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Opening Statement by Mr. Praful C. Patel, Vice President, South Asia Region, World Bank (Press Statement)

July 2, 2007

Dear Friends from Media,

Thank you for accepting our invitation today. As you know, I am just about to end my three day visit to Bangladesh. Before leaving, I wanted to share some observations with you. Afterwards I will be happy to provide answers to your queries.

 My visit is taking place at a time when Bangladesh has new hopes and aspirations of a better future for its people. During my visit, I met with the key players directly involved in the development agenda of the country: the Chief Advisor, the Finance and Planning Advisor, senior government officials, development partners, representatives of civil society and NGO, the private sector, and media. Through my discussions over the past 3 days it is clear to me that the present period provides a rare window of opportunity to make fundamental economic and political reforms which must be seized 

When I came last year, the media presented me as having said that the Anti-Corruption Commission was a joke. Believe me, ACC is not a joke now. Many people who I have spoken with have been encouraged by its new leadership and the vigorous manner in which it has been pursuing its mandate. Anticorruption efforts are vital in the fight against poverty.
What is critical at this stage is that investigations and prosecutions are thorough and that due process guarantees are respected. It is also vital to unbundle corruption. Corruption is the abuse of public office for private gains.  Focusing on credible prosecutions of several big fish, rather than casting the net too widely, will send the right signals and enhance the credibility of the Anti-Corruption Commission in the eyes of the public. Stolen assets must be recovered and the World Bank stands ready to provide assistance in this regard. Tax evasion by private citizens is a separate matter. Moreover there is corruption that took place in the past and corruption that may still be taking place today. It is also important to design checks and balances to minimize abuses of power within the current structures of governance.

Bangladesh continues to maintain macroeconomic stability. We are pleased with the Caretaker Government’s commitment to pursue major economic policy reforms, especially in addressing weak revenue mobilization, large energy sector losses, trade liberalization and outstanding State Owned Enterprise liabilities.

Increases in the prices of food essentials have been very much on the minds of the public. It is important to understand that the prices of food items and other commodities are for a good part set in global markets and out of the government’s control. In fact, inflation in Bangladesh is comparable with other countries in the South Asia region. In March 2007, the consumer price index inflation in Bangladesh was 7.4 percent. During the same period, inflation rates in India and Pakistan were 7.6 and 7.7 percent, respectively, while in Sri Lanka it was 19 percent.

We understand that regional comparisons are no consolation to the poor. We therefore commit to working with Government to understand the different causes of the current inflation situation in order to ensure that the policy measures are appropriate and likely to generate the desired impact. 

Bangladesh’s growth has been led by an increasingly dynamic private sector. It is essential that business confidence be maintained and ideally enhanced during this period. Regular dialogue between the Government and business community is therefore essential and I would urge the Government to create an environment where open and honest feedback is valued. This administration is setting high standards in certain areas and it can do so also by creating a culture of free frank discussion with citizens who should not fear to raise issues where improvements are required.

A related point concerns the plight of micro and small businesses. This sector is the lifeblood of poor people and makes an important contribution to growth. It is therefore vital that those making decisions on the eviction of road-side businesses, or small businesses that are on Government land, keep  in mind the consequences for poor people.

 The World Bank has been a strong and reliable development partner of Bangladesh for many years, and we will continue to support the development programs. A number of World Bank financed projects are ready and will be delivered. By the end of this fiscal year our program will disburse a total amount of about US$ 450 million.

The World Bank is also looking into the possibility of increasing its assistance to Bangladesh over the next few months in order to support key reforms. During our discussions, the power sector; infrastructure (especially the Padma Bridge) and modernization of agriculture were repeatedly raised.

Reform of the power sector is critical since it will impact on the economy at large. Urgent reforms are needed in other areas, particularly: (i) strengthening the sector’s financial viability, and (ii) increasing electricity generation capacity.  Key reforms such as restructuring power companies and ensuring the full financial recovery of the Bangladesh Power Development Board’s are essential. The World Bank remains ready to support these reforms.

In order to maintain the momentum of the ongoing reforms, we must unlock the disbursement of aid. We discussed the Caretaker Government’s constraints in this regard. The World Bank and its development partners stand ready to provide support to build implementation capacity of line ministries in a timely way.

I will conclude by saying that Bangladesh’s potential growth rate of 8-9% has been hampered by confrontational politics and corruption in the past. With an average growth rate of around 5.5%, poverty fell by about 20% points between 1990 and 2005. This is commendable but the lost growth of around 3% has led to millions more people remaining in poverty than was necessary. Bangladesh still has 56 million people living in poverty and there are sharp regional differences in the rate of poverty reduction. As I said in my op-ed in today’s Daily Star, there should be no softening on the critical challenge of improving the lives of the poor during this important political transition. The country is in a unique position to institute reforms that will have a lasting impact and lift millions of people out of poverty. In order to do so this administration will need build on the progress it has already made by further prioritizing its actions and assessing their consequences in a consultative manner. The World Bank will remain a strong and reliable development partner to Bangladesh as the country works to achieve its full potential.