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TOPIC: WHITHER PRSP (Poverty Reduction Strategy Paper)?
M.M. Akash ,
Professor, Department of Economics,
Dhaka University.
E-mail: [email protected] 

1.28 billion citizens of our planet are now living below the poverty line income. This is what World Bank says in its latest World Development Report (WDR, 2000). Almost 72 percent of them live in Asia and about half of the one billion Asian poor live in South Asia alone! Bangladesh is a low-income poverty ridden country of this South Asian region. Every one man in two here is considered to be poor, if we accept the international definition of absolute poverty as offered by WB . What actually are the characteristics of these "Poor People"? Basically they are that part of the society who are relatively most deprived from income, wealth, education, social security and political power. They are the defeated victims of an unequal competition in an intrinsically unequal society. In Bangladesh there is going on a continuous process of unequal and unjust competition through which a greater section of the middle class is slowly becoming the member of a lower middle class and after a brief period of life and death struggle to hold on they also ultimately in most cases slide down to swell the ranks of the poor. Now a day in the literature you will find another category: "Poor becoming Extreme Poor!"

Therefore there must be present an absolutely clear recognition of the following truths in any document promising to change the lots of the lower-depth. Firstly it has to be recognized that if there is unequal distribution of initial endowments like wealth, education, security and political power in the society then there cannot be any fair and equal competition. And the relatively deprived is generally bound to be defeated in that unfair economic and political game. Secondly one has to recognize frankly that the main challenge before a strategic planner planning to reduce poverty is to design such policies that will enable the poor and the weak to win in spite of the unequal nature of the game. So far we find mainly two types of strategic answers to this question.

The radical answer to the above question is to start with a revolutionary redistribution of wealth and power from which will follow an egalitarian growth or pro-poor growth within the society. The problem of that answer lies in its abstract nature. If one means business one should not stop here and proceed further in order to concretize and chart out a political road map for achieving that so called "Revolutionary Redistribution" which is of course not so easy!.
On the other hand the traditional mainstream thinkers are prone to believe that the natural law of "Struggle for Existence and Survival of the Fittest" holds good in the society as well and therefore what one can mostly do is to device a few "Safety Net" measures for at least protecting the rights of the poor to live. The true meaning of these "Safety Net Measures", however, is to maintain the cheap labour reserve for the more powerful employers of labour in the society. That is why they have set the minimum subsistence income or the so-called poverty line income as the norm for the millions of poor people of the globe. Professor Anisur Rahman, one of the founder members of the first planning commission of Independent Bangladesh had rightly ridiculed this concept of poverty as the "Livestock Concept of Poverty"!

We have traversed a long way in the last century where we had observed the rise and fall of cold war between supposedly two diametrically opposite schools of thoughts in the field of development discourse. The practical experiences of the last century taught us two very definite lessons:

" Those who were in favour of radical "Affirmative Action" for the deprived classes actually forgot that it does not mean either "Charity" or "Benevolence". It is actually a question of right of the deprived people justified not only by an external moral ethical ground but also by an active fulfillment of all necessary responsibilities by the enjoyer of those rights. The logic of affirmative action for the weak actually remains valid as long as it can be shown that this help is temporary and time bounded and the helped object will become an autonomous subject in due course of time. In fact in the early part of the last century we really saw the great socialist experiment being started with a radical redistribution of power and a move towards making the people the subject of their own development. But after a period of spectacular rise and success on the basis of a generous support from the above the people there slowly lost all their initiatives and had become a play-toy in the hands of the centralized state power. This is the real reason why people did not make any protest when the state elites in many of these socialist countries shed their masks to recapture openly the state owned wealth and thereby were able to turn themselves into "Mafia Capital" or "Corporate Capital". This was perhaps the biggest tragedy of the twentieth century but the lessons should be well taken.

" On the other hand the so-called victorious capitalism had tried to introduce various reforms e.g. progressive taxation, social security schemes, etc. in order to address the issue of unequal distribution. But the experiences of twentieth century has also made it quite clear that such standard reforms or safety net measures could not stop the absolute growth of the total number of poor people living especially in the historically resource poor regions. This traditional safety net approach is merely a tool for intervention only when somebody is sliding down into the pit of poverty. In that sense it is a curative treatment and not a preventive treatment of the disease of poverty. Thus if the spreading rate of the disease is equal or higher than the recovery rate then the number of poor patients will obviously not decline if not increase! Bangladesh is a very vivid example of this chronic poverty syndrome. During the whole decade of eighties the head count ratio of income poverty in Bangladesh remained almost static fluctuating in between 52.3 p.c. (1983-84) and 49.7 p.c. (1991-92). Presently some people are claiming that there was an impressive decline in the rate of poverty in Bangladesh during the decade of nineties. More precisely they say that in year 2000 it has come down to only 39.8 p.c. Leaving aside the statistical and methodological controversies even if we accept the last figure as it is then what does it actually mean? It actually implies that in 1983-84 there were 38.7 million poor people in the country but now the total number of poor has actually become almost 50 million! The happy people are actually presenting the picture of poverty of our country in relative terms, which again helps them to hide the increasingly alarming size of the poor population in our country. And it does not require a great knowledge in economics to understand that in a country where 50 to 60 million people i.e. almost half the population lives in an abject condition of poverty, everything is going to turn fragile and vulnerable.


On Poverty Reduction Strategy Paper

At present it seems that the Donors especially WB is very anxious about the poverty of Bangladesh. Now a days Donors no longer give grants or untied aids. Most of the loans coming from WB is either for a particular project or based on one or another certain strategic policy framework such as SAP (Structural Adjustment Programme). SAP has miserably failed not only in Bangladesh but also in many countries of Asia and Africa. The main three policy thrusts of SAP are:
1. Indiscriminate Privatization of not only industries but also major utilities e.g. water, electricity, gas, railway, port, etc.
2. The so-called policy of free market policy, which actually means almost unilateral withdrawal of all tariff and non-tariff restrictions by the aid-recipient country.
3. Withdrawal of all kinds of subsidies in the name of "Efficiency".
4. Tightening the belt of the Government in order to ensure so-called macro stability of the economy.

SAP was introduced in Bangladesh from the middle of eighties when the country was under a Martial Law Regime led by General Ershad and is being continued till now. At present it is at its last phase and is trying to privatize all the remaining industries in the state sector whether it is profitable or not. There is also a high pressure on the Government to dismantle BPC (Bangladesh Petroleum Corporation) in order to establish the complete control of MNCs on the gas and oil sector of Bangladesh. Similarly there is a high pressure from US embassy in Bangladesh to hand over the Chittagong Port to a foreign US based company. SAP was evaluated through a national participatory process of all the stakeholders including WB in Bangladesh and the conclusion was negative. The participants even raised the demand that WB should pay compensation for imposing harmful policies that have created a slump in the economy, increased poverty and unemployment as well as caused mass discontent in the Agricultural Sector by withdrawing subsidies. And finally it was recognized that nobody actually owned the SAP. The Minister also confessed that they were forced to accept the SAP under pressure otherwise loans or grants whatever little was coming would have been stopped.
[D ebapriya Bhattacharya and Rashed Titumir (ed), Stakeholders' Perceptions Reforms and Consequences: Report on the First National Forum of SAPRI, Bangladesh, CPD and Proshika, Dhaka, 2001]

Given this unfavourable background not only in Bangladesh but also in all over the world the WB had to recognize the failures of SAP at least partly and they tried to put the blame on the local host country government who according to them were not sufficiently committed and have numerous governance problems. And side by side they also recognized the need for the safety measures to offset the so-called pains of the reform process. Last of all came the announcement of a "Poverty Reduction Strategy Paper". WB was now insisting that Bangladesh and many such highly indebted countries will have to prepare a PRSP within a prescribed limit of time (In the case of Bangladesh it is September 2002) and submit it to them for preliminary scrutiny and then they will forward it to the September meeting of the member states of the board of directors of WB for the final approval. Till then all so-called soft loan options will be remaining withheld.

At this juncture our organization "Peoples Empowerment Trust" in co-operation with Action Aid Bangladesh launched a nationwide campaign against this process of donor driven PRSP [Please See our dialogue paper, "PRSP: What, Why and For Whom" in our web site: ............]. The central theme of our campaign was "OWNERSHIP". We pointed out that like SAP, the Government is now again preparing a PRSP under the influence of the "Carrot and Stick" policy of WB and IMF. and this will produce a paper without any national ownership. We demanded to start the process of PRSP from the ground by first arranging dialogues with the people in the field to understand their understanding of poverty. We also proposed that the PRSP must be integrated with the existing long term and medium term national plans of the country. In that case PRSP will become a part of the whole and not the whole itself. Otherwise, we predicted that the sad story of SAP will be repeated again and we will have to repent afterwards saying, "PRSP failed because of lack of ownership and commitment"! We also apprehended that within PRSP there will be incorporated some of the unfinished macro agendas of the failed strategy of SAP and this is perhaps the real hidden agenda of WB behind PRSP.

In response to our campaign Government of Bangladesh tried to meet both ends in a novel manner. They at first tried to prepare a PRSP in a hurried manner before the Paris Consortium meeting and to give it a semblance of bottom up participation they hired BRAC to arrange twenty-one dialogues. On that thin basis the consultants were asked to prepare a draft PRSP. It was finished just before the Paris meeting and our finance Minister took it with him to Paris calling it interim PRSP . But whatever negotiations took place in Paris it seems that the finance Minister was not at all happy with the donors' standpoint. Later after coming back to home he proclaimed in an open statement published in the top national dailies that although the donors ask us to sit at the driver's seat, but after sitting there we find that the steering wheel is really in the hands of the donors and my task is just to repair the tires and tubes after the accident. Subsequently we found that the name "PRSP" was dropped and the Government circulated a draft paper named "Bangladesh: A National Strategy For Economic Growth and Poverty Reduction" for discussion.. We hailed these moves towards a correct direction and asked the Government to proceed further and incorporate the real demands of our people within it instead of those SAP agendas superimposed by the donors. At the same time we also started to think and plan about a critical engagement with the content of the draft "National Strategy for Economic Growth and Poverty Reduction" [published by ERD, Ministry of Finance, GOB, in April 2002]. But to our utter surprise, we find that in the last budget session the finance minister retreated from his post Paris position saying that the WB and IMF actually have a stronger approval of his regime compared to the previous one. He also added that hopefully after finalizing what he this time called PRSP on the basis of dialogues held between the donors (meaning WB and IMF) and his Government, soft funds would be obtained to implement that so-called "mutually approved PRSP". Thus the truth has ultimately been revealed. So this time we are again going to have a donor driven strategy of poverty reduction and it is going to be approved neither through an extended participatory process in the bottom nor through a minimum national debate in the parliament in the presence of all concerned political parties. Thus we think it is high time to start our second phase of the campaign on the contents of draft strategy, which is after all the real substantial issue!

The Draft Strategy Paper

At page one of the NSEGPR (National Strategy for Economic growth and Poverty Reduction) it is written:

" For operational purposes, the strategy paper will form the core of the sixth Five Year Plan (2002-2007) beginning from 1st. July, 2002."
(P:1)

But in his last budget speech the finance minister spelt out his own understanding of this strategy paper in terms of the following words:

" This strategy will be subsequently converted to PRSP which will provide the basis for holding dialogues with the development partners....... Necessary administrative and economic reforms will be implemented in phases to implement this strategy. A three year macro-economic framework will be developed for achieving the purpose of the strategy The budget deficit will be contained within sustainable limit, domestic resource mobilisation will be augmented to gradually achieve self-reliance and domestic borrowing by the Government will be scaled down. Besides wastage and misuse of resources will be curbed in all spheres of the economy. Private sector will be promoted and made more robust." [section 26 and 27 of the Annual Budget Speech, 2002-2003]

From the above statement it seems that a standard SAP policy package based on a three year rolling investment plan for macro economic stability is the chief concern of the Finance Minister whereas poverty reduction strategy can wait until more resources are available from the donors. This statement creates apprehension about the status of our ongoing sixth five-year plan process. Will it be continued or will it be stopped? What will be its status vis-à-vis the NSEGPR and what shape the NSEGPR itself will take?

We know that at least twenty-one dialogues were held with different sections of the people at three successive levels of Upazila, Division and National level before finalizing NSEGPR. It will be extremely useful from the peoples' point of view to look at these dialogue reports spelling out people's own priorities. The paper has presented the summary findings of these dialogues in chapter three titled " Participatory Consultation on Poverty Reduction Strategy: Emerging Lessons". As reported there, the participants roughly identified seven past commendable achievements and at the same time pointed out to sixteen urgent failures in the field of general development, especially the development of the deprived and poor. These are worth mentioning:


ACHIEVEMENTS (7)

1. Bangladesh has been able to reduce acute deprivations measured in terms of food and income entitlements.
2. Some increase has taken place in educational and health facilities for the poor.
3. The wage of the rural labourers has increased.
4. The traditional money lending business has been curtailed.
5. The volume of remittance transfer from the foreign countries has increased.
6. Employment opportunity in the non-farm sector e.g. fishery, poultry, small business, services etc. have been widened.
7. The role of the Women Entrepreneurs in the rural areas has increased.


But side-by-side the number of areas of key concern was quite large:


FAILURES (16)

1. The law and order situation has deteriorated extremely!
2. Especially the vulnerability of the poor and the weak has increased enormously.
3. "Mastanocracy" has increased very much.
4. The administration in general and especially the law enforcing agencies do not have any accountability.
5. The political parties have recruited the dropouts from the S.S.C. and H.S.C. examinations in order to turn them into terrorists under political protection.
6. The poor people are generally disorganized and are not aware of their rights.
7. The power of the local level Government (UP and UZ level elected body) is inadequate and there is also lack of accountability.
8. The quality and standard of health services at local level is quite low.
9. In the field of education there is no uniformity and inequality is being enhanced by this dual education system.
10. Not only health and education, other governmental services e.g. electricity, water and road services all are in equally deplorable condition.
11. The standard of agricultural extension services is also quite low.
12. There is an extreme lack of coordination among the N.G.O., C.B.O. and the G.O.B.
13. Regional inequality especially rural-urban gap is increasing.
14. Politics has become polarized and conflicting.
15. The micro level borrower and saving groups have not been able to form a united federal body of their own.
16. Poor have neither voice nor any participation in the policy formulation process at local, regional and national levels.

Although the above list can't be considered as comprehensive and complete yet one would wonder what actually has been suggested in the strategy paper to address these important issues, which were self- identified by the people from the bottom?


Fundamental Weakness of the Draft

The draft document concentrates mainly on a technical growth projection exercise and gives very little attention to the really thorny problems, which did surface up in the preparatory dialogues. It is rightly recognized that in the nineties the national inequality index (GINI INDEX) has been increasing at a very accelerated rate (i.e. 2.1 p.c. per annum, see P7)! But in the very beginning of the technical exercise it was fatalistically assumed that nothing could be done to reduce the present level of inequality. Moreover it was further assumed that in future the inequality in the society would continue to increase. Only on that basis the projection suggests that if and only if Bangladesh could achieve a sustained average growth rate of seven percent over the next twenty years we will be able to reduce absolute income poverty from the current level of 50 percent to 25 percent. (See the Annex Table 6). This actually reflects the "Millennium Development Goal" for the developing countries (Reducing poverty rate by half within next twenty years). But like "Inequality" if we also assume that our growth performance would continue to remain same (i.e. two percent per-capita income growth) then number of poor people will rather increase from 63 million to 64 million!!

What a tragedy, our plan even if 100 percent successful would be able to reduce the number of poor people living in the society to a level of only 43 million (the current level is about 63 million). So only 20 million poor people at the margin will be able to cross over the poverty line within next twenty years and almost 68 percent of the currently poor will continue to remain poor. Actually any plan that does not have the courage to attack inequality cannot but have such a pessimistic result. Look at China, Vietnam, South Korea, Cuba, and all other poverty reduction success stories even well recognized by WB, you would find that the success could only be achieved on the basis of an egalitarian growth based on fundamental redistributive measures.

This strategy paper describes the role of the private sector as "The Engine of Growth". But let us look at the facts more critically. Our past experiences have clearly proved that there are two distinct types private sectors in our country. The largest private sector is the agricultural sector and non-formal rural urban sector. During the last decades in spite of the lack of or little state help they played the leading role in augmenting our economic growth. On the other hand the big corporate sector and the co-operators of MNCs actually had failed to produce any significant growth in the modern sector (of course the Garment sector is the only exception but that also is based on special international opportunity and the cheap women labour of our country). So the plan should have specified which private sector they want to target: the big defaulters or the productive entrepreneur?

The plan surprisingly remains silent or ambivalent about a few burning issues of our country. Let me mention a few here. What is going to happen to our garment industry after the withdrawal of MFA agreement in 2005? How will you face the pressure to privatize Gas, Electricity, Water, Railway, etc. and what would be the net impact of such a reform on the poor? How can the government mobilize more resources from the rich? How education and health sector can attain uniformity at least in the basic level? These are really thorny and difficult issues and also popular issues because they touch the pockets of the rich and if successfully implemented can change the lives of the poor. Actually the plan takes it for granted that hard anti-poor reforms within the framework of SAP will be occurring and wishfully hopes,

" The pro-poor programmes will be made strong to complement the liberalization agenda. Macro economic stability and robust growth would ensure that employment losses as a part of needed economic restructuring can be offset by rapid growth in other sectors" (P 27-28)


But all previous studies here and in most of the countries of the world shows that donor driven SAP measures cause slump, poverty and inequality instead of growth, affluence and justice. So what is the basis of this wishful thinking?

Conclusion

The strategy document abounds with numerous rhetorics on "Pro Poor Growth". But never goes beyond the traditional safety net measures. It starts with a self-defeating assumption that inequality cannot be reduced. It is funny to find a chapter titled " Policies and Institutions for reducing inequality" where at the very beginning it is stated that what can be done at best is " to prevent any serious worsening of income distribution to ensure poverty reduction as average income increases". It also remains silent or rather supportive of the measures of SAP dictated by the foreign donors. It totally ignores or pay scant attention to the real issues of life that had actually surfaced up during their own dialogues with the people. Finally it is not clear whether the document will be under national ownership or it will be hijacked by the donors, especially the WB who has both carrots and sticks at his disposal.
But it will be very unfair if I do not point out at least one very strong and the most pro poor statement of this strategy paper. At page 39 it is rightly mentioned,

" A faster pace of poverty reduction would require greater voices of the poor. Greater voices would be ensured through moving beyond the narrow domain of micro-empowerment measures such as access to credit. For greater agency role of the poor, measures would be taken for building institutions for the poor at sectoral, sub-national and national levels with emphasis on developing new institutional ways and means for collective empowerment. This would be needed not just for catalyzing the active pressure group function of the poor but also for increasing their aggregate claims in the distribution of overall benefits for economic growth and distribution"

Whoever has written this deserves to be congratulated for speaking the truth. This should have been the starting point of this strategy document and focus should have been concentrated on further concretizing effective means for effective empowerment of the so-called poor. Instead, the ruling class has relegated this statement to a corner of the text, and has kept it hanging in the air. Perhaps they do not want "faster pace of poverty reduction"! I would like to end my discussion on the draft strategy paper with a statement by Naom Chomsky. He said that a text can be understood by not only looking at what it contains but what it omits and ignores.