislk assess the need for ITnfkciravje>rv of lthis clienL gior* 1o tundisneutally ditMirent from thatr A he micro-rirmce mark' MIL!. A program has alreaa) proved that tber is sigrtificarit dermaird and that serviag 11.- maro Ct ic -4irlbTe. Ii te futime, NlEL A expects ro be-a solid platform Forn visionmI thitkinr in prpnding - ncvaur . fi-ndncdl services for TuLTu-cntei-pnses " 2.52 Ezpanding access to credit to smell ad medium Anma and £? 'on4kerM enterise should be an important policy focus. Promising expeiments are under-way in financing small- scale agriculture and micro-enterprises (Box 2.1). These initiatives are very promising for poverty reduction, because expanded agricultural production and the fo.;mation of new micro-enterprises could create the types of wage and salary employment so important to the poor. For example, 2000 HIES data indicate that of the nearly 8 million people employed by household-based enterprises, about 1.7 million work for enterprises with assets of less than Tk. 100,000 (not counting family 33 Bangladesrh: Ponrty As.essment members working in the enterprise).25 Assisting such small and medium enterprises expand operations will bring a twofold benefit through both direct (poor operating such enterprises)26 and indirect (stimulating non-farm employment opportunities and wages for daily wage workers) channels. Exploring options to reach micro enterprises is a relatively new field of activity, and merits closer monitoring and research to assess the extent to which it contributes to poverty reduction. 2.5: OVERALL ECONOMIC ENVIRONMENT AND COMPLEMENTARY PUBLIC ASSETS: 2.53 Building private assets to accelerate private sector-led, outward-oriented growth is consistent with the growth strategy Bangladesh has successfully followed in recent years. Creating a more conducive environment for higher levels of returns to private assets in turn requires several important elements. First, public order and rule of law, sound macroeconomic management, and continued outward orientation are all pre-requisites for higher economic growth. Second, adequate physical infrastructure is needed to help complement (and raise returns to) private assets. Finally, more active partnerships with (and promotion of) institutions that foster social inclusion and participation is an important element of a more pro-poor growth strategy. Favorable Investment Climate: 2.54 The overall environment and investment cimate in a country strongly influences the level of returns to private assets. If firms cannot operate profitably because of problems of law-and-order and lack of personal safety, bureaucratic harassment, or macroeconomic instability, facilitating the accumulation of private assets will bring only limited benefits. 2.55 Law-and-Order: The governance challenges facing Bangladesh have been the subject of considerable recent attention and discussion (e.g. Sobhan 1998, CPD 2001, PARC 2000, World Bank 2001h, Stern 2002), with broad consensus emerging that institutional reform should rank among the government's top policy priorities. However, with governance problems so deep-seated and pervasive, what are the areas that merit priority action? The findings of a recent nationwide study on governance in Bangladesh point to improvements in law and order as perhaps the single-most important area for reform.27 Breakdown of law enforcement in Bangladesh ranked as the top concern ,of both rank-and-file citizens and entrepreneurs covered in the study. No other type of service drew as much criticism as the perceived deterioration in quality of police services, voiced by 69 percent of interviewed households. Only 12 percent of those surveyed thought that police corruption was low. 2.56 Not only did the citizens and businesses regard the country's police as corrupt and inefficient, but in their estimation, police honesty and responsiveness have also dropped markedly in recent years. In an earlier study (1998) conducted by the Mahbub-ul-Haq Human Development Center, slightly over one-half of all respondents in Bangladesh reported "heavy or malignant corruption" in the police force (52 percent) and deterioration in quality (53 percent); businessmen ranked the police's service standard lowest among all forty-four organizations evaluated. Reported 7s Group I with assets of less than 5000 taka included rickshaw pullers, fisherman, petty hawkers and artisans making pati, -chattais, etc.; group 2 (between 5000-100,000 taka) included those engaged in various trading activities such as teashops, ,retail outlets, tailors, etc., while group 3 enterprises (more than 100,000 taka) were typically textile-related concerns, jewdelrs, contractors, health care professionals, etc. 26 The 2000 HIES data indicate that income from enterprises in group I (total assets less than Tk. 5,000) average Tk. 25,000 per annum, and for those in group 2 (total assets of Tk. 5,000 - 100,000) are around Tk. 57,000 per annum, a modest sum for an average family of 5. Taken together, group I and 2 enterprises comprise four-fifths of total family-based enterprises. 27 The study on governance in Bangladesh sponsored by the Wodd Bank, relied on three nationwide parallel surveys of hiouseholds, businessmen, and civil servants in which 2,952 households were interviewed. A wide range of publicdy provided sevices were covered in the household survey. education, health, law and order, judiciary, and land administration, drinking water, electricity, gas, telephones, as well as loan services. For details, see World Bank 2002c. 34 Chapter2: AceleraftingGrow/th_ crime rates were quite high, with a substantial proportion going unreported to the police. Seven percent of all households surveyed reported being crime vctims, with theft (31 percent) and extortion-related violence (23 percent) being the two most commonly reported types of crimes among victimized households. A substantial proportion - ranging from 6 to 41 percent, depending on the nature of crime suffered - end up not even reporting the crimes to the police. 2.57 Deterioration in law-and-order harms women in particular. A recent study in Bangladesh documents the increase in reports of violence against women indicated by police records between 1995 and 1998. The rise came despite the social stigma attached to reporting such crimes, a tradition so strong that an overwhelming share end up not being reported (Matin etaL, 2000).28 Similaly, news reports of acid attacks and harassment of women have been gaining increasing prominence in the media. Women's increasingly prominent role as income earners is reported to have led to a decline in domestic abuse and improvements in their status in some localities,9 but the deteriorating law-and- order situation limits their freedom of movement and their related ability to take a larger place in the workforce. 2.58 The maintenance of public order and application of the rule of law constitute the government responsibility that most urgently demands attention and reform. Protection of life and property is probably the single-most important role of a state; indeed, some would insist that it is at the very foundation of the social contract between the government and its citizens. Unless households and investors have confidence that their lives and property are secure and their contracts enforceable, they are unlikely to commit the resources and investment required to accelerate the rate of growth. Furthermore, greater emphasis on police and judicial reform has the added benefit that it would most likely also yield high, overall economic payoffs, since fair and strong enforcement machinery is a necessary precondition for implementing reform anywhere. For example, a strong law and order system, with the accompanying effective investigative and enforcement machinery, would enable better loan collection, deter corruption in sectors such as education, health, and urban infrastructure, as well as help improve the overall business environrnent. 2.59 Macroeconomic Sta bilue Good macroeconomic management kept inflation in Bangladesh within single-digits during the past decade. Low inflation benefits the population in general, but especially the poor. Not only does it provide a more predictable and stable environment for long-term investments, but also, as noted in section 2.1, poorer households keep a proportionately greater share of their savings in financial assets that high inflation often erodes in value. In addition to the favorable impact of several bumper harvests and low international inflation, prudent economic management has also helped curtail inflation. The overall central Government deficit averaged around 4.7 percent of GDP during FY90-98, with domestic financing averaging a modest 1.1 percent of GDP. This record compares favorably with the level of deficits and domestic borrowing observed in other South Asian countries duting the same period (though not necessarily with other countries outside the region). Total external debt remained relatively low (36 percent of GDP in FY01), and was owed mainly to creditors at highly concessional terms. 2.60 However, the fiscal position has considerably deteriorated in recent years with a trend rise since 1998 in the governments fiscal deficit to 6 percent of GDP in FY01, financed in large part by higher domestic bank and non-bank borrowing. The rise in the consolidated fiscal deficit, which 28 The study includes suggestions on potentially fruitful areas for further research, as well as reforms in the judicial system that can help women seek legal redress for crimes of violence directed against them. 29 Nabi et. al. 2002. 35 Ban,glaesh: Povery Assessment takes into account the increasing losses of state-owned enterprises (SOEs), is even higher.30 Gross SOE losses were on average equivalent to 30 percent of budgetary spending on health and education during FY91-FY01. Continued high losses in this sector may precipitate a fiscal crisis that would jeopardize the macroeconomic stability of the past decade. A fiscal crisis would be particularly costly for the poor, since declines in social spending often accompany not just the crisis but the adjustments involved in remedying it, and at the margin, the poor are more likely to lose benefits when budgets shrink (see evidence in Chapter 4).31 During FY02, the government has taken corrective measures to reduce the fiscal deficit to 4.6 percent of GDP, and it is developing a medium-term macroeconomic framework to move it toward a more sustainable level. 2.61 In the near term, curbing hemorrhage from the SOE sector remains Bangladesh's highest macroeconomic management priority. Tackling the problems of the state-owned enterprise sector requires a policy response involving a mixture of privatization, with due attention to workers' rights to severance pay, and dosure of non-viable enterprises. The Government's recent decision with regard to Adamjee Jute Mills has been a bold step in line with these policy imperatives. However, there are still many sectors of the economy where the presence of state enterprises creates distortions which inhibit the development of private sector. 2.62 Outward-oriented growt* policies: Largely as a result of trade reforms introduced in the late 1980s and particularly during the early 1990s, Bangladesh now has a much more open economy - - measured by volume of trade, quantitative restrictions, average tariff rates, and black market foreign exchange premium. The real exchange rate has held relatively stable through the nineties, when the adoption of export-promotion policies along with gradual trade opening brought buoyant export growth, averaging 14 percent per annum in dollar terms. Rapid integration with the global economy has meant that the country's trade-to-GDP more than doubled over the last decade. 2.63 Bangladesh's increased trade openness has yielded considerable benefits - among them, and particularly for the poor, stabilized and lower food-grain prices. As Chapter 4 notes, since the liberalization of food grain imports in the early nineties, private sector imports of rice have on several occasions contributed to filling the food availability gap after poor rice harvests, limiting the potential upward spike in prices. Similarly, liberalization of imports resulted in rapid investments in private tubewells for irrigation, which coupled with increased fertilizer use and adoption of new varieties, helped boost agricultural production. Trade policy has thus played an important role in enhancing :food security in Bangladesh. Further, as the robust growth of the ready-made garment, leather footwear, and food and beverage industries in Bangladesh has shown, the shift of labor and capital from import-competing industries to expanding, newly competitive, export industries has been a strong job-creating force for both men and women. A recent study on globalization in the context of gender in Bangladesh condudes that it has had a significant impact on changing the lives of women, bringing more of them into the labor market, enabling their independent migration to urban areas, and giving them greater public visibility.32 30 The Bangladesh SOE sector comprises 40 state corporations and boards, along with their subsidiary enterprises, often enjoying monopoly power in a number of key sectors (induding the traditional infrastructure sectors of power, gas, ports, railways, but also in petroleum, fertilizer, sugar, and jute). SOEs have reported assets equivalent to 32 percent of GDP, and the annual investment of the SOE sector is currendy about 7 percent of Bangladesh's overall gross domestic investment Yet the operating surplus of SOEs in Bangladesh has turned from 0.6 percent in FY91 to negat*ve 0.9 percent of GDP in FY01. For more details, see the PER background paper on fiscal policy, 2001). . de Ferrante et al. (2000) examine government spending for several countries in Latin America and find that even when governments try to protect social spending during economic downturns, social spendingperpoorpmion does fall. 32 Khundker 2002. 36 Chapter 2: Accekrain,g Growth 2.64 Bangladesh has the potential to reap considerable gains from expanding its export base in labor-intensive industries since it has low unit labor costs compared to its main Asian competitors (Appendix Table A2.7). Completing the trade reform agenda to reduce the anti-export bias still in place,33 and creating the climate to improve the low productivity that penalizes competitiveness,34 will help the country realize fiurther gains from a continuing outward-oriented growth strategy. Physical Infrastrcture: 2.65 Average living standads in Eangladesh mre sotzg coff&nled acnccess to infrastructure. The availability of local public infrastructure is important to the development of a modem agricultural and non-farm sector. Farmers have little incentive to diversify crop production into higher value-added crops if what they grow cannot easily be sold, or if critical inputs are not readily available. Industry, businesses, and households all depend on public infrastructure for routine daily activities-providing lighting or operating equipment in a business, transporting goods to the market, and communicating with suppliers and customers. The multivariate regression model cited earlier was estimated to explore how various household and community characteristics in rural areas correlate with per capita expenditures (Background paper 3).35.36 Table 2.8 presents the percentage increase in per capita expenditure associated with the community infrastructure characteristics, after controlling for household characteristics. Table 2.8. Per-capita expenditures & Cormmunnkly RumT2Tctu=e Variables Pareant &hnane in w mfji¢ta En uires Infrastructure and Access to Markets Electricity 5.7 Phone 12.4 Distance to bus stop (kIn) -0.5 Soe:s 2000 HIES rural sample. Natar The reported estimates e the percentage increase in per capita expenditure associated with each variable, controlling for household characteristics. 2.66 The regression coefficients show strong correlations between infrastructure availability and per capita expenditures, even after controlling for personal characteristics. Individuals living in communities that haye electricity and phones have 6-12-percent higher expenditure than those where such services are absent. The degree of isolation, as measured by the distance to the nearest bus stop, accounts for a significant but small part of the differences in expenditure levels across communities. These effects indicate that infrastructure investments designed to improve area characterstics should play an important role in poverty reduction. Of the several ways that infrastucture works to strengthen the environment for growth and poverty reduction, three are noteworthy in Bangladesh: o Creation of marketed surplus from smal ame: Evidence from Bangladesh shows that both producer prices and marketed surplus are higher in villages with better infrastucture. For example, Ahmed and Hossain (1990) report that paddy and rice prices are 2 percent and 6 percent higher respectively in villages with relatively developed infrastructure. Marketed surplus 33 South Asia region has the highest average tariffs in the world. In addition, there remain in place in Bangladesh, significant non-tariff barriers to the free flow of goods and services. For more details, see World Bank, 2002b. 34 According to a study comparing labor productivity in several developing countries, Bangladesh's was among the lowest productivity levels (in terms of GDP per person employed) as a percent of the United States (Ark and McGuckin, 1999). 35 The analysis was done for rural areas only since the community questionnaire was not administered in the urban sample. 36 Note that although theory predicts that many of the variables induded in the analysis do indeed contribute to poverty reduction, the statistical relationships should be interpreted as correlates and not as determinants since causality can run both ways for some variables. 37 Bangladesh: Poverty Assessment for small farmers (less than 0.5 acres) is 52 percent in regions with developed infrastructure, nearly 4 times the surplus observed in less-developed villages. * Development of the non-farm sector: Comparing the importance of the non-farm sector as a source of livelihood across communities covered in the 2000 HIES reveals that availability of basic infrastructure and non-farm sector work are highly correlated in Bangladesh. For instance, where commercial electricity connections were available, localities were more than four times as likely to report small cottage industries as a main economic activity. Likewise, the transport and services were also more likely to show up in such places as main economic activities. * Improving financial intermediation in poor areas: Previous studies have found that credit conditions for small farmers improve considerably when improved roads, telephones, irrigation, and HYV food grain technologies bring increased output and market competition to formerly isolated regions (Chowdhury, 1992; Crow and Murshid, 1990). Infrastructure is also critical to the targeting of the poor by MFIs. They tend to place their officers within more developed rural areas with better access to transportation and communication infrastructure and banks and to avoid areas at high risk of flooding and other adversities (Zeller et. al. 2001). 2.67 Bangladesh has done well compared to South Asian countries in improving access to water and sanitation, but upgrading physical infrastructure remains a priority concern. Comparing infrastructure in Bangladesh with selected countries in the region (Table 2.9) confirms that access to clean water has been a success story. With the increased use of tube-wells, the vast majority of Bangladeshis now rely on groundwater for drinking and cooking, and access to improved water source and sanitation is now better than in India and Pakistan. However, many tube-wells are now known to be contaminated with naturally occutring arsenic. Since most of the wells have not been tested, however, the exact scale of the problem is not known. Still, a potential danger is that many people may revert to using surface water with high levels of bacterial contamination, increasing the risk of diarrhea and other water-borne diseases. Table 2.9. International Comparisons of Selected Infrastructure Indicators Indicator Ban!iadesh China India Pakistan Thailand Vietnam GNP per capita 370 780 450 470 1,960 370 (Dollars 1999) ,'Population 128 1,250 998 135 62 78 (Millions 1999) Population Density 981 134 336 175 121 238 (persons per sq. km: 1999) Access to improved water source 84 85 81 60 89 36 (% of population, 1990-96) 'Access to sanitation 35 .. 16 30 96 21 (% of population, 1990-96) Commercial energy use per capita 159 830 486 440 1,153 440 (kg. of oil equivalent, 1998) Electricity consumption per capita 81 746 384 337 1,345 232 (kilowatt-hours, 1998) Paved roads 9.5 .. 45.7 57.0 97.5 25.1 (% of total, 1998) Telephone mainlines 3 70 22 19 84 26 (per 1,000 persons, 1998) Domestic credit by banking sector 33.4 130.4 44.9 47.0 126.0 21.9 ( % of GDP, 1999). ST-- Soum: World Bank, 2001a. 38 Chapter 2: Accelerain,g Grnath 2.68 Undoubtedly, as well, Bangladesh has already made remarkable progress in developing rural roads and improving access to electricity. Improved road connectivity in Bangladesh during the last decade has played an important role in integrating markets, in reducng both inter-temporal and spatial variation in prices of important food commodities, in improving availability of critical agricultural inputs, as well as in spurring the expansion of the rural non-farm sector. The road network has grown considerably, particularly for roads connecting rual growth centers, new bridges and culverts, and the share of roads paved with asphalt or bricks. Although general road conditions have also improved significantly, access to productive physical infrastructure still trails other countries (Table 2.9), and infrastructure bottlenecks substantially restrict the economy's potential Further infrastructure development will be necessary to accelerate growth; this has been recognized by GOB in the current 2002-03 ADP which accords high priority to improvement in infrastructure. Emphasis should be placed on upgrading and maintaining existing infrastructure along with selectivity and investment in strategic areas so as to correct geographic imbalances and complement new directions of the economy.37 2.69 Increasing electricity supply and upgrading ports, inland waterways, and road networks are important for maintaining the momentum of greater economic diversification. The penetration of cellular telephones in rural areas illustrates that the government does not have to provide the infrastructure itself. In addition to further expansion of the private telephone network and an accompanying penetration of modern information technology, small private electricity networks could expand beyond the Rural Electricity Board's rural network, the growth of which will take decades to cover all rural areas even under optimistic projections. Some of the key issues in these sectors are outlined belovw, policy priorities and actions are discussed in greater detail in the companion Public Expenditure Review Report (World Bank, 2002a). 2.70 Electicty- Even though survey data indicate that access to electricity has improved between 1995-96 and 2000 (Table 2.10), Bangladesh remains far from universal access to electricity, now absent from one-fifth of urban households and four-fifths of rural ones. While this sector receives a subsidy of around $350 million per year (equivalent in magnitude to the total volume of assistance through the targeted food assistance programs), this subsidy disproportionately reaches richer households. Survey data indicate that the richest one-fifth of households are about five times as likely to have an electricity connection as the poorest fifth. Meanwhile, power shortages reduce industrial output by an estimated $1 billion a year, and GDP growth by 0.5 percentage points a year (World Bank, 2001c). Table 2.10. lPercemtage of lHtouaehoRda vith amm IE2ctriciy Comecrdon Per-capita IX-96 IDES20 ]B1 Qeintle Urban Rural -Ovezrl- UT-ac Rnnrai Overl I (Poorest) 35 1 7 46 3 12 2 62 5 14 72 8 21 3 79 8 19 S8 16 30 4 91 14 27 97 24 38 5 (Richest) 96 24 36 99 44 55 ODverall 73% 10% 21% C)% 193 % 31% Sem-a 1995-96 HES and 2000 HIES 37 HIES 2000 community data show considerable disparities in availability of infastructure across comamunities. For example, one-third of the communities surveyed were not connected to electricity, two-fifths did not have a market / bazaar within the community, two-thirds did not have a post-office, and 246 out of the 252 nual communities surveyed did not have any cold storage facilities within the community. 39 Bangladesh: Poveuy Assesrment 2.71 Roads: Many of the rural thoroughfares currently classified as roads are impassable for motorized vehicles.: Cpnsiderable variation exists in the utilization of the road network in different parts of the country, with significant bottlenecks and congestion in many locations due to inadequate capacity. Maintaining the core network in good condition and selectively upgrading other roads based :on well-conceived-and sequenced strategy are priority concems. 2.72 Inland waterways: Construction of simple but safe berthing facilities, dredging of important thoroughfares, and providing adequate clearance under road bridges are important measures that will allow the inland waterways system, which play an irnportant role in internal transportation of goods, to continue to expand the share of total freight carried through the country's extensive boating system. .2.73 Pores: Cargo yards at Chittagong, which handle 80 percent of Bangladesh's foreign trade, are severely congested. A recent study on the effects of higher shipping costs on the garment sector estimated that Bangladesh's exports could earn about 30 percent more -- $1.1 billion per year -- if various port inefficiencies could be removed. (Cookson and Ahmed, 2000). Social Assets and Inclusion: 2.74 I-PRSP consultations at all levels in Bangladesh- have confirmed that. strengthening local governments is one of the most desired institutional changes needed for faster poverty reduction (GOB, 2002). Decenfralization and participation - by enabling people to voice their demands for intervention and hence shape the development process - seem particularly important in Bangladesh -where there is considerable heterogeneity among the poor. Further, decentralization offers the potential for harnessing local knowledge to target interventions as is effectively done with public social safety net programs (Chapter 4). Supporters argue that, while Bangladesh has made reasonable "progress at poverty reduction during the past decade, accelerating the rate of poverty reduction will require increasing the development choices available at the local level as well as better indusion of all "social groups in these choices. 2.75 Bangladesh_ is fortunate to have an extensive network of non-governmental organizations. These organizations have been active in multiple arenas such as health, education, 'water supply and sanitation, micro- credit, development of agri-businesses, -f,a-'2 as well as in the management of : t l M ee common property resources. NGOs in Bangladesh are particularly well-suited led an to act as service providers. They have . 1eie e rend SovLstharrii intimate contact with and knowledge of edted.tro a rx i' " S It N grass-root realities, greater .IaRtu kcu al .w n'na±c accountability, and ability to innovate " and develop multiple delivery models that are better adapted to local conditions. Surveys routinely show that users prefer NGO-run schools and health facilities for their superior quality. Another vital role for non-governmentall'and community-based organiations is to help improve local-level accountability, as well as lobby for the rights of specific disadvantaged groups that may otherwise lack voice (e.g. women, ethnic minorities, 40 Chapter 2: Accelratin,g Groth tribal populations).38 NGOs have an important complernentary role to play through their social mobilization activities in fostering a favorable environment for successful decentralization to take place (Box 2.2). 2.76 Support is growing for progress in strngthenig incr giove me nes no promote paricipstion. Despite attempts (albeit weak) by successive goverunents over the years to introduce reforms to strengthen local government, Bangladesh has had relatively limited success in implementing decentralization. Most initiatives to-date have been partial and have not been sustained in the face of strong opposition from powerful interest groups. However, support for greater progress on decentralization in Bangladesh has been growing in recent years. The 1996 National Commriission on Local Government recommended a 4-tier system of rural local govemrnent for Bangladesh: Zilla (district), Upazila (thana-level), Union, and Gram (village). While three new Acts subsequently passed in the Parliament,39 elections have only been held to the union-council tier. Upazila council elections are still pending, while local government systems at the village and district level have not yet been implemented. 2.77 How best should Bangladesh proceed with decentralization? Among various approaches tried in different countries, examples include the ' P8 years 27.1 25.6 5.3 6.5 Mother's current Married 51.0 48.6 12.6 19.0 marital status Widowed, separated or divorced 54.9 57.8 14.4 20.5 Somure. 2000 CNS 2000 18 Interestingly, no clear relationship emerged from the analysis between child malnutrition and either women's work status or decision-making autonomy (as proxied by who makes the decision on what, if any, treatment to obtain for a sick child). 60 Chapter 3: Investin,g in Human Capital 3.47 The CNS 2000 data suggest more widespread child malnutrition, especially severe malnutrition, in villages where the price of coarse rice is higher. Other research has shown that frequent and large fluctuations in rice prices are likely to be even more important than high price levels in depressing child nutrition levels (Foster 1995). While improved infrastructure and food availability in Bangladesh have led to lower variation in the price of main food grains, the HIES 2000 data reveal non-trivial variation in the price of coarse rice across sample villages.19 Further improvements in infrastructure and transport of goods that leads to better market integration are likely to help improve children's nutritional status. 3.48 Access to safe water and s2nitadon., health facilides, and quality of village infrastructure are important factors eplaining varition in nutitiional status. Contamination caused by unsafe drinking water and lack of sanitation are important causes of diarrhea and other infections in developing countries. These infections, when they affect a child repeatedly, can cause malnutrition. The CNS data indicate a strong association between rates of such malnutrition and household sources of drinking water (Appendix Table A3.8). In general, tap water is observed to be the 'safest' water source, followed by water from wells and water obtained from ponds and rivers. Indeed, children who obtain their drinking water primarily from ponds or rivers are more than two times as likely to be malnourished and even severely malnourished as children who obtain their drinking water from taps. For the same reasons discussed above, the type of toilet in a home can also have a bearing on child malnutrition rates. The CNS data suggest that flush or sanitary toilets, followed by pit latrines, offer the best protection. As would be expected, the use of open space as a toilet is associated with the highest rates of malnutrition, with children in such situations nearly four times as likely to be severely malnourished as those who use flush toilets. Taible 3.13: Malnutrition Rates by Prevalence of lElness and Type of Curative Treatment Children aged 6-71 months who were Children £ged 6-71 months whose reported to have suffered from: Illness is typically treated: By village By a fully- No fever Fever or With no doctor, qualified or cough cough or family homeopath, doctor at a Nutrition indicator One or during the during the treatment herbs, public or No more two weeks two weeks or with pharmacist private health diarrheal diarrheal preceding preceding spiritual or another clinic or episodes episodes the survey the survey water provider hospital Moderate Underweight 50.2 62.9 49.3 59.6 69.2 53.7 42.4 or severe Stunting 48.4 53.5 48.4 50.3 53.9 51.9 38.6 Severe Underweight 12.0 20.8 11.2 19.1 15.4 13.9 8.4 Stunting 18.6 23.9 18.4 21.7 24.1 20.5 14.1 Souc: 2000 CNS 3.49 Illnesses and infections reduce the ability of the body to absorb critical nutrients, leading in turn to malnutrition. The CNS data show this syndrome very dearlyT children who experienced a diarrheal episode are significantly more likely to experience malnutrition and severe malnutrition than children who did not suffer from diarrhea (Table 3.13). Indeed, 21 percent of children with a diarrheal infection are likely to be severely underweight, as compared to only 12 percent of children with no diarrheal infection. Nor is diarrhea the only illness that reduces nutrient absorption of the body; repeated bouts of fever (indicating infection) and acute respiratory infections can also slow down weight gain and lead to malnutrition. In the CNS 2000 sample, both severe and non-severe 19 While the average price of a maund (approx. 40 kg) of coarse rice was Tk. 450 for the entire sample, at least 10 percent of sample households faced a price lower than Tk. 350, while another 10 percent faced prices of Tk. 575 or higher. 61 Ban,gladesh: Poverty Assessment malnutrition rates, are significantly higher among children who had experienced a fever or cough during the two weeks preceding the survey than among children who had not been ill.20 3.50 In addition to infection and illness incidence, the type of medical treatment usually selected for a sick child is also strongly correlated with his or her nutritional status. Children who are typically offered no treatment or home-based treatment for their illnesses are much more likely to be malnourished by every indicator than children who are treated by a village doctor, homeopath or drug vendor. Children in that second category, however, have higher malnutrition rates than those who are taken to a fully-qualified doctor at a public or private health clinic or hospital when ill.21 3.51 The availability of and access to health facilities is likely to reduce child malnutrition by increasing the utilization of health services, an important input into child nutrition and health.22 Data from the CNS suggest that proximity to a thana health center does lower child malnutrition (Appendix Table A3.9). Interestingly, however, the largest declines in child malnutrition from having a thana health center within 5 kilometers are observed for the poorest quintile. For example, a thana health center in close proximity to a village reduces the overall incidence of underweight children in that village from 53.5 percent to 51.9 percent. But the decline is far greater - from 63.1 percent to 57.9 percent - among children in the bottom consumption quintile. 3.52 The results with respect to the proximity of a private health clinic are very similar, showing that such access reduces both overall malnutrition rates and those among the bottom consumption quintile and supporting the finding that the poor also use private health facilities. The availability of an NGO clinic in the village, however, has the perverse effect of increasing overall malnutrition rates, probably reflecting the fact that health clinics are located by NGOs in villages where such rates are high. When nutritional outcomes for only the poorest quintile of children are considered, the local availability of an NGO clinic makes a positive difference. For example, the rate of stunting falls from 60.8 percent to 52.2 percent and that of severe stunting drops from 26.5 percent to 22.9 percent for the poorest quintile of children when NGO clinics are nearby. Finally, other infrastructure such as roads and electricity can also have indirect effects on child malnutrition by improving access to health facilities and by improving conditions of food storage and preparation. The CNS data indicate that villages that are electrified are likely to have lower rates of child malnutrition, particularly among the poor (Figure 3.7). For instance, both the rates of severe and non-severe stunting are nearly 10 percentage points lower in electrified villages than in villages without electricity. 3.53 Presence ofpublic reliefprograms and NGOs is associated with a strong reduction in child malnutrition among the bottom quintile. Households in Bangladesh are often inadequately protected against weather- and environment-induced shocks, such as floods, droughts and epidemics, because of the absence of well-functioning credit and insurance markets. These shocks can diminish household consumption and thereby harm child nutrition, even lasting damage on youngsters, the CNS data suggest, in the case of weather shocks - especially floods and cyclones. For instance, rates of underweight children in villages that experienced a flood in the five years 20 It is unlikely that a single bout of fever or cough could lead to severe malnutrition. What is more likely is that the children who reported being ill during the two-week reference period are the ones who repeatedly come down with fever and cough. Such chronic fever and cough is associated with high rates of malnutrition. Indeed, malnutrition also increases a child's susceptibility to infections, and so the 'causality' can go in the reverse direction. 21 Of course, the strong correlation between treatment choices and malnutrition may simply reflect the fact that parents who are likely to take their sick children to a qualified health provider or clinic are also the ones who are more likely to practice good feeding and hygiene techniques (due to better education or higher income). 22 However, if health facilities are located (by governments or NGOs) in those villages having the worst health and nutritional conditions, a (perverse) positive association between child malnutrition and availability of health facilities would be observed. 62 Chapter 3: Investing in Human Capital preceding the CNS 2000 are 7 percentage points greater than in villages that experienced no flood, with virtually no difference observed between the overall sample and the poorest consumption quintile. Cydones and epidemics also have similar effects on child malnutrition. In such a setting, public relief programs can play an extremely important role in providing disaster relief and short- term risk coping. Figure 3.7: Child malnutrition rates among ahildrein aged 6-71 months, by village eRectrifiestion stntts, 2000 EjModeraste or severe underweight E]Moderate or severe stunting 75 3OSevere underweight OSevere stunting 66 65 63 60 55 54 A (~48 45 : 35 - 31 24 22 25 - - 17 20 22 s:14 -3-1 15 Village not electrifie Village electrified Vilage not electifie Village electrified Entire sample Bottom consumption quintile 3.54 The Government of Bangladesh has operated several food assistance programs going back to the 1970s (see Chapter 4 for a more detailed description and discussion). The CNS 2000 data indicate that, while public food transfer programns, such as Food-for-Work and Vulnerable Group Feeding (VGF), have hardly any effect on reducing overall levels of child malnutrition,23 they have fairly large effects on reducing malnutrition rates among the poorest quintile of children (Table 3.14). For instance, the Food-for-Work program is associated with a reduction of 8-10 percentage points in malnutrition rates among the bottom quintile of children aged 6-71 months old. The CNS data also show very large effects of the presence of either BRAC or Grameen Bank on malnutrition rates among the poorest quintile of children. For instance, the percentage of underweight children is 15 percentage points lower in villages having a Grameen Bank or BRAC program than in villages without one. In the former, the rate of severely underweight children is nearly one-half the rate in the latter villages (15 percent versus 28 percent). 23 This in turn probably reflects the fact that these interventions are not explicitly targeted towards areas of high incidence of malnutrition. 63 Bangladesh Povery Asressment Table 3.14: Malnutrition Rates and Presence of Government/NGO Programs *Programs operating in the past year Moderate or severe Severe In the village of residence Underweight Stunting Underweight Stunting Entire Sample No Food-for-Work program 53.9 51.2 14.9 20.9 Food-for-Work program 52.1 50.6 12.4 19.0 No Vulnerable Group Feeding programn 52.4 50.3 14.9 19.3 Vulnerable Group Feeding program 52.6 50.9 11.9 19.5 No Vulnerable Group Development program 51.9 50.0 13.1 19.2 Vulnerable Group Development program 53.0 50.9 12.7 19.5 No Grameen Bank or BRAC program 53.6 50.2 17.7 20.1 Grameen Bank or BRAC program 52.6 50.8 12.1 19.6 Bottom Consumption Quintile No Food-for-Work program 68.4 65.5 19.9 31.1 Food-for-Work program 58.6 58.1 15.0 23.3 No Vulnerable Group Feeding program 65.6 66.8 21.0 31.3 Vulnerable Group Feeding program 58.7 56.1 12.8 21.6 No Vulnerable Group Development program 63.6 61.4 15.4 29.1 Vulnerable Group Development program 60.1 59.3 16.2 22.6 No Grameen Bank or BRAC program 74.7 66.3 27.7 30.8 Grameen Bank or BRAC program 59.4 59.4 14.7 24.8 Soun: Children aged 6-71 months. 2000 CNS 64 Chapter 4: Redsmn,g Vulnerabi&iy -EY FIND (INS AND CONCLUSIONS POLICY IMPLICATIONS Effectiveness of Targeting VGD, FFE, and VGF are reasonably well-targeted to Priority reform areas to improve targeting poor households, with the poorest fifth of the outcomes include developing finer targeting population nearly five times as likely to participate as criteria to reduce inclusion errors and increase the richest fifth. However, most of the pro-poor coverage of eligible households currently targeting is due to targeting of the poor within excluded from the program. Considerable scope communities rather than targeting of poor areas by the exists to improve geographic targeting to center. Exclusion errors are quite high, with a concentrate resources in areas that have a greater substantial share of eligible households currently not share of the poor or of the target population. covered by any prograrn. Assessment of Leakage Even though visible transfer receipts are pro-poor, a Reducing leakage from safety net programs is a large share of budgeted resources appears not to reach policy imperative. Reform options include the intended beneficiaries, indicating serious problems emulating the design features of other programs of accountability. For example, leakage estimates based with lower system losses (as GOB has done by on data from the 2000 HIES indicate that as much as announcing that the FFE will be replaced by a 75 percent of total FFE transfers do not reach any cash-stipend program to be administered like the beneficiary. Marginal incidence analysis of program female secondary school stipend program), transfers suggests that expanding them at the margin piloting new initiatives such as smart cards or would be decidedly pro-poor: households in the experimenting with altemative payment systems bottom-fifth of the population would be roughly 4-5 used in successful programs like the RMP, as times more likely to benefit from each extra taka of well as institutionalizing other monitoring tools spending than households in the richest fifth. (periodic survey-based assessments, public Reforming program administration to stem leakages expenditure tracking surveys, citizens report thus offers a potentially win-win option: not only cards, etc.) to improve accountability and would reducing leakage free-up additional resources minimize transaction costs. needed to expand program coverage, but increases in spending permitted by these additional resources would be decidedly pro-poor. Improving the Impact of the Public Safety Net Over time, there has been a welcome improvement in Given Bangladesh's high propensity to natural' targeting, with some poorly targeted subsidized PFDS disasters, it is important to retain some relief ration channels cut back, and others abolished programs in the menu of govemment safety net outright. In addition, food transfer programs have programs that could potentially be scaled-up to shifted objectives from pure relief to development, aid short-term risk coping. However, the case' making one of the most important advances in the for excessively large public food grain stocks to evolution of these programs. The change needs to be guard against shortages as well as to stabilize sustained to ensure that program resources make the prices is weak. Enhancing the development greatest possible impact on the long-term welfare of impact of food-assisted targeted interventions intended beneficiaries. Experience with the 1998 requires providing complementary inputs and floods suggests that programs such as the VGF and interventions. In addition, regular monitoring GR have an important role to play in providing much and evaluation is needed to ensure that targeted needed assistance to disaster-affected families. interventions achieve their desired objectives. 65 4. REDUCING VULNERABILITY: PUBLIC SOCIAL SAFETY NET PROGRAMS 4.1 In a low-income and disaster-prone country like Bangladesh, mobilizing sufficient resources to ensure adequate food intake and to protect the poor from natural disasters and other idiosyncratic shocks is a daunting undertaking. Bangladesh has made tremendous progress in improving the availability of food grains and strengthening its disaster management capabilities. 4.1: RECENT PROGRESS IN REDUCING VULNERABILITY: 4.2 The country has moved from being chronically in food deficit to self-sufficiency in rice production. Early investments in agricultural research, reforms in inputs markets (particularly for fertilizer, irrigation equipment, and seeds), and improvement in infrastructure have helped spur agricultural production. The government has privatized foodgrain distribution, lifted restrictions on rice and wheat imports by private traders, and reduced its presence in foodgrain markets, all actions that have contributed to improving availability and diminishing deficits in domestic production (Ahmed et. al., 2000). Since liberalization of trade in the early nineties, private sector imports of rice have on several occasions contributed to filling the food availability gap after poor rice harvests (in 1994-95 and 1995-96) and natural disasters (most notably, following the 1998 floods). Seasonality in rice prices is also much reduced, a consequence of rapid growth in dry-season boro rice production and improved integration of markets in different regions (Chowdhury and Haggblade, 2000). More importantly, 2000 HIES data show that households in Bangladesh are by and large able to shield consumption of this staple cereal from fluctuations in price. For most households, no significant intra-year variation in rice consumption is evident (Background Paper 5). 4.3 Over the years, Bangladesh has also made notable progress in its capacity to deal with natural disasters. Large quantities of public resources are now directed to water management, holding food stocks, emergency public works, and flood protection and cyclone shelters. Weather monitoring and early warning systems have been strengthened, and improved wireless operations have been set up in cyclone prone areas. The decine in numbers of deaths during crises reflects an improved ability to evacuate people from disaster zones and to provide shelter. At the same time, the spread of defensive infrastructure such as coastal and river embankments has helped to mitigate the impact of natural disasters. This enhanced capability, as well as the resilience of its people, was in ample evidence during the country's resolute and effective response in 1998 to one of the century's worst floods. 4.4 Notwithstanding these successes, high levels of poverty magnify the adverse effects of natural disasters: poor people and poor communities are frequently the primary victims, in part because they are priced out of the more disaster-proof areas and live in makeshift houses in areas with low quality infrastructure. In addition, various types of economic and non-economic shocks unrelated to natural disasters affect the poor disproportionately (Helen Keller International, 2001). These conditions justify the commitment of successive governments and the donor community to ensure some social protection for the poor. In 2001-02, total government spending on social safety net programs was approximately 1 percent of GDP and 5.6 percent of total government expenditures. 4.5 Section 2 provides an introduction to the main public safety net programs in Bangladesh, along with a short overview of their respective sizes and main objectives.' Using data from the 2000 While a variety of direct and indirect interventions - such as access to credit, a better enabling environment that gives poor people employment opportunities, effective communications infrastructure that can be mobilized in tirnes of disaster Chapter 4: Reducitng Vulnerabii y HIES, section 3 examines the targeting effectiveness of some of these programs along with some possible options to improve targeting. Transfer of benefits to non-eligible households represents only one type of inefficiency. Misappropriations that result in part from overall program resources not reaching any eligible or ineligible beneficiary can also account for a large share of total losses. Section 4 provides rough estimates of leakage from the system for the Food-for-Education, Vulnerable Group Feeding, and Vulnerable Group Development programs, including a few recommendations on how such leakage could be reduced. Finally, section 5 discusses how best to further enhance the relief and developmental impact of government programs. 4.2: MAIN SociAL ASSISTANcE PRoGRAMS IN l3ANGLADESsf: 4.6 Of the total social safety net expenditures, 95 percent go toward targeted food transfer programs that aim to provide relief assistance as well as to reduce wealth-related disparities in such assets as education, health, income generation skills, and access to infrastructure. Since 1993-94, over 1 million metric tons of food grains have been allocated to these programs each year (Figure 4.1 and Appendix Table A4.1). Figure 4.1. Allocatons to Food Assistance Pmogmms (in metric tons) 2,000.000- s S 1.800,00O0 f 1.6 ,80,00 O|1 8'_ FY40. 010Y2 F0 Y4 FY0 F0 Y7 F00 F0 Y0 F0 sz~~oFF OFFE .VDOG T G OOier .000.000 wE_ ||k 200.000 X ; ; "' : . FY91 FYfe2 FMG FY94 FY9S FY8a FY07l FYea FMe WO FYOI O FFW OFFE OVGD OVGF OTR DGR 06Other 4.7 These programs have been successfully and rapidly deployed to ensure food availability during natural disasters, particularly in 1998. In FY99, in response to heavy floods, the food provided by these programs was increased to about 1.8 million tons. At a conservative estimate this is a transfer of more than US$300 million, a substantial sum by any standard. Aggregate resource transfer under the targeted food assistance programs-not counting grain storage and distribution costs, or associated administrative expenses, etc. - was more than 120 percent of the government's recurrent expenditure on primary education, or nearly 80 percent of the entire budget of the Ministry of Health and Family Welfare that year. The remaining 5 percent of the Government's expenditures on safety nets is directed toward assistance to specific vulnerable groups through a number of smaller programs, including pensions for the elderly, and cash transfers to distressed, widowed or divorced female household heads, to orphans, and to poor freedom fighters (Table 4.1). etc. - are important to reducing vulnerability, this chapter focuses primarily on publidy funded targeted transfer programs that would formally come under the umbrella of the public social safety net. 67 Ban,gladesh: Poverty Assessment Table 4.1. Social Safety Net Programs under Govemment Budget 2001-02 Tk. Tk. Name of Program (mnillion) Name of Program (million) Cash Transfer Programs: Food Transfer Programs: Voluntary women's social welfare center 20 Test relief (recently renamed as RIMP) 1452 National social welfare council 20 Gratuitous relief 291 Private Orphanages 115 Vulnerable Group Development (VGD) 2294 Distressed/WidowedADivorced Women 250 Vulnerable Group Feeding (VGF) 218 Pension for aged 250 Food-for-Work (FFW) . 9920 Cash assistance for poor freedom fighters 288 Food-for-Education (FFE) 4610 Housing Fund 150 Source: Ministry of Finance, Govemrnment of Bangladesh 4.8 Over time, the composition of spending on food transfer programs has shifted from pure relief to development objectives. There are a number of food assistance programs in operation, each with its own specific objectives and target population. Some are relief programs that aim primarily at relieving immediate distress, generally due to natural disasters - these interventions are typically mobilized for a limited period and are targeted at the directly affected households. Other programs have explicit development objectives, such as rural infrastructure development, boosting primary school enrollment rates, and human capital development (Iable 4.2). Although relief provision remains an important objective, most targeted food programs have gradually shifted in emphasis from relief to development.2 Thus overall allocations to programs such as the Vulnerable Group Development and Food-for Education program as a share of aggregate program outlays have been increasing steadily through the nineties (Figure 4.1). Table 4.2. Allocations to Food-Assistance Programs 1999-2000 Program Off-take in Program Main objective 1999-2000 (metric tons) Food for Work Employment generation for the poor, mainly in the dry season 754,818 Development and maintenance of rural infrastructure Food for Promote primary school enrollments and attendance, reduce 285,973 Education drop-outs and improve quality of education Vulnerable Group Assistance to disadvantaged women in rural areas; training in 216,675 Development market-based income generating activities, functional education Vulnerable Group Disaster relief: food grain distribution to needy families in periods 149,138 Feeding of distress Test Relief Employment generation for the poor, mainly in the rainy season 124,508 (similar to FFW except with lighter labor requirements) Gratuitous Relief Disaster relief: food grain distribution according to perceived need 20,324 Other 57,690 Total: 1999-2000: 1,609,126 Sourre: Various program documents. Source for program off-takes reported in Appendix Table A4.1. 4.9 The benefits of the vanous programs extend beyond the simnple transferpaym ent: * The Vulnerable Group Feeding (VGF) and Gratuitous Relief (GR) are the main programs used by the government to provide emergency, short-term relief to disaster victims. 2 The change in orientation of food transfer programs from relief to development objectives has been a gradual process since the early 1980s and is in line with one of the main recommendations of the 1988 joint task force of the Government and aid donors on strengthening institutions for food-assisted development. 68 Chapter 4: Reducing Vulnerability However, besides the short-term assistance these transfers provide, they can also have extremely important longer-term benefits in helping households to avoid costly and damaging risk coping measures (e.g. selling productive assets, reducing food intake, child labor). o Food-for-Work (FF') and Test Relief (FR) are counter-cyclical workfare programs that provide the rural poor with employment opportunities during the lean seasons. In addition, these programs also help build and maintain infrastructure that is important in improving communications and enhancing productivity in rural areas. o Vulnerable Group Development (VGD) has evolved from providing relief to increasing self- reliance by tying food transfers to a package of development services - NGOs working in partnership with government provide poor rural women with skill, literacy, and numeric training; credit and savings mobilization; and health and nutrition education. The program also facilitates the entry of VGD beneficiaries (after training) into regular NGO credit programs and acts as a transition from relief aid to a longer-term development prograrn. o Food-for-Education (FFE) aims to remove economic barriers to primary school enrollment by the poor. An "in-kind" stipend that links monthly food transfers to poor households to primary school enrollment of their children, it promotes four objectives: increased school enrollment, better school attendance, lower drop-out rates, and higher quality of primary education.3 Box 4.L Description of the Main FoodAssisted WRrkfax Programs-s Fsn4i'n'o ork (FTW) ard 'rst Relief (R): FF it j isn umbrela of dsff6renit,progwraus and projects catried. oum c, a 'u%nbce otf lilts ministries iu colLthboration with various donors. 'rhe Government also runs several FFW pr.flgsi vsithcut dninr support, sudh as thc Rutal Infrastructure Developenit Prcgram (RlDP) implemented by dilt 1%iGtiNv Of L)Lastc r N'tatiagsTenti an(d Relief The main donor stipported FFW program is the Rural I X.h,einrnteri1 (R.)) program supported by the World liood Program (WPP), bilateral donors, and the ,'0i ~'7% pnr shafe the basic objectives of developing rutal ilnfrastructure and providing.employment to ,the rIa ; ,n.dr ouirig the dri' sessbon ton ths between Janiuary and April. Sotme prograrns sucfi as (1) piovide losiger-.. tLa;i employwnc3t. kills training, and nutrition education to poor women. nfrafstructare proiccts underakern by;. I; W pivt otrEls i'wlclde artivities such ats digging canals, building embankmenrs, developing ponds, and .Iulr asui tmrin.taiuing, roads. Test Reief, (IR),-recently renanied as the Rural Infrastructure Maintenance ?tugrmn (RI MTP) rd operated by the Mintistry of Disaster Matiagcment and Relief, is in most respects very simjia to other 17tW prjctcrv l lowever, anuikE thc I`FW projects, TR projects are cartied. out during the rainy season wo eenjssly aud ,NJox'imher, rind undertake activities with much hghter lhbor rcuire ments. In the progr-ar funaJed by tbl Goveirnitncit, resources arc,by and huge, illucied a:tr,s.s tegionlsin pr[ullpIrnin to fnpuI latior Ben. f iariv sllctirsn is via sr ll-targeting, since relatively Inw wages and labor requitemeni. in. -r Ln a vWay V3s t) dCi1anur1g. the nmn-poor from participating. Oft each project there is a Project Implerneltation Ccrnaittec Colnp-isiog polornuliy "nirnotables" and headed by the Unlion Partihad chairm.an. The committee is eouustcd with assessing pinjcet prdoity, feasibility, and benefits, as well as ,witb mnaintidnirg a )ist of the bu.-l,6icrir-s entploye.d on tht liroject. Allocations for each project are mnade on a notional bsis, asstunin0 'that IOJ cu. ft of earth woik reqiuires S0 kilogramts of wheat, and that workers will be paid a wage rale of 5.6 .1d;b(:Tams per day worked, Within each thana, the Project Implettentation Officer acts as the main liaison betw'een 'the PIC and the CGoyernrrmret. 3 As discussed later in this chapter, since July 2002 FFE has been changed to a cash stipend program. 69 Bangladesh: PovertyAssessment 4.3: TARGETING EFFECTIVENESS OF FOOD-ASSISTED TRANSFER PROGRAMS: 4.10 A welcome improvement in targeting came in the early nineties when, in an effort to reorient food transfers to the poor, the Government abolished the poorly targeted urban and rural ration channels.4 The share of resources allocated to targeted food-assistance programs has increased through the nineties: almost 80 percent of the total food grains channeled through the Public Food Distribution System (PFDS) is now directed toward these programs. The remaining 20 percent passes through the so-called untargeted, "monetized" channels of the PFDS: Essential Priorities (subsidized food grain sales to the armned and paramilitary forces, hospital and jail inmates), Other Priorities (subsidized sales to workers of government institutions, fire and civil defense departments), and Open Market Sales (to stabilize domestic prices). 4.11, 2000 HIES data can be used to examine the targeting effectiveness of the VGD, FFE, and VGF programs which jointly accounted for 40 percent of food-assisted programs in FY00 (for details, see Background Paper 5). These programs aim to reach different target populations. The target group in the FFE naturally comprises those households that have children enrolled in primary school, but within this large potentially eligible group, local committees select the poorer households based on criteria that include households with distressed female heads, low-income tradesmen, and the functionally landless (see program description in Box 4.2). Because of its objective as a transitional welfare program, the VGD is targeted to those women who have the capacity to leam and can engage in income generation activities. And similar to the FFE, within this large potentially eligible group, local committees select the poorer women using criteria such as female-headship, functionally landless women, women with extremely low or no family income, women day-laborers, and women who lack productive assets (Box 4.2). VGF transfers are targeted to households affected by disasters, with priority given to those disaster-affected households that have low income, that lack agricultural land and productive assets, and that are headed by women or day-laborers (Box 4.3). Figure 4.2. Average Participation Rates by Income Group 10 0 8 6- '-I ~~~~~~~10 4 -- 2 * 0 0 FFE VGD VGF All Programs M Quintile I * Quintile 2 0 Quintile 3 0 Quintile 4 * Quintile 5 4.12 VGD, FFE, and VGF programns appear to be reasonably well targeted to the poor. Estimates of the fractions of the population that participate in the program within each quintile show all three programs to be reasonably well-targeted toward the poor (Figure 4.2).5 The poorest fifth of 4 The impetus for shifting resources from ration channels to transfer programs targeted to the poor arose from a need to contain a ballooning food account subsidy, growing discomfort over the urban middle-class bias in the ration system, evidence of pilferage from ration channels, and shrinking resources from food-aid, all of which led the Government to abolish the main ration channels in 1993. 5 The pro-poor distribution of benefits is evident even after taking into account differences in the amount of transfers across households. 70 Chapter 4: Reduscing Vulnerabiiy IBo 4.2. Description of Main Food-Assisted cl gn Programs Food-for-Education (FFE): FFEI is nm "in-kinld" stipend program tbat links monthly food transfets to poor households to primanr school eFirollment of their children in order to, achitvr, tour okjectives. jircteaced school enrtllment, behttr school attendance, lower drop-out rates and higher quality of primary education. Households with children in primary s;ehool receive wheat orrice provided the children attend at least 85 percent of their classes and the family sends all children of primary school' age to schQol. The program is implemented mainly in rural ateas by the (Government's PXrinary and Mlass Education Diviaion, with the assistance of the Directorate of Primary Education. TIhere are two stages of targt'ting. Virst, in each thong, the I'lhana Education Committee (comprising thef Thatna NibaWi Officet, Thatia Education Officcr, representatives of local head teachers, educatit"4 spectaists, and elites) recommnc;ds one or tmlore unions deomed toi be economically backward and to havt low literacy ratvs fot' inclusion in the program. Based on the thana recommenidations, the Deputy Conm-nissioncr, in consultation wirh the Minister in charge of the district, nakes the final decision. Within each selecuted uion, all government, registeted non-governsutit, samelliie, and low-cost primary schools as well as one indepcndent madrasha are eligi'le for the.progrm. tlowevcr, in orler to provide incentitves for imnproving the quality of primary educatiorn, schools are rquired to mcet prescnbed mirnimuth sfanda±ds' on anendance. piss rates, and exam schedules in order to participate- Second, School Managetent (Comniittees, in consiltation with the C.mpl,..,.rv Primary Education Ward Comraittme, draw up a list of beoefidaries for the progranL hl'e (Govrer nn deliUcs thC cr1CnO (Li inclade (i) distressed femnLle-headed families; (ii) dayJaborers; (iii) low-income tradesmen,and (IV) housebolds that are funLininally landless. In addition, in order to be cligible for the IFFE, the household should neot cLutentlybe a particnE Ln ar.. "dier targeted food assistance program. Al maximum of 40 perxunt of audents at any'scehool may be included. Vobierble Group Development (VGD); Started in 197S as Vulnerable Group Feeding, this program was renamed as it e!VolVed.*m pio' dinyg Feb, f to increasing beneficiaxies' scIf-reliance. VGD provides poor disadvantged womuen in tuad artas with nroEthlt food cranstt-r azid a packagc of dtvelopment services that mobilze savings and traiu beaieficiaries in different tnp:aw,geo eratlJur .kdlb Beneficiaries receive a monthly mation of wheat gndl training for 18 months if they have complied with a pubuLory monrtly rauh savings requirement. 'the VGD progiram, imttiplemnted by the Governtent with support from- WFlPtahil a number rit bitleral donort, coinprises sevraJl subproject; of whicb the Union Parishad (UP) VGI) is by far the lIrgest In Lhc UPVGI), women are organized in groups and providcd with u package of dvecLqpicrAt servicts (primatily irom the Bangladee4 Rural Advancemenut Committee) comprtising. awarencss budding on social and health issues, functional liteorcy. ana "ii ineacy, training in income generating skfllt, participation in savings schemes and actcess to credit to stat up ixw., incoble-generating ventures. VGD is impluiunrl. by the Directorate of Relief atid Rehabilt-ation under thb coordinating authority of the I )epartmcnt vf Wv'omen's Affairs in the Ministry ot Women's and Children's Affairs (MWCA). l'hi-e are two steps in the slectiosi of cardhokldm The national VJI) conmmittee distributes rards across the 461 rutml thanas, rhth hiphL. g t.ana'si food inRcurity rating by the Government and WFI', the greater the share of cauds it gCtf. A mninimiu-a of 0) Worent atc then sel cted from each union by union and thana-level local committees accotding to selection criteria which itehide functtQoally landless *wLumen, women with extremcely low or no ftndy income, wouen who arc day laboters, arnd women who la:k productive swuets. Preference is given to female heads of households (widowed, separated, deserted, divorced ut vith disableo husbands) aiid to wom(n who are physically lit tri train. Wonien wctho receive assistance from other programrs or have partiipated in the VGI) in an eadier cyde cannot be selected for the VCl)., the population, for instance, was nearly 5 times as likely to participate as the richest-fifth. These outcomes are comparable to the performance of targeted programs in other countries.6 4.13 Several factors underlie the pro-poor distribution of benefits. First, the targeting criteria used to select beneficiaries narrow the eligible population to the degree that more than half the target beneficiary group is from the bottom two-fifths of the population. Second, even among eligible beneficiaries, it appears that local program administrators go beyond the criteria to identify the poor from among the egible populations. Thus, even among the group of eligible beneficiaries, a person from the lowest quintile is about 2.5 times as likely to be selected for the program as an individual from the richest quintile. Third, in the case of the FFE programn, part of the reason the distribution is pro-poor is simply because poor households on average have more children of primary school-going age. 6 Grosh (1994) reviewed the design and targeting outcomes of 47 government systems in Latin America, and found that a median targeted program delivered about 70 percent of all benefits to the poorest 40 percent of the households. Subbarao et. al. (1997) also review targeting efficiency for a number of different food-based programs, aand find that it tends to be best for programs involving work requirements, modest under food stamps, and lowest under price subsidies and quantity rationing. 71 Bangladesk: PovertjAssessment. 'S :,n 4.3. 1Descyipti5ctno' dhieB Mum r#ood-,Assited ReisfPh tamngai- h -.e ;| 'ar.l C a e. r ?' '*1 1"' .csi.ined t') pro'ed o or more months uf ffod rations to'a selected wmber cd househots i.1i ir'd iod c'i . . irAitc mtCd hy h citctcrat. of Rdivf oidte the Ministry of L)isster \tII3FCiFct .sIir anclI Rt4ivf. ' ri . lt : .rt t.T' .m-or:'zm. 'tr tI o IiSty of T on-c whnll thought lieceslary. de- i' ,r.;,, ic, . I1'rr:t is'<, J i- ;1ly an t.'ig ti_kras ihat are a4fectd by diastet. Among the .rchCIdi th.rn. rwo thirds, 'oi the iood is _q.te'1 .tcto2,Th ,o o "pulti ii th. sn:inng one-thitrd is alottcd to thanas rated as hni. in; vcrybhsgh ut high ,ond is . GC;(,0.r.vnet;if/` xesource alluoaatt wap tmor food-assistd devdcupsncnt. Within thai4uas,,thVt house!htl4s fo --:.. i r: I" c b. lcl comImuniticsi Each Uniion Patshad (UP) chairman stnds a. list of .otaati bceficit-ite (COtrt-XVa fr'ot ' 'unme-datious cf w Prd laftibers., with 50 pevceixtnf the bheneficiarwts takm trom fem:;e "iard rrrn-=nr lisri; r0o S 'h-r& cl ct- i.re ineludiog, thc 'I rian: Nirbafi Officer ([NO),'UP chairmin, and othei,ltWaI goveron.n. -m.iaa. Aurlth rcr.4..- .h.. .aini selcktiop. Co,'owmcsnt selr'tio, criteria are dri rtd t~~~.O .eit~ .'L .-c -' }tv"' 1?,ecir 'mo'se5.r+ - irl' t if f r i. ti -eIrm .rid to rscu.,ive food for a few months. *fhe Ministry lecides how inudi t ie ' rC.iv', '!J1tOvi tI'V- k- t1 a d o t-c ' *'rtnol the disaster. In piottte. it,is not al'tayvS nptssible to iestAct fIttd d5sti.b.thin iatl ," n't ' ' vSt'A'tm Oi c lJ' ricedy l'ouseht6lds are adsNt prusent at the UP cc&itcr Ut die rir,,c oflsriburiccrt. le Sll . * -Th$,Thro;0 irfies .sveu li teduca thl a-olaaut giVes-s to Cach card holer dIn arder;to 1 UIL PL, ic. t,tI ll .f-<-,,sa 1;J .i> ' .u't , '. jCt 'L.n.-1 n. ..t-tcr.- ;: 6licf ko ,l.iste' area,s. UnitU I),s.is9tu 4.rmirwes (tlDnt .), ras i ?,'. . i,' j-! i..- *li - , - cker.ri t s,.i, ,... i ois'TrMItiO t tON r nutnl '. hou- a h fil u:vrAc *itt' . cioJ .1 .I< 'iJ ' i -I ' "'1S .i -tt *.h *i' IngS nlt'd-at the t',ssa-lcr'e by the-T t I .u l enl t-' c. tlte'Ministry lq '._ 'j-s.u-Jl --t1' :Sr 0'u|. ".i'¶.S. .bP5LL, ''i ~i.Sn,!- Ar.)*i't, the Nkit'~iAtm detcriuirws the type. of .Laui-.I:lrlt.C t..ash, food. .blan'u.'as, b sid«in 'a.lwe.ir^s ard Stu .,a;), g.ol jrphic i-ocaton, ad i.nietsy entitlvi t' t'ncou{tt1_Cd h, jdirrv _ tizzn%. P. rotdFbe feaurue has bee; tbr.- wtdespat pt1ubImcinS .n of the findings. Fm esarnpieu, ,' htrg SY W. ,rldtr,j,L ELl_[il _ufl ' I -. *Li_.sI IiI{ ,_i..,4h1 f,rp ,.i .r . Participatory 'Woniruring ~ind ETvaJnii don in. oh. ,,, stakeholden a 4liffi-rlŽt lvVClS vi'.'.-kir',, togeFthet tol idecO00,000 tk) 3.6 37.9 Infrastructure and Access to Markets Electricity , 5.7 Phone --- 12.4 Distance to bus stop (kIn) -0.5 Distance to Dhaka (km) ns Access to Natural Assets Beel --- 3.3 Forest --- ns Khas --- 2.3 Grazing --- ns Diversification Main economic activity females: NAG --- 3.8 Main economic activity: NAG -- ns One crop land most predominant --- 5.2 Presence of Banks, NGOs, and Cooperatives Krishi Bank --- -14.8 Grameen --- ns BRAC --- -3.9 Proshika --- -5.4 Farmers Co-operative --- ns B.S.S --- 3.9 Notes: The estimates measure the percentage increase in per capita expenditure associated with each variable, controlling for other included characteristics. ns means non significant at 10 percent. Both regressions include a constant and controls for household composition. The rural regression also indudes dummies for Division that,the household resides in. Since the community survey was not administered in urban areas, the urban regression does not include community characteristics. Village dummies were induded in the urban regression to control for village fixed-effects. 102 Apendces and References Table A2.6. Land Ownership and Poverty: Rural Bangladesh Per capita exp. % population by amount of land owned (in acres) Quintile < 0.05 0.05-0.49 0.50-1.49 1.50-2.49 2.5+ acre Total 1 64.9 14.7 13.6 3.7 3.1 100% 2 55.0 13.5 17.5 8.3 5.7 100% 3 43.7 14.2 19.5 10.4 12.2 100% 4 35.2 12.0 20.3 12.3 20.2 100% 5 32.3 8.5 16.7 13.6 28.9 100% Overall 48.0 13.0 17.5 9.2 12.4 100% Somm.: World Bank staff estimates from 2000 HIES, rural sample Table A2.7. International Comparisons of Unit Labor Costs in the Manufacturing Sector Country Unit Labor Cost (% in PPP of U.S.) 1980-1984 1990-1994 Bangladesh 11% 12% India 21% 11% Nepal 11% Na Pakistan 16% Na Sri-Lanka 11% 10% China 11% Na Malaysia 40% 33% Thailand 19% 14% Indonesia 26% 15% Philippines 24% 24% Somr: Estimations based on WDI 2001 and Penn World Tables. Details in Background Paper 8. Figure A2.1. Poverty Trends in Bangladesh under Alternate GDP Growth Scenarios 50- 45 - 0~-. 40 L *o.we _ _r Poverty Line 84=0 - 35 20 3 4L-/ 10 -- 5 + -4 4.5% growth -- - 6.0%o growth . 7.5% growth 2000 2005 Year 2010 2015 103 Bangladesh: Poverty Assessment Table A3.1. Percentage of Children satisfying 'Basic Education' Criteria by Region % of children Region 1993 1998 Change Rural Dhaka 29 24 -5 Rural Chittagong 21 18 -3 Rural Rajshahi 23 31 8 Rural Khulna -18 38 20 Rural Barishal 23 32 9 Rural Bangladesh 23 27 4 Urban Bangladesh 56 48 -6 Overall 27% 30% 3 Source: Reproduced from Table 5.19 in Hope, Not COmPIacenY, 1999. Table A3.2. Gross Enrollment Rates by Expenditure Quintile and Poverty Status Urban Rural Overall Boys Girls Total Boys Girls Total Boys Girls Total Primary: I Lowest 74 86 80 72 79 75 73 80 76 2 91 98 94 85 87 86 86 88 87 3 107 101 94 95 99 97 97 99 98 4 108 102 95 95 103 99 97 103 100 5 Highest 102 83 92 105 108 107 105 103 104 Poor 81 89 85 82 87 85 82 88 85 Non-poor 105 97 101 99 102 100 0 101 101 Total 94 93 93 89 93 91 89 93 91 Junior Secondary I Lowest 12 26 18 19 37 28 17 35 26 2 44 50 47 33 45 39 35 46 40 3 68 92 80 38 49 43 43 58 51 4 96 62 77 60 85 72 66 80 73 5 Highest 76 77 76 72 84 79 73 83 78 Poor 26 37 31 29 43 36 29 42 35 Non-poor 76 75 76 61 80 70 64 78 71 Total 53 61 57 43 59 51 45 60 53 Secondary I Lowest 3 9 6 9 9 9 8 9 8 2 20 51 37 21 26 23 21 33 27 3 62 63 63 31 39 35 37 45 41 4 85 117 100 67 61 64 71 72 71 5 Highest 137 80 103 89 100 94 97 95 96 Poor 11 30 21 19 22 21 18 23 21 Non-poor 89 83 86 73 78 75 77 80 78 Total 62 65 63 47 49 48 50 51 52 High secondary I Lowest 7 7 7 15 0 9 13 3 9 2 38 13 25 14 8 12 18 10 15 3 88 49 69 23 19 21 35 28 33 4 130 90 113 56 43 52 70 54 65 5 Highest 136 187 157 101 75 90 109 99 105 Poor 21 10 15 16 9 13 17 9 14 Non-poor 119 108 114 72 56 66 83 71 78 Total 90 75 83 48 38 45 57 48 54 Sourre: 2000 HIES, World Bank staff estimates 104 Appendices and Refernces Table A3.3. Distribution of Public Education Expenditures (percent) in Various Countries Welfare class Year Source I (lowest) 2 3 4 5 (highest) Total Vietnam 1998 Vietnam PER, WB 2000 Primary 26 25 23 16 10 100% Secondary 13 19 23 24 21 100% Upper secondary 4 11 17 30 38 100% Higher and vocational 1 2 6 20 72 100% Bolivia (urban only) 1989 Grosh 100% Primary 40 28 18 10 4 100% Secondary 30 29 22 13 6 100% Tertiary 8 17 24 27 23 100% Chile 1983 Petrei 100% Primary 37 28 19 11 5 100% Secondary 21 27 22 19 10 100% Tertiary 6 7 14 20 54 100% Costa Rica 1986 Sauma and Trejos 100% Primary 30 27 21 14 8 100% Secondary 18 21 23 21 17 100% Tertiary 10 5 14 29 43 100% Cote d'lvore 1995 Demery et. Al 100% Primary 19 21 24 22 14 100% Tertiary 6 20 15 13 46 100% All education 14 17 17 17 35 100% Albania 1996 Albania PER, WB 2001 100% Basic 22 22 20 20 16 100% Upper secondary 6 10 21 25 38 100% Tertiary 5 5 29 21 40 100% Table A3.4. Distribution of Government Health Subsidies by Sector Urban Rural 1 5 1 5 lowest 2 3 4 highest Total lowest 2 3 4 highest Total F. plan. & communicable diseases 17 19 19 22 23 100% 20 20 20 21 20 100% Child health 23 22 20 23 12 100% 25 22 21 18 14 100% Maternal Health 13 17 24 23 24 100% 23 17 21 18 22 100% Curative care 10 32 16 24 18 100% 14 18 26 22 21 100% All Health Subsidies 14 26 18 23 19 100% 19 19 23 20 20 100% Source. 2000 HIES, World Bank staff estimates 105 Bangladesh: Poverty Assessment Table A3.5. Distribution of health subsidies across welfare classes in selected countries Welfare class Year Source 1 (lowest) 2 3 4 5 (highest) Total Vietnam (inpatient) 1993 Prescott 1997 13 17 24 22 24 100 VietnaTn(outpatient) 1993 9 14 15 23 39 100 Vietnamn (commnunity centers) 1993 - 20 29 22 18 10 100 Vietnam (all) 1993 - 12 16 21 22 29 100 Malaysia(inpatient) 1984 Govt. of Malaysia 25 21 19 20 16 100 Malaysia (out patient) 1984 24 23 21 18 15 100 Ghana (all health) 1992 Demery et. al. 11.6 15.5 18.7 21.4 32.9 100 India (curative) 1995 NCAER 2000 10.1 13.4 17.8 25.6 33.1 100 * For India, consumption of immunizations and outpatient care in PHC and below (non-hospital care) appears to be pro- poor. Outpatient and inpatient hospital care appears to be pro-rich. The exact parameters of the distributions are not available at the moment. Table A3.6: Child malnutrition rates in South Asia, 1990-2000 Bangladesh India Pakistan Sri Lanka Nutrition status indicator 1999-2000 1998-99 1990-91 1987 Stunting (hei&ht-for-age) Moderate or severe 50 57 57 34 Severe 20 32 36 - Underweight (weight-for-age) Moderate or severe 56 58 46 48 Severe 17 24 19 - Wasting (weight-for-height) Moderate or severe 9 13 10 13 Severe 1 2 1 - Source Various DHS Reports. Note: For comparability, comparison is limited to children 24-35 months (24-36 in the case of Sri Lanka). Table A3.7: Rates of child malnutrition among children aged 0-59 months, 1995-2000 Nutrition Status Indicator Bangladesh DHS 1996-97 1999-00 Underweight (weight-for-aze) Moderate or severe 56 48 Severe 21 13 Stunting (height-for-age) Moderate or severe 55 45 Severe 28 18 Wasting (weight-for-height) Moderate or severe 18 10 Severe 4 1 Sorme: Various DHS reports. 106 Appendices and References Table A3.8: Rates of child malnutrition among children aged 6-23 months, Iby d rg watez source, type of toilet, and housing conditions Water, sanitatimn and Moderate or severe Severe lHousing lIndicator Underweiglht Stndtiag Underweight Stunting Tap 38.2 32.2 7.7 11.7 Drinking Well or tube well 51.6 49.3 12.7 19.3 water source Pond or river 68.6 67.2 20.7 23.2 Flush or sanitary toilet 28.2 27.8 4.4 6.4 Type of toilet Pit latrine 47.4 42.4 9.8 18.1 Open space or temporary toilet 56.7 55.5 15.4 21.4 Type of roof Cement 28.1 28.6 6.2 7.1 mtYetfrial: Corrugated iron sheet, wood, tile, other 58.3 56.8 15.7 23.1 material. Hemp, hay or bamboo 50.5 47.8 12.1 18.6 Type of wall Brick or cement 31.6 29.3 6.2 7.6 material: Corrugated iron sheet, wood, mud brick 49.7 46.1 11.2 16.4 Hemp, hay, bamboo and other 58.2 57.2 15.8 24.9 Housing Up to 30 57.4 55.1 15.5 24.6 space (sq. ft.) 31 to 60 51.4 50.6 12.4 19.2 per erson: More than 60 45.4 41.1 10.6 14.1 Somrce: 2000 CNS. Table A3.9: Rates of child malnutrition among chnildren aged 6-711 months, by access to facilties, 2000 Moderate or severe Severe Sample and indicator Underweight Stuong Underweight Stunting Entire 5 km or closer 51.9 47.7 12.1 17.8 sample Thana health More than 5 km away 53.5 52.0 13.9 20.7 Bottom cons. Center 5 km or closer 57.9 56.0 16.0 24.0 quintile More than 5 km away 63.1 62.2 18.4 26.5 Entire Private health 5 km or closer 55.7 53.2 12.0 19.7 sample More than 5 km away 52.6 50.6 13.7 19.7 Bottom cons. Clinic 5 km or closer 60.4 52.2 11.2 18.5 quintile More than 5 km away 61.6 62.1 17.2 26.4 Entire Not in the village 52.4 51.0 13.3 19.4 sample NGO clinic Located in the village 57.4 53.2 13.5 22.2 Bottom cons. Not in the village 61.9 60.8 17.2 26.5 quintile Located in the village 55.5 52.2 16.2 22.9 Somrce:: 2000 CNS. 107 Bangladesb: Povqery Assessment Table A4.1. Annual Off-take of Food Grains from PFDS: Non-Monetized Channels OVERALL FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FFW 462,895 540,585 368,619 425,307 500,223 469,219 458,316 469,070 697,599 754,818 611,000 FFE 79,553 174,486 241,170 277,385 357,738 286,662 285,973 350,000 VGD 224,616 230,733 131,862 166,924 183,901 173,210 179,775 198,150 205,826 216,675 184,000 VGF 85,495 30,585 464,286 149,138 153,000 TR 65,668 97,936 32,972 71,489 96,734 89,338 134,067 101,449 90,310 124,508 90,000 GR 44,397 55,985 17,844 29,594 30,146 74,619 17,850 17,659 74,234 20,324 28,000 Other 65,951 72,433 79,828 99,574 60,423 49,190 54,955 57,690 61,954 Total 883 925 617 845 1,065 1,147 1,128 1,224 1,874 1,609 1,478 (Total in '000 metric tons; all other figures in metric tons) RICE: FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FFW 42,722 28,581 205,084 972 7,336 739 126,576 3,312 7,637 334,516 193,000 FFE 216 6,024 3,897 209,625 71,039 59,636 112,058 150,000 VGD 85,495 26,477 55,585 137 1,679 713 87,584 75,975 11,495 62,032 64,000 VGF 85,495 24,167 168,318 126,475 132,000 TR 33,718 3,751 30,339 546 5,085 1,357 121,423 14,683 37,017 62,374 40,000 GR 31,689 31,974 10,912 12,552 3,807 33,955 16,598 8,532 65,844 7,562 24,000 Other 62,598 57,117 42,279 28,887 55,471 43,618 36,067 38,851 35,000 Total 279 91 365 72 66 70 617 241 386 744 638 (Total in '000 metric tons; all other figures in metric tons) IWHEAT: FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FFW 420,173 512,004 163,535 424,335 492,887 468,480 331,740 465,758 689,962 420,302 418,000 FFE 79,337 168,462 237,273 67,760 286,699 227,026 173,915 200,000 VGD 139,121 204,256 76,277 166,787 182,222 172,497 92,191 122,175 194,331 154,643 120,000 VGF 6,418 295,968 22,663 21,000 TR 31,950 94,185 2,633 70,943 91,649 87,981 12,644 86,766 53,293 62,134 50,000 GR 12,708 24,011 6,932 17,042 26,339 40,664 1,252 9,127 8,390 12,762 4,000 Other 3,353 15,316 37,549 70,687 4,952 5,572 18,888 18,839 26,954 Total 604 834 253 774 999 1,078 511 983 1,488 865 840 (rotal in '000 metric tons; all other figures in metric tons) Source: MIS, DG Food and FPMU, Ministry of Food. 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