Key indicators, key questions and key conclusions

September 3, 2009

Tanim Ahmed, NewAge, 3 September 2009

It is not that the state of increasing radical disparity and inequity was entirely unknown, or that the proportion of poor people was thought to be far lower than what the ADB indicators show. But these data once again point out that the system is failing the poorest. Together these data show that the path to development and economic prosperity that successive governments have pursued and perpetuated fails to improve the lot of the masses

RECENTLY, the Asian Development Bank published its Key Indicators for Asia and the Pacific of 2009. Like every year and like almost every other such publication laden with statistics that the international financial institutions bring out annually, there are a host of issues that warrant strong reservations as far as the quickest path to wholesome development and economic prosperity is concerned. For instance this year’s key indicators devote special attention to small and medium enterprises titled ‘Enterprises in Asia: Fostering Dynamism in SMEs’.

Whether it was small and medium enterprises or large scale heavy industries that had far stronger role in brining about the rapid industrialisation of powerhouses like Japan, Singapore, Malaysia, Korea and more recently China and India could be discussed in detail to illustrate that this stress on small and medium enterprises should be interpreted as an agenda of specific interest groups. Unduly heavy stress on this sector would eventually mean less attention for large industries which should in fact be prioritised over smaller enterprises. There could be a number of other reservations regarding this publication. But these publications also bring out certain facts in the open.

It is not that these facts were entirely unknown, or that no one had any clue regarding the state of a certain indicator. But since there are no periodic surveys or estimates of crucial indicators like unemployment and labour, poverty and state of nutrition, people must resort to using data that are often several years old. And when trying to conduct analysis they can at best posit an educated guess about the state of the economy without updated data on certain key indicators of the economy, which makes it almost impossible to assess the situation on the ground and consequently the government’s performance.

The latest publication of the Asian Development Bank is helpful in that aspect. And those statistics do not speak well of the state of governance in Bangladesh. The one that is of crucial interest, which was naturally among the main highlights of newspaper reports, is poverty. According to this publication, about half the people of Bangladesh live in poverty currently. It used to be 66.8 in 1992. The reason that this data does not conform to the ones that have been published before is because the benchmark for poverty has been reviewed and increased to one dollar and a quarter instead of the previous ‘dollar a day’ mark. And again, this ‘dollar’ is not the one exchanged at around Tk 70 on the market. They are called purchasing power parity dollars, which is more indicative of buying power than the monetary value of the currency.

So according to the reviewed benchmark, half the population of Bangladesh live on less than $1.25 (PPP) per day and are therefore poor. That, however, means little in real terms and provides no idea about the nature of poverty except that this only confirms what has been projected by other research organisations including the Centre for Policy Dialogue and Unnayan Shamunnay. But this publication has the good sense to also calculate how much $1 PPP was in terms of the local currency. According to those figures, the reviewed poverty threshold means that an individual living on less than about Tk 35 per day would be considered poor. Whether that is an acceptable benchmark for poverty, and there is no reason to accept this benchmark as one that encapsulates all the different aspects of poverty, is another matter. What the numbers do indicate is that even according to simplistic and watered-down benchmarks, half the people in this country are poor.

This also confirms a point that had been earlier made by different agencies during the reign of the interim government. It is that the country’s gains in terms income poverty reduction since 2000 came all undone during the two years of emergency when food prices increased phenomenally pushing up food inflation well beyond the double-digit mark while unemployment peaked. The proportion of people in poverty had improved to 40 per cent in 2005.

But there is an even more damning statistic relating to the deprivation of the poor. According to the Asian Development Bank, Bangladesh had 79.5 per cent of its population living on less than Tk 51 ($2 PPP per day is considered an upper poverty line of sorts by the international agencies and organisations) per day in 1995. This proportion of population increased to 80.3 in 2005. This implies a steady worsening of disparity. According to another statistic, the poorest 20 per cent of the population accounted for a little over 9 per cent of the total consumption. When compared against the fact that the average GDP per capita in PPP terms is $1501, and percentage of population living on less the $2 PPP is 80 per cent, the radical disparity becomes somewhat clearer. The high average is, therefore, due to the radically higher income of the remaining 20 per cent.

It is not that the state of increasing radical disparity and inequity was entirely unknown, or that the proportion of poor people was thought to be far lower than what the ADB indicators show. But these data once again point out that the system is failing the poorest. Together these data show that the path to development and economic prosperity that successive governments have pursued and perpetuated fails to improve the lot of the masses. There is no reason to accept the recommendations that the Asian Development Bank, or for that matter other international financial organisations, lenders and so-called development partners give out, should be followed. But it would undeniable that these data, once again, make a very strong case for an overhaul of the system.

It becomes quite clear from the few indicators discussed here that successive governments have done little to genuinely improve the lot of the poorer sections. The trend of rising disparity shows that the current system fails to benefit the poor or contribute to their welfare. People who were poor ten years have by and large become poorer. Those marginally over the poverty line remain precariously perched on it with perhaps a higher vulnerability of falling below. A single bout of sickness thwarts a poor family’s possibility of graduating to the next rung for years if not an entire generation. The poorest sections still cannot afford to seek education because they are poor, but the education is not being revamped in such manner that access to it should matter on the level of poverty of the students. Lack of provision for the basic needs, together breed more poverty. It would perhaps only suffice if realignment of the country’s development path were in an equally radical direction as the existing disparity. Unfortunately, despite the rhetoric of successive governments, that seems very unlikely.


WB unhappy over move to amend procurement rules in Bangladesh

June 1, 2009

The Daily Star, June 1, 2009

The World Bank has expressed concern over the government’s initiative to bring amendments to the Public Procurement Act and Public Procurement Rules, hinting that it could hamper WB assistance.

“A few of the proposed changes (Public Procurement Act/Rules) we have learnt about may have severe consequences on the implementation of a large number of Bank-financed operations,” WB Country Director Xian Zhu said in a letter to M Musharraf Hossain Bhuiyan, secretary of Economic Relations Division.

Copies of the letter dated May 25 were sent to Finance Minister AMA Muhith, Planning Minister AK Khandker and Prime Minister’s Adviser for finance and planning Dr Mashiur Rahman.

In the letter Zhu said, “Following our quick conversations this week on the above-mentioned topic, I would like to stress again that we are really concerned to hear that the Bangladesh Government is planning to introduce some important changes in the Public Procurement Act and related Public Procurement Rules (PPA/PPR).

“You are aware that this matter is important for all your Development Partners,” the WB country director said.

“We would suggest that you organise some consultations at your early convenience. If agreed, we would also suggest that you consider inviting some of the Development Partners to the requested discussions. This would allow us to get an understanding of the Bangladesh Government’s needs as well as an opportunity to review any available documentations on the subject,” he added.

After the present government came to power, an initiative was taken to amend the Public Procurement Act and Public Procurement Rules and a committee was formed with the secretary of Implementation, Monitoring and Evaluation Department of the planning ministry as its chief.

The committee after taking advice from secretaries of different ministries has prepared recommendations for the amendment. The finance minister has already held a number of meetings with other ministers on the recommendations.

The government wants to finalise the amendments before implementing the next fiscal year’s budget.

Sources in the finance and planning ministries said the government informed the donors in a number of meetings that the government was going to amend the PPA and PPR but the donors did not raise any objection.

Later, they came to know that some major articles of the PPA and PPR were going to be amended in order to award projects to people “close” to the government quarters instead of competitive bidders.


People’s Movements’ Manifesto on the Recently Concluded 42nd Annual Governors’ Meeting of the Asian Development Bank

May 7, 2009

May 7, 2009 Bali, Indonesia

Debt cancellation in developing countries is a major part of the solution to the economic crisis. Yet, the ADB, as it closed its Bali meetings, declared plans that will only lead to the intensification of the debt problem for Asian economies.

ADB President Haruhiko Kuroda pronounced this clearly when it made “commitments” to help the region’s developing economies affected by the crisis supposedly through easier access to more loans to “stimulate growth, trade, capital inflows, and private demand.” 

However, what the region needs are not additional loans and support facility funds, many of which could only become additional illegitimate debts. What the people of Asia and the Pacific demand and need is unconditional debt cancellation of all ADB debts as part of the solution to the crisis and in the immediate, as a more efficient economic stimulus package to help developing nations weather the direct effects of the economic conundrum.

The cancellation of illegitimate debts must be seen as a strategy for economic recovery and should constitute the cornerstone of the process in the reversal of neoliberal policies that have serious consequences to the Asian people. Moreover, as a result of debt cancellation, there will be more funds for social safety nets and retrenchment funds as well as support funds for small and medium industries. 

Subsequently, we also assert that reparation must be made by the ADB for promoting and financing climate crisis, flawed development projects that displaced communities and neoliberal policies such as privatization of public commons. Since its inception, ADB caused monumental damage and negative impacts on the people’s services, food production and environment.

On the other hand, we believe ADB President Haruhiko Kuroda’s call to shift to a “new development paradigm” is hypocritical and purely double talk. We remind Kuroda that for four decades, the ADB was the chief promoter of the now discredited neoliberal economic framework which largely contributed in the worsening of the current crisis.

Proof of this, amid strong calls for state re-regulation of the financial architecture and public services, Kuroda warned developing nations of veering towards “protectionism.” It is also manifested in ADB’s push for Private Equity Funds (PEF) or deregulated risky investments as a cornerstone of its private sector development strategy for Asia. 

As such, ADB not only declared its unwavering loyalty to the now despised and crisis-endemic free market development framework but also virtually advanced the absurd proposition that the solution to the crisis of neoliberalism is more neoliberalism.

Lastly, the “policy recommendations” that were crafted in the ADB meetings do not necessarily reflect the interest of the majority’s region. For an institution that wants to play a lead role in protecting Asia from the crisis, it is so undemocratic and discriminatory. 

Even now, many of the region’s developing countries are still widely underrepresented with nominal voting rights while developed countries like Japan are extremely overrepresented in its governing body.

Without doubt, nothing significant has come out of ADB’s Bali meetings. Like its previous meetings, it just reiterated its same old economic and development prescriptions—dangerous “remedies” that have only aggravated strong private sector involvement and ownership of public services, acquisition of illegitimate debts and promotion of destructive neoliberal policies. 

The ADB can and will never be a “beacon of hope”, a “shining white knight in armor” or a “reformed” regional financial institution that will save the region’s developing nations from the global economic crisis. The surest path towards the resolution of the economic crisis lies in the process of abandoning the destructive and fully discredited neoliberal economic paradigm and the introduction of a new post-capitalist economic model. 

Thus, we enjoin the people of the Asia Pacific Region to begin this meaningful process by implementing the comprehensive audit of all public debts and by establishing autonomous and democratic Asia-based financing mechanisms for sustainable and equitable development institutions and mechanisms as an alternative to ADB, its policies and illegitimate debts.


Anti-debt coalition activists stage a protest against the upcoming Asian Development Bank meeting

April 28, 2009

alertnet.org 27 April 2009

2009-04-27t131334z_01_jak11_rtridsp_2_indonesia_articleimage

A group of Anti-Debt Coalition activists stage a protest against the upcoming Asian Development Bank (ADB) meeting, in Jakarta April 27, 2009. The ADB meeting in May is scheduled to be held in the Indonesia’s resort island of Bali. REUTERS/Dadang Tri (INDONESIA) 


Overhaul of international institutions: Is the G20 willing to deliver?

February 17, 2009

Bretton Woods Project, February 13, 2009

With bleak economic news dominating the headlines, the IFIs are gaining prominence but also attracting renewed criticism. We cover the political response to the financial crisis, the IMF’s lending programmes (see Update 64), the World Bank’s boost in lending (see Update 64 on Bank lending and IFC lending) and reform of the international architecture (At Issue).

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In the wake of a November summit (see Update 63) of the G20 leaders, a grouping of roughly the largest 20 economies in the world, an international work programme of financial reform is taking shape. But the ambition of the discussions will be dependant on both how vocal citizens become and the depth of the economic gloom.

The next G20 leaders’ summit is planned for 2 April in London. It will be preceeded by a specially planned G20 finance ministers meeting in mid-March in Sussex, UK. Britain is the 2009 host country for the G20, which is usually a process only involving finance ministries. The G20 finance ministers’ meeting is normally scheduled for November, but because of the extraordinary circumstances it is expected that several meetings of finance ministers will occur this year.

The meeting in London is increasingly being billed as the “London Summit” rather than a G20 summit, because some rich country governments are worried about the G20 supplanting the G7 as the forum for global economic decision-making.

The G20 working groups tasked with making proposals for financial and economic architecture reform have been announced, covering: accounting regulations and transparency; international cooperation on financial regulation; reforming the IMF; and reforming the World Bank and other multilateral development banks. Each working group is co-chaired by officials from a developing and a developed country. The full composition of the working groups has not been made public. The groups will issue their recommendations to the finance ministers at the March meeting. Inside information indicates that consensus on financial regulation is only likely on narrow changes.

The parallel process initiated by the United Nations General Assembly president Manuel D’Escoto (see Update 63) is also under way. The UN commission, chaired by former World Bank chief economist Joseph Stiglitz, also has four working groups – on regulation, multilateral issues, macro-economic issues and reforming the global financial architecture. It met at the beginning of January and issued its first recommendations. They noted the deficiencies in the actions taken so far by developed countries and the need to learn lessons from countries that have avoided instability. A second meeting is planned in early March in Geneva.

More money for the IMF?

The UN commission pointed out the “large asymmetries in global economic policies” and called it “imperative that developing countries be provided with funds to enable them to undertake … policies, to stimulate their economies, to provide social protection, and to ensure a flow of liquidity to their firms.” It was also careful to demand that the money “be provided without the usual conditionalities, especially those that force these countries to pursue pro-cyclical policies or to adopt the kinds of monetary and regulatory policies which contributed to the current crisis.”

The IMF has already agreed nearly $50 billion in loans but with heavy conditionality (see page 2). That leaves the Fund with only $200 billion in available capital, plus another $100 billion that Japan agreed to lend it. IMF managing director Dominique Strauss-Kahn admitted that the IMF might need an injection of capital: “If in six months from now the crisis has worsened and many other of our members need our help, the demand may be above what we have.” The IMF deputy managing director, John Lipsky, indicated that the IMF wanted to raise its available resources up to $500 billion. The G20 is likely to announce an increase in IMF resources, though it is not yet clear where these will come from.

It’s the power, stupid

Everyone seems to agree – from African finance ministers and the UN financing for development process, to US president Barack Obama – that one element of any reform must be IMF governance.

A coalition of 15 mostly US-based academics wrote to the new US treasury secretary Timothy Geithner at the end of January calling the IMF governance reforms of 2008 (see Update 60) “inadequate particularly in light of the ongoing global economic and financial crisis.” They urged Geithner and Congress to “reopen the package starting in discussions with other governments in advance of the meeting of G20.”

But even broad agreement that global governance is problematic has not led to discussions on international reform being democratic or open. Civil society organisations in several statements and letters have condemned the G20 process for being exclusive and secretive. Biaggio Bossone, a former Italian IMF executive director, noted the legitimacy of the original Bretton Woods agreement. “It is fundamental that world leaders walk the same path that was traced in Bretton Woods precisely not to leave anyone out. They need to renew that same obligation to engage all.”

The British government has different objectives: shoring up support for liberalised economic models. After a call to return trust to the financial markets, a letter from the UK finance minister to other G20 finance ministers states: “Open, innovative financial markets are critical in driving forward economic growth. … Our second objective, therefore, must be to retain and build on the benefits that open financial markets bring to the world economy.”

However the US administration seems more keen on discussing exchange rate policy rather than legitimacy, as the US and China have been trading barbs over the value of the Chinese currency, the yuan. China has been incensed over perceived IMF meddling with the Chinese exchange rate (seeUpdate 57), while the US has been frustrated that the IMF did not do more.

This does not bode well for the proposals from the UN Conference on Trade and Development (UNCTAD). Just before Christmas, UNCTAD issued a policy brief stating: “Multilateral or even global exchange rate arrangements are clearly necessary to achieve and maintain global monetary and financial stability.” The idea to return to globally managed exchange rates is unlikely to find backing in the West where interested parties prefer floating rates; nor in Asia, where governments do not trust the IMF to oversee such arrangements fairly.

Continental Europeans have been singing a different tune altogether, talking about stricter regulation and greater international oversight. At a January conference in Paris hosted by the French government, French president Nicolas Sarkozy and German chancellor Angela Merkel called for a “new capitalism,” with Sarkozy leading calls against “immoral capitalism”.

Merkel reiterated her idea for a UN economic council that would sit in parallel to the UN security council. It would presumably oversee international economic institutions such as the World Bank and IMF. However the German leader did not specify what sort of governance arrangements would be supported for such a council, leading to fear that, like the security council, it will be dominated by a few large rich countries. The UN’s existing body, the 54-seat Economic and Social Council (ECOSOC) with diversified regional representation, was described by Merkel as not viable.

Merkel has now called for a summit of European members of the G20 – including Germany, France, Italy, the European Commission and Turkey – to take place in Berlin at end-February. She also has invited Spain and the Netherlands to participate. This will be an important venue for European countries to consolidate their position in advance of the London summit, especially to develop their strategy to deal with a US administration that is likely to be uninterested in ceding sovereignty over economic issues to an international organisation

The president of the UN general assembly proposes that a fully inclusive UN conference on the financial crisis take place from 26-29 May in New York. He wants it to include plenary meetings of heads of state as well as ministerial working group meetings.

NGOs’ uphill battle

Civil society organisations have been trying to make their voices heard in these debates. The most noticeable intervention has come from the International Trades Union Congress (ITUC), a global labour umbrella organisation. . In January it organised an 85-member international trade union delegation to meet with the Bank and Fund. As a result, “commitments to strengthen social programmes for workers hit by the economic crisis and to increase action on core labour standards were made by World Bank president Robert Zoellick and IMF managing director Dominique Strauss-Kahn,” according to the ITUC.

At the World Social Forum, held in Belem, Brazil at the end of January, there were dozens of workshops and meetings about a response to the financial crisis. The social movements and NGO’s gathered at the event in the end authored a one-page call to action, saying “Let’s put finance in its place!” The statement makes nine specific demands, including a call for a reformed and democratised UN to be put at the heart of any process for reform of the financial system and the implementation of “a global mechanism of state and citizen control of banks and financial institutions.”

In the UK, a coalition of environment, social and development charities is joining with trade unions to launch a mass mobilisation on 28 March under the slogan “Put People First: Jobs, Justice and Climate”. Solidarity actions are being organised in other cities around the world.

John Hilary, director of UK NGO War on Want said: “The governments meeting here in London must realise that this is not just a banking crisis but an indictment of the entire economic model. We’re calling on them to commit to an open and democratic process for rewriting the global financial architecture so that people and the environment are served by finance, and not vice versa.”


ADB energy policy proposal ‘misled’ govts, stakeholders

February 3, 2009

GMANews.TVMANILA, Philippines – The Manila-based Asian Development Bank (ADB) was criticized for “deliberately misleading” stakeholders and governments of its member-countries regarding its energy policy. 

The bank’s energy policy draft — which governments and stakeholders had earlier commented on — “was later submitted to the ADB board for approval as a binding policy document that had already undergone public scrutiny,” NGO Forum on the ADB claimed in a statement. 

As a result of this perceived irregularity, the process was a “sham of a review of the ADB’s energy policy,” said the group, which comprises of 250-strong Asian civil society organizations. 

In 2006, the ADB announced it was drafting an energy strategy paper that would operationalize the energy policy it approved in 1995, which would remain unchanged. 

The Forum said “for three years the ADB repeatedly informed its stakeholders that the ADB’s 1995 energy policy will be sustained and that comments will only be for the ADB strategy draft, which bank officials said would operationalize existing energy policy.”

However, in a surprise move last week, the regional bank said it was about to launch an updated energy policy based on a document that, the ADB admits, was “developed as an energy strategy.”

The ADB released its first energy strategy draft in 2007. It was roundly described by participants to the consultations held by the ADB in the same year as “mediocre” and “confused.” 

The ADB did not disclose subsequent drafts and released a revised strategy version relabelled as an “upgraded energy policy” only last Saturday, after emails demanding full disclosure and public consultations flooded the ADB. 

The move is a “bait and switch trickery demonstrating the bank’s contempt for public scrutiny and basic due diligence,” the group’s executive director Red Constantino said. 

“Is the ADB really so beholden to shady power players that it will short-circuit its own process, tamper with its own papers and change institutional policy just to favor the interests of dirty energy peddlers?” asked Constantino. 

“Aspirational climate-related language in the so-called Updated Energy Policy draft appears to have been added to mask the insertion of dangerous text, such as the provision which now encourages the ADB to rapidly increase its support for scandal-infested coal-mining activities across Asia,” Constantino said.

The ADB’s operating energy policy explicitly states that the regional bank will not support coal extraction operations unless these are for mine-to-mouth, “captive use” projects. 

In the draft submitted last January 16 to the ADB board, the bank is allowed to finance coal extraction if coal is deemed for “substantial use” of a mine-to-mouth project. 

“The change is insidious,” Constantino said. “The word ‘substantial’ will be defined incredibly loosely. A mine-to-mouth coal-fired power project merely has to state that its power station will utilize a “substantial” portion of the coal it extracts and it can export equally substantial coal tonnage to other countries. This would not be possible under the current ‘captive use only’ policy restriction,” said Constantino.

The ADB was forced to pull out of a controversial coal mine project in Phulbari, Bangladesh in 2007 because the project’s design included the export of Phulbari coal to India, which conflicted with the ADB’s “captive use only” policy for coal extraction.

The Forum called for an official Board-level inquiry over what it called “document tampering” by the ADB team managing the energy strategy review process. 

The Forum said it has evidence that “the 2007 energy strategy draft on display in the ADB website is “materially different from the paper that it posted and distributed in 2007.”


Bangladesh govt to seek $800m a year budgetary support from World Bank and Asian Development Bank

January 13, 2009

The Daily Star, January 13, 2009. Dhaka, Bangladesh

Bangladesh will forward a proposal to the donors including the World Bank and the Asian Development Bank for a budgetary support of around $800 million a year.

Finance Minister AMA Muhith yesterday directed the Economic Relations Division (ERD) to prepare a proposal in this regard.

“Since Bangladesh has never failed in paying debt it should get a reward,” he told a meeting with ERD officials, adding that they would prepare a proposal for getting budgetary support equal to the amount the country pays as debt annually.

ERD Secretary Muhammad Musharraf Hossain Bhuiyan apprised the finance minister about the overall foreign aid situation.

Bangladesh last year paid a total of $771 million as principal amount ($585 million) and interest ($185 million).

Muhith said he asked the ERD officials to prepare a proposal specifying the sectors where they want to use the budgetary support.

After the meeting, the finance minister told journalists that the government would try to be included in the Millennium Challenge Account and hoped that it would succeed in doing so.

The ERD secretary told the finance minister that Bangladesh has never failed in paying foreign debts.

Bhuiyan also said the global financial crisis might have a negative impact on the country’s economy but they have not received ‘any indication’ of that from the donors.

He also said the resource gap would be $90 billion in implementing the PRSP in the next three fiscal years including the current one.

The ERD secretary said in the current fiscal year till December 31 last year, 25 project agreements involving $1.75 billion have been signed while 36 project agreements involving $1.27 billion will be signed in the next six months.