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Ban_gladesh

An Agenda for Action

Status Report 1997

UThe World BankSouth Asia RegionJanuary 1998

This report is a study by the World Bank's staff, and the judgments made hereindo not necessarily reflect the views of the Board of Executive Directors orof the governments they represent.

CONTENTS

BANGLADESH: AN A GENDA FOR ACTIONSTATUS REPORT 1997

Implenmentation Status Update page

BRIEF I Macroeconomic Essentials 4

Macroeconomic Stability

BRIEF 2 Making room for Private Enterprise 5

Private Sector Development, Privatization

BRIEF 3 Curing the Financial Sector 8

Banking and Finance

BRIEF 4 Agriculture, Natural Resources and Environment 13

Agr icultulre, Water and Environment

BRIEF 5 Human Development 18

Educcation, Health, Nutrition, Poptulation andGender issues

BRIEF 6 Food Safety Nets 28

Food Policy Issues

BRIEF 7 Municipal Services 29

The Urban C hallenge

BRIEF 8 The Energy Sector 31

Gcas and Powiver

BRIEF 9 Telecommunications for Growth 35

Telecommunications Sector

BRIEF 10 Transport Infrastructure 37

Ports, Railways and Roads

BRIEF I I Between State and Market 42

Bzuilding Institulionis and Improving Governance

This report was compiled by Zaidi Sattar, under the overall guidance of Pierre Landell-Mills. Valuableinsights and comments came from Shekhar Shah who was also responsible for the cover photo. The

following sector team members contributed to the draft: lImtiazuddin Ahmed, Carter Brandon.

Babinton Dias, Rashid Faruqee, Wahida Huq, Tajul Islam. Shakila Khan, T.C. Sarker, Khurshid Alam,

Shamsuddin Ahmad, Charles Draper, Reazul Islam, Rachel Susan Palmer, Bashirul iluq, N1. lqbal,

Zahed Khan, K.M.M. Mannan, Lucio Monari, Mohi Uz Zaman Quazi, Shaila Sinha, Milia Ali, Audrey

Arons, Regina Bendokat, Shahadat Chowdhury, Philip Gowers, J.S. Kang, A.F.M. lqbal Kabir, Nazma

Sultana and Dilshad Dossani. Subrata Dhar took charge of publication and Mehar Akhter helped with

word processing.

Abbreviations

ADB Asian Development Bank KFW German Aid AgencyAGFA Agenda for Action LGED Local Government Engineering DepartmentARI Agricultural Research Institute MBM Master of Bank ManagementASSP Agriculture Support Services Project MIS Management Information SystemBADC Bangladesh Agricultural Development Corporation MTR Mid-Term ReviewBARC Bangladesh Agricultural Research Council MOE Ministry of EducationBB Bangladesh Bank MOPT Ministry of Post and TelecommunicationBIWTA Bangladesh Inland Water Transport Authority MOU Memorandum of UnderstandingBIWTC Bangladesh Inland Water Transport Corpration MOS Ministry of ShippingBTTB Bangladesh Telecom and Telegraph Board MOWCA Ministry of Women and Children AffairsBRTA Bangladesh Road Transport Authority MEMR Ministry of Energy and Mineral ResBRTC Bangladesh Road Transport Corporation NAC National Action PlanBSTI Bangladesh Standard Institute NGO Non-Government OrganisationBWDB Bangladesh Water Development Board NFE Non Formal EducationCBNC Community Based Nutrition Component NCB Nationalized Commercial BankCBO Community Based Organization NCWD National Council For Women's

DevelopmentDANIDA Danish International Development Agency NEMAP National Environmental Action PlanDEDO Duty Exemption and Drawback Office NBR National Board of RevenueDCC Dhaka City Corporation OECF Overseas Economic Cooperation FundDOS Department Of Shipping ODA Overseas Development AgencyDUTP Dhaka Urban Transport Project PMPTFS Port Master Plan and Trade Facilitation

ServiceDESA Dhaka Electricity Supply Authority PSO Private Sector OperatorsECNEC Executive Committee of National Economic Council PB Privatization BoardEPZ Export Processing Zone PEDP Primary Education Development PolicyERD Economic Relations Division PBS Palli Bittutyan SamityEPB Export Promotion Bureau PFA Platform For ActionFFYP Fifth Five Year Plan PMED Primary Mass Education DivisionFSSAP Female Secondary School Assistance Programme PSC Production Sharing ContractsFMMS Frequency Management and Monitoring System PTI Primary Teachers Training InstituteGIDP Gas Infrastructure Development Project REB Rural Electrification BoardGNCC Government-NGO Consultative Council RFP Request For ProposalHRD Human Resource Development RHD Roads and Highways DepartmentHDM Highway Design and Maintenance RRMP Road Rehabilitation and Maintenance

ProjectHPSS Health and Population Sector Strategy RRMIMP Rural Roads and Market Improvement and|

Maintenance ProjectHAPP Health and Population Programme SBW Special Bonded WarehouseIAS International Auditing Standards SIFAD Strengthening Institutions for Food Assist d

DevICB Investment Corporation Of Bangladesh SOE State-Owned EnterpriseIDA International Development Association STP Stakeholders ParticipationIEC Information , Education and Communication TLM Total Literacy MovementIPPs Independant Power Producers TRB Telecommunications Regulatory BoardIOC International Oil Companies TRP Telecommunication Reform ProjectICD Inland Container Depots TA Technical AssistanceIRWID Institutional Review of WID UGC University Grants CommissionISSA Inland Ship Safety Administration WID Women in Development

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Bangladesh: An Agenda for ActionStatus Report 1997: A Summary

The Agenda attempted to focus attention on a number of major concerns that the newgovernment, which took charge in June 1996, would have to address -- some in the short- to medium-term, while others in the longer term. The present report seeks to take stock of the progress made so far,some eighteen months into the tenure of the new administration.

Macroeconomic stability for growthl. That macroeconomic stability was a pre-condition for rapidgrowth has been recognized, but stronger efforts are needed to steer the economy on to a higher growthpath while remaining within prudent limits of income and spending. Although the government's fiscaldeficits have been contained to within 5 percent of GDP, with current account deficits at around 3 percentin FY97, the expected restraint on current expenditures or strict prioritization of ADP expenditures is yetto occur. Among other things, unrestrained domestic financing of the deficit, which has been risingrecently, threatens to dislodge the tenuous macroeconomic stability achieved.

Promoting private sector development. The lead role of the private sector in future development hasbeen accepted in principle, but much work remains in creating the supporting policy environment forprivate sector to thrive. Trade liberalization appears to have slowed. The remaining controls on importscontinue while there is some back-sliding in the scaling down of tariffs. But a proposed IDA ExportDiversification Project contains components that would contribute to the development of new exportproducts while speeding up customs clearance and duty drawbacks.

Banking reforms, covering both Bangladesh Bank and commercial banks, are under way. Therehas been progress in strengthening Bangladesh Bank's monitoring and regulatory functions. New capitaladequacy requirements are in place along with a tightening of loan classification and provisioningregulations. There has been modest progress in strengthening the Securities and Exchange Commissionand in improving transparency and efficiency of trading in the stock exchanges. Much more, however,needs to be done before investors' confidence is restored in the capital market.

More efficient and productive agriculture. To make agriculture more productive and efficient, theAgenda had outlined several market-friendly policies for adoption in the areas of fertilizer and seeddistribution, foodgrains procurement and storage, agricultural research and extension, and streamlining ofrural finance. Results on the ground so far are mixed. While progress has been made in imparting greaterfinancial and management autonomy to the premier agricultural research institution, BARC, publicintervention exists in fertilizer production and distribution. Weaknesses in the availability of institutionalagricultural credit remain as many NGOs, working with government, try to bridge the yawning gapbetween demand and availability.

Progress is slow on the preparation of a National Water Plan and in reforming the premier waterdevelopment agency, BWDB. There is more discernible progress, however, in adopting NEMAP andimplementing its recommendations.

Human development. The Agenda laid considerable emphasis on the need for concerted action in thearea of education, particularly at the primary level. The urgent need to gear up service delivery in health,nutrition and population programs was also underscored. The issuance of a broad-based PrimaryEducation Development Policy letter by the Ministry of Education is a salutary achievement as it lays the

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groundwork for radical qualitative changes in the country's primary education program and instillinggreater urgency in the quest for higher literacy.

In the health and nutrition area, the government approval to the integrated HPSS and progress inimplementation of Bangladesh Integrated Nutrition Project marks watershed events. The formation of a

Ministerial Committee to regularly review progress in the nutrition and education areas is a salutarydevelopment. Another is the formation of a Government-NGO Consultative Council designed to make therole of NGOs more effective in education - both formal and non-formal-- health service delivery and

poverty alleviation. The formation of a committee headed by the Minister of Law to address all forms of

discrimination against women is a welcome step.

Energy and Infrastructure. To harness the plentiful reserves of natural gas and to cover the shortfall inpower generation capacity, the Agenda argued that it was imperative that the country vigorously pursuedprivate sector participation, implement a rational gas pricing structure and unbundle the integrated powersector. Furthermore, it was felt that lack of competition in telecommunication and the underdevelopedand poorly integrated transport system was hampering commerce and stifling the growth of exports.While rationalizing of gas pricing structure remains elusive, increases in private foreign investment in thegas sector is materializing, though haltingly, through the mechanism of production sharing contracts.There is also discernible progress in private foreign participation in power generation on a BOO basis,with some movement towards unbundling of power transmission from generation; but no re-structuringof BPDB is in the offing.

Telecommunication privatization has begun with four private cellular companies currently inbusiness; but basic telephone services remain a public monopoly under BTTB. The management of thecountry's major port remains precarious and a definite hindrance to trade and commerce. The apex taskforce, recommended in the Agenda, has not come about. The nation's road network is being expanded

under the Road Master Plan of the Roads and Highways department. A salutary development is theparticipatory approach introduced by LGED in planning, monitoring and maintenance of ruralinfrastructure.

Governance and institution building. The Agenda reiterated the urgency to address public sectorreforms, announce a Policy Vision for public sector performance and to establish lead institutions forchange. Progress on all these counts remain elusive including progress on privatization. Although therewere visible signs that the privatization process received impetus under its new Chairman, a successfulprivate entrepreneur, who was instrumental in getting swift government approval to divestment of nearly30 state enterprises, there was little progress in the process of actual handing over of these enterprises toprivate owners. Parliament recently enacted legislation relating to the introduction of village councils and

union parishad elections which got under way in December 1997. The formation of the PublicAdministration Reforms Commission brought hope to the agenda of urgent reforms in governance but theresignation of two Chairmen, in succession, raises serious doubts about the prospects of real reforms.

In sum, the record of progress on the ground suggests that there have been notable achievementsin some sectors, such as health, nutrition and primary education, but slow progress in such critical sectorsas banking and finance, and administrative reforms. Consequently, the agenda for the future remainschallenging with needed actions in several directions in the short- and long-term. Looking ahead, some ofthe more critical actions needed are highlighted below:

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Short-term measures:

* restrain current expenditures and limit domestic financing of fiscal deficits to no more than1.5% of GDP.

* announce a three-year schedule for further tariff rationalization.* reorganize health and family welfare service delivery systems to provide one-stop delivery of

an essential package of services under a sector-wide program management.* complete administrative processing and negotiations and award of contracts to private gas

and power companies in a transparent and prudent manner.* pass the Telecommunication Act and announce a Telecom Policy soon.* increase private sector representation on the boards of Chittagong and Mongla ports.* renew commitment to administrative reforms by re-invigorating PARC.

Medium-term and long-term measures:

* strengthen domestic resource mobilization through substantial improvement in the tax effortand further reduce anti-export bias of the trade regime.

* complete the process of SOE privatization and financial sector reforms.* complete the process of integrating formal and non-formal primary education and develop a

national policy for secondary education.* ensure decentralized management of public hospitals and health care facilities with sufficient

autonomy, cost recovery and local accountability along with a safety net for provision ofessential services to women, children and the extremely poor.

* complete the process of establishing corporatized entities for power generation, transmissionand distribution activities.

* complete a National Port Development Master Plan for the development and operation of theports of Chittagong, Mongla and Dhaka in a manner which will ensure an economicallyoptimal import/export of cargo traffic and related inland traffic.

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MACROECONOMIC ESSENTIALSMacroeconomic Stability

The Agenda for Action noted that restoring macroeconomic balances required redressing thefundamentals -- to restore output and confidence, protect the economy from the adverse consequences ofinflation, and set the stage for future growth. To ensure a sound and stable macroeconomic framework,fiscal, monetary, and exchange rate policies and economic data needed to be improved.

Implementation Status Update

AGFA Recommendations Current Status* Contain inflationary pressures, limit * Domestic financing has been around 2% of GDP in

domestic financing of fiscal deficits to no the past two fiscal years, showing no signs ofmore than 1.5% of GDP. relenting, under the current fiscal stance.

* Restrain current expenditures. * Pay increases, by phases, based on the PayCommission's report, is being implemented at acost of Tk.9.4 billion in FY98, Tk. 15.7 billion inFY99 and Tk. 17.7 billion in FY00. Subsidies andloan forgiveness in agriculture continue unabated.

* Aim to top the revenue target of 12% of * Revenue-GDP ratio has stagnated around 12%GDP. since FY93 with no sign of improvement with

incremental tax efforts feeble at best.

* Base the budget on annual public * Quite appropriately, the government continues toexpenditure reviews to ensure that maintain high levels of sectoral allocations for thebudget allocations encourage growth and priority social sectors and physical infrastructure.sustain reforms. Yet considerable scope remains for rationalizing

public investment program and improving qualityof ADP spending.

+ Maintain a pragmatic and flexible real * A policy of "managed but moderately flexible"exchange rate policy to ensure external exchange rate regime has been followed, withbalance and competitiveness. periodic mini devaluations, leading to a cumulative

depreciation of 4.6% in FY97 and another 6.1%since.

* Improve the quality and availability of * Under an ADB-financed project, BBS has alreadyeconomic data. published a draft of revised and re-based national

income estimates for FY90-FY95. An expertreview committee has been formed to examine andconfirm these estimates.

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MAKING ROOM FOR PRIVATE ENTERPRISEPrivate Sector Development

The Agenda for Action reported that Bangladesh had made a good start on policy reforms toshape the private sector for efficient and rapid industrialization, and the economy had made importantprogress toward a stronger export orientation, but that there was still much room for reducing the biasagainst exports and improving incentives for industrial restructuring.


AGFA Recommendations Current StatusTrade Policy Issues

* Removal of remaining import controls. * Trade liberalization policy seems to have been* Quite modest change in FY97 to achieve a halted. Controls have been retained on textiles,

three rate schedule of 10, 20, and 35 %, petroleum products, salt and sugar. Thoughwith zero rates only for imports used by maximum tariff rate has been reduced in FY98 toexporters. 42.5% from 45%, the reduction has been negated

* A further compression of rates down to 10 by a new 2.5% infrastructure developmentand 20 percent in FY98. surcharge resulting in an increase in the average

* A flat rate of about 15%, to be announced unweighted tariffs to 23.5% from 2 1.8%.now for FY2000. Protection level has also been increased

selectively by raising some rates on outputs andlowering some on inputs. Rate dispersioncontinues to be high and the number of tariffslabs has not been compressed as recommendedfor FY97.

* Overcome the obstacles that have caused * There has been no further expansion of SBWcustoms to delay making SBW facilities facilities to other export industries. DEDO isavailable to most types of exports. functioning as before with little improvement

lately. Both of these issues are being addressed,* Resume improvements in the functioning of however, in the government's current

DEDO. preparation of an Export Diversification Project(EDP) which IDA would finance.

* Consolidate progress in developing * Government is expanding the EPZs at Dhaka andexisting EPZs. Private investment in new Chittagong and also plans to set up three moreestates. EPZs. Besides, EPZs are also permitted in the

private sector but work on the first private EPZin Chittagong that was to be set up by a Koreangroup is all but halted due to the East Asiancrisis.

* Replace EPB's attempts to encourage * The Export Diversification Project now underexport diversification with a professionally preparation includes the matching grant scheme.managed matching grant scheme forproduct and market development. l_l

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* Direct the EPB's attention to identifying the * EPB is functioning as before with very limitedpolicy, institutional, and infrastructure institutional capacity. Alternative mechanismsobstacles that raise transaction costs. for identifying obstacles and proposing feasible

solutions are being explored for inclusion in theEDP.

* Upgrade Bangladesh Standards Institute * BSTI standards have not improved and(BSTI). upgradation has not occurred yet. Alternative

private approaches are being explored forinclusion in the EDP.

Legal Framework

* Modernize the Legal Framework for * The permanent Law Commission has beenBusiness. activated and working. The Bank is also

supporting institutional development of the LawCommission. The Judicial Training Institute isalso functioning and imparting training to judgesespecially for dealing with the financial cases.Besides on request from the government theBank is funding project preparation for acomprehensive judicial and legal reform projectaimed at building a more enabling environmentfor the private sector to flourish.

Administrative Reforms

* Public Sector Management Reforms. * Administrative reforms appear to be headingnowhere. After nearly six months in office, ahighly reputed civil servant, who was appointedChairman of the Public Administration ReformsCommission, resigned just as his predecessor haddone.

* Yet efforts at management reforms in differentsectors are progressing: e.g. steps to improvemanagement efficiency in primary education (seep. 17 under Education) and in health andnutrition service delivery (see p. 21 underHealth, Nutrition and Population).

* While private sector participation has increasedin what traditionally used to be public sectordomain, e.g. electricity generation,telecommunication, gas and oil exploration,export processing zones etc., the regulatoryenvironment is still not enabling.

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MAKING ROOM FOR PRIVATE ENTERPRISEPrivatization

The Agenda for Action argued that Bangladesh needed to reduce the economic cost and thebudgetary drain of state enterprises and the barriers to domestic competition to allow efficient privatesector development. The Agenda recommended that the government should breathe new life into theprivatization program which remained stalled since 1993.


AGFA Recommendations Current StatusUpgrade both the mandate and the technical * The appointment of a Chairman from thecapabilities of the Privatization Board. private sector and upgrading the status of the

Chairman to the rank of a "State Minister"enhanced the importance of the PrivatizationBoard. A Privatization Act which is underpreparation by the Privatization Board willrequire approval by the Cabinet and theParliament. It will provide the propermandate to the Board to implementprivatization. To enhance technicalcapabilities of PB, a number of TAs from theWorld Bank, ADB and ODA are either underimplementation or in process.

# Support the Board's work through a clear * The Privatization Act which is underCabinet policy statement on generic issues preparation will address the generic issues onsuch as compensation of retrenched staff and privatization including the legal difficultieslegal difficulties in making sales. and compensation issues of the retrenched

workers.* Set a firm deadline of 1998 for completing the * Although, a target for privatization for FY98

privatization process, with intermediate targets has been fixed, the privatization process ofat six month intervals for specific groups of SOEs is extremely slow. This shows that itenterprises. will take some years before the SOEs'

privatization process is complete.* Make the values of the companies being sold * A number of Chartered Accountant firms

more transparent before putting them on the have been employed to make an assessmentauction block by removing all the privileges of the appropriate market valuation of SOEsthey enjoy that bestow advantages over private in order to attract more buyers for sale; bankcompetitors, such as soft budgets, loan and client relationship is being encouraged toforgiveness, discrimination in public establish financial discipline towards lendingprocurement, tariff protection, and non-tariff to SOEs.barriers to imports. As an important means ofimproving domestic competition, thesechanges should be made even if the enterpriseswere to remain in state ownership.

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CURING THE FINANCIAL SECTORBanking and Finance

The Finance Ministry and Bangladesh Bank have recently begun work on banking reform and

established several working groups. As past efforts have amply demonstrated, partial solutions will not do

the job.


AGFA Recommendations Current Status

* Tighten loan recovery and its legal * The process of strengthening the legal framework

framework. is continuing as follows:

* Amend the Financial Loan Courts Act to * The Financial Loan Courts Act has been amended

strengthen the loan courts giving them the by Parliament in February 1997 giving the courts

powers to execute their decrees and staffing the power to execute their decrees. Further

them adequately. amendments are being suggested by IDA to makethe Act more effective. The staffing problem is

being addressed by the Ministry of Law andJustice.

* Increase the number of loan courts, * The Ministry of Law has decided to open two

specially in Dhaka, Chittagong and Khulna, new loan courts in Dhaka and Chittagong for

to clear the backlog of cases. dealing exclusively with suits under the FinancialLoan Courts Act. These courts are in place but

operational procedures for handling cases arebeing worked out.

* Promulgate the proposed Bankruptcy * The Bankruptcy Act was passed by Parliament on

Act and formulate the supporting March I1, 1997. Supporting regulations have

regulations. been framed and gazetted in August 1997. The

Ministry of Law is setting up special courts to trybankruptcy cases. The Act is being reviewed byIDA.

* Break down the problem of loan recovery * A team of intemational lawyers working under

into specific impediments and find the Commercial Banking Restructuring TA is

solutions. looking at the entire legal framework for loanrecovery and is drafting amendments to most ofthe debt recovery laws. These amendments havebeen submitted to the govemment for review andenactment.

* Reduce information asymmetries by * BB's credit information bureau has generated

ensuring full cooperation between BB's data on all loans above Tk.1 million. However,

credit information bureau and the new cooperation with the new private credit rating

private credit rating agency. agency cannot be initiated as it has not startedcommercial operations yet.

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* Strictly enforce all laws against white * During 1997 BB sent notices to all defaultingcollar crime. bank directors (26) to clear their overdue

liabilities out of which 12 directors have adjustedtheir overdues, 9 have rescheduled their loans and5 have filed writ petitions with High Court. BB'senforcement process is continuing.

Central Banking Reforms* Strengthen Bangladesh Bank. * Progress in strengthening Bangladesh Bank is

also continuing. IDA is providing assistancethrough international experts.

* Bring prudential regulations to * Some progress has been achieved in tighteninginternationally accepted norms. prudential regulations.

* Tighten regulations on bank capital, loan * The tightening of the loan classification andclassification and provisioning, and provisioning regulations initiated under BCDownership. Circular 20 of December 27, 1994, is continuing

according to the phased schedule and is expectedto reach international standards by January 1999.The new capital adequacy requirements based onrisk-weighted assets introduced by BB in January1996 are being applied to all banks althoughcompliance is poor.

* Define and enforce penalties for insider * The legal team included in the June 1997 IDAlending. mission looked into the issue of defining penalties

for insider lending and draft amendments toseven existing laws and three new laws are beingexamined by the government.

* Examine the deposit insurance scheme * The June 1997 IDA mission examined the depositand devising a strategy for its future. insurance scheme and provided initial

recommendations for making it more effective.

* Ensure that BB's autonomy, legal status, * The June 1997 IDA mission looked into BBorganizational structure, staff incentives, autonomy, legal status, organizational structure,and staff training complement tighter staff incentives and training issues and provided aprudential regulations and help sustain TOR for further studies in this regard.improved supervision.

* Strengthen Bangladesh Bank's * The IDA mission also looked at BB's supervisionsupervisory, inspection, treasury, and capabilities and drafted a TOR for furtherrisk management. assistance.

* Introduce changes to the Bangladesh Bank * The IDA legal team has drafted amendments toAct to provide greater autonomy the BB Act to provide greater autonomy. The

draft is being reviewed by the government.

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* Identify salary comparators from the * A BB team visited seven central banks in Asiaprivate sector and other central banks in and provided a report and recommendations onAsia to create the basis for reforming reorganizing BB and changing the salaryBangladesh Bank's personnel policies. structure.

+ Establish twinning arrangements with * No progress has occurred in terms ofother central banks, for example, in establishing twinning arrangements, upgradingMalaysia or U.K. technology and privatizing the BB's Credit

Information Bureau.* In the medium term, upgrade technology,

strengthen monetary management, considerprivatizing the Bangladesh Bank's CreditInformation Bureau, and continue initiativesfor strengthening staff capabilities insupervision and risk management.

Commercial Banking Reforms

* Restructure private banks. * Not much progress has been achieved withrespect to the restructuring of the private banksand the MOUs signed by BB remain unenforced.

* Contract with reputable international * BB is strengthening its supervision department soaudits firms to audit at least four private that its banking inspectors can carry out morebanks initially, and then all other private meaningful audits of private banks.banks over the next three years.

* Develop criteria for selecting banks for * A Problem Bank Unit has been set up in BB forrestructuring. identifying problem banks on the basis of the

CAMEL rating system.

* Sign restructuring contracts with the * BB has signed MOUs with six private banks andselected banks specifying the steps needed assigned an observer to the Board of each bank.to restore viability and capital adequacy. However, BB has not yet decided on how to deal

with non-compliance of the terms of the MOU byany of these banks. IDA assistance would beprovided to make the MOUs effective.

* Clarify the incentives for bank owners to * The government has reduced the income tax ratecomply and to operate profitably in a applicable to financial institutions from 45% tocompetitive environment, closely 40%. Further work on the entire incentivesupervise banks in accordance with structure is needed.prudential norms, and promptly enforcepenalties for non-compliance.

* Be prepared to take a series of clearly laid * The November 1997 IDA mission worked without, graduated steps to deal with banks that BB and made recommendations for dealing withsystematically fail to comply with their banks that fail to comply with the terms of thecontracts, including change in management MOU.

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and legal prosecution of owners,appointment of conservators, purchase,assumption, and, if necessary, liquidation.

* Privatize nationalized commercial banks. * As a first step for the eventual privatization of theNCBs, IDA is assisting the government in

* Define a timetable (and priority) for carrying out a special portfolio audit of the fourprivatizing each NCB. NCBs to determine the net valuation of its assets,

especially its loan portfolio. The audit is being* Appoint a financial advisor with carried out by four local audit firms which have

comprehensive terms of reference for long-term association with reputable internationalselling the first bank. firms. Moreover, IDA has hired a quality

* Begin international audits of the banks in assurance auditor to oversee the audit work andthe next three months based on their 1995 ensure its quality. The portfolio audit is expectedaccounts. to be complete by May 31, 1998. Supplementing

* Develop a strategy for dealing with the the portfolio audit, a management audit will alsodelinquent debt of state enterprises in be carried out culminating in the preparation of acoordination with the privatization program strategic business plan which will include afor state enterprises. timetable for privatization.

* Begin pre-privatization bankrestructuring, if necessary, with the goal ofcompleting the first privatization within sixto nine months.

* Complete the privatization of two morenationalized banks over the next two years.

* Strengthen accounting and auditing * Not much progress has occurred in strengtheningpractices. the accounting and auditing practices. A seminar

* Review fees for auditing NCBs and state on IAS 30 was organized jointly by the Worldenterprises, which are currently set below Bank and the Institute of Chartered Accountantscomparable fees for auditing private of Bangladesh which resulted in unanimouscompanies. recommendations for greater disclosures in

* Require audits to trace suspected insider financial statements through the adoption of IAS(under fake names) loans. 30 in the preparation of financial statements of

* Initiate a study of financial statements to banks and other financial institutions. IDAbring them in line with international assistance would be provided.standards of accounting and financialdisclosure.

* Implement new information technology. * Not much progress has been achieved inimplementing new information technology in the

* Computerize BB's regulatory functions banking sector. The November 1997 IDAand set up real time data communication mission made an assessment of BB's and NCBs'links with the commercial banks it computerization needs, including the need forregulates. Computerize the clearing house. computerizing the clearing house, and made

initial recommendations.* Develop staff skills. * Progress in developing staff skills has been slow

in relation to the perceived need for skillsdevelopment. The banks are continuing theirown skills development program which needs tobe strengthened.

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* Increase the functional and technology- * In house training of BB and NCBs is continuing.related training of BB and commercial Some foreign training has also been arranged for

bank staff. BB staff under the commercial bankingrestructuring TA.

* Start a Master of Bank Management * BIBM has started the Master of Bank

(MBM) program at the BIBM. Management program from January 1997 and has

already enrolled 50 students in the first batchwhich is expected to graduate at the end of 1998.

Capital Market Reforms* Deepen capital markets. * Some progress has been achieved in the capital

markets area as follows:

* Strengthen prudential regulations in the * A tripartite committee, comprising the Securities

stock market and gradually remove overly and Exchange Commission (SEC), the Dhaka

restrictive and ineffective regulations on Stock Exchange (DSE) and the Chittagong Stock

share issues and market-makers. Exchange (CSE) worked on the settlement of thestock exchange transactions and regulations tomake the settlement system transparent and

identical in both the stock exchanges. The system

has been instituted in both the Exchanges. ADB

will provide assistance for strengtheningprudential regulation.

* Create the enabling environment to foster * A study to develop the market for corporatethe market for corporate bonds and bonds and commercial paper would be initiated in

commercial paper. November 1997 under IDA's non-bank financialmarkets development TA.

* Strengthen the Securities & Exchange * ADB has initiated a TA for strengthening SEC.

Commission.

* Improve the efficiency and transparency * The tripartite committee, mentioned above, is

of trading on the stock exchange. looking into ways and means for improving theefficiency and transparency of trading on the twostock exchanges. Further assistance would beprovided by ADB.

+ Develop specialized institutions for credit * The only private sector credit rating agency is yet

rating. to begin commercial operations. No specificinitiatives have been taken so far.

* Reconsider the role of ICB. * ADB has initiated work on restructuring ICB.

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AGRICULTURE, NATURAL RESOURCES AND ENVIRONMENTAgriculture

The Agendafor Action noted that creating a vibrant, sustainable rural economy with agriculture atits core will require actions on many fronts. Measures for efficient agricultural growth and better naturalresource use need to start now, supported by a range of complementary actions in macroeconomicpolicies, rural infrastructure, the social sectors and local government.


AGFA Recommendations Present Status* Get out of fertilizer distribution and price * Public sector involvement in fertilizer remains

domestically produced urea in line with unchanged. Although domestic urea pricesworld prices. were raised, they are nearly 23% lower than the

import parity price. This is made possibleprimarily by subsidizing input (gas) prices forpublicly owned urea factories.

* Abolish rather than merely suspend * There is no restriction on trade and storage atrestrictions on private sector trade and this point except that restrictions are stillstorage. imposed in times of crisis. There is no incentive

for private sector storage when public sectorreceives substantial subsidy in its food storageprogram.

* Enact into law the seed policy published in * Parliament has passed the revised Seed Act and1993. the government issued a Gazette Notification

on March 13, 1997.* Deregulate Air freight services. * There is no restriction on commercial airlines to

provide air freight services. However, Bimanservices are subsidized and that discouragesother airlines in providing services.

* Bring tariff rates on agricultural * Done. Tariffs on agricultural machinery andinvestment goods at par with industrial equipment are at par with such items forinvestment goods. industrial use.

* Procure rice for food security programs * Not yet introduced.through competitive bidding.

* Convert the seed wing of BADC into a 0 Not yet done.semi-autonomous corporation.

* Monitor demand and supply for food * Besides setting up the Agriculturalgrains and fertilizer more effectively. Commission, there appears to be no regular

improvement in the monitoring capacity.* Adjust food store policy to conform to a * There is no change from past practice of public

realistic assessment of needs. foodgrain stocking.Agricultural Research and Extension

* Increase the autonomy of research * The BARC and ARI Acts 1996 have been

14

organizations in management, budget and passed by Parliament. The Acts confer greater

personnel decisions. personnel, financial and research managementautonomy to BARC's governing body andARI's board of management.

* Support privatization of research through * BARC is well ahead in arranging contractfunding of contract research. research through out-sourced contracts.

* Increase local control over extension * The government has formulated a newservices to make them more attuned to local agricultural extension policy which grants local

needs. control over extension services. A strategy for

implementing the policy is under executionwith support from IDA-funded AgriculturalSupport Services Project (1991-98, $35million)

* Government agriculture research and * In the Bank-assisted Agriculture Supportextension agencies, NGOs and private Services Project (ASSP), collaboration withagricultural firms should work together to NGOs in the extension service for homesteadimprove agricultural technologies. agriculture has been introduced.

Rural Finance

* Extend financial sector reforms to cover * Bangladesh Bank (BB) has conducted a studythe formal rural financial institutions. to strengthen the rural financial institutions.

The findings are being reviewed by BBmanagement.

* Stop political interference in the * There is no progress.

operations of rural financial institutions byannouncing a policy of no loan forgiveness.

* Improve the legal and regulatory * This is being considered under the ongoingenvironment to be able to use moveable Commercial Banking Restructuring TA, which

property and accounts receivable as loan covers, among other things, an overhaul of thecollateral. entire legal framework for loan recovery.

+ Promote integration of formal * Some progress has been made linking NGOs(commercial banks), semiformal (NGOs), with Commercial Banks (BRAC with Janata,

and informal (suppliers) lenders to make and ASA with Agrani). NGOs have been

rural financial intermediation more efficient working closely with the government inwithin an appropriate regulatory formulation of a national Agricultural Policyframework. and the proposed establishment of Agricultural

Credit Foundation to aid the farmers has beenbased on the consultation meetings with theNGOs. Further, a study will be initiated under

the Poverty Alleviation Microfinance Project tosuggest appropriate measures.

* Modify public registries to improve the * There is no progress.

security and quality of collateral used forloans and promote credit bureaus to help thepoor use their past repayment history andreputation as collateral for future loans.

15

AGRICULTURE, NATURAL RESOURCES AND ENVIRONMENTWater

Noting that the government has completed the Flood Action Plan and released its "Water andFlood Management Strategy," the Agenda for Action called for a comprehensive institutional reformprogram that would emphasize improved sector planning in a multi-disciplinary environment.


AGFA Recommendations Current Status* Continue the reform program for * Some progress has been achieved for the

BWDB including, inter alia, strengthening recommended program. Some policy decision hasits capacity (using its own staff or NGOs) been made to separate out services (such asto develop and work with beneficiary dredging and mechanical equipment units) fromorganizations, and improving supervision BWDB functions. There is also now a plan toand quality control. downsize the BWDB, awaiting final approval (by

the government) and subsequent implementation.BWDB prepared a Restructuring Plan in July1997 where provisions have been made toeventually make over two engineering units ofBWDB to the private sector. The plan has not yetbeen implemented.

* Allow stakeholder organization to retain * There is now a move to revise the participationuser fees to finance maintenance activities. guidelines and allow small projects, such as those

covering an area of I 000ha, to be handed over tothe beneficiaries. For the larger projects, moreparticipation is called for in the revisedguidelines. The plan is still to be implemented.

* Strengthen the water resource planning * The on-going River Bank Protection Projectorganization to help it meet its national includes a component of this. However, overallwater planning responsibilities. progress has been extremely slow.

* Produce a National Water Plan by 1999. . Prospects for having the plan by 1999 are slim. Adraft contract for the consultancy services forpreparing the plan is expected to be finalized soon(about one year behind schedule).

16

AGRICULTURE, NATURAL RESOURCES AND ENVIRONMENTEnvironment

The Agenda for Action noted that with the formulation of the National Environmental Action

Plan (NEMAP) the government's strategy now recognized the inseparable links between environmental

degradation, poverty, and population growth and the implications for natural resource management.

Policies and institutions are needed to improve regulatory enforcement mechanisms and to develop the

capacity for analysis and research in line agencies responsible for water, fisheries, forestry, and

agriculture.


AGFA Recommendations Current StatusShlort- Term Measures

* Conclude the prioritization of the * DoneNEMAP and begin implementation ofpriority actions.

* Initiate discussions with principal line * Doneagencies to incorporaterecommendations of NEMAP in sectorstrategies and to mainstreamenvironmental impact assessmentprocedures.

* Strengthen the capabilities of the * World Bank will execute a UJNDP-financed

Planning Commission and Ministry of technical assistance on these topics, starting in

Environment and Forestry for early 1998.environmental policymaking andenforcement.

* Institute an annual assessment of how * Methodology has been endorsed by the

NEMAP is being implemented. government but it is too early to see it being

institutionalized.

* Reform pesticide regulations to speed * Parliament passed an Act in 1997 but the

access to less harmful products through operating rules are yet to be framed.

licensing by chemical formulation ratherthan brand name and by allowing the

immediate use of products tested andapproved for use in industrial countries,without requiring in-country testing.

* Ban the destruction of mangrove stands * There is no official ban but unofficially Fisheries

for shrimp farming on public lands. and Forest Departments claim that shrimp farming

is not allowed in mangrove strands. This is to be

addressed in the Bank's Fisheries IV and

Environment Projects.

* Ensure adequate drainage and measures * Under IDA assisted Second Flood Control,

to mitigate any impact on fisheries in all Drainage and Irrigation Project, BWDB has

17

embankment projects (flood control, prepared a mitigation plan estimated to cost $20drainage, irrigation, and road projects). million. Implementation depends on availability

of funds.* Implement the government's Forestry * Forestry Policy is being implemented with local

Policy to encourage private investment in participation initiated in pilot schemes at somenew plantations and to increase local reserve forests but private investment in newparticipation in resource management and plantations is yet to take place.use.

Longer-Term Measures

* Design and implement a comprehensive * This will be addressed in the Environmentprogram on environmental research, Project.data collection, analysis anddissemination.

* Review selected policies and regulations * A paper has been completed for the NEMAPto favor private sector involvement in workshop and will be followed up in theenvironmental management. Environment Project.

* Move wood prices progressively to * Such pricing mechanism is being applied for pulp.world market prices to provide properincentives for private afforestationactivities.

* Adjust the use of forest estates based on * Sufficient information is not available.their current characteristics, rather thanhistorical use. Some degraded forest landwould be more suitable for agriculture,while some unused plantation land wouldbe more suitable for afforestation.

* Strengthen Environmental Forest * Action in this regard is under way.Divisions to demarcate and protectreserved forests.

18

HUMAN DEVELOPMENTEducation

The Agenda for Action identified three key areas which impact the overall efficiency and qualityof the education sector:

* development of professional capacity of teachers, especially women,* greater emphasis on learning outcomes, and* more efficient management of human, physical, and financial resources.

The government of Bangladesh, in recognition of the fact that a comprehensive policy is requiredto integrate and coordinate the current piecemeal efforts in the sector, formed a committee for preparingan education policy. The Committee has been in operation for about a year. The policy for the educationsector has been formulated and has been distributed for public debate.


AGFA Recommendations Current StatusPrimary Education - Grades 1-5

* Prepare a policy statement on primary * A Primary Education Development Policy Letter,education as part of the national policy on signed by the Minister of Education, was issuededucation. on June 5, 1997. It emphasizes the government's

commitment to ensure equitable access andimproved quality of primary education. The letterelaborates on the specific strategies and measuresthat will be adopted to address the existingconstraints in the primary education system.

* Accredit all teachers, based on minimum * According to the policy statement, all teachereducation levels, and training and recruitment will be subject to standard criteria andestablish common pay scales and career teachers will be provided with the Certificate inopportunities for qualified teachers. Education through various training modalities

including distance education. However, a systemfor accrediting teachers has yet to be developed.

* Reward schools that have high * A formal school performance reward system hasperformance standards/ high student not yet been introduced by the government.completion rates. However, each year the Prime Minister

recognizes up to 130 schools/communities/ thanaoffices during Education Week. In certain casesmonetary awards are given for outstandingperformance.

* Conduct biannual national assessments of * Under PEDP, the government is committed toschool performance. introducing a formal system for assessment of

school performance at a national level. However,an ADB-financed TA project, which is currentlyin its identification stage, is expected to addressthis issue.

19

* Institute a textbook reuse program. * The government policy letter states that theexisting textbook policy will be expanded so thatby 1999, 50% of textbooks will be reused and athree-year book-life span will be possible.

* Target construction of essential new * The government will set annual targets based onschools and classrooms more carefully to identified needs. In principle, this would be basedmeet identified needs based on a ratio of on a school mapping yet to be completed.one classroom for 50 students.

* Promote cost-effective NGO programs * The government is already implementing the bulkfor non-formal and mass education. of its mass literacy program through NGOs. The

Total Literacy Movement program also has NGOinvolvement. In the primary subsector, the NGOschools cater to the hard-to-reach and under-privileged children.

* Strengthen local-level planning and * Capacity of the School Management Committeesmanagement of primary schools. and local union and ward committees will be

enhanced through training and awarenessprograms. Under PEDP, planning for resourceallocation and school quality improvement isenvisaged at the thana and district levels. Inaddition, there is an on-going UNICEF project,Intensive District Approach in Education for All(IDEAL), which focuses on institutionalstrengthening at the local level.

* Introduce more participatory teaching * Although several projects under PEDP will bemethods to ensure learning achievements. upgrading the existing teacher-training programs

and there has been a move toward participatoryteaching in PTIs, the emphasis is still onknowledge-based training rather than onmethodology.

Long-Term Actions

* Improve building maintenance. * Under PEDP, there is a provision forreconstruction and expansion of schools and thegovernment is also committed to increasing themaintenance budget. KFW is funding work on amanual for school maintenance based onsuccessful models in India.

* Institute automatic grade promotion, * There is no progress so far.but link it to measurable improvements inteaching and learning.

* Target subsidy programs such as food- * The Food for Education program will be criticallyfor-education more carefully for cost- reviewed before it is expanded further. BIDS haseffectiveness and sustainability. already undertaken an assessment.

* Develop a national plan for integrating * Currently, 95 NGOs have commenced work informal and non-formal primary some 6075 centers offering literacy classes toeducation that calls on NGOs to provide about 182,250 learners in 30 districts. Thenon-formal primary schooling and avoids government has embarked on a rapid expansion of

20

overextending the government's its Non-formal education program with threeimplementation capacity. new projects, NFE 2, 3 and 4, already at the

approval stage. These will be implemented partlythrough NGOs and partly through the innovativeTLM (Total Literacy Movement) approach. Thenew initiatives pose a serious managementchallenge to the still evolving capacity of the NFEsubsector.

Secondary Education - Grades 6-10

+ Develop a national policy to deal with * Such a national policy is yet to be announced.the rapidly rising demand for secondaryeducation within the constraint of usingscarce public resources: the policy shouldclearly articulate priority objectives andconditions for successful programimplementation.

* Increase investments in pre-service and * Although the ADB-financed Secondary Educationin-service teacher education, especially Development Project has a component forfor female teachers. upgrading teacher competence, very little progress

has been achieved in improving the teachertraining courses.

* Upgrade curriculum and textbooks, * According to the draft FFYP, the curriculum asparticularly in science and technology, well as the assessment system will be criticallyand improving examination and reviewed. The government plans to introduce theassessment system. semester system of examination at the secondary

level but has not done so yet.

* Link the currently high grants for * There is no immediate plan for linking subventionteachers' salaries to the private secondary to performance.schools to school performance criteria.

* Review the sustainability of the popular * While there is no immediate plan for targeting thefemale stipend program and tighten stipend program ,the IDA-financed projectselection criteria, for example, by (FSSAP) will pilot a targeted project in a fewtargeting based on merit or need selected areas to develop appropriate targetingconsiderations. criteria.

* Spend relatively more on lower * The government plans to expand its stipendsecondary instruction (grades 6 - 10) program to Grades 11 and 12 despite thethan on upper secondary levels (grades 11 recommendation made by the FSSAP MTR team-12). that the expansion be postponed until suitable

criteria are developed.University Education

* Find bipartisan political solutions for * Depoliticization of universities is a key objectiveending the persistent disruption and articulated in the government's draft Fifth Fiveviolence on campus, without which Year Plan (FFYP) but is far from beingplanning for greater efficiency of higher accomplished.education is almost meaningless.

21

* Encourage government-sponsored * An increase in tuition has been proposed in theuniversities to develop market-driven Fifth Plan but so far no action has been taken.programs that charge substantially higherfees for those who can afford to pay andaward scholarships to needy students andwomen.

* Decide on government subsidies to * No action so far. The universities in Bangladesh,institutions based on their performance. although heavily subsidized by the government,

are autonomous and the University GrantsCommission (UGC) is responsible for financialmanagement and for ensuring that performancestandards are met. During the Fifth Plan period,the government intends to review the role of theUGC, Syndicates and Senates to make them moreeffective. Their work will be supervised forgreater financial and administrativeaccountability.

* Give priority to faculties identified as * The government plans to establish 12 morevital to national development. science and technology universities during the

fifth plan period. Although construction work onsix of these was to start in 1997, there was noprogress.

* Let further university expansion depend * Private universities, particularly thoseprimarily on private institutions with emphasizing teaching and research in science andminimal government support. technology, are encouraged. The UGC will,

however, scrutinize the proposals based on thegovernment's quality guidelines.

Management and Organization

* Recombine the Primary and Mass * PMED and MOE have, over the last five years,Education Division (under the prime evolved as separate entities. However, theminister's office) and the Ministry of government has placed both the Division and theEducation and streamline organization Ministry under the Minister of Education.and administration to enhance system-wide coordination.

* Develop a strategy to strengthen * An overall strategy is missing, although eachmanagement capacity within the project has its own institution-buildingministry for the overall education system. component.

* Recognize the role of non-government * At the primary level, there is an increasedschools more clearly and explicitly. recognition, although not explicit, of the role of

the NGO schools. At the secondary level mostschools are non-government and once they areregistered they receive salary subventions.

* Involve communities in making schools * Not yet accomplished. The government plans tomore accountable to parents. increase involvement and participation of the

local communities through block grants andtraining. Under PEDP, the community isexpected to provide land for schools and will also

22

be responsible for teacher recruitment.* Delegate responsibility for equitable * Institutional strengthening of thana and district

distribution and use of resources for administration will be done under UNICEFschool improvement to the district and project (IDEAL) but there is no progress yet onthana levels. delegation of authority.

* Give schools block grants for * As mentioned above, under PEDP, block grantsmaintenance, supplies, and learning will be provided to schools.materials.

* Give districts block grants for * This is a component under the new IDA -fundedconstruction, learning materials, and in- project in the primary education subsector.service teacher training to supportimprovements in learning outcomes.

23

HUMAN DEVELOPMENTHealth, Nutrition and Population

The Agenda for Action argued for improving health, nutrition and population services bystrengthening the policy framework and the management of service delivery. It also recognized theimportance of beneficiary participation for effective delivery.


AGFA recommendations Current StatusHigh-Priority Short-Term Measures

* Focus on a basic package of essential * The government has recently approved a Healthservices. and Population Sector Strategy (HPSS). Based on

the HPSS it is currently preparing the Fifth Health+ Develop and implement a reproductive and Population Program (HAPP-5) which will be

health strategy. financed by the Bank-led donor consortium andimplemented from July 1998. As part of the

* Accelerate the sector reorganization HAPP-5 preparation, the government has madestudA l progress in several areas. It has prepared and

studY. prioritized a package of essential services, andprepared a draft reproductive health strategy with* Prepare an HRD master plan. stakeholder feedback. A high-level Committee onOrganization and Management was set up toprepare a report on sector reorganization andoversee the process for the first year. TheCommittee has recommended to the government--and the latter has approved -- a phasedreorganization beginning with the unification ofhealth and family planning staff from Thana leveland below. The government has also completed adraft HRD strategy which will be used as a basisfor developing the HAPP-5 HRD component andfor preparing an HRD Master Plan.

* Address quality concerns by involving * Professional associations have previously not beenprofessional associations. involved in the planning and implementation of the

govemment's program. The government has nowinitiated a dialogue with them on sector reform andis seeking their involvement in its program.

* Pilot decentralized management to * The government has decided to implement twolocal bodies. pilot projects on decentralized management of field

level services and hospitals with elements of cost-recovery, provider incentives and unification of thetwo wings. The preparatory work on the pilots hasbegun and will be implemented from July 1998.Another pilot project will be implemented onhospital autonomy involving one medical college

24

.___ _ __ _ __ _ __ __ _ __ _ __ _ _ _ hospital and a district hospital.+ Entrust a greater role to NGOs and the * Recognizing that NGOs have already made

private sector. impressive contributions in family planning

covering about a third of the eligible couples andalso in some health programs such as EPI and

TB/leprosy control, the government has initiatedstudies on how to facilitate their work and achievegreater involvement of the for-profit private sectorin its program.

* Launch a massive information * Information, Education and Communication (IEC)

campaign to raise awareness of the size is the central activity of Community Based

and impact of the malnutrition problem Nutrition Component (CBNC) of the Bangladesh

and to deliver key messages on how to Integrated Nutrition Project (BINP) -- a $67

address it. million IDA funded project which aims to.promoteimproved child care practices through communityeducation coupled with demonstration. The IECstrategy includes advocacy for nationalcommitment, social mobilization, and programcommunication to foster specific behavior change.The work for IEC package has been contracted outto the private sector. Meanwhile, IEC activities atthe community level is being carried out underCBNC by community nutrition promoters. There isalso an initiative to develop a long-term vision fornutrition through expansion of BINP to cover theentire country by 2010.

Long-Term Measures

* Improve the referral system. * All these issues have been elaborated in the HPSSand will be addressed through HAPP-5. The

* Include quality of care indicators in the government has adopted a National Policy on HIV,

MIS. AIDS and STDs, and prepared a strategic plan forthe national AIDS program. But progress on the

* Improve the program's financial ground has been slow.

sustainability.

* Introduce cost-sharing while protectingthe poor.

* Raise awareness of the links betweenhealth and development.

* Address the potential AIDS threat.

* Improve the regulation of private carestandards.

25

* Resolve the pressing organizational and * This is being addressed in HAPP-5.management issues in the social sectorand broaden participation to enhanceservice delivery. By facilitating a bigger-but also clearer-role for NGOs, theprivate sector, and local communities,the government could expand the reachof the delivery system at low cost, obtainfeedback on alternative deliverymechanisms, and improve the quality andimpact of services by making them moreresponsive to local needs and makingproviders more accountable tobeneficiaries.

* Form a Government-NGO * GNCC has been formed and is operational. ItConsultative Council (GNCC) that has decided to form a task force on reaching thewould signal the government's intention poorest and another task force to review andto build a stronger partnership with update the age-old legislation concerning theNGOs and pave the way for the NGOs with a view to strengthening thegovernment to solicit the help of NGOs Government-NGO collaboration and making thein winning grassroots support for role of NGOs more effective in development andreforms. poverty alleviation.

26

HUMAN DEVELOPMENTGender Issues

The Agenda for Action set out a number of measures to improve the status of women. A lot ofground work has been done by way of establishing the National Council for Women's Development(NCWD), a national Committee to address discrimination against women, preparation of a NationalAction Plan (NAP) for PFA follow up, completion of the Institutional Review of WID etc. But actualaction seems to be rather slow. Formal approval and adoption of NAP and IRWID has not taken place.More proactive efforts are needed for enhancing recruitment of women in the higher positions in thepublic sector.


AGFA Recommendations Current Status* Activate the National Council for * A 44 member reconstituted NCWD has been

Women's Development and prepare an established consisting of public representatives,action plan to implement international Ministers and Secretaries from several linecommitments made by the government, Ministries with the Prime Minister as the Head ofincluding the 1995 Platform for Action. the Council. This reconstituted body met for the

first time in February'97 but has not met since.

The responsibilities of NCWD are:

=> To ensure women's participation in socio-economic development work; the Council willformulate rules and regulations for thedevelopment work of different Ministries,divisions and other agencies and coordinate them;

= To formulate laws and regulations to ensurewomen's legal rights and development and toprevent oppression against women;

= To take measures to preserve women's interests inall areas in which women are active and ensuretheir participation and advancement. Forimplementing the Beijing PFA, a National ActionPlan was prepared and finalized in June'97, but itis yet to be approved and adopted.

* Immediately constitute a law reform * A committee headed by the Minister for Law,commission to review laws that may Justice and Parliamentary Affairs has beendiscriminate against women and propose constituted to address all forms of discriminationreforms that give women effective legal against women.parity with men.

* Vigorously address the physical abuse of * The MOWCA has decided to undertake awomen and use gender-awareness multisectoral project to prevent violence againsttraining to improve police response to women.

27

violence against women.* Provide greater access to services like * The recently approved National Action Plan based

credit and banking, training, and on the PFA has included these issues.advocacy as women enter the formallabor force.

* Institute a recruitment policy that * Progress on adoption of a more pro-active stanceactively promotes women's employment for promoting representation of women in thein the public sector, consistent with public services has been slow.overall restructuring of the sector.Increase the employment of women as * There are still relatively very few women inteachers and health workers. senior positions.

* Existing quotas for recruitment of women in thepublic sector remain to be filled up.

* The government has recently decided to appoint afew Joint Secretaries from amongst womenworking in the public sector, subject toqualifications and appropriate seniority.

* The Local Government Commission has proposedspecified numbers of women members in theCouncils for all the four tiers of local govemment.

* Strengthen the Ministry of Women's * The International Review of the WID capabilityAffairs and broaden its focus to include of the government has recommendedplanning and monitoring of women- strengthening of MOWCA. The final report isrelated activities and issues across sectors. awaiting adoption.

* Train staff of the gender focal point units * There are 47 gender focal points and WIDset up in individual ministries. training has been imparted to them by the

MOWCA.* Involve women more directly in * Stakeholder participation activities involving rural

participatory planning at all levels and in women have started taking place particularly inkey decisionmaking on the design of the planning work of various sectors.public interventions across sectors.

28

FOOD SAFETY NETSFood Policy Issues

The Agenda for Action noted that the need for resources to ensure adequate food intake for allBangladeshis was massive and called on the government to deploy its limited resources as cost-effectively as possible to provide food security to the most vulnerable. Efforts to promote food securityhave high payoffs in Bangladesh as nearly half of all Bangladeshi households cannot afford an adequatediet.


AGFA Recommendations Current Status* Discontinue rationing channels to the * Rationing is abolished by and large. Some

relatively better-off and minimize financial channels still exist where it is warranted bysubsidies on food channels that remain due to presence of large employers (e.g. tea gardens,political constraints. flour mills). In addition, highly subsidized

foodgrains continue to be provided to"essential categories" which include defensepersonnel and law enforcement agencies.

* Diversify food-for-development activities to * Food-assisted programs supported by donorsreach more women, particularly in the lean have been increasingly diversified in recentseason. years in line with the IFAD initiative to support

innovative programs. On the other hand,government-supported programs remainedunchanged with rather limited poverty impact.

* Eliminate open market sales in their current * The government maintains buffer stocks withform, since expanding them leads to costly grain storage facilities engaging inuncertainty in private storage and marketing market interventions to stabilize prices. Thisdecision, price variability, and corruption. has adverse implications for the growth of

private grain trade.* Fund increased public spending for * The volume of foodgrains distributed under the

efficiently targeted food transfers. VGD and Rural Maintenance program has

remained stagnant since the decline in food aidlevels have not been compensated by infusionsfrom government stock.

* Ensure active participation of local level * There has been progress in including localofficials, beneficiaries and implementing stakeholders in the design and implementationagencies. of donor-supported food-assistance programs.

* Move towards cash-for-work programs in * There has been no significant expansion in theline with recommendation of working group on only cash-based program, Rural Maintenance,Targeted Food Interventions. nor has there been an introduction of any new

cash-for-work program.

29

MUNICIPAL SERVICESTlhe Urban Clhallenge

The urbanization challenge is threefold: to cope with the current backlog of unmet demand forurban services, to strengthen urban management and coordination and the public agencies providingurban services, and to draw in private urban infrastructure investments and management skills within asound regulatory framework.

Bangladesh now needs a coordinated national urban strategy that addresses the full range ofessential activities and their phasing over the next two decades. The detailed longer-term agenda formeeting the urbanization challenge would become clearer as the urban services strategy is worked outBut there has been hardly any progress in preparing such a strategy and a sound policy framework by thegovernment of Bangladesh. The Agenda for Action outlined ten actions which were to form the core ofsuch a strategy. There have been some positive developments on some of these suggested actions, whilestatus quo prevails generally.


AGFA Recommendations Current status* Redefine each player's role: the central * In a few donor-assisted projects, private sector

government as regulator, and the local and NGOs have been involved as partners ingovernment, private sector and NGOs as providing urban services but the role of the localpartners in facilitating and providing governments remains ambiguous while the centralurban services. government maintains its control.

* Consider issues related to the * There has been little change on these issues; aorganization, structure and governance Coordination Committee was formed for Dhakaof Dhaka and Chittagong based on city but has been largely ineffective.recommendations of the recentlycompleted Urban Structure Plans.

* Focus attention on land use planning * There has been no significant development but theand zoning issues for the larger towns situation in the cities continues to worsen.with city corporations.

* Strengthen the internal capacity of * There has been no significant change.municipal corporations and secondarytowns to plan, finance, and execute cost-effective capital investment programs.

* Implement the recommendations of the * A workshop on this study was organized by themunicipal finance study. government/IDA in June 1997, and the

government has pledged to form a commission tofollow up on the recommendations of the studyand the workshop.

* Implement the recommendations of the * The study (under the Fourth Dhaka Water Supplyproposed study on private provision of

30

water supply in Dhaka. Project) is yet to be completed as the project

became effective on July 8, 1997.

* Develop participatory approaches to * There is no significant development yet but theproject preparation and implementation. proposed Arsenic Mitigation-Water Supply

Project, which may potentially cover 90 urban

areas, will be based on such participatoryapproaches; the proposed Municipal ServicesProject will use participatory approaches in

implementation.* Support the formation of public and * Efforts are being made in this direction but there

private environmental constituencies. are. no tangible results yet. However, a framework

for implementation (under the NEMAP/BEP) isexpected to address these concerns.

* Consider ways to provide security of * Little progress has been made on this issuetenure to slum dwellers in urban areas. although several NGOs and CBOs are active in

lobbying the government; legal security of tenureto slum dwellers has become the main stumblingblock for the proposed Urban Poverty Project to

be finalized by ADB.

* Implement a program to provide basic * The Bank's proposed Municipal Services Project

urban services to low-income and slum will provide for the implementation of such a

areas in Dhaka, which can serve as a program; a similar approach was envisaged under

model for other towns and municipalities. the ADB's proposed Urban Poverty Project.

31

THE ENERGY SECTORGas

The development of the gas sector in Bangladesh is proceeding apace. Ensuring its soundmanagement is a major challenge. Besides the outstanding need to vertically separate gas transmissionfrom distribution, there are a multitude of subsidiaries of Petrobangla engaged in similar tasks withunclear mandates, which raises substantially the cost structure associated with gas production and supply.


AGFA recommendations Current Status* Restructure and privatize the public gas * It has been planned to initially off-load 25% of

companies. the equity of two companies, viz., BangladeshGas Fields Company Ltd. (BGFCL) and TitasGas Transmission and Distribution Co. Ltd.(TGTDCL) to the private investors includingtheir employees. Consultants appointed byPetrobangla have completed asset valuationwhich is now lying with the government for adecision. There is no further progress onimplementation.

* Establish a regulatory framework for the * To institute a gas regulatory authority, thepetroleum and gas sectors with a jiixed goverpment has set up in MEMR aownership structure that is compiptely different Hydro~arbon Unit, which will ultimately be afrom the current centralized system. part of National Energy Regulatory Authority

(NER.A\, as envisaged in the National EnergyPolicy and also recommended in the latest gassector study conducted by Beicip-Franlabunder a TA project of ADB.

* Implement a rational gas prijing structure * The gas pricing issue has remained unsettled.that takes into account the clqse rclationship There has pot been any revision/ adjustment ofbetween the gas and the powqr and the the 3ss tariff since 1994. A high powered gasfertilizer sectors. pricing policy committee constituted by the

governmqnt two years ago, submitted its reportiin spring 1997. The report is being reviewedand a deqision is pending.

* Vigorously pursue increased private sector . This is gne of the most important objectivesparticipation so that gas investments do not outline4 by the government but the one leastdepend on the government's budgetary realized so far. It was not until 1991 that a newresources. Petrolfum Policy was announced. This, among

others, offered significant incentives forproduction sharing contracts (PSC). Thegovernment, supported by the Bank, organizedinvestment promotion round table conferencesin 1993 and 1997. The results of these

32

conferences have been very encouraging. To

date, 6 PSCs have been signed with

iettrnational oil companies (IOC) for 8 blocksout of 23. In the second round of bidding,which closed on July 15, 1997, a large number

of bids have been received from IOCs for 12

out of the remaining 15 blocks. The bids havebeen evaluated and negotiations/discussions

are continuing with prospective bidders.

* Withdraw Petrobangla's right of first refusal * This is under active consideration of the

and encourage production sharing contractors government and this may be one of the

to develop the gas market. negotiable issues in the second round of bids.

* Address sectoral impediments, from weak * Three TA components of Gas Infrastructure

institutional capabilities to technological Development Project (GIDP) on capacity

limitations, using the technical assistance building of Petrobangla and Gas Transmission

components of existing donor-funded projects, Company Limited (GTCL) are in progress.

as appropriate.* Make sure that the Bangladesh Power * Not much progress so far. Although the

Development Board, the single largest gas government has recently approved some

consumer, is able to pay its gas bills to: electricity tariff increase, it is unlikely to be

Petrobangla. adequate tQ restore the complete financialviability of BPDB to enable it to pay its arrearsto PetrobaAgla.

33

THE ENERGY SECTORPower

A number of initial steps have been taken by the government to restructure and reform the powersector. However, critical issues remain to be resolved. Still outstanding is the acceptance of the PowerSector Reform Study carried out by consultants (London Economics) with the support of the Power Cell.Another issue is the need to transform the new companies established (Power Grid Cooperation ofBangladesh and Dhaka Electric Supply Company) from their present status as 'shell' companies intofully operational concerns. A simultaneous exercise to improve operating efficiencies of existing publicsector power institutions is also a priority.


AGFA recommendations Current Status* Create an enabling environment for private * The Power Cell in MEMR has finalized the key

sector participation in build-own-operate policy documents (private power generation(BOO) power generation plants. policy adopted in October 1996) and standard

legal agreements related to the private powergeneration program. The government has alsoprepared legislative amendments to enableBPDB, DESA and REB to buy power fromprivate sector and these are to be presented toparliament shortly. Presently, a number of privatepower projects are at varying stages ofdevelopment: evaluation of Haripur (360 MW)and Meghnaghat (420 MW) plants is complete.The Haripur plant has received final governmentapproval and the Power Cell has issued letter ofinvitation to AES for negotiation. Cabinetapproval for Meghnaghat plant has been givenbut further administrative processing is neededbefore LOIs can be issued. Contracts for twobarge-mounted plants (100 MW each) have beenfinalized and contracts for two more areexpected; an RFP was issued for Baghabari plant(100 MW) and two offers received are beingevaluated; preparations are under way for theSirajgonj plant (300 MW). A total of about 1280MW of power is expected to be commissionedwithin the next four years bringing in about $1billion of private investment. REB has alsoreceived government approval to install smallpower plants for PBSs under private participation(BOO model).

* Restructure the Bangladesh Power * An overall sector reform program has beenDevelopment Board along functional prepared by consultants (London Economicslines, and establish independent and report of April 1997) which identified the process

34

corporatised entities for generation, of unbundling the integrated power sector. Atransmission and distribution activities. number of initial steps have been taken by the

government. The Power Grid Company ofBangladesh (PGCB) was established inNovember 1996 under the Companies Act withthe objective of taking over transmission system.The Board of Management and key officials havebeen appointed (inclusive of private sectorinterests). A development strategy for take-overof the transmission system remains to be workedout and the government commitment to fast-trackthis program is essential at this stage.

* Corporatize and commercialize the * Dhaka Electric Supply Company (DESCO) wasDhaka Electric Supply Authority, giving it established under the Companies Act with themanagerial and financial autonomy. objective of taking over DESA system gradually.

Appointment of key executives has beencompleted but a strategy or time frame for thetake-over has not been finalized as yet.Meanwhile, DESCO has floated tender forcontracting out billing and revenue collection.

* Establish an independent regulatory * Preparatory work for the necessary enablingauthority to oversee the reorganized legislation is under way. The government'ssector, including the setting of tariffs. commitment to the proposed restructured sector

organization is essential to move the processfurther.

* Rationalize distribution areas to improve * Re-demarcation of the greater Dhaka area hasthe viability of operating units, and been completed but the handing over ofintroduce private participation in peripheral lines is being delayed due mainly to adistribution- for example, using franchises- court injunction. Rationalization of the otheron an experimental basis. BPDB zones is under preparation by the Power

Cell. A greater commitment towards the handingover of distribution areas from BPDB to REB isnecessary. While a number of contracts forbilling and collection have been let out theirperformance is below expectations mostlybecause of the lack of cooperation from BPDBemployees.

35

TELECOMMUNICATIONS FOR GROWTHTelecommunications

The government has taken several initiatives recently on private entry and competition in thetelecommunications sector. It was taken out from the reserve list and private investment allowed in someselective areas under the government licensing system. The priorities are now to promote greatercompetition and, simultaneously, to strengthen regulation quickly and transparently before investors looseinterest.


AGFA Recommendations Current Status* Evaluate the cellular bids received in * The government already awarded four Cellular

August, 1995 and award the long-awaited Licenses to the private sector.new licenses.

* Draft a telecommunications act that * The Telecommunication Act has already beendefines the regulatory framework for a drafted. The Ministry of Posts andmodern, multi-operator sector. Telecommunications (MOPT) obtained

comments on this Act from various ministries.* Make a telecommunications regulatory * A Telecom Regulatory Board (TRB) has

board a reality. To do so the government already been established in MOPT.should initially establish the regulatoryboard as a semi-autonomous agencywithin the Ministry of Post andTelecommunications, to take over allregulatory functions exercised by theBTTB.

* Strengthen the regulatory board and its * A TRB TA is under implementation. Thestaff. Project Director of the TA project has been

appointed and the recruitment of consultantsand project staff is in process.

* Maintain the momentum generated by the * It is in process.recent clearance of the technical assistanceproject to make the regulatory boardoperational and build its regulatorycapacity.

* Provide short-term support to the * MOPT has appointed consultants who will startregulatory board for developing the work in February 1998. A Traffic Study haslicensing regime and addressing the been completed and the draft report, submittedinterconnection and tariff issues for which to the government, is expected to be finalized intechnical assistance has apparently been February 1998.approved by the Planning Commission,though the next steps have not yet beentaken.

36

+ Pass the Telecommunications Act. * Expected in mid-1998.

* Prepare the organizational structure and * MOPT has already prepared an Organizationalstaffing plans and undertake intensive staff Structure Staffing Plan for TRB. Consultantstraining programs. who will be appointed under the proposed

"Telecom Reform Project (TRP)" will finalizethe Organizational Structure and Staffing Plan.

* Explore technical cooperation * MOPT is exploring such cooperation with anarrangements with other internationally internationally reputed agency (e.g. Canada).respected regulatory agencies.

* Focus on training and technical * TRP will design and implement acooperation on the Frequency comprehensive FMMS system includingManagement and Monitoring System training of staff.(FMMS).

+ Encourage competition for services * MOPT has taken measures to encourage suchamong private cellular operators and the competition. It organizes periodic meeting withBTTB. private sector and BTTB to promote

competition and facilitate interconnection.

* Open up new investments for long- * Telecom Policy which is expected to bedistance services and allowing competition announced shortly, envisages competition inbetween wired and private radio-based long-distance and wired services after the yearnetworks. 2000.

* Privatize BTTB soon and make up the * Although the government has no immediatelost revenues with appropriate taxes and plan to privatize BTTB, this option is, however,fees. included within the privatization agenda of PB.

37

TRANSPORT INFRASTRUCTUREPorts, Railways and Roads

The Agenda for Action saw Bangladesh's underdeveloped and poorly integrated transportsystems as hampering commerce and stifling the growth of exports. It remains true that physical andinstitutional transport weaknesses continue to choke the country's international trading links, and withoutadequate corrective actions, no amount of good macroeconomic, trade and industrial policies willproduce the massive export push required for accelerated economic growth in Bangladesh.


AGFA Recommendations Current StatusPorts

* Increase the autonomy of port * The Chittagong Port Authority (CPA) is stillauthority, raising thresholds for functioning under the Port Ordinance of 1976.financial decisions, permitting flexible- There has been no increase in its autonomy.use of foreign exchange accounts (for However, the Port Master Plan and Tradespare parts management and the like), Facilitation Study (PMPTFS) which commencedand getting greater private sector in early September, 1997 will identify and suggestrepresentation on the Chittagong and measures in the execution of port activities,Mongla port boards. recommend changes in management structure,

organization, staffing and employment policiesand practices, institutional arrangements etc.

* The thresholds for financial decisions have beenincreased from Tk. 20m to Tk. 50m.

* In the wake of current account convertibility, CPAis not facing any problem in the procurement ofspare parts due to greater flexibility in the use ofits foreign exchange account.

* There is no private sector representation on theChittagong and Mongla Port Boards (whichconsist of a Chairman and three membersappointed by the government). However, there isan advisory committee comprising representativesfrom chambers, C&F agents, dock workers, portusers, local members of parliament. Thecommittee is chaired by the Secretary, Ministry ofShipping (MOS).

* Establish an apex task force comprising * This has not been established. The PMPTFS willinter-ministerial, private sector, and port prepare a National Port Development Policyauthority representatives with a mandate Master Plan for the development and operation ofto recommend investment plans, set the ports of Chittagong, Mongla and Dhaka in aperformance evaluation criteria, and manner which will ensure an economically optimalestablish procedures for accountability. import/export of cargo traffic and related inland

traffic.

38

* Allow the private sector, under sound,competitive guidelines to:

a) establish and run inland container * The government has given its approval to fifteendepots outside Chittagong port, in private entrepreneurs for the construction of InlandDhaka, and at other locations. Container Depots (ICD) outside Chittagong port,

in Dhaka and at other locations. Out of the fifteenfirms, only two firms have established their ICDsin Chittagong. The establishment of ICDs by theprivate sector was seriously constrained by NBR'sdecision not to allow them to handle the importcontainers at these ICDs.

b) operate rail container movement on the * Still under contract with Bangladesh Railway.Chittagong-Dhaka corridor (undercontract with Bangladesh Railway).

c) operate the new river port container * The government has agreed to this. The design ofterminal in Dhaka on a long-term lease the container terminal and the inland containerbasis. vessels has been completed. This project, funded

by OECF, was approved by ECNEC.d) operate container barges to link Dhaka- * This will depend on progress made in operating

Narayanganj with Chittagong and the new river port container terminal in Dhaka.Mongla (dropping the government's planto buy and run such barges).

Inland Water Transport

* Strengthen the institutional and * This is an on-going process. BIWTA, BIWTC andfinancial management capacities of the DOS are implementing various components underBangladesh Inland Water Transport their Operational, Institutional and FinancialAuthority (BIWTA) and the Bangladesh Recovery Action Plans.Inland Water Transport Corporation(BIWTC) (including appointing aBIWTA member for planning andoperation, increasing the independenceof operational units, and supporting thefinancial recovery plan).

* Strengthen the institutional capacity of * Same as above.the Department of Shipping.

* Improve cost recovery by increasing * Three-shift dredging is done as and when required.tariffs, improving the productivity of the It will be introduced on a regular basis afterBIWTA dredging fleet that do not meet completion of refurbishing of the dredgers.safety regulations.

* Approve the organizing plan and * The organizational plan and recruitment rule forrecruitment rules for the Inland Ship the Inland Ship Safety Administration (ISSA) haveSafety Administration and enact ship been approved by the Ministry of Shipping (MOS)safety rules. but is still awaiting approval by the Ministry of

Establishment. The Safety Rules are awaiting theapproval of the Ministry of Law.

39

* Expedite the award of the * Completed.environmental consultancy contract forthe Department of Shipping.

* Adopt the draft Marine Pollution * Comments on the draft Ordinance received fromOrdinance developed by the Department various agencies are being incorporated by theof Shipping. Department of Shipping. The Ordinance is

expected to be finalized soon.

* Encourage the country boats sector by * Site selection for establishment of four boatproviding adequate support centers has been completed. BIWTA is in theinfrastructure. process of completing the land acquisition. The

Boat Owners Association was involved in the siteselection. DANIDA is also funding a technicalassistance for the improved design andmechanization of country boats.

Railways* Short-term measures* Adjust tariffs and improve collection * Tariff restructuring was approved by BR on July

31, 1997* Replace open-ended subsidies with * BR will continue to receive PSO compensation for

explicit subsidies for uneconomic but socially desirable services.essential services. * The compensation will be reduced by 5% per year

(FY97 - 2000).* Reduce over-staffing and restructure * Reduced to 40,200 at present.

Bangladesh Railway * BR plans to reduce staff to 30,000 by June 2003.* Rationalize services and facilities and * 5 branch lines are now closed (in FY97). BR has

sell surplus assets, guided by an scrapped 11 MG locos in FY97 and 9 more areunderstanding of the areas in which targeted for FY97/98.railways can be expected to have a * 2 loco sheds were closed in FY98 and 5 more lococomparative advantage over road sheds are identified for closure.transport (for example, because of * Conversion to dual gauge has been planned forhighway congestion). Ishurdi to Parbatipur under Jamuna Bridge

Railway link project.* Outsource to the private sector in areas * Dhaka-Naraganganj rail for passenger service has

in which Bangladesh Railways is not been leased to the private sector. The unusedwell placed to operate efficiently. capacity of BR's fibre optics cable network has

been leased to Grameen Telecom.

* Long-term measures

* Focus on rehabilitation and * ADB is funding a TA for the improvement ofmaintenance of the network, much of it planning and management of BR. The Five Yearnow degraded, rather than on major new Action Program envisages preparing BR forinvestments. corporatization.

* Consider integration of rail and road * A marketing department has been established innetworks for container cargo. BR.

40

* A container terminal in Dhaka is under expansion(BR/CPA).

* A private sector terminal is to be commissioned atJoydebpur under the Jamuna Bridge Railway-linkproject (dual gauge - meter gauge -road) financedby ADB.

* National and Regional roads

* Continuously monitor and update the * Roads and Highways Department (RHD) has

Road Master Plan. started updating of Road Master Plan by applying

* Declare full support for ongoing HDM Model, based on which periodic

capacity building at the Roads and maintenance program for the Third Road

Highways department. Rehabilitation and Maintenance Project (RRMP-111) is under preparation.

* Introduce computerized cost * Computerized financial management system will

accounting practices into the department be introduced in RRMP-III.

* Strengthen the department's guidelinesfor civil works.

* Improve coordination between R&H * Coordination between RHD and Local

and LGED on contractor registration, Government Engineering Division on road safety

road safety, and contractor equipment. and contractor registration has started.

* Establish Planning cell in Road * Planning cell has been established at the Road and

Transport Division of Ministry of Railway Division of the Ministry of

Communication. Communication.

* Set up a National Road Safety * National Road Safety Council has been formed but

Secretariat. its permanent secretariat is yet to be established.

* Rural Roads

* Improve maintenance and * LGED has taken up a major rural structures

construction of missing structures on program under IDA financed Second Rural Roads

priority rural roads and give the LGED and Markets Improvement and Maintenance

the powers and the resources needed to Project (RRMIMP-II) where U$ 55 million will

get this done. be spent for the construction of 6000 drainagestructures (32,000 m) on rural roads.

* Increase institutional capacities for * Participation by local authorities and users in the

efficient and cost-effective planning, selection of the drainage structures as well as 15%

implementation, monitoring, and upfront contribution in cost sharing by unions is an

maintenance of infrastructure. important element of the project.* Government has agreed to allocate 50% of the land

transfer tax to Union Parishad and increased therevenue share of market lease from 65% to 75%

for the unions.* LGED has taken steps to increase the institutional

capacity related to planning, implementation and

41

maintenance of rural infrastructure.* Urban Transport

* Deregulate bus fares. * Bus fares have been deregulated for premium busservice, and private transport operator has startedair-conditioned bus services on two routes inDhaka city.

* Control growth of auto-rickshaws. * Bangladeshi Road Transport Authority (BRTA)has fixed a ceiling of 40000 auto rickshaws forDhaka city.

* Segregate fast- and slow-moving * No facilities have been created for the segregationtraffic. and facilitate the operation of of fast and slow moving traffic.premium bus services.

* Some pedestrian overbridges and underpass havebeen constructed by DCC.

* Improve pedestrian facilities. * Public consultative group with representativesfrom stakeholders and civil societies (journalists)has been formed which is being consulted by the

* Create a transport planning and project preparation team of Dhaka Urbancoordinating agency and establish a Transport Project (DUTP) on different issues.traffic funld for road and traffic Bangladesh Road Transport Corporation (BRTC)operations. has started applying commercial principles by

leasing out city bus operation to private operators.Structure of transport planning and coordinatingagency, modalities for the establishment of trafficfund, and development of parking policy are underpreparation.

* Strengthen the Dhaka City Corporation * A road maintenance and traffic engineering unitroad maintenance unit. for Dhaka City Corporation (DCC) has been

proposed but is yet to be established.

42

BETWEEN STATE AND MARKET

Butilding Institutions and Improving Governance

The Agendca for Action pointed out that loss-makinig public enterprises, bureaucratic

entanglements, budgetary weakilesses, and an ill-equipped civil service hold back the momentum of

change. It underscored the need for reforming and re-defininig the operations and ideologies of these

institutions as essential to fulfilling the couLitry's econolilic potential.


AGFA Recommendations Current Status

Initial Reform Actions* Demonstrate persuasively the * Althougil, very early on, the cabinet

government's intentionis to tackle public accepted in principle the recommendations

sector reforms resolutely. of the workshop on "Governmeit that

* Address issues of the higilest conceril, Works", there is little progress on the

thereby mobilizing support from large ground to suggest that it has been given a

groups of society. higih priority in implementation. An

* Be administratively and techinically easy to eminent retired civil servant who was

implement. appointed Chairmani of the newly-formedPublic Admilistrationi Reforms Committee(PARC) recently resigned signallinig a

serious setback to administrative reforms.

* Announce a Policy Vision for public * This has not happenied.

sector performance presentilig thegovernment's view of the public sector in

the 21 st century and of the key elements of

reform needed to make governmeit work

better.* Establish lead institution for change to * The proposals in the Agenda for setting up

galvanize support for reforn. a National Commission for reformingGovernment (NCRG) and a SteeringCommittee, headed by the cabinetsecretary or principal secretary to the

Prime Minister has not led to any action.

The Efficiency Unit that was set up in the

PM's secretariat as the staff unit to the new

NCRG has remained essentially non-

functional for lack of 'any agent for

change' at its helm. Other proposed leadinstitutions that remain unfulfilled are: a

bipartisan Task Force on Parliamentaryaccountability, Deregulation Commission,Citizen's Charter that would publicizeperformance standards, Ombudsman'sOffice, Prime Minister's Private Sector

Advisory CouLIcil and a Task Force for

eradicating Corruptioll. Only the GNCC

has been formed and is operational.

43

* Accelerate the privatization program * There has been tangible progress inand the deregulationi of telecommillLllication., privatization recently in the sense thatpower, gas, and shippin1g, clearly defining adminlistrative formalities for divestmentkey targets for reform uLider a publicly has been completed for 28 enterprises: (a)anlouliced, time-bound, and monitorable letters of intenlt were issued for 9, (b) ICBprogram. was entrusted with selling publicly held

shares of anothier 9, and (c) cabinetapproval was obtained for 10 moreeniterprises. Very recently, over 7500\\orkers in 11 publicly-owned textile millswere retrenchied thus facilitating theirprivatization. But no more thani 3 units\Nere actually hanlded over to privateowniers, procedural entanglemenits anddelays are impeding rapid transfer.

* Merge or downsize departments and . There is no progress to report.agencies that have clearly lost any rationalefor existence (e.g. the Ministries ofTextiles and Jute).

* Reduce the number of decisions needilng * PARC was to examine some of theprime ministerial, ministerial, or cabinet possibilities but nothlinig concrete has yetapproval. emerged.

The Next Plhase* Raise the profile of IMED by relocating it * This has not happenied and there is no

from the Planninig, Milistry to the PM's adminiistrative decision to indicate that thissecretariat. is likely to happeni.

* Revive the project paper format for * The standard PCP and TAPP formatpublic investment projects to force continues to impede speedy projectagencies to think about alternative ways of approval, thougIl line ministries have beendelivering services. given some enilliaced authority for project

approval and extensioni of on-goinig ones.

* Activate the Law Reforms Commission. * The permianenit Law Commission has beenactivated and is working. (See also page 5ulider Private Sector Development).

* Initiate personnel management reforms: * This could have been one of the aspects foras a first step introduce a special merit pay examination by PARC.schemile and a crash, overseas traininilgprogrami.

* Establish a pay research unit in the . A Pay and Wage Commission set up earlyMilistry of Fhianice to start laying the on submitted its recommendations forfoulidationls of pay reform. upward across-the-board revision of

salaries and benefits. Theserecommendationis are now beingimplemented at substantial budgetary cost.

44

* Formulate programs to enable ministries * Target-oriented budgeting is still not on the

and agencies to identify performance program of any ministry.

targets and objectives in thieir budget

subm issions.* Establish a fully-funded safety net * Thougil redundant SOE workers are being

program for redundanit state enterprise retrenchied with severance packages under

workers. ad hoc provision of funds, a

comprehenisive safety net program is not in

the offing.

* Issue guidelines on the scope of external * This has not happenled.

audits of state enterprises.The Medium-term Agenda and Beyond* Convert selective bureaus and boards into * This has not happenled.

agencies with full finanicial and

administrative autonomnly.

* Provide legislative assistance for * Tlis has not happened.

members of Parliament and establishparliamentary watchdog agencies and anEconomic Policy Unit in the Parliament

secretariat.* Enact local government legislation and * After reviewing the recommendations of

transfer resources for rural programs from the Local Government Commission (LGC),

the Ministry of Local Govermiienit to the governmeit has approved a four-tier

elected local govermilenits. local government structure -- consisting ofvillage, union, thania/upazilla and district

councils -- with specific provision for theircomposition, functions, financial powersand sources of income. Parliament has

recently passed legislation relating to the

introduction of elections for village andunion parishad councils, but the major

opposition abstained from voting.

* Reduce the size and scope of the Planning * This was a recommendationi of the

Commission. Nuruliniabi Committee (ARC). but neitheracceptance nor implementation of thisrecommendationi appear to be on the

government's agenda.

* Starting with a few ministries and agencies, * This has not happened yet.

initiating a program that links budgets to

performance objectives and targets.

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