Bangladesh

This paper addresses whether microcredit participants in Bangladesh are trapped in poverty and debt, as many critics have argued in recent years. Analysis of data from... Show More + a long panel survey over a 20-year period confirms this is not the case, although numerous participants have been with microcredit programs for many years. The results of the analysis suggest that participants derive a variety of benefits from microcredit: It helps them to earn income and consume more, accumulate assets, invest in children's schooling, and be lifted out of poverty. This is not to say that non-participants have failed to progress over the same period. Both participants and non-participants have gained as the economy has grown; however, the rates of poverty reduction have been higher for participants. Testing the net effect of microcredit programs requires applying an econometric method that controls for why some households participated and others did not, conditional on their initial characteristics. In addition, the method must control for time-varying, unobserved heterogeneity that affects everyone over time, albeit in possibly different ways. The paper's econometric estimates show significant welfare gains resulting from microcredit participation, especially for women. They also show that the accrued benefits of borrowing outweigh accumulated debt. As a result, households' net worth has increased, and both poverty and the debt-asset ratio have declined. Show Less -

Weak exports and investments resulting from the impact of the euro-area crisis, domestic supply constraints, and intensified strikes and unrests underpin the growth... Show More + slowdown. Strong remittances and robust service sector performance are expected to help maintain growth at a still healthy level. Increasingly fragile political stability does not bode well for revival of investment needed to accelerate growth. A broad-based declining inflation trend appears to be gaining ground. Average (twelve-monthly-moving) inflation has declined steadily over the past ten months, from a peak of nearly 11 percent in February 2012 to 8 percent in March 2013, reflecting declines in both food and non-food inflation. Favorable international commodity prices, a stable exchange rate and monetary tightening contributed to lowering inflation. Show Less -

Bangladesh seeks to attain middle-income status by 2021, the 50th anniversary of its independence. To accelerate growth enough to do so, it will need to undergo a structural... Show More + transformation that will change the geography of economic production and urbanization. Critical to its transformation will be the creation of a globally competitive urban space, defined here as a space that has the capacity to innovate, is well connected internally and to external markets, and is livable (Organization for Economic Cooperation and Development, or OECD 2006; World Bank 2010). This study identifies what is unique about Bangladesh’s process of urbanization and examines the implications for economic growth. Through the lens of Bangladesh’s most successful industry, the garment sector, it describes the drivers of and constraints to urban competitiveness. Based on the findings, it provides policy directions to strengthen the competitiveness of Bangladesh’s urban space in ways that will allow Bangladesh to reach middle-income status by 2021. Show Less -

Using calories in a unitary framework, previous literature has claimed lack of gender inequality in intrahousehold food distribution. This paper finds that while there... Show More + is lack of gender disparity in the calorie adequacy ratio, the disparity is prominent among children, adolescents, and adults for a number of critical nutrients. Pregnant and lactating women also receive much less of most of these nutrients compared with their requirements. A wife's bargaining power (proxied by assets at marriage), as opposed to her husband's, significantly and positively affects the nutrient allocations of children and adolescents and of adult females. The bargaining effects remain significant after controlling for unobserved household characteristics and the potential nutrition-health-labor market linkage. The findings, which have important policy implications for the growing problem of micronutrient malnutrition in the developing world, also imply that perhaps the nutrition-health-labor market linkage as a key explanation for intrahousehold food distribution has been overemphasized in the previous literature. Show Less -

The electricity sector in Bangladesh has been facing unprecedented challenges, with severe capacity constraints and sector subsidies that quadrupled from 0.2 percent... Show More + to 0.8 percent of gross domestic product (GDP) between 2010 and 2012, driving the government's fiscal deficit deeper. This policy note examines the poverty and distribution impact of one such reform-residential electricity tariff increases-along with their fiscal implications. A challenge of such adjustments is how to minimize their impact on the poor and vulnerable. Using household survey data, this report studies the distributional and fiscal implications of the residential tariff adjustments between March 2010 and March 2012 on to inform policy dialogue on the provision and targeting of electricity subsidies. Electricity subsidies are defined as the difference between the cost of supplying a unit of electricity and the tariff the end-user is charged for a given unit. Between 2010 and 2012, real cost of supply increased almost 20 percent. This policy note focuses on just one part of a much broader and complex system of connected energy policies. The policy implications of this analysis should only be considered in light of this broader context. In particular, this note does not study in detail the complex issues of generation and operational efficiency (in transmission and distribution). Second, this note does not study the political economy of tariff and subsidy reform. Tariff increases have been a source of social unrest, and planned increases could generate additional unrest. It will be important for the government to consider the political economy of further reform carefully. Moving forward, both of the new slab systems being discussed could relieve the fiscal burden of subsidies. Show Less -

Despite an unfavourable global economy, economic growth in Bangladesh is projected at close to 6 percent in fiscal 2013 (FY13). Adverse external demand and domestic... Show More + supply constraints continue to be a drag on growth. Shortfalls in exports and investments due to a possible protracted crisis in the euro area and internal supply constraints may underpin the moderation of growth. Investment targets of the medium term budget framework 2013 to 2017 face major obstacles in shortage of electricity and gas supplies, and poorly functioning roads and ports. One positive prospect on the investment front is the increase in foreign direct investment in FY12, which surpassed the US$ 1 billion for the second time in Bangladesh's history. Fiscal policy is back on track. Fiscal performance in FY12 was favourable, notwithstanding increasing subsidies. The overall budget deficit in FY12 is estimated at 4.5 percent of Gross Domestic Product (GDP). Domestic financing of the deficit declined to 3.2 percent of GDP, from 3.5 percent in FY11. Lower government borrowing from the banking system in the second half of FY12 was a welcome reversal from worrying trends in the first half of the year. The FY13 budget deficit target 5 percent of GDP is modest, though higher than the estimated 4.5 percent of FY12, and is likely to be undershot primarily because of a shortfall in the implementation of the ambitious Tk 550 billion annual development programs, by now a familiar pattern. However, the financing of the deficit may be a challenge with a projected US$2.2 billion net external financing need, substantially more than the $1.4 billion of the revised FY12 budget. The rest of the deficit is projected to be financed from domestic sources, with a still heavy 69 percent reliance on bank borrowing. Bangladesh's economic outlook is subject to several near-term risks. Possible intensification of the euro area crisis may deepen Bangladesh's export slump of the last six months; escalation of global food prices may reverse the recent decline in food inflation; global oil price shock will place the balance of payments under pressure again and shrink fiscal space; banks are susceptible to credit and market risk and the global economic vulnerabilities; and increased political instability and labour unrest may depress investments further. Show Less -

In Bangladesh, growth needs to accelerate to absorb the burgeoning labor force and continue making dents in poverty. Such acceleration will require sustained growth... Show More + in exports and remittances. It will also need an increase in investment both public and private. However, growth acceleration alone will not be enough to absorb the labor force. This will need an improvement in employment intensity of growth, and a further improvement in inclusiveness of service delivery. Moreover, to help ensure that growth acceleration is sustained, the ex-ante and ex-post effects of climate change will need to be addressed. Finally, urbanization offers opportunities to accelerate growth, but can also undermine it if not proactively managed. Bangladesh's Gross National Income (GNI) per capita more than tripled in the past two-and-a-half decades, from an average of US$251 in the 1980s to US$784 by 2011. This growth was accompanied by impressive progress in human development. Yet, after 40 years of independence, Bangladesh remains a low-income country with nearly 50 million people still impoverished and its economic growth potential under-exploited. It is therefore important to understand the drivers underpinning Bangladesh's growth process, what enabled the drivers to move Bangladesh forward, what its prospects are for graduating to middle-income country status by 2021, as envisaged in its sixth five-year plan, and what it would take to accelerate growth sufficiently to achieve this objective. Show Less -

The primary objective of this study is to analyze the impact on Bangladesh of increased market access in India, both within a static production structure and also identifying... Show More + dynamic gains. The study shows that Bangladesh and India would both gain by opening up their markets to each other. Indian investments in Bangladesh will be very important for the latter to ramp up its exports, including products that would broaden trade complementarity and enhance intra-industry trade, and improve its trade standards and trade-handling capacity. A bilateral Free Trade Agreement would lift Bangladesh's exports to India by 182 percent, and nearly 300 percent if transaction costs were also reduced through improved connectivity. These numbers, based on existing trade patterns, represent a lower bound of the potential increase in Bangladesh's exports arising from a Free Trade Agreement. A Free Trade Agreement would also raise India's exports to Bangladesh. India's provision of duty-free access for all Bangladeshi products (already done) could increase the latter's exports to India by 134 percent. In helping Bangladesh's economy to grow, India would stimulate economic activity in its own eastern and north-eastern states. Challenges exist, however, including non-tariff measures/barriers in both countries, excessive bureaucracy, weak trade facilitation, and customs inefficiencies. Trade in education and health care services offers valuable prospects, but also suffers from market access issues. To enable larger gains, Bangladesh-India cooperation should go beyond goods trade and include investment, finance, services trade, trade facilitation, and technology transfer, and be placed within the context of regional cooperation. Show Less -

The solar home project is managed and administered by the Bangladesh Infrastructure Development Company (IDCOL) and involves the following activities: developing consumer... Show More + awareness of solar home systems (SHS) and their potential for rural lighting; establishing standards to be met for equipment ; providing refinancing of loans of Participating Organizations (POs) to their customers; establishing standards to be met for equipment; and supervising the activities of POs and coordinating activities between participants . The preparatory stage of the project showed that the high initial costs to customers and the inability of the majority of rural households to meet this expense in the short term, combined with the lack of available credit with longer term and lower interest is the main barrier to SHS sales. Show Less -

This study investigates the choice of occupational focus versus diversification between household members in rural Bangladesh as an autonomous and proactive adaptation... Show More + strategy against ex ante local rainfall variability risks. The analysis combines nationally representative household level survey data with historical climate variability information at the Upazila level. The authors note that flood prone Upazilas may face reduced risks from local rainfall variability as compared with non-flood prone Upazilas. They find that two members of the same household are less likely to be self-employed in agriculture if they live in an area with high local rainfall variability. However, the occupational diversification strategy comes at a cost to households in terms of consumption welfare. The paper considers the effects of three policy actions, providing access to credit, safety net, and market. Access to market appears to be more effective in reducing the likelihood of costly within-household occupational diversification as an ex ante climate risk-reducing strategy as compared with access to credit and safety net. Show Less -