March 15, 2010

WORLD BANK COUNTRY ASSISTANCE STRATEGY FOR BANGLADESH

1

Table of Contents

Background on World Bank

Bangladesh Today

CAS Objectives and Results Framework

Program and Challenges

2

Background on World Bank3

The World Bank

4

Largest source of funding for developing countries

Mission: “to fight poverty with passion and professionalism for lasting results…”

Bangladesh is one of the largest partners; received $14 billion since 1972

Active in Agriculture, Transport, Energy, Health, Education, Infrastructure, Local Government, Water Supply, Rural Roads and Electricity

World Bank provides interest free financing; 40 years maturity; 10-year grace period; 0.75 % service charge

Results of World Bank Assistance in Bangladesh

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Half a million disadvantaged children attending schools

Assisted Government in tripling girls’ secondary enrolments

Livelihood programs impacting over 350,000 men and women in villages

Improved 2,500 kms of rural roads

Helped build the Jamuna Bridge

Around 600,000 new consumers connected to electricity and 500,000 rural households provided solar home systems

Bangladesh Today6

Sustained macroeconomic stability, income growth and poverty reduction

56.6 58.7

42.7

48.952.3

35.240.0

43.8

28.4

0

10

20

30

40

50

60

National Rural Urban

Poverty Headcount Rate (Percent)

1992 2000 2005

5.25.4

6.3

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

FY96-00 FY01-05 FY06-09

Average GDP growth

2.8

2.4

3.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

FY96-00 FY01-05 FY06-09

Gross Reserves (in months of imports)

7

Despite political turbulence, stability has been maintainedand private sector growth has accelerated, leading to measurable decline in urban and rural poverty.

Accelerated human development and social transformation

Secondary School Gross Enrollment Rate by gender

Today, less than 20 percent of Bangladeshi women in their fifties completed primary school; for teenage girls, the comparable figure is over 80 percent.

Key health status indicators, 1993-2007 1993 1999 2007

Infant mortality rate 87 66 52

Under 5 child mortality rate 133 94 65Maternal mortality ratio 452 320 --

Total fertility rate 3.4 3.3 2.7

Chronic malnutrition (under 5) 56% 48% 46 %

0

5

10

15

20

25

30

35

40

1995-1996 2005-2006

Men

Women

Labor Force 1995-2006 in Million

8

Energy

Shortage of 2000MW at peak periods. Extensive load-shedding and energy rationing

Access is low: electrification is 47%, natural gas 6% (India: electricity 56%, Pakistan: electricity 60%)

Per capita electricity consumption (160Kwh) is about one-fourth of India; one of the lowest in the world

Transport

Heavy dependence on roads: 88% of total transport

Only 40% of the main roads are in good condition

Rural road accessibility is 37% in BD compared to 69% in India

Urban

Dhaka population has increased eight fold since 1972; now 8th

largest city in the world; projected to be 3rd largest by 2020

Dhaka among 10 most-polluted cities in the world

Economic losses resulting from environmental pollution impacts equivalent to 4% of GDP

9

8

15

20

24

28

0

5

10

15

20

25

30

1965-70 1975-80 1985-90 1995-00 2005-10

Share of population in urban areas

Increased infrastructure gaps and urban congestion constrain growth

Resilience to global financial crisis but vulnerability to food and fuel price hikes

192 194

265 268

162178

150

200

250

300

Jan 07-Jun 07

Jul 07-Dec 07

Jan 08-Jun 08

Jul 08-Dec 08

Jan 09-Jun 09

Jul 09-Nov 09

Fuel Imports (Million US$)

Remittances and garment exports sustained economic growth

Spot surveys on nutritional status in 2008 suggested acute malnutrition levels of 25% in hardest-hit areas, nearly double the trend rate

21.38

34.65

20.36

0

5

10

15

20

25

30

35

40

Apr.07 Apr.08 Apr. 09

Price of Coarse Rice in Dhaka(Taka per Kg)

10

519573

745 750

864922

500550600650700750800850900950

S1 S2 S1 S2 S1 S2

2007 2008 2009

Remittances (Million $)

992

1082

1269 1292 1301

1212

600

700

800

900

1000

1100

1200

1300

1400

S1 S2 S1 S2 S1 S2

2007 2008 2009

Export value (Million $)

Democracy restored within a challenging governance environment

Peaceful transition to elected government in January 2009.

Citizen surveys show increased confidence in government.

Steady improvement in global governance scores from low base.

Worrisome action in late 2009:

reduce public procurement transparency

limit independence of anti-corruption agency1

1.5

2

2.5

3

3.5

4

2005 2008 2009

Bangladesh

India

Pakistan

Nepal

0

5

10

15

20

25

FY05 FY06 FY07 FY08 FY09

TI Corruption Perception Index Global Ranking

0

10

20

30

40

50

Increased Decreased Stayed the same

How has citizens' confidence in the government changed over the last year?

% of citizens

11

12

Heightened awareness of climate changeand natural disaster vulnerability

Ranked as the most climate vulnerable country in the world

In delta of 3 largest rivers in the world; 2nd highest water flow in the world during flood season

30 to 50% of the country affected by floods annually

Increasing weather severity: cost of damages ($6b) from only 4 disasters in 2000-2009 was equivalent to the cost of 93 disasters in the ‘90s

1980 -2000: cyclones caused 250,000 deaths worldwide: 60% in Bangladesh

A four degree increase in temperature will create a 100cm rise in sea level by 2100,estimated to inundate 15% of land area and cause 20m displaced persons

Increased opportunities for regional cooperation

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Historic Prime Ministerial Summit with India in January 2010

Government restoring regional cooperation with India, Nepal & Bhutan

Agreements on trade, ports, transport and power interconnections

Commitment for stronger dialogue on water resources

Emerging opportunities with India and other regional countries:

Develop ports (Chittagong and Mongla) as regional transit points

Reduce cross-border restrictions on trade and investment, creating growth opportunities (border districts have highest poverty profiles)

Potential to double export income from India (currently at a deficit)

Regional power trade with Bhutan, Nepal, India

Water cooperation with upstream countries

Collaborate on climate change (regional initiatives SAARC, Abu Dhabi dialogue)

Key challenges going forward

Accelerating growth. 8 percent per annum needed to achieve poverty reduction targets and reach middle-income status by 2021.

Closing infrastructure gaps. Deficit constrains growth; regional potential unrealized.

Alleviating urban congestion. Economic activity and investment discouraged; quality of life reduced.

Reducing vulnerability. Natural disasters exacerbated by climate change effects. Food security at risk. Agricultural adaptation becoming urgent.

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Key challenges going forward (continued)

Absorbing the labor force. Requires strategies for youth employment, skills development, labor mobility.

Improving health and nutrition. Strengthen maternal health services. Identify multi-sectoral approach to persistent malnutrition.

Strengthening governance. Build domestic acountability while decentralizing public service delivery and unleashing private sector potential.

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Bangladesh’s Second National Strategy for Accelerated Poverty Reduction

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Road map with five strategic blocks: Macroeconomic environment for pro-poor economic growth.

Critical areas for pro-poor economic growth.

Essential infrastructure for pro-poor economic growth.

Social protection for the vulnerable.

Human resources development.

Achieve ambitious targets through the following supporting strategies: Ensuring participation, social inclusion and empowerment

Promoting good governance

Ensuring efficient delivery of utility services

Caring for the environment and tackling climate change

Enhancing productivity and efficiency through science and technology

The Sixth National Five-Year Plan will incorporate NSAPR II priorities in longer time horizon

CAS Objectives and Results Framework17

Emerging storyline: accelerating growth

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Building on Bangladesh’s strong track record on growth and development in recent years, the Bank Group will support the country’s aspirations (as indicated in the NSAPR II) to reduce poverty to 15% and achieve middle-income status by 2021. This will require accelerated, sustainable and inclusive growth, underpinned by stronger governance at central and local levels.

Accelerated growth. Massive infrastructure investment is needed--along with a more conducive business environment--even to sustain recent levels of private sector growth. As one of the country’s largest development partners, the Bank will increasingly invest in infrastructure that can transform lagging areas of the country, create agglomeration economies in urban areas and foster broader regional networks.

Emerging storyline: sustainable and inclusive growth

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Sustainable growth. Bangladesh’s geography offers an opportunity to accelerate growth through regional collaboration, but requires dynamic adaptation to climate change effects at the same time. Bangladesh is at the global forefront on climate change policy and interventions, and needs cutting edge technical and financial support from the Bank to adapt and respond to disasters.

Inclusive growth. Dramatic social transformation has occurred with female entry into the education system and labor force. Improved delivery of social services at the local level is needed to bring marginalized groups and rural communities more firmly into the development process, and to allow Bangladesh to compete in regional and global markets with a healthy and skilled labor force.

Emerging storyline: strengthening accountability

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Stronger governance. The economy has performed reasonably well despite a challenging governance environment. With the peaceful restoration of democracy, the country has avoided major conflict. But to grow faster and more inclusively, government will need to be more responsive and effective, building on a renewed commitment to decentralized service delivery. The Bank will support this commitment to service delivery, coupled with strengthening of domestic accountability at central and local levels.

Partnership on the ground. The Bank has joined other development partners in enhancing aid effectiveness in Bangladesh. Together, development partners will support the country’s growth and poverty reduction objectives while promoting voice and participation by diverse stakeholders.

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Country Assistance Strategy:Accelerated, sustainable and inclusive growth

underpinned by stronger governance

Accelerated growth: Increase

transformative investments and enhance

business environment

Sustainable growth: Reduceenvironmental

degradation and vulnerability to climate change and disasters

Inclusive growth: Improve social

services delivery

Stronger governance:

Enhance accountability and promote

inclusion

National Strategy for Accelerated Poverty Reduction II: Achieve Middle Income Country Status by 2021

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Strategic objectives and CAS outcomes

Increase transformative investments and

enhance the business environment

Increased public investment and

revenue generation

Improved environment for

private sector investment

Increased infrastructure provision and

efficiency

Strengthened planning and

management of urban growth

Reduce environmentaldegradation and

vulnerability to climatechange and natural

disasters

Strengthened water resource

management and coastal protection

Improved agriculture production and food

security

Reduced environmental

degradation

Enhanced disaster preparedness

Improve social service delivery

Improved access to quality health and nutrition services

Expanded access to safe water and

sanitation services

Enhanced and more systematic social

Protection

Improved student learning based on quality education

services

Enhanceaccountability and promote inclusion

Increased effectiveness and

efficiency of public resource use

Enhanced transparency of the

public sector and efficacy of public

services through ICT

Increased effectiveness of public service delivery at the

local level

Expanded participation in local

development and women’s economic

empowerment

Program and Challenges23

World Bank existing program in Bangladesh

24 ongoing projects with committed amount of $2.7 b

Projects in several sectors including: Agriculture, Education, Health, Rural Roads and Electricity, Local Government, Agriculture, Power.

In last CAS period (FY06-09), $2.6b new commitments made

Provided over $1b in Fiscal Year 2009

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Going Forward - Better programming consolidating and innovating

Strengthening strategic link between CAS outcomes and proposed operations

Showing realism in programming for manageable portfolio supervision and client capacity

Enhancing our presence and contribution through larger, more strategic interventions

Replicating and scaling up interventions with demonstrated results and country ownership

Innovating through smaller, flexible interventions

Sequencing analytic work and new operations strategically

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CAS Pillar 1: Accelerated Growth: Increase Transformative Investments and Enhance Business Environment

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Ongoing Activities: Operations and Analytical work in Private Sector, Power,

Central Bank, Rural Energy and Transport

Examples of Proposed Activities: Scaled up operations in Infrastructure, i.e. Padma Bridge,

Inland Water Transport; Rural Transport and Energy; public-private partnerships in power sector; Power Distribution and Transmission; Urban Services: Major Cities Improvement

Analytical work: Investment Climate Assessment, Opportunities in South West Region, Economic Reports, Poverty Assessment, Governance in sectors

CAS Pillar 2: Reduce Environmental Degradation and Vulnerability to Climate Change and Natural Disasters

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Ongoing Activities: Operations in Agriculture Technology, Disaster

Management, Water Management and Environment

Examples of Proposed Activities: Scale up operations in Water Resources Management,

River Restoration (including Gorai River); Disaster Preparedness: Coastal and River Bank Protection, Cyclone shelters; Climate Change Resilience; and Food Security

Analytic work: Climate Change Adaptation, Regional Initiatives in Water, Energy Efficiency, Agriculture Productivity

CAS Pillar 3: Improve Social Service Delivery

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Ongoing Activities: Operations in Health, Education, Safety Net and Water

Supply

Examples of Proposed Activities: Next phase of Health and Education SWAps; Multi-

sectoral Nutrition program; expansion of Rural Piped Water Supply and Sanitation; Extension of water supply and sanitation to Chittagong; Employment Generation Program

Analytical work: Health and Education Sector Reviews; Nutrition Report

CAS Pillar 4: Enhance Accountability and Promote Inclusion

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Ongoing Activities: Operations in Public Procurement Reform; Local

Governance Support; Social Investment and Livelihoods; Strengthening Expenditure Management

Examples of Proposed Activities: Expansion of Social Investment and Livelihoods; Digitized

National ID cards; Local Government Support; Employment opportunities for women, and PRSCs

Analytical work: Institutional and Governance Review on decentralization policy options, Assessment of local governments financial and service delivery capacity

Country program challenges

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Limited implementation capacity

Continuation of political support for regional cooperation

Slow progress in decentralized decision-making and local empowerment

Risk of misuse of funds