Bangladesh Implementing Structural Reform World Bank 1993

Abstract

Durable progress in poverty alleviation—the overarching objective of economic reform in Bangladesh—requires an acceleration in the rate of economic growth to around 6-72 in the medium-to-long run. This report takes the v i e w that higher growth and employment generation can be eventually sustained only through increased investment led by a more vibrant and dynamic private sector, complemented by public investment in social and physical infrastructure to help create an enabling environment for such activity. The GOB has effected a successful stabilization of the economy and must n o w increasingly focus on implementing structural reforms needed to bring about this increase in investment. Its first priority should be to raise the level of public investment through a drastic overhaul of project execution and aid utilization procedures and the reform of key public enterprises responsible for important investment projects. The acceleration in public investment w o u l d lead to an increase in import demand which must be offset by higher exports. Hence, the G O B’s second priority should be to restore export competitiveness through reforms of urban labor markets and a continued commitment to flexible exchange rate policies. The experience of other reforming countries indicate that higher public investment and enhanced external competitiveness are not sufficient to bring about the ne e d ed private sector response. Private investors need to be convinced of the G o v e r n m e n t’s resolve in pursuing reform efforts. Hence, the G O B’s third priority should be to clearly articulate its vision for the future and seek widespread support for its policy agenda, while accelerating the implementation of reforms in the areas of trade policy, privatization and financial sector restructuring. Bangladesh will not be able to attain externally competitive growth and a rapid reduction in poverty wi t h o u t accelerated human resource d e v e lopment. Therefore, the G O B’s reform agenda emphasizes the need to improve the quality and coverage of the education system as well as health and family planning services, while expanding social safety net programs serving vulnerable groups in the population.