State Role in Welfare in Bangladesh: Attacking Extreme Poverty Mozammel Huq Department of Economics University of Strathclyde, Glasgow 12 November, 2013. 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 Proverty trends in Bangladesh 80 70 60 50 40 30 20 10 0 National Rural 8 *1 1-8 98 2 3 *1 -84 98 5 19 -86 88 19 - 89 91 19 - 92 95 -9 6 20 00 20 05 20 10 Urban *1 9 Poverty Head Count Ratio by the DCI Method 1981- 82 to 2000 (% of population) Fig 1: Bangladesh - Dramatic Fall in Poverty Years Source: Bangladesh Bureau of Statistics, Household Income and Expenditure Survey (various years). 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 lowincome country such as Bangladesh. Fig 2: Social Safety Nets viewed in the context of a wider framework of Development Policy Source: Grosh et al. (2008). 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. 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. 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). Table 1: Major Types of SSN Programmes TYPE PROGRAM 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), 6th Five Year Plan, Part 1, o.166. 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. Fig 3: Government Expenditures on SSNs: 1996-7 to 2004-5 (as % of GDP) 1.2 1 % GDP 0.8 0.6 0.4 0.2 0 • 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). Fig 4: Growth in Expenditures: Major SSN Programmes Price (Mil Taka) 1999-00 to 2011-12 (In Mil. Taka: At 1999-2000 prices) 9000 Gratuities Relief & Test Relief 8000 Vulnerable Group Feeding 7000 Primary Education Stipend Project 6000 5000 4000 3000 2000 1000 0 1999-00 2001-02 2003-04 2005-06 2007-08 Source: Based on data from Khandker et al. (2011). 2009-10 2011-12 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). 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. 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.” Khaleque et al (2008), Overview 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.” 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. 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. 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. 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. 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 lowincome countries. • However, need to improve co-ordination significantly. 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. 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. 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. 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. 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). 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, 6th 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). 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. Thanks!