1. Bangladesh: Improving Governance
Issues & Initiatives

2. Transparency International’s Corruption
perception Index
Transparency International ranked Bangladesh as the fourth most corrupt country in the world in 1996 of the 54 countries surveyed. They have not surveyed Bangladesh since. The ICRG index similarly ranks Bangladesh as the sixth most corrupt country over the period.

3. Corruption is Increasing

4. Bangladesh is paying a high price for mis-governance
and corruption, resulting in lost economic growth
Empirical work done by the Bank shows that the country could be loosing between 2-3 percent of economic growth annually as a result of mis-governance. We estimate that this extra two-three percent growth, which would take growth from 5 percent to the 7-8 percent range annually, would mean that by 2020 the percent of population living below the poverty line could fall from about 40 percent to under 11 percent.

5. Substantial Governance Related Work Program
Institutional & Governance Review
Anti-Corruption Report
Financial Accountability Assessment
Procurement Assessment
Survey on Urban Service Delivery
Survey of households, businesses and civil servants on governance-related issues
Over the last months, we have done a lot of analytical work diagnosing the nature and extent of the problem. We have completed a Financial Accountability Assessment; a Country Procurement Review; an Anti-Corruption Report; and an Institutional and Governance review. As a result of this work, we now have a pretty good idea about the costs to the nation of poor governance; the reasons why the situation has deteriorated to the extent it has and the various elements of our strategy for helping to improve governance.
Before I talk about how we are operationalizing our strategy, I would like to ask Pierre to tell you a little bit about the key findings of the IGR and its implications for our strategy.

6. Mainstreaming the Governance Agenda
Energy Sector
Financial Sector
Education Sector
Health Sector
So, how are we going from this analysis to action? I guess we are approaching this in a number of ways.
One of the ways in which we are operationalizing our strategy is through our sector dialogue - for example, in the power sector we are emphasizing the need to reduce system losses - a polite way of referring to the theft of power that costs the country $100 million annually. Similarly, in the financial sector, we are working with authorities on financial sector reform aimed at improving financial intermediation and reducing the proportion of non-performing assets. This is also true in the health and education sectors, where the theft of books and medicines is a major problem and the quality of education and health care is of major concern.

7. Key Partners PROSHIKA (A large Bangladeshi NGO)
40 Community-Based Organizations
Survey & Research Systems (SRS)
Public Affairs Center (Bangalore)
AUSAID, CIDA, Netherlands, UNDP and USAID

8. Political Economy Dimensions
Role of state: wide-scale nationalization post-independence
Tight control over resources by the elite – patronage network dating back to the military dictatorship
Heavy reliance on personal networks, resulting in pervasive patron-client relationships
Well organized interest groups influence political decisions
People have been forced to rely heavily on personal networks – and, over time, this has resulted in lack of public trust in formal “modern” institutions. An outcome of this is that muscle power has tended to replace the rule of law.
These interest groups include the military, the bureaucracy, private business, trade unions, NGOs, religious groups, and the donors. These interest groups tend to be fractious and divisive. Understanding the dynamics of these competing interest groups is essential in explaining political decision making.
Political, business, trade union and bureaucratic power structures have been captured by vested interest groups and muscle power is frequently used to enforce the authority of criminal elements.

9. Political Economy Dimensions
Significant discrepancy between private agendas and public agendas
The poor lack “voice” and often have to attach themselves to a patron to survive
Grudging acceptance of the growing plunder of state resources
Confrontational political environment

10. Strengthening Financial Management
Budget Implementation
Budget Preparation
Budget Evaluation
Budget Oversight
Macroeconomic Framework
Development & Recurrent Budget
Sector Strategies
MTEF
Annual Reports
IMED
Value-for-money Audits
Revenue Administration
Pensions & Payroll
Procurement
Internal Control
C&AG’s Office
Parliamentary Committees

11. Issues in Financial Management
Lack of medium-term fiscal framework
Recurrent & development budgets prepared separately – not linked
Weak tax administration & low revenue effort
Corruption & delays in procurement
Lack of internal control
Limited prioritization – scarce resources spread too thinly across a large number of projects
Revenue effort at less than 10 percent of GDP is among the lowest in the world
Public procurement amounts to about US$3 billion a year – average time in awarding a contract is 14 months; bribes ranging from 5 to 15 percent cost the economy about $300 million annually.

12. Issues in Financial Management
Deficiencies in budget monitoring & reporting
Delays in external audit & limited attention to audit objections
Weak parliamentary oversight
Limited effort to measure development impact of expenditures
Limited prioritization – scarce resources spread too thinly across a large number of projects
Revenue effort at less than 10 percent of GDP is among the lowest in the world
Public procurement amounts to about US$3 billion a year – average time in awarding a contract is 14 months; bribes ranging from 5 to 15 percent cost the economy about $300 million annually.

13. Overview of Surveys Urban Service Delivery Governance Survey
Covered 11 services
Four cities (47% of Urban Population)
2,400 Households
900 in Dhaka
600 in Chittagong
500 in Khulna
400 in Rajshahi
Governance Survey
Covered 3,000 households
1,500 enterprises
1,500 civil servants

14. Satisfaction with Services
(% of All Households)

15. Education Sector

16. Education Sector

17. Education Sector
Data from the 2000 Household Income & Expenditure Survey show that about 75 percent of the allocations for the Food for Education program do not reach any household. Government has decided to monetize this program from July 1, 2002.

18. Health Sector

19. Electricity

20. Electricity

21. Electricity
Slum dwellers pointed out that they had to pay Tk50 per light bulb per month (for use after sunset and before 5:00 a.m.). At existing rates, legally connected households pay Tk13-15 for the same light bulb for 24 hours supply.

22. Water
Slum dwellers pointed out that they had to pay as much as Tk2 per bucket of water, which is several times the price paid by those who have legal connections (the official price in Dhaka, for example, is Tk4.33 per 1,000 liters)

23. Police

24. Police

25. Land Registration

26. Land Registration
As a result of bribes paid, the registered price of land was reduced by, on average, 25 percent.
The loss in Government revenue from this item alone is estimated at Tk400 million annually, enough to build 600 primary schools or pay the annual salaries of 17,500 teachers

27. Bribing to Borrow

28. Bribing to Borrow

29. Tied in Red-Tape

30. A Tax to evade a Tax

31. Taxing Trade
Import Permit: Six signatures, four weeks, and a bribe equal to 85 percent of the permit fee
Export Permit: Five signature; two weeks, and a bribe equal to 197 percent of the authorized fee
Duty Drawback: Four signature; two weeks, and a bribe equal to 192 percent of the established fee

32. The Bureaucrats View

33. Corruption is Increasing

34. Getting a Promotion

35. Improving Governance Re-examine the role of State
Improve public sector efficiency by reforming the incentive system, modernizing human resource management, overhauling the cadre system, revamping the rules of business, and implementing a broad-based training program
Make Government more accountable – by strengthening national “pillars of integrity”
Services that are better performed by the private sector and the NGO community should not be performed by the state, which should focus instead on core areas like the provision of law and order, justice, provide macroeconomic stability, improvements in the investment climate, etc.
Pillars include the judiciary, the anti-corruption bureau, the Ombudsman, C&AG, parliament, the press, etc.

36. Improving Governance
Decentralize and bring government closer to the people in order to improve the quality of service delivery
Promote community involvement in overseeing service delivering agencies by including them on monitoring bodies, autonomous boards, etc.

37. Improving Governance
Ensure independence of regulatory agencies and strengthen institutional capacity of parliamentary standing committees
Encourage service delivering entities to publish "Client Charters“ informing clients of what service standards to expect. Publicly post prices for all services.

38. Improving Governance
Implement a priority program to improve law & order and the system of justice.
Institutionalize user surveys to provide users with regularly updated information on prices charged, time lags in availaing services, satisfaction levels, bribes, etc.