Governance in Bangladesh

Bangladesh continues to make efforts to improve its overall governance environment. Currently,
efforts are underway to improve core governance systems in areas such as public procurement,
financial management, fiscal reporting, and watchdog institutions. Several reforms to improve
sectoral governance are also underway.

• A number of public administration reforms have been implemented over the years.
They include improvement of a promotion policy for Class I officers, with emphasis on
merit; an improved training policy for Government employees; and creation of a Career
Planning and Training Wing in the Ministry of Establishment. Nonetheless, the civil
service remains relatively ineffective and unaccountable, and lacks proper motivation due
to a weak incentive system. The highly centralized political and administrative system
weakens the government’s capacity to deliver and monitor services.
• To improve public financial management, the Government of Bangladesh issued in
FY05 new annual budget guidelines on a pilot basis, which contained elements of more
strategic budgeting practices, better fiscal discipline, and better coordination of recurrent
and capital budgets. The government has also undertaken expenditure tracking surveys
in the health and education sectors to establish benchmarks against which to track the
effectiveness of service delivery over time. Furthermore, the Government of Bangladesh
recently released a comprehensive Public Financial Management Action Plan. The Bank
and other donors are working with the Government to further develop this action plan,
and hope to align their future support in accordance with its priorities.
• With a population of 140 million, Bangladesh has only 1.4 million registered income
taxpayers and 300,000 businesses registered for value-added tax, with total tax revenue
amounting to just 7.4% of GDP. In light of growing development spending needs, an
extremely low revenue base and the planned reduction in trade taxes, strengthening
domestic tax mobilization is at the core of the medium-term budget strategy. Unless
revenue efforts and tax administration are improved, revenues will be insufficient to
fund pro-poor expenditures. The government has recently approved a strategic
development plan aimed at increasing revenue collection, developing a more effective
organizational structure along functional lines, developing legal and regulatory systems,
fostering an ethos of taxpayer service, and ensuring that businesses are treated
uniformly and equitably. A fully-fledged tax administration modernization project is also
being planned.
• In the legal judicial area, the World Bank’s Legal and and Judicial Capacity
Building project, which commenced in 2001, has made some gains in improving the
commercial legal framework. The court administration and case management reforms in
five pilot districts have yielded some achievements, with significant improvements in
disposal rates, case processing times and settlements through court-facilitated alternative
dispute resolution in a majority of the pilot districts. These reforms will be “rolled out” to
20 more districts in the second phase of the project. The case management system is
expected to be extended to criminal cases as well as the civil cases it now covers, to
overcome the artificial divide in data collection and case management. The Bank’s
development partners have been implementing the law reform and judicial training
components of the project.
• As the overwhelming majority of both civil and criminal cases filed in the court system
emanate from disputes over land and are linked to the system of land registration, reform
of land administration (modernization of land registration procedures and greater clarity
on land titles) will play a vital role in dispute prevention. The Bank is currently assessing
opportunities for intervention under its existing project.
Despite progress, the remaining agenda is challenging. Recognizing this, the
government has intensified its efforts to improve the overall governance
environment. More recently, the completed Poverty Reduction Strategy Paper (PRSP)
highlights good governance as a major thrust, “because everything else in the nation’s life
depends on it”. Improving governance in Bangladesh is also at the center of the Bank’s Country
Assistance Strategy (CAS) for fiscal year 06-09. Both the CAS and PRSP acknowledge that the
price that Bangladesh pays for poor governance may be rising to the point where it is beginning
to offset the beneficial impact of some of its governance successes and to seriously impact on the
effectiveness of its development efforts.

Presently, efforts underway within the CAS work program on governance in Bangladesh are
centered on three main themes:

1. Core Governance. Beyond strengthening governance in the various sectors in which the
Bank works, the strategy aims to enhance accountability and transparency by
strengthening ‘core’ governance institutions including the Comptroller and Auditor
General, Public Accounts Committee, Bangladesh Bank, Public Service Commission,
Securities and Exchange Commission and the courts; in addition to the ‘core’
governance processes of public financial and budgetary management, public
procurement, enhancing the modest revenue effort through the National Board of
Revenue, justice sector reform, greater transparency in government and increased
access by citizens to information held by public authorities.
2. Improving the investment climate through supporting sectoral governance
reforms. The Bank will support governance reforms and investments in the power sector,
water and sewerage, roads, railways and urban development. The CAS focuses on
reducing administrative barriers by streamlining regulatory processes, facilitating
infrastructure services through industrial zones, and building capacity of government
agencies such as the Board of Investment and Export Processing Zone Authority.
3. Empowering the Poor. The program will support governance reforms and investments
in health, education, sanitation, local government strengthening and safety net
approaches. These initiatives are central to Bangladesh meeting the Millennium
Development Goals (MDGs) and improving the quality and efficiency of social service
provision to the poor. Similarly, enhancing voice and participation as a way to
strengthen accountability and governance is an important underlying theme, particularly
through innovative local governance and community driven development programs. The
Bangladesh Local Governance Support Project (LGSP) aims to support union parishads
(UPs), the only tier of elected local government in Bangladesh, in providing services that
meet community priorities. In its first year, the project will focus on capacity building,
particularly regarding financial management and procurement. Following this, UPs will
receive additional fiscal transfers through the Government’s block grant system.
Alongside the block grants, a safety net program for the rural poor will also be piloted
through 15 union parishads. It is hoped that the emergence of effective local
governments can create space for broader political participation and bring with it a
chance for greater accountability of the state to its citizens.

The CAS acknowledges that progress on governance will prove difficult without creating public
demand and pressure for reform, especially as the rule of law is not in the interests of the client-
list politics that prevail in Bangladesh. In the coming period, the Bank is looking more to demand
side interventions, and building constituencies for reform (through cultivating a broad dialogue,
led by key influential and reform-minded actors in governance and development). By encouraging
and facilitating a dialogue among key actors, including civil society, academia, government and
politicians, the Bank is hoping to build a broad national consensus on such reforms and the
priorities.