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State Role in Welfare in Bangladesh: Attacking Extreme Poverty Mozammel Huq Department of Economics University of Strathclyde, Glasgow 12 November, 2013.

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Presentation on theme: "State Role in Welfare in Bangladesh: Attacking Extreme Poverty Mozammel Huq Department of Economics University of Strathclyde, Glasgow 12 November, 2013."— Presentation transcript:

1 State Role in Welfare in Bangladesh: Attacking Extreme Poverty Mozammel Huq Department of Economics University of Strathclyde, Glasgow 12 November, 2013.

2 Structure of the paper Introduction State role in Income Distribution: Theoretical Perspectives SSN Programmes in Bangladesh: An Overview A Brief Assessment: Findings of the Various Studies Impact of SSNs on Poverty Decline Concluding Remarks

3 Fig 1: Bangladesh - Dramatic Fall in Poverty Source: Bangladesh Bureau of Statistics, Household Income and Expenditure Survey (various years).

4 Main Objective To review the SSN programmes in Bangladesh, in particular its role in attacking extreme poverty. Thus, we are taking a narrow focus, confining the discussion to the attack on poverty via the SSN programmes. Related to the above, gain awareness of the issues and concerns regarding the effectiveness of the SSN programme for attacking extreme poverty in a low- income country such as Bangladesh.

5 Fig 2: Social Safety Nets viewed in the context of a wider framework of Development Policy Source: Grosh et al. (2008).

6 Theoretical Perspectives (only some key points) As with the efficient allocation of resources, the economists have remained concerned with the distribution of income. Society's view of just distribution may conflict with the existing distribution. In particular, there is concern with the injustice in the original distribution of endowments. Also factor market imperfections, especially monopoly pricing of the factors of production, can be an important cause of income inequality.

7 Theoretical Perspectives (cont’d) Private redistributions made voluntarily, say through charities, are riddled with problems, a major concern is that the task may be too big for the private redistribution to execute. Musgrave (1959), among others, would like to justify state intervention to maximise social welfare. Moreover, various charities may compete with each other as a coordinating role will be missing. Indeed, the state can perform a redistribution policy in a coordinated and comprehensive way. (See, e.g. Brown & Jackson 1990.) However, Hayek (1960)and other libertarians are rather concerned that state intervention in income distribution will cause curtailment of personal freedom and, in the process, hamper growth. Hence the emphasis on voluntary contributions made by individuals personally and/or help channelled through NGOs.

8 SSN Programmes in Bangladesh In Bangladesh, the SSN programmes got a serious start in the early 1990s with the democratic government taking over in 1991. There now exists an extensive range of SSN programmes, as many as 90 or so (World Bank 2006; Khuda 2012; GOB 2011 Part 2). “The bulk of the programmes are implemented through government channels. However, non-government channels play an important supportive role particularly in those programmes focused on sustainable graduation. 97% of annual allocations are spent through 30 major programmes.” (Rahman and Chowdhury, 2012, p. 3). The programmes are mainly rural based, those with “an urban focus as yet remain minuscule, as only 0.7% of the total allocation” (ibid, p. 3).

9 Table 1: Major Types of SSN Programmes TYPEPROGRAM EXAMPLES Cash Transfers Old Age Allowance Widowed and Distressed Women Allowance Disabled Allowance Conditional Cash Transfers Primary Education Stipend Program (PESP) Stipends for Female Secondary Education Public Works or Training-based or in-kind Transfer Rural Maintenance Program, Food for Work Vulnerable Group Development (VGD) Employment Generation Program (EGP ) Emergency or Seasonal Relief Vulnerable Group Feeding Gratuitous Relief (GR); Test Relief (TR) Open Market Sale (OMS) Source: GOB (2011), 6 th Five Year Plan, Part 1, o.166.

10 Major SSN Programmes: Govt Expenditure Allocations Govt expenditures (as % of GDP) on SSNs from 1999-00 to 2011-12 are shown in the next slide (Fig 3). Except the Food for Work programme (in which financial allocation by the Government of Bangladesh decreased from Taka 8,060 million in 1999-00 to Taka 6,224 million in 2011-12), all the other major SSN programmes have witnessed an increase in allocations (some shown in Fig 4). Such increases are particularly marked in Honorarium for Freedom Fighters, Primary Education Stipend Project, Old Age Allowance, and the Allowance for Destitute Widows.

11 Fig 3: Government Expenditures on SSNs: 1996-7 to 2004-5 (as % of GDP) Note: The Govt allocation on SSN has recently been increasing, from less than 1% of GDP in 2004-05 to just over 1.5% in 2010-11, Source: Based on data from World Bank (2006).

12 Fig 4: Growth in Expenditures: Major SSN Programmes 1999-00 to 2011-12 (In Mil. Taka: At 1999-2000 prices) Source: Based on data from Khandker et al. (2011).

13 Review and Assessments The emergence and the growth of the SSN programmes in Bangladesh have attracted attention from a large number of researchers. Various international organisations including the World Bank, UNDP and FAO have also shown a keen interest in it. Findings from selected studies (shown below).

14 Mannan & Paul-Majumder (2003), based on Field Surveys Coverage: Country-wide, seven major SSN Programmes Investigated Main Findings: The targeted programs have positive impact on income, food consumption and access to safe housing. However, there is an urgency to extend the coverage with additional funding allocation. Also the distribution mechanism needs to be improved to get rid of political patronage.

15 World Bank (2006), Analysis of key primary data. Coverage: Country-wide, based on HIES 1991 & 2000, and 2000 Labour Survey, & a 2003 survey of selected SSNs Main Findings: SSN expenditures are extremely low, less than 1% of GDP during the late 1990s and the early part of the last decade (the highest was 0.91% of GDP in 1998-99). Also, numerous agencies are involved in administering these programs – with “frequent overlapping between programmes and inadequate co-ordination across ministries.”

16 Khaleque et al (2008), O verview of SSNs in Greater Rangpur, a highly poverty-stricken area Coverage: Assessment of SSNs in the monga-affected Greater Rangpur. Main Findings: “VGD/VGF has strong positive effect in reducing poverty while old age pension has no such contribution.” Highly vulnerable groups such as day labourers and beggars are found to be “left out from the benefit of SSN programs due to their limited coverage and size. Also, inter-ministerial coordination is found to be lacking, resulting high administrative expenses.”

17 Begum & Paul-Majumder (2008), based on Field Surveys, Dec 2000-Jan 2001 Coverage: Country-wide, Destitute Women’s Allowance. Main Findings: 86% of the recipients spend their allowance to satisfy their food and basic needs. However, there is an urgency to extend the coverage as only around one-fifth of the deserving destitute women are getting the allowance. Also need to increase the amount.

18 Paul-Majumder & Begum (2008 ), based on Field Surveys, 2000 Coverage: Country-wide, Pension for the Elderly Poor Main Findings: Programme largely successful, 96% of the poor elderly recipients are able to meet part of their basic needs. However, the coverage of the programme has remained yet very limited or far below the appropriate level.

19 Morshed (2009), General Overview Coverage: Country-wide Main Findings: Both Govt and non-Govt agencies are actively implementing SSN programmes. However, most implementing ministries lack sufficient capacity to monitor programmes.

20 Maniruzzaman (2009), based on Field surveys, 2007-08 Coverage: Assessing Food insecurity in Char (flood-prone) areas Main Findings: High level of food insecurity (90% in Kurigram), while 34% in Narsingdi. 34% of the 321 male-headed households and 61% of the female-headed households received some SSN benefits, so greatly helping them with food security.

21 Khuda (2011), General assessment Coverage: A general review of the SSNs in operation. Main Findings: High success of the SSNs, the lessons learned should even be of great help for other low- income countries. However, need to improve co-ordination significantly.

22 Khandker et al (2011), based on Household surveys, 2006-07 Coverage: Review of SSNs in the ‘monga-affected Greater Rangpur. Main Findings: SSSNs are found to have a positive effect on mitigating both seasonal and non-seasonal food deprivation. However, the study recommends investment in physical infrastructure and human capital, and argues for diversification of income and increase in productivity.

23 Huq and Salimullah (2012), based on Field Surveys, 2010 Coverage: Assessment of the SSN programmes in rural and urban areas. Main Findings: Only one-fifth of the rural households received Govt-provided SSN benefits, while in urban areas it was almost negligible. NGOs were providing SSN-type benefits in both rural and urban areas, helping about 13% households in the former and just over 4% of the urban poor households.

24 Rahman & Chowdhury (2012), based on Field Surveys, 2010-11? Coverage: Country-wide, comprehensive review. Main Findings: Improvement in income and food intake, also halving of hunger in the chronic deficit areas. However, serious concerns because of disaggregated nature of the coverage gaps, multiple types of leakages, presence of some low value-for-money programme components.

25 Impact of SSNs on Poverty Decline, Findings by Inchauste et al (2012) Negligible role of public transfers in poverty reduction in Bangladesh; “leakages and small size of individual transfers made their impact on poverty negligible, despite an expansion of transfer programs during the last decade”. (Inchauste et al, 2012, p19). In contrast, labour-market related factors contributed to 61% of poverty decline in Bangladesh, “pointing to an increase in real wages and higher productivity as the main contributors to poverty reduction.” (p. 4) International remittances, and also decline in population growth and fall in the dependency ratios also contributed significantly to poverty reduction in Bangladesh.

26 Key Issues & Concerns Although the SSN-support has been of particular help to some needy groups and areas, e.g. poor elderly, destitute women and the poverty-stricken parts, the programme is still low in coverage and size. Also, day labourers and beggars, among others, are also found to be left out. As strongly argued by the World Bank (2006), Bangladesh seems to spend somewhat below the norm (less than 2% of GDP) – as compared to 2% for Africa and close to 5% for South Asia. (The serious resource constraint faced by the Govt in Bangladesh is, understandably, a major hindrance.) There are also a number of other concerns (see below).

27 Key Issues & Concerns (cont’d) A major concern relates to the deficiency in administration of the SSN programmes. Some 30 or so Government Ministries are reported to be involved, and without any inter-Ministerial collaboration. Also, at times various Government and non-Government agencies are found to be working without any coordination. “Leakages” are frequently reported, and in some programmes as high as 26% (GOB, 6 th Five Year Plan, Part 1, p.168). Hence the need for improving the administrative capacity and, in particular, involving central co-ordination, thus institution building demanding a serious attention (World Bank, 2010).

28 Concluding Remarks The role of public transfers via SSN programmes in attacking extreme poverty, though found negligible, needs to be viewed in a special context because of the critical benefit they often provide, and also that SSNs “are important components of any comprehensive poverty alleviation strategy.” (Mukherjee and Kundu 2012, p.81). Related to the above, the removal of poverty especially of those with handicaps and also in deprived areas is likely to remain a challenging issue. Hence the need for a highly co-ordinated approach by strengthening the SSN programmes carried out by the Government. The concern for poverty alleviation is mainly an issue of income redistribution and the government will be able to perform this in a comprehensive way only when a country has succeeded in raising the capacity of its state, with (a) enough allocation as a percentage of GDP and (b) an organisational set up to administer the programme efficiently.

29 Thanks!

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