1. Bangladesh Poverty Assessment Report Assessing a decade of progress in reducing poverty, 2000-2010 May 10, 2015 Iffath Sharif World Bank

2. Objectives Using data mainly from the 2000, 2005, and 2010 HIES the report aims to: i)Identify sources of the continued improvement in poverty and structural elements that drove the observed changes - Explain the economic forces underlying the qualitative differences in poverty patterns in 2000-2005 vs. 2005-2010 ii)Stimulate public discourse on key policy implications for further poverty reduction over the medium and long term iii)Inform the development of future World Bank programs Bangladesh Poverty Assessment 20132

3. Main Data Sources and Collaborations 2000, 2005, and 2010 Household Income and Expenditure Survey (HIES) – Collected by Bangladesh Bureau of Statistics with support from the World Bank – Key poverty monitoring instrument – Multi-module survey covering a wide range of topics spanning the wide spectrum of economic and social sectors Supplemental data sources include Labor Force Surveys, Demographics Health Survey, Monga Household Survey, etc. Background papers supported by the UK Department for International Development Bangladesh Poverty Assessment 20133

4. 2000-2010: A remarkable decade of progress

5. There has been steady and strong GDP growth over the last decade… Source: Bangladesh Bureau of Statistics Bangladesh Poverty Assessment 20135

6. … and significant poverty reduction. Source: HIES 2000, 2005 & 2010. Bangladesh Poverty Assessment 20136  Poverty reduced by 1/3 over a 10 year span.  From 2000 to 2010, steady decline in poverty ( > 1.7 points per year)  Number of poor declined from 63 million in 2000 to 47 million in 2010  Both MDG goals on poverty depth and on halving poverty headcount have been met

7. Poverty projections Bangladesh Poverty Assessment 20127

8. Comparable rates of poverty reduction across rural and urban areas Bangladesh Poverty Assessment 2013 Extreme poverty nearly halved (34% to 18%) but is pervasive in rural areas 8

9. Bangladesh Poverty Assessment 20139 Poverty patterns have dramatically changed across regions between 2000 and 2010  In the 2000-05 period, Eastern divisions had experienced significant reductions in poverty while Western counterparts had remained practically stagnant  In the 2005-10 period, Western divisions experience larger reductions in poverty and managed to reach levels of poverty that are close to those of their Eastern counterparts.

10. Impressive improvement in living conditions of the poor over the decade Bangladesh Poverty Assessment 201310 Phone ownership: increased from 0 percent in 2000 to 38 percent in 2010 Type of wall of dwelling: increased from 17 percent in 2000 to 50 percent in 2010 Electricity connections: increased from 10 percent in 2000 to 32 percent in 2010

11. Substantial achievement in health outcomes but limited improvement in nutrition outcomes Significant improvements in immunization rates, especially of the poor between 2005-2010 However overall dietary diversity remained static across all deciles Bangladesh Poverty Assessment 201311 Fully immunized children (< 5 years old) Non-poorPoor 20050.820.77 20100.960.95 Dietary diversity by decile

12. Growth and Distributional Changes  2000-2005: increase in pc consumption benefited the extreme rich and poor.  2005-2010: those below the 70 th percentile of the per-capita consumption distribution experienced the largest gains.  “Pro-poor” growth over the decade higher than the growth rate of the mean. Bangladesh Poverty Assessment 201212

13. Inequality has remained relatively stable  Over the decade, absolute differences in consumption percentiles have increased, but the ratios have stayed largely unchanged.  Gini coefficient unchanged: 0.31 (in 2000), 0.31 (in 2005), 0.30 (in 2010) Bangladesh Poverty Assessment 201213

14. Drivers of Poverty Reduction Bangladesh Poverty Assessment 201314

15. Possible Sources of Poverty Reduction – Demography: Changes in the population structure 2000-10: Household size declined from 5.4 to 4.5 – Labor Income: Movements in employment, occupational choice, earnings and other characteristics of the work-force 2000-10: Agriculture shrinking as a proportion of GDP, from 24.6 to 19.8 2000-10: Industry increasing as a proportion of GDP, from 24.7 to 28.9 – Non-labor Income: Changes in public transfers, private remittances and other non-labor incomes 2000-10: Remittances growing from under US$2 billion to US$11 billion Bangladesh Poverty Assessment 201215 Micro-decomposition South Asia Seminar Series

16. Examining the Sources: Micro-decomposition of Poverty Reduction Bangladesh Poverty Assessment 201216

17. Decomposing Poverty Reduction by: Income and Demography Bangladesh Poverty Assessment 201217 Changes in income and share of adult population played key roles in poverty reduction over the decade

18. Growth in labor income, mostly in the form of farm income contributed the most to poverty reduction over the last decade 18

19. Contribution of each income component to poverty reduction: 2000-2010 Returns to farm and non farm endowments accounted for 64% of the reduction Demographic changes helped to reduce poverty by 25% International remittances accounted for 11% decline in poverty 19

20. 20 Increase in rural real wages coincided with food price shocks of 2007-08 Bangladesh Poverty Assessment 2012

21. Agriculture declining but nevertheless employs half of workforce and provides 45% of total household income Source: Own estimations based on HIES 2000, 2005 & 2010 Bangladesh Poverty Assessment 201321

22. A reduction in fertility led to lower dependency ratio … 22Bangladesh Poverty Assessment 2012 Bangladesh will soon be at the replacement level of fertility Household structure has changed whereby nuclear families dominate Increased proportion of elderly living on their own

23. … resulting in important demographic changes and labor market implications A swelling of youth population will have to enter the workforce: between 2010- 2015 an estimated 10 million to enter the labor market; and another 11 million to enter by 2020 Increased female labor force participation while contributed to poverty reduction remains a challenge Demographic dividend window to end by 2040, suggesting the rise of an aging population in the next 20 years Bangladesh Poverty Assessment 201323 Female labor force participation, by decile Population growth and working age population

24. There are bottlenecks to continued job creation in industry and services Inadequate access to electricity, corruption and access to finance are key business constraints These constraints appear much more significant compared to the rest of South Asia Inadequately trained workforce also appears relatively more of a challenge Bangladesh Poverty Assessment 201324 Major business constraints

25. Seasonality, shocks and coping mechanisms 25

26. Income seasonality is still a problem, particularly in Rangpur 26Bangladesh Poverty Assessment 2013

27. … and so is seasonality in consumption in areas affected by seasonal deprivation 27Bangladesh Poverty Assessment 2013 During the lean season: Per capita household expenditure declined significantly at all income levels. Poorest 40 percent of the population could not smooth calorie intake over the three seasons.

28. Global food price shocks affected the rural extreme poor disproportionately in the short run Consumption changes from the rice price shocks Immediate effect Medium term effect Extreme poor, rural -22%-8% Non-poor, rural -4%-10% Food price volatility is an additional source of vulnerability Impact analysis of 2008 food price shock suggest the poor are the most adversely affected in the short term Medium term labor market adjustment (i.e. increases in nominal wages) largely equalizes the impact of higher food prices along the wealth distribution Bangladesh Poverty Assessment 201328

29. Dhaka Sylhet Chittagong Rajshahi Khulna Barisal Safety net coverage doubled between 2005-2010 with largest increase in poorest regions … 29Bangladesh Poverty Assessment 2013 Source: HIES 2010.

30. A third of poor are not covered by SSN programs A majority of safety net beneficiary is non poor Transfers are inadequate, falling from 22% in 2005 to 11% of the total consumption of poor households in 2010 If allocated to the poor, the total safety net budget can reduce poverty by roughly 4.3 percentage points Source: HIES 2005 and 2010 Access to SSN by Quintile 30 … Yet the potential of safety nets to reduce household poverty remain largely untapped Performance of all SSNs 20052010 Coverage of the poor (%) 20.934.4 Leakage (%)44.359.8 Bangladesh Poverty Assessment 2013

31. Microfinance is important for coping with shocks and mitigating extreme poverty Conditional on experiencing a shock, households report the use of savings and loans to cope with shocks rather than safety nets This is consistent with the relative size of the sectors Microfinance participants experienced a decline in extreme poverty Annual disbursement by MFIs Savings mobilized by MFIs

32. Major Policy Implications Raise Household Income Facilitate pro-poor growth via investments in agriculture to increase productivity and consequently rural labor income Ensure returns to labor in manufacturing and services keep pace with productivity growth in these sectors Increase female labor force participation (e.g. create “female friendly” jobs, work environments, and reduce the incidence of early marriage) 32Bangladesh Poverty Assessment 2013

33. Major Policy Implications Manage the Demographic Transition Develop the relevant skills of the swelling working age population for gainful employment both at home and overseas Prepare for aging out of the demographic dividend by putting in place programs and policies that protect the elderly in a fiscally sustainable manner 33Bangladesh Poverty Assessment 2013

34. Major Policy Implications Protect Household Income and Improve Human Capital Formation via Targeted Programs Implement safety nets that are better timed, targeted, and tailored to the needs of the poor Enhance human capital formation via conditional transfers to (i) promote early childhood development that integrates nutrition, early stimulation and pre-school education, and (ii) build skills and improve the employability of poor youth 34Bangladesh Poverty Assessment 2013

35. Thank you