An Overview of Poverty Reduction Strategies: First FYP to Fifth FYP Presentation by Dr. Muhammad G. Sarwar Civil Service College, Dhaka 13 June 2011

Presentation Contents Poverty in Post-Independent Bangladesh Historical Context of Mid-Term Planning Planning for Poverty Reduction – First Five Year Plan – Tow Year Plan – Second Five Year Plan – Third Five Year Plan – Fourth Five Year Plan – Fifth Five Year Plan

Poverty in Post-Independent Bangladesh Types of Poverty1963/641973/74 Absolute Poverty4079 Extreme Poverty0542 3

Planning for Poverty Reduction: Bangladesh Development Planning is based on the State Constitution (Part II, Articles 9 -20) 1.Article 14: emancipation of the peasants and workers from all forms of exploitation; 2.Article 15: provision of basic necessities of life- food, clothing, shelter, education, and medical care; 3.Article 16: rural and agricultural development; 4.Article 17: free and compulsory education; 5.Article 18: improvement of nutrition and public health; 6.Article 19: equality of opportunity to all citizen; 7.Article 10: participation of women in national life. 8.Article 9: promotion of local govt. institutions for improving public service delivery; 4

Historical Context of Mid-Term Planning After Bolshevik Revolution Soviet Union initiated mid-tem five year centralized state planning in early 1920s Newly emerged decolonized independent countries in Asia and Africa followed the mid- term five year centralized mixed economy planning in 1950s after the Second World War 5

1970s: Dominant Development Planning Paradigm In 1970s Dominant Development Planning Paradigm was Keynesian economic model that advocates state interventions in economic management. Technical framework mostly based on H-D model along with with I-O tables – First Five Year Plan 1974 – 1978 – Two Year Plan

First Five Year Plan : Plan Objectives – To reduce poverty – To continue and complete the reconstruction work to the benchmark of 1969/70 – To expand the output of essential consumption items – To arrest the inflation (rising trend in the general price level) – To increase the GDP growth rate – To increase per capita income – To attain self-sufficiency in food-grain production – To reduce population growth rate – To reduce dependency on foreign aid – To consolidate the gains made so far in socialist transformation of Bangladesh 7

First Five Year Plan: targets Increasing GDP growth rate to 5.5% per annum Increase per capita income at the rate of 2.5% per annum Employment creation of 54 lakh man-year (against 39.3 lakh man-year additional employment requirement in the Plan period) Reducing dependency on foreign aid to 27% of total investment requirement Reducing population growth rate to 2.8% from 3.0% per annum 8

First Five Year Plan: Plan outlay and its financing (Crore Taka at 1972/73 prices) Plan Outlay4,455 Public3,952 (88.7%) Private503 (11.3%) Financing Domestic Recourse2,656 (59.6%) Foreign Aid1,799 (49.4%) 9

First Five Year Plan: strategies Recovery of the war damaged economy Growth of Output and Income Equitable distribution of income Employment creation (generating 54 lakh man-year in crop agriculture, rural works programme, construction, industry, and social sectors against 39.3 lakh man-year additional employment requirement in the Plan period) 10

First Five Year Plan: achievements /failures GDP growth rate per annum: 4.0% (GDP grew by 44%) Domestic resource mobilization: 20% of Plan outlay Money supply grew by 148%, so was the general price level Terms of trade deteriorated to 69 by 1978 from 100 in

1980s: Dominant Development Planning Paradigm Keynesian model was discredited 1098s due to bad performance of the State Enterprises, however, Keynesian Planning model continued. Technical Framework incorporated SAM in addition to I-O table – Second Five Year Plan (1981 – 1985) – Third Five Year Plan ( ) 12

Second Five Year Plan : Plan Objectives/targets – Attaining 5.4 % GDP growth rate per annum on average – Equitable growth – Expansion of employment – Eliminate illiteracy and achieve universal primary education – Reducing population growth rate – Strengthening local government – Domestic resource mobilization to attain self- reliance 13

Second Five Year Plan : Plan Strategies Emphasis on rural development Increasing agricultural production Regional / spatial planning to reduce regional disparity Developing Institutional Framework for local level production planning Industrialization Balancing public and private sector development Population planning 14

Second Five Year Plan : Plan Outlay and Financing (Crore Taka at 1979/80 prices) Plan Outlay17,200 Public11,100 (64.5%) Private6,100 (35.5%) Financing Domestic Recourse9,100 (52.9%) Foreign Aid8,100 (47.1%) 15

Third Five Year Plan : Objectives/targets Reduction of population growth rate from 2.4% to 1.8% Expansion of productive employment to reduce unemployment Attaining universal primary education and HRD Development of technological base for structural change in the economy Attaining food self-sufficiency Satisfying of basic consumption needs Accelerating Economic growth for poverty reduction Domestic resource mobilization for attaining self-reliance Upazila development program 16

Third Five Year Plan : Plan Outlay and Financing (Crore Taka at 1984/85 prices) Plan Outlay 38,600 Public 25,000 (64.8%) Private 13,600 (35.2%) Financing Domestic Recourse 17,572 (45.5%) Foreign Aid 21,028 (54.5%) 17

1990s: Dominant Development Planning Paradigm In 1990s Neo-liberal ‘Washington Consensus’ emerged that advocated market liberalization for higher economic growth and targeted safety-net programs for poverty reduction. Keynesian Planning Model along with neo- classical growth model with more emphasis on market economy followed- Fourth Five Year Plan (1991 – 1995) Fifth Five Year Plan (1998 – 2002) 18

Fourth Five Year Plan Plan Objectives/targets – Attaining 5% per annum average economic growth in the plan period – Poverty Alleviation and HRD – Increasing self-reliance 19

Fourth Five Year Plan : Strategies Export led economic growth Intra-sectoral balance in sectoral planning Efficiency culture in the economy Mainstreaming women development in Planning Reduction of population growth rate Restructuring administrative system Increasing private and public investment Community participation through NGOs Local level (district level) planning 20

Fourth Five Year Plan : Plan Outlay and Financing (Crore Taka at 1989/90 prices) Plan Outlay 62,000 Public34,700 (56.0%) Private27,300 (44.0%) Financing Domestic Recourse43,400 (70.0%) Foreign Aid18,600 (30.0%) 21

Fifth Five Year Plan : objectives Poverty alleviation through accelerated economic growth rate Employment generation Creating an equitable soceity Attaining food self-sufficiancy Human Resources Development Development of Physical Infrastructure Development of CHT, north-west and coastal regions 22

Fifth Five Year Plan : objectives (contd.) Reducing population growth rate Strengthening scientific and technological base Protection of environment Closing gender gap Establishing social justice Development of local governments. 23

Fifth Five Year Plan : targets Achieving on average 7% per annum GDP growth rate in the plan period Reducing population growth rate to 1.3 % per annum at the terminal year of the Plan. 24

Fifth Five Year Plan : plan outlay and financing (Crore Taka at 1996/97 prices) Plan Outlay195,952 Public85,894 (43.8%) Private110,058 (56.2%) Financing Domestic Recourse151,976 (77.5%) Foreign Aid43,976 (22.5%) 25

Five Year Plans: Public vs. Private Investment 26

Financing Five Year Plans: Domestic vs. Foreign aid 27

Comparative Performance of Five Year Plans (Million Taka at respective base year prices) Plan PeriodPlan SizeActual Expenditure Growth Targets (%) Realized Growth Rate (%) First Plan44,55020, Two Year Plan 38,61033, Second Plan172,000152, Third Plan386,000270, Fourth Plan620,000598, Fifth Plan1959,

Realized GDP Growth Rate in Mid- Term Plans 29

Trends in Poverty and Inequality over the Plan Periods Absolute Poverty (Headcount Rate) 79%58.8%49.8%40.0% Gini Index of Inequality

Poverty Trends

Inequality Trend

Critique of Development Planning in Bangladesh All the Five Year Plans were implemented only partially indicating the lack of political will and institutional capacity to implement successive Five Year Plans Non of the Five Year Plan did set specific poverty reduction targets implying stated ‘poverty reduction’ objective has been a political economy rhetoric to some extent While Bangladesh has a success story to tell to some extent regarding ‘poverty reduction’ but the down side of planning has been the rising inequality 33

Thanks ! 34