The World Bank

March 2002

Page No. Executive Summary i Chapter 1: Poverty, Governance And The Performance Of the Public Sector 1 Chapter 2: Obstacles to Governance Reform 11 Chapter 3: Strengthening Accountability 21 Chapter 4: Tightening Financial Management 39 Chapter 5: Decentralizing to Improve Service Delivery 55 Chapter 6: Energizing Administrative Reform 69 Chapter 7: E*Government for Better Governance 83 Chapter 8: A Strategy for Improved Governance and Better Performing Institutions 89 Annex 1: Learning from a Decade of Institution Building 105 Annex 2: Bibliography 125 Box A: Villagers Perceptions of Ups v Box 1.1: Structure of the State 2 Box 1.2: Voices of the Poor 4 Box 1.3: Government That Works (1996) 7 Box 1.4: Privatization at Snail’s Pace 8 Box 2.1: Why I am a Corrupt Businessman 13 Box 2.2: Home grown Management of Institutional Change – The Case of BWDB 17 Box 3.1: Combating Corruption with Information in Rajasthan 32 Box 4.1: RIBEC – A Successful Reform Initiative 39 Box 4.2: Making the Budget and Public Accounts Transparent The Example of Guatemala 47 Box 5.1: The Good, the Ordinary, and the Ugly -- Portraits of Three Unions 58 Box 5.2: Public Expenditure Tracking in Uganda – Promoting Transparency 60 Box 5.3: Overcoming Arsenic Poisoning of Water Supplies -- A Community Approach 65 Box 5.4: Village Organizations in Kishorenganj 66 Box 6.1: Motivating Accounts Staff to Work Better 74 Box 6.2: Protecting the Common Citizen from State Abuse the Peruvian Ombudsman: Defensoria del Pueblo 76 Box 7.1: E*Government in Andhra Pradesh 84 Box 8.1: Governance Score Cards 97 Box 8.2: Moving from Projects to Program Support in Uganda 103 Table 5.1: Adequacy of Services and attention received from UPs 61 Table 5.2: Services rendered by UPs 62 Table 5.3: Problems in their relations plus obstacles and constraints faced by UPs 63 Table 5.4: Possibilities of mutual support between Union Parishads and NGOs 64 Chart 4.1: Gross Reserves 38 Chart 4.2: Inflation 38 Chart 4.3: Exchange Rate Movements 38 Figure 1: Institutions and Growth: Capacity improves economic growth viii Figure 2: Enhancing State Capability viii Figure 1.1: % Investment Share in GDP 5 Figure 1.2: Income per Capita Growth Rate 5 Figure 3.1: External horizontal and vertical checks on the executive 22 Figure 4.1: Types of Financial Irregularities 46 Diagram 5.1: Services Received from the UPs 61

The Review has been prepared by a team lead by Pierre Landell-Mills and including:

Khurshid Alam, Jorge Barenstein, Nurunnabi Chowdury, Phil Keefer, Rick Messick, Shirin Pasha, Habibur Rahman, Vinod Saghal, Robert Schware and Geof Wood. Case studies were contributed by Helen Abadzi, Guy Alaerts, Asarul Islam Chowdhury, Henry Gassner, Mohammad Iqbal, Reazul Islam, Tajul Islam, Keiko Miwa, Thampil Pankaj, Mohi Uz Zaman Quazi, S.A.M. Rafiquzzaman, Paul Thornton, and Jan Weijenberg. Valuable comments were received from Fakhruddin Ahmed, Sadiq Ahmed, Rashid Faruqee, Ashraf Ghani, Kapil Kapoor, Reidar Kvam, Yashiku Masuda, Michael Stevens, Frederick Temple, Tara Vishwanath and Roberto Zagha. This Review has drawn heavily on a very substantial literature on governance, institution building, and public management relating to both Bangladesh and other developing countries. Only a selection of these are noted in the Bibliography. The Review also benefited from a series of focus group discussions in June 1999 with young businessmen, middle level civil servants, researchers, and representatives of NGOs. Lastly, two surveys were conducted: one (undertaken by CAPRe) covering the views of representatives of local government, NGOs and citizens in a sample of Unions; the other (undertaken by Professor Muzaffar Ahmed) covering the views of public officials in the Secretariat, Departments and Districts. Five major Background Papers and 12 case studies of public agencies were prepared. These are listed in the Bibliography.

This Review aims to analyze the underlying causes of Bangladesh’s poor governance, the

consequential weak performance of public institutions, and reasons for the slow response of the government to proposals for pub lic sector reform.

In essence, good governance depends on establishing effective checks and balances on the exercise of official power, thereby holding public officials accountable so that they become true servants of the publics they are supposed to serve. And transparency is the handmaid of accountability. Too little attention has been paid to this fundamental prerequisite. The performance of public agencies should be publicly tracked and measured against clearly established benchmarks. This Review outlines ways to help strengthen such accountability mechanisms.

A central theme of the Review is that for public sector reform to be successful there must be benefits for all stakeholders whose cooperation is needed. Special attention must be given to the incentives – formal and informal -- that drive the behavior of public officials and the social context in which they operate.

The Review concludes that reform of public institutions will be a gradual and laborious, but not impossible, task that requires a clear long term vision, a readiness to investigate and make explicit the factors that drive behavior, pragmatism in exploiting windows of opportunity, a readiness to adjust programs in the light of experience, imagination in circumventing entrenched vested interests, and a willingness to be engaged over the long haul. Institutional reform takes decades not years and even then will only succeed if pursued with a constancy of vision and determined single-mindedness.

In conclusion, the Review underlines the centrality of achieving great accountability and transparency in government operations if Bangladesh is to achieve more rapid and sustainable development. To this end priority should be given especially to: human development as a fundamental prerequisite for enhancing the awareness and capacities of civil society; judicial reform to help impose the rule of law and to underpin accountability mechanisms; and by strengthening civil society organizations to help articulate and empower the “voice” of ordinary citizens in demanding better governance. Lastly, the quality of donor coordination needs to be greatly improved to achieve a common and coherent approach to supporting improved governance and institution building.

As a follow-up to the management review of the draft World Bank’s policy paper

Addressing the Challenge of Reforming Public Institutions (July, 1998), a decision was taken to pilot a number of country institutional reviews. The objectives were: to make an assessment of the status of institutional reforms and the related efforts to strengthen public management and governance; and to propose recommendations for improving the donors’ assistance in this area. This Review is intended to help sharpen the institution building focus of the country’s development strategy, and contribute to the public dialogue among representatives of the government, civil society and development partners on improving governance. Bangladesh was selected as one of the pilots.

The Review is based on a preparatory mission to Bangladesh undertaken by Pierre Landell-

Mills and Rick Messick in March 1999, a main mission consisting of Jorge Barenstein, Phil Keefer, Pierre Landell-Mills, Rick Messick, Vinod Saghal, and Geof Wood in June 1999, reports on administrative and local government reform prepared by Nurunnabi Chowdury and Habibur Rahman, a review of implementation completion reviews and audit reports of all IDA supported projects completed between 1990 and 1998 and supervision reports of ongoing projects, undertaken with the assistance of Shirin Pasha, and twelve case studies of institution building prepared by Bank staff/consultants. The full list of background papers and case studies is given below. Pierre Landell-Mills drafted the main report.

This Review was prepared in parallel with that of the Public Administration Reform Commission. The World Bank team had several discussions with the Commission and shares many of the conclusions and recommendations of their Report issued in June , 2000.

The Review has taken as its starting point the Bank’s comprehensive study of public sector

institutions entitled Government That Works published in June 1996. The Review seeks to understand why the government has done so little since then to tackle the weaknesses in public sector performance so vividly portrayed in that study and to probe more deeply into the underlying motivational and socio-political factors that have constrained public sector reform. It identifies the core issue in improving public service delivery and policy making and implementation to be the absence of adequate mechanisms to hold public officials accountable for their actions, or lack of action, and recommends focused assistance on nurturing accountability mechanisms. Effective accountability depends on instituting far greater transparency in public agencies than is the current practice and in mobilizing public opinion through participation and education to insist on better public sector performance.

Redefining the role of the government -- refocusing the public sector on the core functions of government and leaving business activities to the private sector -- although agreed in principle, largely remains to be done. Privatization has been stalled by vested interests and, in the absence of effective regulation, the private sector has often abused the public’s trust. This undermines public support for privatization. Establishing a modern regulatory framework for private sector activities –

Taming Leviathan: Reforming Governance in Bangladesh ii

a severely neglected and misused core function of government -- and accelerating privatization remain priorities for the development agenda.

The Review also identifies a systematic failure to analyze and take account of the incentives and the related social context that drive bureaucratic behavior in the institutiona l components of IDA assisted projects. To correct for this weakness, the Review brings out the importance of mobilizing multidisciplinary expertise in institution building and underlines the paramount need to take a long-term view of capacity building. The Review also emphasizes that institution building requires patience, persistence and continuous reassessment and adaptation based on the lessons of experience. The constantly changing and rotating staff makes this particularly difficult; good institutional work calls for deeper country knowledge than do the more technical aspects of project, sector and economic work.

Lastly, the Review emphasizes the value of close cooperation among the development partners in supporting a well coordinated strategy to help improve governance in Bangladesh. There are many donors active in Bangladesh, each with its own set of policies and objectives. There are frequent changes in donor personnel which makes it very difficult to maintain continuity of purpose in the support the reforms needed to build efficient and accountable institutions.

To accomplish its ambitious goals, in addition to the studies noted above, the Review has drawn heavily on an extensive existing literature on both Bangladesh’s experiences and that of other countries in promoting institutional development. In Bangladesh, two surveys and a number of focus group discussions have served to validate the analysis derived from the team’s own extensive knowledge of Bangladesh and years of operational experience.

Bangladesh is a country of paradoxes. It is a homogenous nation with a rich culture, yet it

remains one of the poorest nations in the world. Located in a region ravaged by natural disasters – frequent floods, cyclones, tornadoes and even droughts, it is nonetheless very close to achieving self-sufficiency in food and has succeeded in steadily improving per capita income and most of the basic measures of welfare. Since 1975 life expectancy has risen 12 years, child mortality has fallen by 30 percent, fertility has halved, primary school enrolment has doubled to over 90 per cent and now there are almost as many girls going to school as boys. Despite these impressive gains, the country still suffers from political turmoil, a deteriorating law and order situation and wasted public resources.

For a large part of its existence as an independent state, the development of Bangladesh’s institutions was hampered by the lack of democracy. With the advent of democratic government in 1991, there were high hopes that decisive action would be taken to tackle the well-publicized failures of governance. These hopes have been largely disappointed. In some respects the problems have deepened. This Review analyzes the underlying causes of Bangladesh’s poor governance, the consequential weak performance of public institutions, and reasons for the government’s slowness to reform. The starting point is the Bank’s comprehensive study of public sector institutions entitled Government That Works (GTW) published in June 1996. This in turn drew on major earlier reports prepared by government officials (e.g. The Four Secretaries’ Report and the Administrative Reorganisation Committee Report). This Review has been prepared in parallel with the work of the Public Administration Reform Commission (PARC), with which it shares largely similar views.

With so much effort at diagnosis and study, the question that must be asked is why has so little action been taken to implement the public sector reforms that a wide spectrum of informed opinion has agreed are needed? This Review examines this aspect in some detail. Redefining the role of the government -- refocusing the public sector on the core functions of government and leaving business activities to the private sector – although agreed in principle, largely remains to be done. Privatization has been stalled by vested interests and, in the absence of effective regulation, the private sector has often abused the public’s trust. This has undermined public support for privatization. Establishing a modern regulatory framework for private sector activities – a severely neglected and misused core function of government - and accelerating privatization are still priorities for accelerated development.

I. THE CONTEXT: A COUNTRY OF GREAT POTENTIAL

Taming Leviathan: Reforming Governance in Bangladesh ii

This Review argues that Bangladesh’s development has been slow because too little attention has been given to social and political obstacles in the design of reforms to strengthen the rule of law, reduce corruption and arbitrary decision making, and improve service delivery -- which are the government’s avowed objectives. To succeed, reform must benefit all the stakeholders whose cooperation is needed. Because reformers have generally adopted a technocratic approach, and largely ignored the way incentives play out, the record of institution building is mixed – with few real successes and many setbacks to learn from. Effective incentives linked to real accountability are the key to better public sector performance. The Review concludes that reform requires:

• a clear long-term vision • a readiness to investigate and make explicit the factors that drive behavior • designing incentives to encourage a pro-active attitude towards implementing reforms • pragmatism in exploiting windows of opportunity, • a willingness to adjust programs in the light of experience • imagination in circumventing entrenched vested interests, and • a determination to be engaged over the long haul.

If Bangladesh’s development partners wish their assistance to be effective in helping

improve governance in a sustainable way, they must be prepared to adapt their modalities to the fact that institutional reform takes decades not years and, even then, will only succeed if pursued with a constancy of vision and dogged single-mindedness.

Good governance depends on holding public officials accountable. Yet, in most countries

public officials, both elected and appointed, will resist being held accountable. Reform will only succeed if driven forward by the force of public opinion and the empowerment of ordinary people whom public agencies are paid by the taxpayers to serve. Transparency and genuine participation of stakeholders are essential elements of that process. It follows from this analysis that Bangladesh’s highest priorities should be: human development as a fundamental prerequisite for building capacity and empowering civil society; judicial reform to establish a firmer basis for the rule of law and to underpin accountability mechanisms; and building civil society to help articulate and empower the “voice” of ordinary citizens in demanding better governance. Institutional development requires patience, persistence, and continuous reassessment and adaptation based on the lessons of experience.

Ever since its emergence in 1971 as an independent country, a critical challenge facing Bangladesh’s leaders has been to create viable and well-managed institutions. The civil war that preceded independence devastated not only the physical but also the institutional structures of the country, which in any event had been degraded by many years of corrupt military rule. Rebuilding bridges and the like was a costly but reasonably straightforward matter. However, creating the accountable public institutions needed for rapid social and economic development has proved to be elusive.

II. THE DIAGNOSTIC: A PERVASIVE LACK OF PUBLIC ACCOUNTABILITY

Poverty, Governance and the Performance of the Public Sector

A Strategy for Better Governance iii

In the early years of independence, a socialist government embarked on wide-scale nationalization and the state dominated the economy. The outcome was disappointing – corruption and inefficiency abounded. Subsequently, the government gradually gave increasing space to private enterprise. Meanwhile, NGO activities expanded impressively, providing services to the poor that the state was unable to deliver. Consequently, the relative importance of the state as a producer of goods and a provider of services declined. Nonetheless, public ownership still accounts for over 20 percent of manufacturing output, 80 percent of commercial bank assets, and most utilities. In 2000 the losses of state owned enterprises totaled over $800 million, while the percentage of non-performing loans1 in the nationalized commercial banks exceeded 50 percent. After over a quarter of a century of independence the State still cannot ensure the rule of law or provide a well functioning regulatory and policy environment. Extortion and “toll-taking” are widespread. Lawlessness is particularly damaging to the small and medium sized enterprises. Student political factions frequently engage in armed clashes on the university campuses. At times it is hard to distinguish between the political “activism” of various party youth cadres and simple thuggery. The police are ill-disciplined and often seem more intent on extracting money from citizens than protecting them.2 Land title registration is chaotic and tax administration corrupt and ineffective. Power outages are frequent, the main port is a major constraint to trade, and telephone services are among the worst in the world. In short, the inefficiency and corruption of the public sector remains a huge drag on the economy and a major constraint to improving the welfare of ordinary citizens.3 The size of the civil service has doubled since independence while, by common consent, the quality of public administration has declined along with purchasing power of the salaries of public officials. This problem is compounded by the arrival at senior levels of a batch of officers recruited in the early 1970s without passing the usual competitive entry examination; these have less education and training than their predecessors and are generally viewed as much less competent. The gradual lowering of educational standards has also contributed to the low quality of the civil service. Recent surveys show that corruption is endemic and people’s expectation of public services is minimal. For example, a survey conducted on behalf of the Bangladesh Chapter of Transparency International in 1996 revealed that 97 per cent of those questioned had no confidence in the integrity of the police. The figure for the lower judiciary was 89 per cent. Most serious of all, the country continues to be mired in political dissension that has led to the loss of nearly 200 work days in the past five years and a whole month lost in 1999 through hartals or general strikes which close down the formal economy. Each day lost has been roughly estimated by the business community to cost some $60 million. This political impasse results from the disinclination of the political leaders across the political spectrum to adhere strictly to democratic processes for the settlement of disputes – to play politics by democratic rules. Street violence is often the chosen mode of political discourse. Neither major political party allows genuine democracy within the party. And the conduct of parliamentary debate is generally unparliamentary. On the positive side, gradual progress has been made by Parliamentary committee members to work constructively together to review the actions of the Executive.

1 Using international standards. 2 “In Bangladesh, allegations against police corruption, misconduct, harassment, death in police custody have been common and the police department has also failed to check the misuse of police power” PARC Report ,June 2000 (para 6.23, p.86) 3 “They (foreign investors) are discouraged by the risk of militant and politicised manpower, corrupt practices and slow settlement of disputes by the judiciary. …Delays in project implementation cause further wastage of public funds.” Etc. PARC Report, June 2000 (p.102).

Taming Leviathan: Reforming Governance in Bangladesh iv

But, with the right leadership, public institutions can perform well. A few islands of excellence --for example, the Rural Electricity Board – make this clear. The Supreme Court remains a respected institution. And the NGOs have gone from strength to strength; they have developed a strong and productive working partnership with many government agencies in the field – especially in the delivery of health services, family planning, nutrition and non-formal education. The NGOs are also playing an important role in social mobilization and by assisting poverty groups to defend their interests against encroachments on their rights to land and fish resources by local mastans (musclemen). In addition, their legal aid and advocacy work is steadily grown to the benefit of the community. Grinding poverty, nonetheless, remains the fate of nearly half the population. A recent study Bangladesh 2020 (UPL, 1998) demonstrated that to achieve real impact on poverty within a generation, with the absolute numbers in acute poverty starting to decline, requires substantially higher economic growth (closer to 8 percent). This prerequisite is attainable only if the Government were willing to adopt a vigorous public sector reform program, as well as put in place policies that more effectively encourage and support private sector investment, entrepreneurship and job creation. A parallel program of accelerated human resource development is also essential. Economic losses from the inefficiency of the public sector are huge. For example, it has been calculated that the cost of inefficiency in the Chittagong Port amounts to as much as 5 percent of the value of goods passing through the port – a sum that exceeds $600 million a year. The “system losses” in the power sector have been estimated to amount to well over $100 million a year. The revenue loss to government of corruption and inefficiency in the customs and income tax departments must surely exceed 5 percent of GDP – for example, it is extraordinary that 56 percent of income tax collections come from 700 taxpayers in a country of 130 million people. Over 40 percent of the commercial banks’ loan portfolio are overdue, a large part of which will never be recovered. And these numbers do not capture the real costs to the economy that arise from the discouragement of investors resulting from such poor governance. In addition, the positive development outcomes noted earlier have been counter-balanced by a decline in the quality of life, most notably the increased physical insecurity of poor people and women, and the rapid deterioration of the natural environment – all documented daily in the Press. Poor governance has a particularly harsh impact on the poor who are least able to fend for themselves, lacking as they do both the resources and the knowledge to assert their rights. The instruments of governance are controlled by a self-serving elite whose behavior is reinforced by the deep-rooted social norms of dominance and subservience characteristic of a patrimonial society, reinforced over years of military rule. These “chains of poverty” can only be loosened through initiatives that extend poor people’s control over their lives and expand their access to assets and their entitlements from the State.

Since the publication of GTW in 1996, government actions to advance reform have been

sparse. Most notably, Union Parishad elections have been held under a new law that provides for the direct election of women. Yet, these local bodies are still heavily supervised by the central government representatives and have a long way to go to become truly democratic. New financial courts have been established to handle cases arising under the recently enacted bankruptcy law, as well as to pursue loan defaulters more effectively. Considerable efforts have gone into the preparation of a judicial reform program. The public accounting system is being redesigned and

Recent Reform Efforts

A Strategy for Better Governance v

Box A: Villagers Perceptions of UPs Two thirds of rich villagers are satisfied with Union Parishad (UP) services, while two thirds of the poor are dissatisfied. This is the finding of a recent survey of nine representative Unions. The relatively high level of satisfaction for the better off residents is because they are principally interested in the role of UPs in providing administrative services – for example, settling disputes, especially with regard land, and issuing certificates. For the poor, receiving relief was the major benefit. The range of services is very limited with no mention of health or education services. This compares with the long list of functions of the UPs spelt out in the legislation and contrasts with the many services provided by NGOs. The survey revealed that villagers complained about the lack of availability and detachment of the UP Chairmen. All wished to see greater responsiveness and accountability. Changing the quality of leadership comes well ahead of their concern to see more resources given to the UPs. The feeling of lack of inclusion, especially among the poor was revealed by the villagers strongly expressed wish to participate much more in defining and implementing local development programs. UP officials and NGO representatives both called for more joint activities between the UPs and NGOs underlining the considerable potential for mutually beneficial collaboration. Source: Centre for Analysis and Policy Research (1999)

extensive training of accounts staff to implement the new system has taken place. And some railway passenger services have been successfully privatized and the ticketing system computerized.

Actions are noticeably absent in terms of restructuring government following the

recommendations of the Nurunnabi Committee4, addressing civil service reform and corruption, appointing an Ombudsman, repealing the much abused Special Powers Act, or abolishing the state monopoly of radio. However, the last government did grant a license for a carefully selected privately run TV station. No much was done to increase the transparency of government decision-making. The annual IDA Country Portfolio Performance Reviews, now completed jointly with the Asian Development Bank and in consultation with other donors, have identified measures agreed with the government to overcome a number of systemic weakness in public management adversely affecting project implementation. To date most of these actions, many dating back several years and renewed each year, still await government implementation. An important number of actions aimed at strengthening institutions have been pursued in the context of donor supported projects. Despite these and other important initiatives (some of which are faltering because of opposition from vested interests and lack of strong leadership), poorly performing public institutions remain a major obstacle to development and the more rapid reduction of poverty. While lack of skills and weak capacity within government is undoubtedly part of the problem, far more important is poor governance -- lack of public accountability, corruption, and the private agendas of public officials that prevail over the public interest. In an increasingly competitive world, Bangladesh’s future depends critically on the government’s willingness to address the systemic weaknesses in the governance and management of public institutions. 4 Administrative Reorganisation Committee Report (1996)

Taming Leviathan: Reforming Governance in Bangladesh vi

The two democratically elected governments in power during the 1990s were reluctant to

undertake significant reform. With elections every five years, short run political calculations have dominated decision-making. The political leadership perceived the immediate political costs of reform to outweigh the longer run welfare benefits. The efforts made by the donors to support institutional reform, principally through technical assistance both as self-standing projects and as components of other projects, have had limited success in strengthening individual institutions. But, in the absence of a strong drive for reform from the government leadership, progress has been slow. The systemic problems have mostly remained and in some respects have even deepened (e.g. the role of the public sector unions in corruptly undermining the efficiency of the ports, and the power and telecommunications utilities). Reform initiatives have frequently failed because they promoted technical solutions when, in reality, the main obstacles to improved public sector management are socio-political. This assertion may be made clearer by three observations: First, the functioning of the public service reflects a pervasive clientalism operating within clearly defined hierarchies. In this Bangladesh is far from unique; these are problems that every society must struggle with at some point in its development. Second, as in all societies, Bangladesh has a number of well organized interest groups that largely determine political decisions; in particular: the military; the public bureaucracy; private business; the trade unions; religious groupings; the NGOs; and the donors. Some of the activities of interest groups are legitimate, while some (bribery, extortion, harassment and use of musclemen) are not. Competition among special interest groups is the hallmark of a well functioning democracy always provided the special interests are pursued within a legitimate framework. In Bangladesh any public sector reform is likely to run up against the organized resistance of one or more interest groups, with frequent resort to illegitimate methods. However, these groups are by no means monolithic. On the contrary, interest groups tend to be fractious and are frequently divided and overlapping. This fragmentation results in much contention and distrust. Third, there is a major discrepancy between the private agendas of the principal public actors and their formal public agendas. The political, business, trade union and bureaucratic power structures in Bangladesh have been partially captured by an underworld that uses ‘muscle-power’ to enforce its authority. In the districts the powerful often gain the support of the police and even certain members of the lower judiciary for their own benefit, to the disadvantage of the poor. The rural elite are able to exploit their links to patrons within the higher echelons of the formal power structure who seem able to by-pass the normal constraints of the law. As in the past so today, the poor, to survive, need the support and protection of patrons. Indeed, almost everyone needs a patron to progress, since patron-client relationships are ubiquitous and particularly so in the public bureaucracies. In these respects Bangladesh’s power structures differ little from that of most other poor countries around the world. The 1998 Independent Report on Bangladesh’s Development (IRBD), written by some of Bangladesh’s most respected intellectuals, contains a scathing indictment of the country’s governance practices. The report sets out with great candor how the present power structure effectively condones extensive corruption perpetrated by public officials and how major bank defaulters are not called to account for fraud, even where their activities severely damage the economy and

Deep Seated Resistance to Reform

A Strategy for Better Governance vii

compromise the government. This situation is in no way new; past governments have tolerated the same practices. As is true in many developing countries, at both the national and local levels the elite has achieved tight control over resources and over the economic opportunities and benefits distributed by the state. This elite also manipulates to its advantage the imperfect private sector markets. To a large extent state resources also allocated via patronage networks stretching down into the village. The destitute poor -- the elderly without families, orphans, the chronically sick or severely disabled, victims of life-threatening, communicable diseases, and outcast (often elderly, deserted) women -- are largely excluded from the traditional patrimonial forms of welfare and safety nets since they have little of value (not even their labor) to offer patrons. Such categories tend not to be included in the large-scale mobilization of NGOs, though they may receive charitable support from smaller, more specialist ones (see Box A). Everywhere in the world the behavior of public officials derives from a balance between the prevailing social codes and the institutional incentives they face. These incentives in turn depend on an individual’s perception of his or her self-interest given the system of rewards and punishments offered. In public organizations in Bangladesh there is frequently a lack of delegation that recognizes the difference between what is routine and what is policy work that leads to an unclear differentiation of roles. Managers have a tendency to control rather than steer, to be concerned with inputs and procedure rather than outputs and results, and for an emphasis to be placed on job security and loyalty rather than good performance. Large organizations are made up of a pyramid of ‘nested’ patron-client relationships spanning the hierarchy from peon to boss. Notwithstanding this difficult environment, the same incentives to good performance apply in Bangladesh as anywhere else:

Transparent and monitorable performance benchmarks that are agreed and tracked Rewards that are consistently and fairly given for good performance and poor performance

sanctioned; and Rigorous respect for the rule of law.

The challenge lies in bringing about these conditions in a social context where relations are highly personalized and where personal loyalties are valued more highly than the “rules” of the organization. This requires a conscious decision by the political and bureaucratic leadership to establish clear institutional rules (even through these will depart from current norms within the traditional patrimonial society) and then abide by them. The Bangladesh Supreme Court is a good example of a public institution functioning according to its own distinct, well-established and firmly imposed rules. Government “rules of business” already exist, but are honored more in their breach than in their practice. These rules urgently need to be updated and then applied consistently and firmly. The need for respect for rules and laws applies equally, if not more so, to the political leaders and to parliamentarians. In practice Bangladeshi parliamentarians frequently have not respected the rules and norms of good parliamentary conduct and, as a consequence, the legislature has been seriously weakened. The government itself has not always abided by its own laws – for example those relating to the environment and land planning. Reform programs need to recognize the importance of supporting deliberate measures that strengthen civil society as a watch-dog against wrong-doing by public officials and build respect for the rule of law and the prescribed procedures of public agencies. In facing these challenges, Bangladesh is little different from other developing nations. Indeed, all societies have elements of clientalism that have to be overcome. And in Bangladesh, as elsewhere, a successful reform strategy will depend on building a wide public consensus that recognizes that corruption, nepotism, cronyism, arbitrary discretion, secrecy, rigid hierarchies and the like as intrinsically inimical to the sound functioning of modern public organizations. These practices

Taming Leviathan: Reforming Governance in Bangladesh viii

need to be replaced by adherence to clear rules, rewards based on measured performance, fair competition, and a high degree of transparency and, hence, accountability. Accountability lies at the very heart of good governance.

Since the early 1990s there has been an explosion of research and country analysis on the role of the state, governance and public sector management.. In a nutshell, the recommended reform strategy is two pronged (I) to explore exhaustively all possible avenues for reducing the role of public agencies by depending more on private suppliers operating in competitive markets and on such devices as contracting out, and (2) to radically upgrade the capabilities of public agencies and make them accountable to the public for their performance.

The 1997 World Development Report5

set out research findings that demonstrated conclusively there was a strong long-term correlation between the “institutional capability” of the state and economic performance. This is summarized succinctly in Figure 1. The difference in economic growth rate between countries with strong institutions, and hence high capability, and those with weak institutions and low capability is as much as 2.6 percentage points. In short the ones with strong institutions grow twice as fast as those with weak institutions. These dramatic findings have focused researchers' attention on what factors make for strong institutions. The strong consensus that has emerged from extensive analysis of country performance worldwide covering two decades and over 80 countries for which reasonable data is available confirms that there are a number of critical elements. First and foremost, is the rule of law, which lends greater predictability to investment decisions and creates an environment of physical security, which is a precondition for a flourishing economy. Second are public agencies that are supportive rather than obstructive of the private sector. Third, come low levels of corruption. And fourth, is a participatory approach that permits a partnership between the state, business and civil society.

To achieve these supportive conditions for more rapid development within public institutions, three sets of factors need to be at work:

5 The State in a Changing World, World Bank (May 1997)

III. LESSONS FROM GLOBAL EXPERIENCE

Capability improves economicgrowth..

Capability improves economicgrowth..

Highcapability Low

capability

Highpolicydistortion

Lowpolicydistortion

0.00.0

0.50.5

1.01.0

1.51.5

2.02.0

2.52.5

3.03.0

3.53.5

Per capitaPer capitaGDP growthGDP growthin percentin percent

1.4

0.4

3.0

94 countries 1964-9494 countries 1964-94

Figure 1: Institutions and Growth Capability improves economic growth

CompetitivePressures

•• Competitive service Competitive service delivery

• Merit-based recruitment- promotion

•• ClientClient surveys

Voice andPartnerships

Rules andrestraints

•• JJuuddiicciiaall iinnddeeppeennddeennccee•• WWaattcchh--ddoogg bbooddiieess•• BBuuddggeettiinngg rr uulleess• PPuubblliicc aauuddiittiinngg rr uullee ss

•• Decen- tralization•• CC oommmmuunniittyy

aa cc ttiioonn•• PPuubblliicc--pprriivv aa ttee ddeelliibbeerraattiioonn• NN GG OO ssuuppppoorr tt

Three drivers ofpublic sector

reform

Figure 2: Enhancing State Capability

A Strategy for Better Governance ix

A public sector governed by rules and restraints – the clear separation of powers among the

legislature, the executive, and the judiciary supported by appropriate oversight arrangements Effective mechanisms that promote citizens “voice” and participation which necessarily also

requires transparency and “open” government An environment that fosters competition not just among firms producing goods, but more

widely in society – competition among the providers of information and services, and competition among politicians and political parties, all geared to serve the citizen better.

These factors contribute to better governance in a complex inter-linked way as illustrated in Figure 2. The conceptual framework of the proposed strategy for the reform of governance is based on the mechanisms summarized in Figure 2.

Many new pressures are emerging to force faster change in Bangladesh’s public

bureaucracies. But reform is still a very slow process. If Bangladesh is to survive in the increasingly competitive global market place, and a start made to reduce the huge numbers in absolute poverty, the pace of reform must be accelerated.

The prerequisite for accelerated development is improved governance. The strategy to promote good governance has four critical dimensions: (a) strengthening the core institutions of accountability; (b) building civil society; (c) decentralisation to bring government closer to the people; (d) making public administration more effective and efficient; and (e) mobilizing the national efforts to bring about the needed reforms. Each of these dimensions is elaborated below.

Good governance hinges on having in place mechanisms that hold the government

accountable to its public in a way that ensures the equitable treatment of all its citizen – rich and poor – whatever their race or creed. This requires, firstly, respect for the rule of law, based on an honest and equitable judicial system and effective law enforcement; secondly, a fair and open system for political contestation and the periodic election of a new government, effective parliamentary oversight between elections; thirdly, transparency and a free press; fourthly, arrangements to permit stakeholders to be consulted and to participate in government decision-making that directly effects them; and, fifthly, responsive public officials who recognize they hold office to serve the public.

Effective accountability depends on having systems and processes in place that are understood, accepted and respected by everyone concerned, with effective and consistent sanctions applied when transgressions occur. For this to happen, the responsibilities and assignments of every agency and official need to be clearly spelt out, performance benchmarks set and systematically monitored. And this entire process should be an open one that can be tracked and debated by the public. An effective parliament, judiciary, and press linked to an aware public and a strong civil society are the means to achieve greater accountability. Transparency is the essential glue to bind together these processes of accountability.

IV. THE STRATEGY: MEASURES TO ACHIEVE A MORE EFFECTIVE, TRANSPARENT AND RESPONSIVE GOVERNMENT

A. STRENGTHEN THE SYSTEMS OF ACCOUNTABILITY

Taming Leviathan: Reforming Governance in Bangladesh x

Like most governments, the Bangladesh government has a long tradition of operating in secrecy and surveys have shown that the public has low expectations of government. As has been vividly recounted in the recent report Voices of the Poor6, the most that those who are poor and lack social connections can hope for is to escape harassment by the police and public officials. However, Bangladesh has achieved notable progress in recent years in making government more accountable in two areas.

First, democratic processes have been markedly strengthened both with the innovative constitutional amendment adopted in early 1996 providing for a “Caretaker Government” to oversee national elections and the reasonably fair and well run elections for the Union Parishads held in 1998, and the national elections in 2001.

Second, the Supreme Court has increasingly allowed public interest litigation which has served in a number of instances to hold the public authorities accountable for actions that were judged to contravene the law. This has served to restrain government abuses.

Holding government accountable is about power: the power to demand information, to

require explanations for bad performance, and ultimately to sanction those who fall short. As noted earlier, power in Bangladesh, as in many societies, is tightly held by a self-perpetuating and self-enriching elite which has no incentive to be enthusiastic about reform. But to the extent that changes can be promoted to speed the process of empowering Parliament and enhancing the Supreme Court’s effectiveness, a valuable contribution can be made to holding government more accountable. Ways to achieve these objectives are discussed in the next two sections.

Parliament is the apex institution in Bangladesh’s accountability system. Parliament empowers the government and gives it its legitimacy. But, under the present Constitution, strong ties of party loyalty make it unlikely that Parliament will become an effective accountability agent. The party with the majority controls both the executive and the legislative branches. Members of Parliament belonging to the party in power do not dare investigate their own party’s ministers. If they turned up evidence of incompetence or wrongdoing, they would discredit their own party in the eyes of the electorate. They would also be jeopardizing their own positions. The internal organizations of the main political parties are tightly controlled by a handful of party leaders. Those in power can direct government largess away from the districts of Members of Parliament who become too zealous in their oversight activities, and, in extreme cases, party leaders can deny renegade members the right to stand for re-election on the party’s ticket. Furthermore, the party in power has every incentive to deny the Opposition MPs any real opportunity to challenge the government. Without a strong parliamentary tradition and an aware public, it is all too easy for the government to sideline the Opposition. The outcome, frequent recourse to street action by calling hartals (strikes) -- over 200 days lost in the period 1995-99 costing the economy over $10 billion in lost production – is a measure of the failure of Parliament to be accepted as an effective institution for resolving politically different interests and holding the government accountable. Those parliamentary committees willing to undertake investigative work merit encouragement. The level of support required is small, principally for staff. The committee 6 World Bank, 2000

Reinforce the Role of Parliament as a Key Instrument of Accountability

A Strategy for Better Governance xi

overseeing the health ministry, for example, could gather data on the operation of health facilities across the country. Modest levels of assistance to help it collate and analyze the information could provide substantial returns. Committees receiving funds could file a written report and commit to engage with civil society and the media. Ultimately, what counts is for the government to respond, and to be seen to respond, to the questions raised in audit reports and to the queries and requirements of Parliamentary committees. A start would be for the government to respond formally over the next three months to the outstanding queries in the recent reports of the Public Accounts Committee and the Public Undertakings Committee. In the past, the government has rarely seen the need to respond even though some of the queries indicate major malfeasance7. Nor has Parliament itself debated the reports of these committees. The press should be permitted to witness and report on the deliberations of parliamentary committees A third measure would be to support work aimed at opening the space between policymakers and the bureaucracy. In reality, no minister can possibly be on top of all the activities of his or her department. As happens in some other parliaments based on the Westminster model, bureaucrats could be required to appear before parliamentary committees to justify their actions. These are modest recommendations. They do not address the more serious issues of constitutional structure that retard efforts by Parliament to oversee the Executive. These issues include: 1) the provision in Article 70 of the Constitution barring MPs from voting against their party, and 2) weak local government which contributes to the concentration of power in the hands of the leaders of the majority party. Recent research suggests that, at least for new democracies such as Bangladesh, bicameralism, proportional representation, decentralization, and other institutional arrangements that diffuse power among the organs and levels of government are strongly correlated with better government performance. This would suggest that significant improvements in the Bangladesh government’s ability to deliver services and otherwise meet its obligations to its citizens depend on rethinking the present institutional structure.

The Supreme Court is widely recognized and respected in Bangladesh as the ultimate

guarantor of citizens’ rights under the Constitution. Protecting and enhancing this independent role is central to achieving good governance. In contrast, a survey by Transparency International (Bangladesh) in 1997 revealed that the lower judiciary does not enjoy the general public’s confidence or respect. Correcting this situation is a pre-condition for achieving the rule of law and is also central to achieving good governance.

While Parliament has so far not been effective in holding the government accountable between elections, the Supreme Court has shown an increasing readiness to issue court orders requiring the government to justify its actions. The roots of this activism appear to lie in the Court’s growing willingness to order the release of individuals detained under the country’s preventive detention act. Whereas in 1982 the Court freed only 54 of the 1548 persons held under the act, by 1996, the last year for which figures are available, they had ordered that 3376 of the 5413 detained individuals to be released.

7 The Chairmen of the PAC and PUC reported (January 2001) that Ministries are now beginning to respond

to their Committees’ queries.

Uphold the Supreme Court: The Ultimate Guarantor of the Constitutional Rights of Citizens

Taming Leviathan: Reforming Governance in Bangladesh xii

This assertion of judicial power has now extended beyond individual human rights cases. In 1995 the Appellate Division, Bangladesh’s highest court, ruled that an environmental NGO had a sufficient interest in the impact of a proposed flood action plan to bring suit on behalf of itself and those who would be displaced by the plan’s implementation. Since then, there have been more than 30 major public interest litigation (PIL) cases brought in Bangladesh. These appear to have had a significant impact. On occasion the Court has ordered the government to refrain from certain actions. In April 1999, in perhaps the most far reaching case to date, the police were instructed not to arrest or detain a member of an opposition political party without first seeking the Court’s permission. This is an extraordinary order by common law standards and it was only issued after the Court found a troubling pattern of police harassment. Other cases have arisen from government efforts to sell public land illegally to certain private interests, which the Court has stopped. The pivotal role of the Judiciary in Bangladesh’s accountability system underlines the importance of moving forward with the judicial reform program that has been under preparation for the last three years. The success of the proposed strategy for better governance depends ultimately on ensuring and enhancing the rule of law. The main elements would include computerizing the courts’ records and case management, upgrading their facilities, supporting initiatives to improve management of physical and human resources, and better training for justices, especially training programs that would equip the justices to deal with technical cases (e.g. relating to environmental or commercial law). In addition, the antiquated procedures that that hamper the bringing of PIL case should be revised. Courts are effective only if court decisions are promptly and effectively enforced. This is not happening at present. The need here is partly to streamline procedures and partly to provide adequate resources to ensure that enforcement is prompt and effective. The courts are but part of the system of administration of justice. Effective and accountable policing is another. The poor law and order situation reflects a deep malaise within the police and the prosecution service. Police abuses are reported almost daily in the Press. The poor are particularly the victims of police brutality as they have little recourse. Several serious cases have been reported in recent years of police raping women in custody, so much so that this has become a major issue with women’s rights groups. The frequent extortion of tolls by traffic police has also been widely reported. More serious are the cases of police arresting individuals on false charges with the object of collecting a ransom from their families – this was brought to public notice in 1998 when a student died at the hands of the police. All of this underlines the urgency of implementing comprehensive and fundamental police reform as a priority component of any governance reform strategy.8

Central to good governance, and a special aspect of the rule of law, is the efficient and accountable management of public finances. This is an area of great weakness in Bangladesh. The starting point must be a sound system of planning and budgeting for the use of the state’s financial resources, followed by reliable and timely accounting and auditing, and ending with a process that leads to corrective action where mismanagement is found. Good progress has been made in the field of public accounts which have been reclassified according to international standards and successfully computerized under the UK supported Reforms in Budgeting and Expenditure Control Project. However, the budget is not framed within a consistent macroeconomic and medium-term expenditure framework. The development (ADP) and recurrent

8 “The police has already tainted itself as the most corrupt department” PARC Report, June 2000 (para. 6.37, p.89)

Tighten Public Financial Accountability

A Strategy for Better Governance xiii

budgets are prepared and approved separately, resulting in a mismatch between the capital budget and the recurrent budget. The recurrent budget is formulated on an incremental basis resulting in the ratcheting up of existing expenditure items on an automatic basis while much needed new expenditures on operations, maintenance, supplies and services are crowded out. To add to these defects, the quality and relevance of projects in the ADP need to be improved, and cash and resource management need to be strengthened. Addressing the entire spectrum of problems identified above will require a phased, medium-term program of 5-10 years. The highest priority measures needed are to: provide top-notch policy advice to the Minister of Finance; establish a resource management unit to monitor the implementation of the budget and improve the quality of budget data; provide urgent practical training to the economics, budgeting and planning staff; and computerize and rationalize the payroll and pensions systems. Strong financial management must include a system of audit and sanctions to back up the budgeting and accounting systems. In Bangladesh, the lack of financial accountability is particularly acute. The chain of accountability linking the public, the legislature, and the executive has serious gaps. The Comptroller and Auditor General (CAG) and the media have repeatedly documented waste, fraud, and abuse of public funds. The Public Accounts and Public Undertakings Committees have issued damming reports, yet little corrective action has resulted. Waste and corruption seem accepted and have become institutiona lized. The absence of any effective follow-up at a full session of Parliament, or any response from the Executive, reflects the power of the respective vested interests and, in contrast, the weak voice of public opinion. In theory the CAG’s office is independent of the government but, in practice, it is a department within the Ministry of Finance. Its budget is tightly controlled by the government and remains inadequate. The CAG lacks the authority to hire the staff he needs. He cannot restructure the office, promote staff, or purchase equipment without prior approval from the Ministry of Finance and Establishments. Flexibility to improve methodology and productivity is limited. This limitation is inconsistent with the notion of an independent supreme audit. Because of his compromised status, the CAG effectively cannot provide press releases on his findings, nor do staff routinely explain the contents of the CAG’s reports to the media. This is a sharp contrast to practice in countries with effective public audits, where media relations and communication are essential elements of audit methodology. All these shortcomings need to be tackled systematically.9 The integrity of public procurement is closely linked to public financial accountability. A recent assessment of Bangladesh’s procurement system10 noted major weaknesses and malpractices: poor advertising, too short bidding periods, inadequate specifications, failure to disclose selection criteria, inappropriate use of lotteries and negotiation with bidders, one-sided contract documents, re-bidding with insufficient justification, and a variety of other irregularities. The assessment noted reports of extensive corruption and political pressures. In short the procurement system is in need of radical improvement. The report makes a detailed set of recommendations to this end that merit the government’s urgent attention and should be seen as part of the public financial accountability framework.

9 “To make audit effective it should be separated from accounts.” PARC Report, June 2000 (para. 2.12, p.10) 10 Country Procurement Assessment Report (World Bank, November 1999)

Taming Leviathan: Reforming Governance in Bangladesh xiv

Accountability cannot be achieved in an atmosphere of secrecy. Good governance means

open government and an informed public. In this domain Bangladesh has much to do. Measures to promote greater transparency must therefore be another critical component of the strategy for better governance. This is one set of measures that has no financial cost and can be quickly implemented if the political leadership so chooses. Bangladesh is blessed with a free, exuberant, but youthful Press. Despite difficult conditions, the Press has played a significant role in the life of the nation, particular during the periods when military rulers suspended democracy. The leading newspapers are trying hard to set standards for professional journalism and are facilitating public debate on pertinent national issues. The Press’ effectiveness as agents of accountability is constrained by a number of serious weaknesses: dependence of public sector advertising revenue, bribery and intimidation of journalists, and the weak training of journalists in investigative reporting. The growth of private sector advertising, and judicial and police reform as discussed above should assist the independence of the Press. Given these weaknesses, the planned training of journalists merits priority attention. With a low level of literacy, the Press is read by much less than half the population. Radio and television heavily influence the remainder. Allowing independent radio and television stations to operate is a sign of a free society and essential to achieve better governance. A government monopoly of these media deprives the public of information critical of government. Government should have the self-confidence to face its critics in open debate. A free press, radio and television cannot function effectively as part of the accountability system unless public agencies issue regular reports on their activities. These would be submitted routinely to Parliament and made available at the same time to the public both in print and on a web-site. To serve the purpose of accountability, the reports would be based on clearly elaborated annual work programs and budgets with monitorable objectives and performance targets. Accounts and audits need to be published within six to nine months of the end of each financial year.

Ultimately it is public opinion expressed through organized civil society that holds a government accountable. People depend on networks, associations and other social organizations to reduce life’s risks, access services and resources, and protect themselves against the depredations of their fellow human beings. It is this “social capital” which must serve ultimately to hold governments accountable and thereby enhance their performance. Consequently, improving governance depends on progressively building the networks of civic associations and other positive forms of social capital, which extend people’s range of institutional choices in accessing public services, and strengthen their ability to influence policy formulation and implementation. Systematically increasing poor people’s social capital must be a key component of an effective strategy to reduce poverty in Bangladesh. Typically the poor have weak social networks – they lack social capital – and therefore tend to be excluded from mechanisms that would allow their voices to be heard. Traditionally, they have sought a patron who would help them. As noted earlier, the very poor – the old, the abandoned women with small children, and the infirm – mostly lack patrons because they have little to offer in a client-patron relationship.

B. STRENGTHEN CIVIL SOCIETY

Promote Transparency: Protect the Independence of the Press and Build its Capacity and Allow Independent Radio and TV

A Strategy for Better Governance xv

NGOs have sought to help the poor who are excluded from public services in two ways: by enhancing their voice by facilitating their ‘exit’ by furnishing substitute services (e.g.: BRAC schools and clinics). PROSHIKA and Nijera Kori are examples of NGOs that have played prominent role in assisting the poor to voice their interests via ‘people’s organizations’.

Notwithstanding the usual applause justifiably given to the NGO movement in Bangladesh, its significance needs to be placed in perspective. Six sets of issues can be identified: First, as NGOs move into more generic service delivery roles in sectors such as primary education, primary health care, agricultural services, fisheries, micro-finance, and rural infrastructure, the accountability link between society and state is weakened. Second, the internal governance and management of NGOs will inevitably reflect the patrimonialism present in society at large. In the absence of clients’ rights, there are few incentives to move away from the clientelist character of the relationship of beneficiaries to NGOs. Third, not unlike private businesses, NGOs often attempt to establish territorial monopolies and resulting turf wars confuse their clients. Fourth, there is an inevitable tension between the powerful national NGOs and the smaller local ones. Given the risks of poor accountability to beneficiaries, it is important to nurture smaller NGOs as one way to encourage healthy competition among NGOs in the provision of services to the poor. In this context, the proposed Social Investment Foundation is an important initiative as a special organization that would intermediate in favor of smaller NGOs. There is a strategic interdependence between macro level NGOs which can provide heavy-weight support for their beneficiaries in local struggles and local NGOs which can contribute crucially to the mobilization of the poor in such matters as opposition to the eviction of slum dwellers, access to land, and so on. This complementarity between the local and the national level NGOs in the mobilization of the voice of the poor offers an opportunity for effective collaboration. Fifth, while NGO activism has clearly had a positive impact in securing greater benefits for the poor such as access to khas land, NGOs have had less success in tackling other issues such as rural indebtedness, tenancy/sharecropping rights, wage levels (including for women), that have been the traditional arenas of struggle. Some NGOs have retreated from confrontational activism, preferring to concentrate on service delivery. The donors, on whom the vast majority of NGOs depend, seem at least implicitly to be opposed to confrontation, by preferring to support service delivery activities. This raises troubling issues about the often unwitting role of donors in helping or hindering the campaign for social and political reform. And finally, how do the urban middle classes connect to the political process? What civil society organizations, outside the party 'machines', represent their interests thereby help improving governance? Professional associations for some (e.g. law, medicine, and banking); Chambers of Commerce and other clubs (Rotary, Lions and so on) for businessmen; the Press club for journalists; and university graduate associations for others. Across all such civil society organizations, including the NGOs, the major competing political parties are eager to build alliances where possible. This gives them some leverage to promote reform. But up to now, clientalism rather than civil society organization has been the dominant and divisive force. One factor encouraging social and political change is the emergence of a class of dynamic young better-educated entrepreneurs, whose attitudes differ markedly from the small group of ‘crony capitalists’ who thrived under the martial law regimes. Most importantly, there are a significant

Taming Leviathan: Reforming Governance in Bangladesh xvi

number of export oriented enterprises that will only prosper if they can compete in global markets. For them it is crucially important to reduce transaction costs; they need efficient transport, ports, financial services, telecommunications, power and the like. They cannot afford to pay large bribes to public service providers and the tolls extorted by the police and mastans. Consequently, they are potentially a powerful lobby for improved governance. A focus on improving corporate governance is closely linked with efforts to improve public sector governance. After all, commercially managed public agencies, so long as they exist, should adopt commercial practices. The way forward must be through working with the existing chambers of commerce and industry to improve the standards of integrity within the business community and help them mobilize as powerful advocates of better governance. From all of the above, it is undeniable that the nurturing of a pluralist society capable of providing a critique of the failures of the public sector is crucial to strengthening governance. Such a strategy is entirely in line with the present government’s declared objectives: to combat corruption; to improve the functioning of the bureaucracy; and to fight poverty. The challenge is to translate words into deeds.

The proposed strategy sees decentralization as an important way to improve the accountability

of public service delivery to those who are the intended beneficiaries. While some reform of local government aimed at putting in place a new system of elected local councils has been initiated, progress has been slow and is still very incomplete. So far, the central government has refused to give local authorities fully delegated control over their own finances and personnel. Without this there can be no genuine empowerment of local government.11 The consequence of this disempowerment is local government institutions with little capacity to deliver services. Local communities lack resources, organization, leadership, and know-how to fend for themselves. In a few instances, a powerful local patron may fill this gap in the way that zamindars sometimes did in the past. But, more often than not, there is no such benevolent patriarch. The inability of local government to deliver effective services is also due to a range of institutional weaknesses. The Union is the lowest tear of local government; above that comes the upazila or thana and above that the zila or district. The existing Union Parishad (UP) councilors, both Chairman and Members, and their support staff (e.g. Secretaries) lack the necessary management and financial skills, and awareness of the social and economic development potential of local communities. Despite these constraints, there is scope to make the local bodies more participatory and people-oriented, and thereby more able to play a useful development role.

The plan to establish elected upazila councils is still unfulfilled. To reduce the inevitable tension between the MP and the Upazila Chairman built into the proposed institutional arrangements, Upazila Chairman and MPs should stand for election at the same time; this should help reduce the discrepancy in the political, policy and program stances of these two key local personalities. MPs should be concerned with national policies and programs and local councils with local matters for which they are responsible. The two responsibilities should not be confused.

11 “All local government bodies shall appoint their own personnel.” PARC Report, June 200 (p.76)

C. DECENTRALIZE TO BRING GOVERNEMENT CLOSER TO THE PEOPLE

A Strategy for Better Governance xvii

There is a great physical and psychological distance between the lowest administrative level where professional government services are found (generally at the thana headquarters) and the village communities where the needs exist. This problem is brought out most dramatically in the current effort to confront arsenic contamination of tube well water. Although NGOs have gone some way to fill this institutional vacuum, they are still relatively thin on the ground and remain excessively dependent on foreign funding, posing an issue of sustainability. UPs frequently lack the capacity to collaborate effectively with NGOs and other development partners. Because of their shortage of resources – they have limited scope to raise taxes to improve the resource base – potential partners tend to discount their role. Nonetheless, there is room for resource mobilization by increasing fees collected at the bazaars and from businesses, and by leasing khas land and water bodies. Municipal governments operate in parallel with the district, upazila, and union councils and suffer from similar generic weaknesses. Nonetheless, their capacity is generally much greater. The government has established a Municipal Development Fund to channel resources to the town councils on a matching grant basis. This is accompanied by a number of measures aimed at improving the technical and management capacity of the municipalities. A review of past attempts to establish responsible local government in Bangladesh suggests that such initiatives may have both positive and negative consequences. The proposed reform must build on the lessons of this experience. For example, the introduction of new Upazila Parishads could usefully benefit from the experience of the 1980s. At the other levels, (i.e. village and district) there is less solid experience to draw on. On each occasion in the past corruption and patronage have engulfed newly established local government institutions. Moreover, the intervention of the central government in the guise of supporting 'decentralization' has over the years promoted a new pattern of dependency between the central government, the local elites and the rural poor. Support for decentralization is based on the expectation that by bringing government closer to the people, the intended beneficiaries of local public services may have a greater opportunity to influence the management of those services in ways that better meet their needs. However, history teaches us that there is a substantial risk that, with the empowerment of local elected councils, available resources will be captured by local elites to the detriment of the poor, as happened in the 1980s. Of all Bangladesh’s governmental institutions, local government impacts most directly on the lives of ordinary citizens. Unfortunately, local government is inevitably molded by the pervasive clientalism that exists in the society at large. The more powerful members of the community, with greater wealth, more education and stronger social networks are inevitably better placed to secure whatever benefits the local authorities have to offer. In the past, the oversight role of central government has been largely ineffective in curbing such abuses because the local representatives of central government are easily co-opted by the local elite, especially where the elite is connected to powerful political figures at the center. These risks may be partially mitigated if a way can be found to better articulate the “voices of the poor”, in other words, if local civil society groups – community-based organizations and NGOs – are encouraged to track the performance of the local bodies and hold them accountable. Also, increased transparency (for example, displaying publicly at local sites information about funds allocated to the local authorities, and for what purpose, as has been done outside Uganda’s primary schools) can also be effective. The proposed strategy envisages building into the decentralization process similar mechanisms for enhancing accountability.

Taming Leviathan: Reforming Governance in Bangladesh xviii

The rapid expansion of primary education and the growth in literacy are creating a more aware and self-confident population, making it increasingly possible for the poor to participate in holding public agencies accountable. Consequently, one may envisage from now on a process of local participation, representation and empowerment which, taken together, may progressively improve governance. At a minimum, we might hope to see emerge over time a convergence of views among both the poor and the better-off on matters of shared interest, such as improved primary education and health delivery, public sanitation, environmental protection and the like. NGOs have a dual function being both public interest watchdogs and service delivery organizations, either as contractors for central or local government or acting on their own account. In the latter role they may compete with public service delivery agencies – for example, running clinics or schools or distributing micro-credit. Because of this dual function, there may be a conflict of interest. Over time the proposed strategy would be to promote direct community involvement in the management of facilities and services. For this to happen there must be effective mobilization of the intended beneficiaries of local government services through community-based organizations (CBOs). The activities of NGOs are key here, since the main agents for building CBOs are in fact the NGOs, and NGOs also interact directly with the local authorities on behalf of the poor. However, as yet NGOs have a strong presence in less than half of all villages. The private sector is an alternative to the NGOs, but in the absence of effective demand backed by financial resources, local private service providers will not emerge. In these circumstances, parallel with the strengthening of elected local government, there is great need and much scope for promoting direct community participation in the management of certain facilities such as schools, clinics, sanitation services, and water supplies. The proposed strategy calls for mobilizing and empowering communities to manage their own services and solve their own community problems as the only viable long-term solution for improving service delivery. To help launch this approach, UNICEF has piloted community management of health facilities in a few districts in the recent past. The UNDP has for several years supported an experiment in social mobilization in the Sadar Thana in Kishorengani District. This attempts to build on the existing social structure. With close supervision from dedicated public officials, this experiment appears to have met with some success. But it is hard to see how over the longer term it can avoid suffering the same fate of elite capture as similar schemes in the past unless some sustainable countervailing forces are established within the community. These pilot projects now need careful evaluation, and adaptation if they are to merit continued support. Much more attention needs to be given to this end of the service delivery chain. In summary, local government councils, to the extent that they are elected bodies genuinely representing local people, offer an important opportunity to improve local service delivery. But, subject to clear rules and audit, they must be given delegated control over their finances and the appointment and management of their staff. The councils are well versed in the needs, problems and priorities of local communities, and they are not profit-making agencies or volunteers. At the same time the local village community and groups of poor people within those communities must be given sufficient and effective “voice” to hold the local authorities accountable on a day-to-day basis through their participation in management committees, parents association, various community-based or peoples’ organizations. The importance of giving the poor “voice” is elaborated further in the next section.

A Strategy for Better Governance xix

To a casual observer poor villagers would seem extraordinarily tolerant of poor service delivery. This apparent passivity is a function of the lack of opportunities they have to express their ‘voice’ within a patrimonial society. Given the chance, the poor are highly vocal about the oppression and deprivation they experience in their everyday lives. As has been argued above, strengthening the articulation of ‘voice’ is central to nurturing local democracy, as is expanding the opportunities for ‘exit’ –for the poor to be able to turn to alternative ways to meet their needs for services; for example, to send their children to non-governmental schools. This in turn depends on empowering groups of poor villagers and increasing the presence and effectiveness of spontaneous associations (samities). Recently, there is some evidence that ‘people’s organizations’ (otherwise called ‘grassroots organizations’ or trinomul groups) have had modest success in a few areas in championing the interests of the landless poor. But the rural elites continue to dominate the local councils. The scaling up of social capital in the villages has been a major function of NGOs. Unfortunately the impact of NGOs on social capital creation is not always wholly benign. NGOs can help communities help themselves, or they can become de facto monopoly suppliers of services. The target beneficiaries of NGOs are those with lowest articulation of voice and the fewest alternatives to meet their needs (i.e. the least opportunities for ‘exit’), even though this group constitutes about half the population. There is always a risk that NGOs, mirroring the prevalent patron-client structure of social relations, will themselves become oppressive and undemocratic in their mode of action. The answer lies in establishing explicit codes of behavior and instituting effective self policing mechanisms. This analysis would argue for greater attention to the manner in which support for NGOs is provided. The remarkable performance of the more prominent NGOs easily lulls their financial backers into complacency. The donors should insist not only on transparency, but also accountability to their intended beneficiaries. To conclude, the proposed strategy views strengthening local government – both is capability and the oversight mechanisms – as an imperative for broad-based pro-poor development, not an option for reformers. The new government should give priority to implementing the recommendations of PARC in this regard.12

The success and sustainability of a strategy for better governance is predicated on having an honest and competent administration. Reform of Bangladesh’s public administration has been extensively studied by expert groups and for some years there has been a wide measure of agreement both on the urgent need for reform and on what should be done. But in practice little has changed. Meanwhile, the capacity of the civil service, for want of good quality recruits, effective leadership, and proper training, has been in progressive decline. The PARC Report addresses these issues extensively and has made a set of important recommendations to improve the efficiency, efficacy and accountability of the civil administration. These, too, merit the new government’s priority attention.13 The few ‘champions of reform’ inside government seem hamstrung by career concerns and the fragility of their access to the political decision-makers. These problems are compounded by the

12 see PARC Report, June 2000 (Chapter 5) 13 see PARC Report, June 2000 (Chapters 3 and 4)

Strengthen the Voice of the Poor

D. ENERGIZE ADMINISTRATIVE REFORM

Taming Leviathan: Reforming Governance in Bangladesh xx

politicization of the civil service, the scarcity administrative skills leading to arbitrary decision making, inadequate attention to following the rules of business, and not imposing discipline for fear of retaliation from the powerful staff associations. In the absence of an effective demand for reform emanating from civil society and firm support from the political leadership, the reform champions who are scattered sparsely within the bureaucracy can make only limited progress within their narrow areas of control. Despite this bleak picture, there are some officials who in the recent past have made progress amid adversity – for example in LGED, Water Affairs, and in NBR. But these are isolated cases, few and far between. The central challenge for the political leadership is to find ways to energize the administrative reform process more broadly.

Beyond question, a competent and well-motivated bureaucracy is central to achieving Bangladesh’s development objectives whatever the development model. A necessary, though far from sufficient, condition is providing public officials with adequate pay and benefits both to enable the public sector to compete with the private sector for talent and to reduce the incentive to be corrupt. This pre-condition for an honest and productive public service is not present currently in Bangladesh. Since 1969 the pay of senior officers has eroded by around 70 percent. Even the remuneration of Grade 5 staff, which is one-step above the entry grade for Class 1 officers, has halved in real terms over the past thirty years. In contrast, over the same period the pay of the lowest grade (grade 20) registered a real rise of about 11 percent. A substantial increase in the compensation of Class 1 officers is essential if corruption is to be curbed and motivation restored. At the same time, performance based pay increments should be introduced. To be affordable, civil service salary reform must be combined with measures to rationalize the civil service. This does not mean the massive lay-off of staff, but rather that new hiring of Class 1 officers should be highly selective and a general freeze placed on hiring Class 2-4 officers and all other categories of employees. This needs to be combined with a massive effort to train and restructure along the lines proposed in the PARC Report. Much greater use should be made of consultants who would be hired at market rates for specific tasks and have no entitlement to permanent employment. Better remuneration is unlikely to produce better performance if the officers lack skills. Better training of public officers is indispensable; the present arrangements are seriously deficient, as has been well documented in a recent study by an ADB sponsored expert team. The lack of skills in government is a major drag on the country’s development. The main recommendations made in the study that have yet to be taken up by the government and merit urgent consideration. A major reason for the absence of reform is the predatory behavior of some workers in the public sector and the consequent opposition to reform coming from the militant Collective Bargaining Agents determined to preserve the massive “rent” collections made by their members. The pressures are such that it is very difficult for senior officials to avoid complicity. Consequently, a credible reform strategy will need to include a well-articulated, time-bound anti-corruption action plan.

Incentives and Performance

A Strategy for Better Governance xxi

A recent survey of public officials confirmed that the system of promotions, central to creating effective incentives for good performance, is widely perceived as being based on time served and good contacts. The introduction of promotion strictly on merit, and without restrictions as regard to cadre, would be an important step forward. A recent decision to select some officers for training, as a prelude to promotion, on the basis of their evaluation in the annual confidential reports (ACR) and years of service before retirement is a welcome innovation. It recognizes the urgent need for training at this level and introduces an element of meritocracy. However, given the flaws in the ACR system, open competitive exams for training overseas seems preferable. Two ways to enhance the capacity of the ministries would be to allow, indeed encourage, lateral entry at various levels from the private sector and to greatly reduce job rotation. Greater staff mobility between the public and private sectors would enhance mutual comprehension and increase the ministries' awareness of the needs of business. Excessive job rotation in the ministries obstructs the acquisition of professional expertise of any particular ministry. For example, in recent years the tenure of an Assistant Secretary in the Ministry of Post and Telecommunication has varied from 2 months to 22 months, averaging 14 months. The Deputy Secretary averaged 27.5 months, Joint Secretary 13.5 months and Secretary 12 months in the same Ministry. The situation is similar in other ministries. This clearly has a very damaging impact on the quality of work. Though frequently identified as an issue, no decision has been taken to ensure longer tenure. Another negative development has been the creation of the posts of Additional Secretary and Administrative Officer, two unnecessary layers that have complicated the process of decision making in ministries. The practice of passing files slowly up and down an inordinately long hierarchy of officers, combined with a reluctance to take decisions and lack of client service orientation makes dealing with the bureaucracy a nightmare for the ordinary public. The way out, for those who can afford it, is to pay bribes, which means that decisions are not taken on their merit and those with poor social networks and few resources (i.e. the poor) are at a great disadvantage. The key incentive currently associated with postings is better ‘perks’ – a perverse incentive. Thus, the preferred postings include those empowering the office-holder to influence decisions related to contracts and provide patronage, accompanied by good housing, the exclusive use of transport, nice office space (preferably air conditioned), and scope for foreign trips. Postings abroad usually bring with them allowances that can be partly saved, as well as useful contacts. All these perks are legitimate; it is the scope for taking improper advantage of them which gives rise to corruption. This is another matter to be addressed by an anti-corruption plan.

Responsive public service depends on having in place effective mechanisms ensuring public

accountability. In Bangladesh, public service delivery is regulations-driven and input-oriented rather than results-directed. The relationship has taken the form of clientalism rather than of service provider to customer. Information on services provided is extremely scanty and effective procedures for receiving complaints and settling grievances hardly exist. In practice, the public is obliged to endure neglect and harassment from service providers. In the face of abuse by officials, the ordinary citizen feels helpless. For the most part their expectations are extremely low; surveys indicate that the poor would be happy simply to be left alone. But for the more educated, this situation is

Promotions and Postings to be Based on Merit

Establish a Credible Oversight System

Taming Leviathan: Reforming Governance in Bangladesh xxii

changing, as may be seen from the uprising of Dhaka utility consumers and the large demonstrations against police rape of women, and the police kidnapping and killing of a student.

One mechanism to limit these abuses would be to appoint an Ombudsman as provided for in the Constitution and long ago promised by the main political leaders. However, in the absence of an aware general public pressing for action, it is hardly surprising that those in power drag their feet over putting in place such a potentially irksome check on their exercise of power. Yet, without question, the early nomination of an eminent person of courage, wisdom and integrity to this position would contribute to establishing better governance.

Transparency is the handmaid of accountability. And performance indicators are vital part of her toolkit. Bangladesh is in a position to benefit from the considerable experience that has been gained across the globe in recent years in the use of indicators to track the performance of public service agencies. Bangladesh has just begun to make valuable use of these techniques, for example, in conducting feedback surveys in the health and family planning sector. The opportunity exists to greatly expand their use. Systematically and openly monitoring the performance of public agencies is a simple but powerful instrument for increasing their efficiency and customer satisfaction. However, this approach presupposes a government’s willingness to embrace greater transparency and to take corrective action as needed. Ideally, each public agency would publish and post on an Internet web-site regular ‘report cards’ on their performance, which would be publicly debated. Greater transparency is needed in other spheres. Public accountability is seriously handicapped by the outdated government practice of classifying all government business into Top Secret, Secret, Confidential and Restricted. Thus all official information cannot be disclosed unless specially or generally authorized. The Official Secrets Act makes unauthorized disclosure a criminal offence. Secrecy is therefore the key to all government business. If the Bangladesh citizen is to benefit from accountable government freedom-of-information legislation must be enacted, as is happening more and more elsewhere in the world. The PARC report includes a draft Bill for this purpose that merits the new government’s prompt attention.

In 1989 a Public Administrative Efficiency Study Working Group found that the key constraint on effective departmental operations and the major cause of delays in their activities was a lack of adequate delegation of authority over personnel and financial matters. Regrettably, this remains the case today and is the cause of costly inefficiency. In 1996 the Administration Reorganization Committee documented cases where the failure to delegate caused severe adverse implications for efficiency and management, ranging from policy formulation to implementation -- a lack of policy guidance from Ministries, indecision within departments and subordinate offices, and damaging micro-management of the activities of departments by the supervising Ministries. Even the supposedly autonomous bodies also do not enjoy appropriate delegated powers – for example, the head of Chittagong Port lacks the authority even to buy an air conditioner for his office. The power to approve budgets, purchase equipment, and award bonuses to staff is taken over by the oversight Ministry rather than being exercised by the management and boards of public corporations. In the process many abuses, delays and perverse decisions occur. The reluctance of ministers and senior officials to let go these valuable prerogatives is easy to understand. But, if the aim is to exercise oversight,

Transparency and the Use of Monitorable Performance Indicators

Delegation for Improved Efficiency and Accountability

A Strategy for Better Governance xxiii

this should be by holding the corporations accountable for the results of their actions, not by usurping their decision-making powers. To correct this situation, the Schedule of the Rules of Business concerning the distribution of powers between the Ministries, Divisions, Attached Departments and other offices should be re-established as the firm basis of working of the government. The Guidelines of 1976 defining the relationship between government and corporations and Resolution of 1983 concerning operational autonomy of the corporations should also be implemented. The Rules (including government orders and instructions) should be revised to bring them in line with the functions mandated by the Rules of Business and consolidated in one place. Delegation carries with it an obligation to be accountable. For this reason ministries, divisions, departments, corporations and other offices should prepare annual reports of performance and audited accounts for timely publication and public debate.

The extraordinary development of information and communication technologies (ICT) in recent years has largely by-passed Bangladesh’s public sector.14 The easy availability of a huge range of user friendly software, the robustness and rapidly falling cost of hardware, the growing familiarity with the use of computers worldwide (and Bangladesh is no exception) all combine to create significant opportunities for the use of informatics for improving governance and the efficiency of government. Unprecedented new possibilities for addressing longstanding weaknesses in governance are emerging as is being ably demonstrated, for example, by the governments of Andra Pradesh and Guatemala, as well as by the Calcutta Municipality. The challenge for the public sector in Bangladesh, no less than in any other country, is to find the best ways to adopt and use modern ICT techniques: as a productivity tool and as a platform for improved service quality; to ‘formalize’ public management processes and so reduce rent-seeking opportunities; and to strengthen government information flows, both inter-agency and with the private sector and civil society. For example, tax administration can be largely depersonalized through self-assessment and electronic submission of returns and payment of tax. Tracking of government stores can be made systematic and transparent. Land records keeping can be radically improved and tampering largely eliminated. There can be little dispute that exploitation of ICT can bring about a dramatic improvement to the transparency, integrity and efficiency of public administration and therefore should be made a central component of the public sector reform agenda. The first step toward reform of ICT use in government is to ensure high-level coordination and the support and cooperation of high-level stakeholders. A unified program and oversight between ministries is needed to ensure (at the very least) compatibility between management information systems. Without this, confusion and waste is inevitable. An early decision should be taken to establish a focal point within government with competent leadership to coordinate the public sector informatics work The development of ICT is very fast moving. In this area more than any other, the government must facilitate the private sector, not compete with it. Regulation needs to balance carefully the value of state coordinated development and the need for competition with allowing the private sector the freedom to innovate and the incentive to invest.

14 “there is still a dearth of policy and support to introduce and utilise IT in public agencies.” PARC Report, June 2000 (para. 2.9, p.11)

Exploit the Unrealized Potential of E*Government

Taming Leviathan: Reforming Governance in Bangladesh xxiv

Exploitation of the potential of ICT is dependent in large measure on efficient telecommunications. Bangladesh cannot afford to allow its development to be hamstrung by giving a protected role to a lethargic, obstructive, resource starved and poorly trained public telecommunications utility. The BTT monopoly should be ended, the private sector welcomed in all areas and effective, objective, independent regulation of telecommunications instituted as quickly as possible.

Opposition to reform comes from deeply entrenched vested interests. The proposed strategy

seeks to nurture six significant countervailing forces. First is the crucial role of the judiciary in protecting citizens’ rights and especially the activism of the Supreme Court in accepting public interest litigation to limit and control public sector abuses. Second is the phenomenal growth of dedicated development organizations (NGOs, Grameen Bank, PKSF, etc.) which are now empowering and giving voice to millions of poor people. Third is a steady growth of genuine wealth-creating private sector activities and the concomitant growth of a class of younger entrepreneurs and managers who are increasingly demanding a more supportive environment for business which means better governance. The fourth countervailing force is the growth of other private not-for-profit organizations, such as independent research institutes (e.g., Centre for Policy Dialogue and Bangladesh Unnuyan Parishad) and public advocacy groups (e.g.: Bangladesh Environmental Lawyers Association and Transparency International [Bangladesh Chapter]). Fifth, is the rapid expansion of basic education, which is opening the minds and raising the aspirations of ordinary citizens, enabling them to participate more effectively in the economy and in civil society activities. Allied to this is the sixth countervailing force -- a thriving and increasingly independent Press. Improved governance and public sector management reform is best pursued through a strategy that nurtures all these positive forces. Worldwide, and across the centuries, sustained improvement in governance has always come from an alert public that forces its government to be transparent and accountable. Bangladesh is no different. In the process, the role of the state should be redefined. It needs to cease to obstruct and start to facilitate. Instead of commanding its public, it should build partnerships. In place of coercion, there ought to be cooperation and public service. The conditionality of foreign aid may encourage and support change, but the changes will not last without clear public demand for them. There can be no instant cure for the cancer of poor governance that is now corroding the state, disabling civil society and obstructing private sector activities. It is both widespread and deep-rooted. Yet, there are some very practical steps that may be taken to improve governance. While the vision must be long term, actions must be immediate. The reform dynamic will depend first and foremost on the development of a better informed public brought about by the spread of education, the strengthening of the Press, public awareness campaigns, empowerment of grass roots organizations and, more generally, the construction of social capital. Measures that serve these objectives would be part of the proposed strategy for improving governance. By its nature, this will be a gradual process that is certain to be persistently, and sometimes violently, opposed by those who benefit improperly from the current situation. These vested interests have a firm grip on the existing political processes. Above all, in each area of reform, effectiveness depends on establishing clearly defined objectives and responsibilities, specific time-bound action plans, and performance benchmarks

E. MOBILIZE PUBLIC SUPPORT FOR REFORM

A Strategy for Better Governance xxv

combined with a transparent tracking system to measure progress. Effective incentives and credible sanctions recognizing the ruling social codes must accompany this approach. At the same time, taking more explicit account of the winners and losers in the implementation of a reform strategy would help achieve greater success. ‘Winning’, of course, will be a lot more than earning more money; it also involves status, recognition, job satisfaction, and the exercise of power. Aware of the huge distance between central government and the citizen in a village or an urban slum, reformers have long seen decentralization as helping to improve agency responsiveness. However, the risk of ‘capture’ of local authorities by self-seeking local elites must be countered by empowering the poor at the local level and promoting participation through partnerships with NGOs and civil society organizations. The NGO coverage of the less accessible rural areas needs to be expanded. The growing role of NGOs must be accompanied by better internal governance practices with fuller transparency and accountability. ADAB has responsibility to convert itself into a more inclusive and more effective umbrella NGO organization that is able to inculcate a rigorous code of conduct among its members. In all of the above there is a need for a better-educated population. Attaching higher priority to education in the public development program is fundamental to improved governance and more effective institution building, as well as to more rapid and sustained private sector development. It is important to have a focal point within the government to champion public sector reform, such as a Public Administration Reforms Implementation Commission. Yet this step will be meaningless unless accompanied by genuine demonstrated political support and encouragement. Actions rather than statements are the acid test. Bangladesh’s development partners can play a constructive role in assisting institution building and governance reform. Regrettably, this opportunity has been often missed in the past because of the absence of a well-articulated shared vision. The strategy set out above could provide this missing element.

Change will require major painful adjustments in the way society conducts its business. Reform will be vigorously resisted. As in all countries that have made major advances in improving the welfare of its citizens, what counts most in this situation is dedicated and visionary leadership. The most opportune moment for a government to tackle these sensitive matters, which require bold action and courageous leadership, is soon after it takes office. All the diagnostic work has been done, wide consultations have been held, precise and detailed recommendations are on the table. Now is the time for the political leaders to act decisively to bring about better governance for a better future for Bangladesh.

Public agencies have been generally characterized as being rigid, unresponsive, inefficient and ineffective,…insensitive to the changing demands of the people….in general, public servants have not acted as

“servants” of the people, but rather as their “masters”. Report of the Public Administration Reform Commission, June 2000 ( p. 7)

Bangladesh is a country of paradoxes. It is located in a region ravaged by natural

disasters – frequent floods, cyclones, tornadoes and even droughts, and yet it has achieved a sustained improvement in agricultural production to the point where it is practically self-sufficient in food. And perhaps most surprising of all, despite severe problems of governance, it has succeeded in steadily improving per capita income and most of the basic measures of welfare. Since 1975, life expectancy has risen 12 years, child mortality has fallen by 30 percent, fertility has halved, primary school enrolment has doubled to over 90 per cent and now there are almost as many girls going to school as boys.

Ever since its emergence as an independent country, a critical challenge to Bangladesh’s development has been to create viable and well managed public institutions. The civil war destroyed not only the physical but also the institutional structures of the country, which in any event had been degraded by many years of corrupt military rule. Rebuilding bridges and the like was a costly but reasonably straight forward matter. Creating the accountable public institutions needed for rapid social and economic development has proved to be far more difficult.

In the early years of independence, with much private enterprise abandoned by their West Pakistani owners and with a socialist government in power, which embarked on wide-scale nationalization, the role of the state was dominant in the economy. The outcome was disappointing – corruption and inefficiency abounded and economic growth was impeded.

With strong pressures from the donor community, the government gradually gave increasing space to private enterprise. There was a concomitant growth in NGO activities, mainly Bangladeshi run but largely donor financed, providing services to the poor that the state was unable to deliver. Consequently, the relative importance of the state as a producer of goods and a provider of services declined. Nonetheless, public ownership still accounts for over 20 percent of manufacturing output, 80 percent of commercial bank assets, and most utilities’ services. In FY01 the losses of the state owned enterprises were over $500 million, while the percentage of non-performing loans in the nationalized commercial banks exceeded 40 percent.

CHAPTER 1

Taming Leviathan: Reforming Governance in Bangladesh 2

After over a quarter of a century of independence the State still does not ensure the rule of law or provide a well functioning regulatory and policy environment. Extortion and “toll” taking are widespread and are particularly damaging to small and medium sized enterprises. The police are ill-disciplined and, as evidenced by several surveys, seem more intent on extracting money from citizens than protecting them; needless to say, they are hardly the preferred refuge for an ordinary citizen seeking protection. Corruption is pervasive. Land title registration is chaotic and tax administration weak. Power outages are frequent, the main port is a major constraint to exporting and importing, and telephone services are among the worst in the world. In short, the inefficiency and waste in the public sector remains a huge drag on the economy and a major constraint to improving the welfare of ordinary citizens.

Box 1.1: Structure of the State

The Bangladesh Constitution provides for a Parliamentary form of government with a Prime Minister as Chief Executive and a President as the Head of State with very circumscribed powers. The President is elected by Parliament and the Prime Minister is a Member of Parliament who can command a majority in Parliament. The Constitution provides for the separation of powers with an independent judiciary, though up to now the administration of the lower judiciary has been in the hands of the Ministry of Law.

The Prime Minister appoints and heads a Cabinet of Ministers which is collectively responsible to Parliament. The unicameral Parliament is the supreme legislative authority, as well as the ultimate repository of public accountability. The Executive is organized on the basis of Ministries and, within Ministries, by Divisions. The system is two tiered: the Secretariat is responsible for policy, and oversight and coordination of government departments, agencies, district administration (divisions, districts and thanas). A politically appointed Minister heads each Ministry, while a permanent civil servant (usually a Secretary) is the Ministry’s administrative head and Chief Accounting Officer. There are currently 36 Ministries and 49 Divisions with close to one million public employees with a total wage bill of approximately 4.2 percent of GDP and 46 percent of total revenue expenditure.

Implementation of government programs rests primarily with the Departments and Directorates. Currently there are 178 departments, which differ greatly in size, status and character, depending on their responsibilities.

The public sector includes a large number of corporations and autonomous bodies set up, for the most part, as statutory organizations under special Acts, Ordinances and Presidential Orders (during the time of military government). Among them are some 150 state-owned enterprises engaged in manufacturing.

The district administration is thinly spread across a large population as follows:

Level No. Av. population Av. Area (in sq. Km) Division 5 26 million 29,514 District 64 2.03 million 2,306 Thana 489 266 thousand 302

Under the close supervision of the district administration, there is a local government system composed of elected union parishads and municipal pourashavas, and appointed thana and district committees. Plans are under way for establishing elected Thana (Upazila) and District (Zila) Councils. The local authorities have little capacity or authority to collect revenues and depend heavily on central government transfers. The local authority staff are hired by the central government.

The lowest level of government is the union parishad of which there are some 4,500. These cover a population in the region of 25,000-30,000 each. The union parishads have no staff (other than a guard) and few responsibilities.

Poverty, Governance and the Performance of the Public Sector 3

Corruption is pervasive.1 Land title registration is chaotic and tax administration ineffective. Power outages are frequent, the main port is a major constraint to exporting and importing, and telephone services are among the worst in the world. In short, the inefficiency and waste of the public sector remains a huge drag on the economy and a major constraint to improving the welfare of ordinary citizens.

The size of the civil service has doubled since independence while, by common consent, the

quality of the Administration has declined along with the purchasing power of staff remuneration. This problem is compounded by the arrival at senior levels of a batch of officers recruited in the early and mid 1970s without passing the usual competitive entry examination; these have less education and training than their predecessors and are perceived to be less competent. Low educational standards have also contributed to the poor quality of the civil service. Recent public service delivery surveys show that people’s expectation of public services is minimal. For example, a survey conducted on behalf of the Bangladesh Chapter of Transparency International in 1997 revealed that 97 per cent of those questioned had no confidence in the integrity of the police. The figure for the lower judiciary was an astounding 89 per cent.

Most serious of all, the country has been mired in political turmoil. This led to the loss of nearly 200 work days in the period 1995-01, through hartals or general strikes, which close down the formal economy. Each day lost has been roughly estimated by the business community as costing some $60 million. This political impasse results from a reluctance to adhere to democratic processes for the settlement of disputes – to play politics by democratic rules. Street violence is the preferred mode of political discourse. Neither major political party allows open democracy within the party. And the conduct of political discourse has been generally unparliamentary.

Despite this unfavorable overall picture, there are nonetheless a few islands of excellence –for example, the Rural Electricity Board – which demonstrate that with the right conditions public institutions can perform well. The Supreme Court remains a respected institution. And the NGOs have gone from strength to strength; they have developed a strong and productive working partnership with many government agencies in the field – especially in the delivery of health, family planning, nutrition and non-formal education. The NGOs are also playing an important role in social mobilization and by assisting poverty groups to defend their interests against encroachments on their rights to land and fish resources by local mastans. In addition their legal aid and advocacy work has steadily grown to the benefit of the community.

Despite its major governance problems, Bangladesh has achieved impressive development outcomes compared to most low income countries. This is remarkable given the extremely difficult circumstances Bangladesh has faced: achieving independence through a brutal civil war that decimated the elite and destroyed its physical infrastructure, repeated major natural disasters – floods, cyclones, droughts, famines– and military government. GDP has grown by 4 – 5 percent annually over the past 20 years, fertility has halved, 10-15 years has been added to life expectancy, and food production has increased from a situation of chronic shortages to the point where the country is nearly self sufficient despite the rapid increase in population.

Notwithstanding these achievements, about 40 per cent of the population lives below the poverty line and Bangladesh will not be able to reduce poverty rapidly while the present flaws in the political system and inefficiencies in public management remain. As the recent study Bangladesh 2020 (UP, 1998) demonstrated, to achieve a real impact on poverty within a generation, with the absolute numbers in acute poverty starting to decline, substantially higher economic grow th is needed (closer to 8 percent). This prerequisite is attainable only if the Government is willing to adopt a vigorous

1 see PARC Report (para. 6.01, p.83)

Taming Leviathan: Reforming Governance in Bangladesh 4

public sector reform program, as well as put in place policies that encourage and support private sector investment, entrepreneurship and job creation more effectively. A parallel program of accelerated human resource development is also essential.

Economic losses from the inefficiency of the public sector are huge. For example, it has been calculated that the added costs of inefficiency in the Chittagong Port amount to as much as 5 percent of the value of goods passing through the port – a sum that exceeds $600 million a year. The system losses in the power sector have been estimated to amount to well over $100 million a year. But these greatly understate the real costs to the economy which arise from regulatory abuses and the discouragement of investors. The revenue loss to government of corruption and inefficiency in the customs and income tax departments must surely exceed 5 percent of GDP – for example, it is extraordinary that 56 percent of income tax collections come from 700 taxpayers in a country of 130 million people. About 40 percent of the commercial banks’ loan portfolio is overdue, a large part of which will never be recovered.

In addition, the positive development outcomes noted earlier do not take account of other aspects of the quality of life which seem to be in decline. The pervasiveness of corruption and extortion, the frequent disregard for the rule of law, the lack of police accountability, and the rapid deterioration of the physical environment – all documented daily in the Press and largely preventable if the government so wished it – have very adversely affected the quality of life of ordinary citizens.

The harsh impact of weak governance on the poor emerges clearly in a recent survey of Voices of the Poor (see Box1.2). The poor are least able to fend for themselves, lacking both the resources and the knowledge to assert their rights. The instruments of governance are controlled by a self-serving elite whose behavior is reinforced by deep -rooted social norms of dominance and subservience characteristic of a patrimonial society, reinforced over years of military rule. These “chains of poverty” can only be loosened through initiatives, which extend poor people’s participation in decision-making that directly affects their welfare and expand their access to assets and their entitlements from the State. 2

Today within the development community it is a widely agreed that improved governance is crucial to reducing poverty. Research has increasingly pointed to poor governance—and poorly

2 Breaking the Chains, J. Kramsjo and G. Wood (1992)

Box 1.2: Voices of the Poor

Poor people have very modest expectations of government. They see the chairman of the Union Parishad as likely to favor the rich. The police are more likely to harass them than help them. The Forestry officials are equally perceived as a potential threat. The Thana health centres are viewed as discriminating against the poor. And the poor have no expectation of obtaining credit from the formal banking institutions which are seen as corruptly serving the interests of the rich. Overall, the poor have little trust in local government institutions. These conclusions emerged from a participatory poverty assessment undertaken in June 1999 based on a series of focus group discussions in 10 locations selected purposively as being representative of the different levels of poverty and regional differences. The survey was undertaken by a team mobilized by Proshika, Action Aid Bangladesh and Concern Bangladesh.

Global Experience Confirms Governance Matters ACCOUNTABILITY

Poverty, Governance and the Performance of the Public Sector 5

performing public institutions— as responsible more than anything else for the disappointing outcomes of so many development programs. The World Development Report 1997: The State in a Changing World summarized research results, which indicated a strong positive correlation between growth in per capita income and attributes such as the predictability of court decisions, levels of corruption, the competitiveness of civil service salaries, and low distortions in development policies (see Figures 1.1 and 1.2). Analysis set out in that report concluded that countries with high quality governance grew almost twice as fast as those with poor governance and investment rates were as much as five percentage points higher. Although not above criticism, this type of analysis has been increasingly used by researchers to give a strong quantitative and analytical underpinning to the proposition that governance matters3.

Over the years a series of reports and books on Bangladesh’s institutional development and

public management reform have been published. In 1996 the Bank issued a comprehensive report on this topic, entitled Government That Works (GTW), which had been prepared with the participation of a number of senior Bangladeshi officials and researchers, and foreign experts (see Box 1.3). This in turn drew on major reports which had been prepared earlier by USAID and UNDP, as well as by government officials (e.g. The Four Secretaries’ Report and The Administrative Reorganisation Committee R Report4). In addition, in 1997 UNDP issued a report on local government reform and in 1997-98 the government undertook studies to define a reform of local government designed to introduce a new two-tier system of representative local government.

Since the publication of GTW, a number of decisions and actions have been taken by the government, notably:

A Public Administration Reforms Commission (PARC) was established: this encountered many practical difficulties and, although a number of modest administrative reform proposals

3. See, for example, Dollar, D., Assessing Aid: What Works and What Doesn’t (World Bank 1998); Reforming Public Institutions and Strengthening Governance: A World Bank Strategy (World Bank 2000); “Supporting Country Development: World Bank Role and Instruments in Low and Middle Income Countries,” Operations Policy and Strategy, discussion draft dated July 14, 2000. Also see the Executive Summary of this report. 4 Often referred to as the Nurunnabi Committee Report.

Past Governance Reform Efforts in Bangladesh

Figure 1.2: Income per capita growth rate

-2

-1

0

1

2

3

High Low

GovernanceSource: WDR 1997, p. 5

Figure 1.1: % Investment share in GDP

10

15

20

High Low

GovernanceSource: WDR 1997, p. 5

Taming Leviathan: Reforming Governance in Bangladesh 6

were approved “in principle” by the last Prime Minister, very few were acted upon. In June 2000 PARC submitted a major report with over 125 recommendations. These merit the new government’s urgent attention.

Considerable efforts have gone into legal and judicial reform supported by an IDA credit – this is potentially one of the most significant initiatives of the present government in terms of improving governance. Successfully completing the implementation of this project is of the utmost importance for Bangladesh’s future development.

Legislation modifying the holding of Union Parishad elections and their functioning was presented to and approved by Parliament and new elections were successfully held in December 1997. For the first time women were directly elected. Nonetheless, these local bodies are still heavily supervised by the central government representatives and have a long way to go to become truly democratic.

Active consideration is being given to preparing legislation for Upazila (Thana) and Zila (District) level elections.

The last government announced that an Ombudsman would be appointed but never fulfilled this commitment. The great delay in appointing someone to this post put into question the Executive’s willingness to subject itself to such oversight.

New financial courts have been established to handle cases arising under the recently enacted bankruptcy law, as well as to more effectively pursue loan defaulters.

The public accounting system has been redesigned and extensive training of accounts staff to implement the new system has taken place. This so-called RIBEC initiative has been funded by UK’s DfID.

A Government-NGO Consultative Council has been established to serve as a forum for discussing State-NGO relations. Regrettably, its performance so far has been poor, with too few meetings attended by junior officials, marking the disdain of the bureaucracy and the political leadership for this instrument of consultation with the representatives of an important segment of civil society.

The Local Government Engineering Department has adopted a participatory approach to local public works project design, piloted by the IDA supported Rural Roads and Markets Project.

Some railway passenger services have been successfully privatized and the ticketing system computerized.

Actions are noticeably absent in terms of restructuring government following the

recommendations of the Nurunnabi Committee, or addressing civil service reform and corruption, or repealing the much abused Special Powers Act, or abolishing the state monopoly of radio. However, the government has agreed to license two carefully selected TV stations to be privately run.

The last Prime Minister has announced steps to strengthen the Anti-Corruption Bureau, but unfortunately not ones that would have ensured its independence of the Executive. Experience worldwide (especially that of Hong Kong and Singapore) underlines the need for such agencies to be free to investigate corruption anywhere in government, including senior political figures. On the positive side, it should be noted that the last government permitted the establishment of a Bangladesh Chapter of Transparency International (TIB). It is now regarded as one of the strongest

Poverty, Governance and the Performance of the Public Sector 7

of all the TI chapters. TIB has drawn up an impressive program of future activities, which includes establishing support groups (Committees of Concerned Citizens) in the district towns and preparing citizens’ watch reports monitoring the performance of public agencies.

One important way to both reduce corruption and increase economic efficiency is to privatize state owned enterprises. As noted earlier, the huge losses of these enterprises weigh heavily on the budget. Both the main political parties have accepted the need for privatization but neither has done much to implement that policy when in power (see Box 1.4).

Box 1.3: Government That Works (1996)

GTW provided a candid assessment of the Bangladesh public sector, highlighting its achievements, weak spots, and the imperatives for reform. Based on three surveys – covering civil servants, the ordinary citizens, and businessmen, GTW mapped the glaring inefficiencies and public waste in public administration, service delivery, regulation and the management of utilities and state-owned enterprises. Drawing on global experience, GTW charted the reforms needed to achieve value for taxpayers’ money – to redefine the role of the public sector, leaving commercial activities to the private sector and focusing the government’s efforts on the efficient provision of public services responsive to the intended beneficiaries, to convert regulation from strangulation to facilitation of private sector activities, to re-establish the rule of law, and to make government transparent and accountable.

GTW set out a comprehensive set of reforms which gave special emphasis to the following measures: • Judicial reform to overcome the huge backlog of court cases and provide prompt, honest and

competent judgements • Strengthening of Parliamentary oversight committees and the provision of improved logistical and

research support for Members of Parliament • Improve public finance management through budget reforms, better expenditure tracking, establish

a medium term revenue and expenditure framework and upgrade the functioning the CAG • Accelerated privatization of the SOEs and opening up telecommunications, power and other utilities

to private sector competition • Introduce comprehensive reform of public administration, including the progressive elimination of

surplus employees and using the savings to significantly improve civil service salaries • Rationalize government departments and divisions along the lines recommended by the Nurunnabi

Commission • Systematically scrutinize all government regulations with a view to eliminating all those lacking a

strong justification and identify ways to simplify and facilitate all citizens interactions with the state • Accelerate local government reform as a means of bringing the locus of accountability for service

delivery closer to the clients.

To achieve these important objectives, GTW proposed a set of institutional measures, including establishing a National Commission for Reforming Government under a senior Cabinet Minister to lead the reform process. GTW also proposed establishing a Deregulation Commission, a bipartisan Task Force on Parliamentary Accountability, an Ombudsman (as provided for under the Constitution), an independent Task Force for Eradicating Corruption, a Government-NGO Consultative Council, and a Private Sector Advisory Council. To mobilize public support and set clear objectives, GTW recommended preparing and publicizing a policy vision for public sector reform.

Taming Leviathan: Reforming Governance in Bangladesh 8

The World Bank has supported improved public management and institution building through

its policy dialogue, projects and economic and sector work. For example, to address the systemic weaknesses in public accountability, Bank staff have prepared a Country Profile of Financial Accountability (1998), Country Procurement Assessment (1999), and a Country Financial Accountability Assessment (2001) which propose a set of recommendations covering the strengthening of public accounting, auditing, financial management, and procurement.

In October 1998 a proposal on ways to improve macro-economic management was prepared. This analyzed the shortcomings of the investment programming and budgeting processes. In addition, the recent annual country program performance reviews, conducted jointly with the government and the Asian Development Bank, and in consultation with other donors, outlined an action plan agreed with the government for overcoming a number of systemic issues which the donors’ local consultative group had identified as matters adversely affecting project implementation that merited the government’s urgent attention. To date most of these actions still await government implementation despite being repeatedly reaffirmed each year.

In addition to the above, an important number of actions aimed at strengthening public agencies have been pursued in the context of IDA supported projects. Indeed, almost every project includes capacity building as an integral part of project design. Some noteworthy recent examples are the following:

Box 1.4: Privatization at Snail’s Pace

Less than 0.01 percent of the SOE portfolio, measured in terms of asset value, has been privatized during the past five years, and the situation was similar in the early 1990s. The previous government did little better. Large-scale nationalization took place in the first three years of independence and included a number of enterprises that had been abandoned by their Pakistani owners. In 1975, the government began to reverse its policy of state ownership due to their heavy fiscal burden. Some 120 State Owned Enterprises (SOEs) were returned to their owners by the end of that year. During the period of 1976-1981, 225 SOEs were privatized. The second phase of disinvestiture took place in the first half of the 1980s and covered mostly jute and textile mills owned originally by Bangladeshi citizens prior to independence. The industrial policy issued in 1982 took a major step towards privatization and industrialization in Bangladesh. The jute and textile industries were partially denationalized at this time. A total of 222 SOEs were privatized during the period of 1982-1985.

Little happened thereafter until the establishment of the Privatization Board in March, 1993 which was intended to reinvigorate the program of SOE divestiture. The Board has so far handed over 19 SOEs to the private sector with a total sales value of little more than Tk 1 billion. By comparison, the total asset value of all SOEs is estimated to be around Tk 759 billion. In addition, the Board has negotiated the sale of 17 enterprises (8 by sale of shares and 9 by outright sale to the private sector) for a total sales value of $14 million and is in the process of arranging for their transfer to their new owners. Experience shows that this can be a long drawn out process that is sometimes aborted. Privatization Board has set up a target of 50 SOEs for privatization. The list includes 7 jute mills, 9 textile mills, 6 steel and engineering enterprises, 5 food and sugar enterprises, and 4 chemical enterprises. The shares of a further 19 enterprises are to be sold. A new Privatization Law has been enacted aimed to make the privatization process more effective, transparent, and better coordinated.

World Bank Support for Public Sector Reform and Institution Building

Poverty, Governance and the Performance of the Public Sector 9

The Rural Roads and Markets Project has successfully pioneered a participatory approach to the identification and design of rural road works and rural markets which has led to the internalization of participatory processes in LGED. Most significantly, women are being consulted on such matters as the location and design of rural markets with a view to facilitating women’s participation in trading.

The Poverty Alleviation Micro-Credit Project is assisting small NGOs to acquire the capacity to engage in micro-credit lending by training staff and providing equipment to ensure proper record keeping and sound financial management practices. This is an important step helping to build civil society.

The Arsenic Mitigation Project is pioneering the coordinated involvement of CBOs/NGOs and Union Parishads in overcoming arsenic contamination of rural water supplies. This can be considered a pilot for future such collaboration within the framework of a reformed system of local government It also initiated measures to strengthen the Public Health Engineering Department. The Social Investment Foundation Project under preparation will also involve institutional innovation related to encouraging CBOs/NGOs and Union Parishads to work together on social investment projects. This project will build on the experience of PKSF in establishing an autonomous public sector entity for intermediating funds for NGO activities.

The Dhaka Urban Transport Improvement Project has led to the development of new institutional arrangements for coordinating transport planning and management in Dhaka as well as mitigate air pollution, bringing together the relevant departments in the Ministries of Roads and Highways, Environment, and Local Government, and the Dhaka City Council.

The Jamuna Multipurpose Bridge Project has established a new organization to operate and maintain the Bangabandu Bridge to be managed by a private concessionaire and which may in turn manage new major bridge projects. Also, the JMBA resettlement program has helped introduce a new more generous approach to compensating people adversely affected by public works programs.

The Health and Population Program was prepared by the Ministry of Health with extensive client consultation using focus groups and user surveys. Its design departs radically from previous interventions in this sector by dispensing with project implementation units with a view to strengthening the line agencies. It has also initiated the reintegration of the family planning and health services which is a precondition for providing integrated reproductive health service delivery at the village level. In addition, the program will pilot a new management accounting unit in the Ministry of Health and Family Planning as part of the reform of the government accounting system.

The Female Secondary School Stipend Program has resulted in successfully establishing a completely new system for distributing and accounting for stipends for girls from poor families attending secondary school.

The Dhaka Water and Sanitation Project has supported the creation of an autonomous water supply utility, Dhaka WASA, with an independent Board of Directors and a manger recruited on contract terms on the open market. This is seen as the model management system for public service delivery agencies. Its partial failure to date must be attributable to a Board and the supervising Ministry which have not respected their designated roles vis-a-vis that of management. A similar confusion has risen in the relations between the Board of the Silk Foundation and the Ministry of Textiles.

Taming Leviathan: Reforming Governance in Bangladesh 10

Yet, despite these important initiatives – some of which are faltering for want of strong political support -- poorly performing public institutions remain a major obstacle to development and the more rapid reduction of poverty. While lack of skills and weak capacity within government is undoubtedly part of the problem, far more important is poor governance -- lack of public accountability, corruption, and private agendas which prevail over the public interest.

“The necessity of the time, more than ever, calls for our utmost fortitude and perseverance” Samuel Adams, 1771

As noted in Chapter 1, many well-researched studies have documented the

weaknesses of Bangladesh’s public institutions and have spelt out in some detail the needed reforms. Yet, the two democratically elected governments in power during the 1990s have been reluctant to undertake significant reform. With elections every five years, short run political calculations have dominated decision-making. To date the political leaders have clearly perceived the short run political costs of reform as outweighing the longer run welfare benefits. This Chapter explores the obstacles to governance reform.

The World Bank’s study, Government That Works, published in 1996, recapitulated the salient points of the earlier reports and added additional information and analysis based on new surveys and research. Because this report documented vividly the governance failures of previous regimes, it was received favorably by the Cabinet. However, during the following five years virtually none of the report’s recommended reforms were implemented. An Efficiency Unit, recommended in the Four Secretaries Report, which the BNP Cabinet decided to create in 1995, was discarded by the Awami League government. Instead, a Public Administration Reform Commission was created in 1996. The work of the Commission was severely impeded by weak political support and bureaucratic obstruction. To his credit, the last Chairman – the third in as many years -- succeeded in breathing new life into the Commission’s work. In June 2000 the Commission submitted to the then Prime Minister a remarkably candid and constructive report. The bulk of its many useful recommendations remain to be implemented.

It is evident that public administration reform has been perceived by the leadership as politically risky and there has been a particularly strong disinclination to initiate reform in the lead up to an election. The BNP government, in the period 1991-96, and the AL government, in the period 1996-2001, both postponed reforms that what were perceived as offending powerful vested interests. The inevitable consequence was that the vast majority of the population have continued to suffer from poor or non-existent public services.

The efforts made by the donors to support institutional reform, principally through technical assistance both as self-standing projects and as components of other projects, have had some limited success in strengthening individual institutions. But inevitably, in the absence of a strong government drive for reform, progress has been slow. The systemic problems have mostly remained and in some respects have even deepened (e.g. the role of the public sector unions in undermining

CHAPTER 2

Deep Seated Resistance to Reform

Taming Leviathan: Reforming Governance in Bangladesh

12

the efficiency of the ports, and the power and telecommunications utilities). The donors have provided technical assistance that has typically promoted technical solutions when, in reality, the main obstacles to improved public sector management are social and political. This proposition may be made clearer by three observations:

First, as in most developing countries were formal institutions are weak, so in Bangladesh people are forced to rely heavily on personal networks which results in pervasive patron-client relationships. This is a rational economic response in managing risk. However, these deep structures adversely affect bureaucratic performance which, in turn, leads to a widespread lack of public trust in the country’s formal “modern” institutions. Moreover, development in recent years has lessened the traditional social controls that regulated village life. And, the tremendous pressures resulting from the rapid expansion of population, together with the pressures of a global consumer society, have lead to fierce competition for scarce resources. The outcome, put bluntly, is a society where “muscle-power” generally takes the place of the rule of law1, especially in the rural areas and urban slums where together 95 percent of the population live.

Second, as in all societies, Bangladesh has a number of well organized interest groups that largely determine political decisions; in particular: the military; the public bureaucracy; private business; the trade unions; religious groupings; the NGOs; and the donors. Understanding the dynamics of these competing interest groups is essential in explaining political decision making. Because these groups are far from monolithic, there is in practice plenty of room for political maneuvering. On the contrary, interest groups tend to be fractious and are frequently divided and overlapping. For example, the private businesses based on exporting have different and conflicting interests with those based on trading or import substitution. Most trade unions split along political party lines and there may be several competing unions in one industry or enterprise. Religious groups are fragmented, too, though the most organized and influential are the Islamic fundamentalists. The bureaucracy is divided between the different classes and cadres. The NGO movement is also divided with strained relations between those who believe in mobilizing “people power” now and the rest who advocate a less confrontational strategy with a more phased approach to social and political reform. This fragmentation results in much contention and distrust which inhibits collective action for reform. Any public sector reform is likely to run up against the organized resistance of one or more interest groups.

Third, all the evidence points to a significant discrepancy between the private agendas of the principal public actors and their formal public agendas. The political, business, trade union and bureaucratic power structures in Bangladesh have been partially captured by an underworld that uses ‘muscle-power’ to enforce its authority with the connivance of the police and even certain members of the lower judiciary. In the districts, the powerful often gain the support of the police and even certain members of the lower judiciary for their own benefit, to the disadvantage of the poor. The rural elites are able to exploit their links to patrons within the higher echelons of the formal power structure who seem able to by-pass the normal constraints of the law. As in the past so today, the poor, to survive, need the support and protection of patrons. Indeed, almost everyone needs a patron to progress, since patron-client relationships are ubiquitous and particularly so in the public bureaucracies. In these respects Bangladesh power structures differ little from that of most other poor countries around the world.

The above critique of the way politics are conducted in Bangladesh is not new. The 1998 Independent Report on Bangladesh’s Development (IRBD) cited earlier, written by some of Bangladesh’s most respected intellectuals, contains a scathing indictment of the country’s governance practices.

1 “(Political) parties seem to prefer candidates with money and muscle power more than persons having real qualities of head and heart” PARC Report, June 2000 (p.114).

Obstacles to Governance Reform 13

The report sets out with great candor how the present power structure effectively condones the fraud that is often perpetrated by officials and how major bank defaulters are not called to account for fraud, even where their activities have damaged the economy and compromised the government.

The private sector is also infused with the same patron-client characteristics as are the public bureaucracies, although the need to survive commercially limits and modifies behavior that is dysfunctional for successful business. In addition, multinational companies bring to the workplace their corporate behavioral norms, while Bangladeshis who have worked abroad also bring back different ways of working. Nonetheless, it their interactions with the State, businessmen are bound to conform to the social norms prevailing within the bureaucracy, which means accepting in most situations that the bureaucrats who hold power must be appeased. Not surprisingly, this environment encourages corruption, more particularly because poorly paid public officials desperately seek to acquire more resources which they can use to meet their own family and social obligations (see Box 2.1). Furthermore, the functioning of markets depends on an effective and predictable regulatory environment, which is at odds with the personalized authoritarian practices in public regulatory agencies. In this situation, it is hardly surprising that serious abuses -- misprocurement, rent seeking and the like -- occur. The counterpart of authoritarian bureaucracies is crony capitalism and political nepotism.

A key feature of patrimonialism world -wide is the focus on the redistribution of existing wealth, rather than the creation of new wealth. Thus, both the farmer and the businessman view the State and its representatives as a source of resources that should be shared (or “eaten”) and

Box 2.1: Why I am a Corrupt Businessman

Mr. Hashim Ali (not his real name but nonetheless a real person) has been a corrupt businessman for 14 years. He revealed this at an informal meeting in June 1999, claiming to be very uncomfortable in that role. He wanted to explain why he was corrupt and how.

He had started his career in the early 1980s working as an engineer in a PDB power station. When he saw that the funds allocated for maintenance were being misappropriated by the staff who used false invoices for supplies, he quit and joined the BTT. There he was soon pressured by his supervisor to participate in a fraudulent contract. When he resisted, he was threatened so, once again, he resigned.

To earn a livelihood, he decided to go into business becoming a local representative of a number of prominent foreign companies selling their products to public agencies. He quickly came to realize that unless he shared his fees with the officials concerned he would not win any contracts. He explained that the regular practice was to pay half the agreed bribe up-front and the remainder on completion of the contract. Typically, nowadays the amount paid was fixed at 6-8 per cent of the value of the goods being supplied. This contrasted with payments of as much as 20 per cent during the 1980s when the country was under an authoritarian regime. Works contracts, he reported much higher amounts were normally expected – as much as 20 per cent was not uncommon. He said that in 14 years only one official had refused his money.

When officials took his money but failed to deliver the contract, his down-payment would normally be returned, so the risks incurred were minimal. When questioned why he had volunteered to tell his story, he said that he wanted to help stop corruption. Was he afraid? No, not really, because he had enough money if needed to bribe any official who might come after him.

(This is a story volunteered by a Dhaka businessman who is still active in business and actively corrupt.)

Taming Leviathan: Reforming Governance in Bangladesh

14

consequently he feels no strong obligation to repay loans received from the nationalized commercial banks or other public financial institutions. Likewise in granting credit, the employees of the nationalized commercial banks consider it normal that they should receive a share of the loan in the form of an informal “commission” for sanctioning the loan. This contrasts with micro-credit administered by the Grameen Bank or NGOs which is very closely supervised.

In every country, public administration reflects the prevalent social norms and conditions. Public sector reforms need to take account of this social reality. The social context in Bangladesh summarized above is reflected in a political economy that has the following salient features:

Rural class relations are based on landholding and the effective control of other key resources such as water, fisheries, forests, and orchards. In this context it is important to note that most public servants are first generation migrants, with their early education and socialization occurring within the village political economy. The vast majority of members of parliament and Class 1 officers come from the rural elite.

At both the national and local levels the elite has achieved tight control over resources and opportunities distributed by the state and through the imperfect markets of the private sector. To a large extent state resources have been allocated via patronage networks stretching down into the village, in which the locally stronger families have successfully maneuvered to occupy khas land, ponds and orchards via linkages to local officials with rights to allocate. The same principles have applied to accessing vital agricultural inputs previously through the monopoly BADC, but even now through favored relationships with dealers. Rural works have been a notorious arena of alliances between engineers at district and thana levels, working with local landlords and controllers of labor through local project committees.

The destitute poor are largely excluded from the clientelist based forms of welfare and safety nets. This is almost a tautology, since this exclusion has become a definition of destitution, reflecting the breakdown of family or community based social protection and mutual support mechanisms. The destitute are of little or no value to patrons, and thus fail even to be adversely incorporated. Examples are: the elderly without families, orphans, the chronically sick or severely disabled, victims of life-threatening, communicable diseases, outcast (often elderly, deserted) women, and permanently dislocated under conditions of sustained emergencies (such as the 'Biharis'). Such categories tend not to be included in the large-scale mobilization of NGOs, though they may receive charitable support from smaller, more specialist ones. In Bangladesh, these notions of exclusion also extend to the Hindu minority (who are anyway frequently from outcaste groups by Sanskrit criteria) and other ethnic minorities, especially the Chakma in the Chittagong Hill Tracts, but also the Garo in the Madhepur Tract, between Dhaka and Mymensingh, and other Adhivasi groups in the North-West, such as the Santhali. In governance terms, all of these categories and groups are weakly placed in the overall society, though the Hindu and Tribal groups internally have their own patron-client hierarchies. Thus, in terms of rights, labor market entry, equal opportunities and participation in the mainstream society, these are all second-class citizens who tend to be excluded form the mainstream political economy.

Women are pervasively dominated by men with heavily gendered socialization within an entrenched ideology of patriarchy. This circumscribes women's participation in income earning activities, as well as in public leadership roles. Men have a vested interest in the maintenance of their dominant position, exploiting female labor in the household and in family farming. The low status of women in the rural areas translates into a strong supply of

The Social Dimensions of the Political Economy

Obstacles to Governance Reform 15

docile female labor in urban labor markets easily exploited in the garments industry and domestic service.

Extended families of the richer classes can rely on their wide network to benefit from imperfect, non-transparent markets as well as in their dealings with the state. These families will often have brothers, cousins, uncles and in-laws spread across different services and sectors (including the military and NGOs), as well as cross party political loyalties. The middle classes operate by the same principles albeit more modestly. These families are able to make more strategic marriages, using dowry as a medium of capital circulation to cement long term relations. These kinship loops operate at several times remove (in-laws of in-laws), providing access to positions, information about contracts, information about land deals and property, places for each other's children in the best schools and colleges, connections to office-holders, links to mastaans, and so on. These extended networks have brought into urban life rural social practices, where the landlord and stronger peasant families were linked across villages via marriage, ensuring favorable access to land, labor and other resources.

In contrast, the poor have none of these advantages. To cope, the poor attach themselves to a patron who can deliver land for rent, credit when required, employment and protection in return for accepting client status and a loss of control over basic rights (e.g. to political affiliation, to direct access to government officials or dealers, to arguing for higher wages, lower rents and less interest). The patron classes thereby interpose themselves between the poor and those who hold power and control resources.

With acute competition for resources and changing economic conditions, a growing plunder of public resources has arisen, where the priorities of family, wider kin and friendship networks take precedence over the public good. This is not just an observation about the fact of widespread corruption, but about attitudes towards it – the surprising lack of indignation. It has become accepted that meeting the needs of immediate and less immediate family and friends is the paramount obligation and that, in the absence of either sufficient official incomes or predictable profits, theft of public resources and the collusive manipulation of business opportunities is legitimate, family serving behavior. Not to use the opportunities at hand would be to incur the criticism and even ostracism of kin and friends. Retired public servants argue that corruption among officials is much more widespread now than in the past, when the relative value of incomes and other benefits was much higher. A generation ago, it was the corrupt officials who were ostracized by their colleagues. Now, it seems, the reverse is true. Young officials have reported the enormous pressure they experience to agree to contracts or invoices that have been falsified, and to share the “profits” among colleagues. For example, it has been reported that at power stations, maintenance funds are frequently expropriated in this way. Those who fail to conform are transferred, or forced out (see Box 2.1).

Increasing individualism in which a wider sense of responsibility and social conscience is eroded has been observed. To some extent, this qualifies earlier observations about the breadth of kinship. The gradual emergence of a ‘modern’ political economy and the concomitant increasing economic 'opportunities' means that while people continue to exploit their family networks, they are nonetheless relying increasingly on their own ingenuity and skills. Sooner or later this trend should create a demand for improved governance.

Much of the above discussion of the prevailing social landscape may appear to be cast in a

negative light because of its focus on the adverse impact many social practices have on public sector performance -- the subject of this review. These practices have, of course, evolved in quite a different political economy context and in that context served a valuable purpose. The fact that the context

Taming Leviathan: Reforming Governance in Bangladesh

16

has changed means that the process of modernization requires either a change in social practices or the adaptation of the institutions to overcome the problems that the practices cause. In all likelihood both will happen, as has been the case in higher income countries.

Bangladesh has a democratic parliamentary political system. This is the remarkable achievement of the 1990s, given Bangladesh’s turbulent if brief political history. In 1971 Bangladesh emerged from fratricidal civil war. Its first two national leaders were assassinated and another imprisoned for five years after his fall from power. It was only in 1996 and then again in 2001 power was transferred smoothly and relatively peacefully from one leader to another and from one political party to another through democratic elections. But bitterness and lack of trust between contending political parties remains deeply ingrained. Unfortunately, there is to date still little sign of a willingness to accept the protocol of democratic politics with its tolerance of political discourse, its give and take and mutual respect. Yet, the present situation has a measure of checks and balances owing to the existence of two major parties – the Bangladesh Nationalist Party (BNP) which won the 1991 election by a small margin and the Awami League (AL) which won the 1996 election also by a small margin. The election in 2001 has again been hard fought with the outcome in doubt right up to the elections. The innovation of installing a “Caretaker Government” during the three month run up to the election has been remarkably successful in promoting democracy in Bangladesh. Nonetheless, Bangladesh still has a long way to go to instill the protocol of democratic politics with its tolerance of political discourse, its give and take and mutual respect.

The 1996 election was preceded by the opposition boycotting of Parliament, when they were out-voted. Instead, the Opposition engaged in prolonged violent street agitation, causing considerable damage to the country’s economy and its political culture. The government eventually was forced to resign, shortly before its five year term had ended. The result has been a pervasive conviction that the politics of street action works, thereby severely undercutting democratic values. Copying the Awami League’s tactics after the 1996 elections, the BNP in turn boycotted Parliament on the grounds that they were allowed little opportunity to express their views and raise issues of concern to them. And like Awami League, they took to the streets.

In the early days of the last Parliament, the Opposition ‘walked-out’ on numerous occasions to protest the alleged bias of the Speaker in his conduct of parliamentary debates. They argued that there speaking time was far less than that allowed the Opposition in the previous Parliament and that not a single adjournment motion proposed by the Opposition had been accepted. The Opposition also claimed that the government manipulated the television coverage of debates to favor the ruling party and embarrass the Opposition. The inability to settle these matters amicably, combined with the abusive language used in parliament, has certainly damaged Parliament in its role as a key national institution. It is imperative for the future of parliamentary government in Bangladesh that the Opposition play a full and active role in Parliament.

Outside Parliament, Opposition parties have alleged systematic harassment by the police, whereas the government claim that the police are trying to tackle widespread ‘terrorism’. In the High Court, the BNP has claimed that in 1996 and 1997 some 1,637 cases were filed against 10,495 BNP workers. In March 1997 four BNP leaders were arrested on charges of sabotage, then quickly released by the

The Culture of Confrontational Politics

Obstacles to Governance Reform 17

court, which took the unprecedented step of awarding damages amounting to Tk100,000 in each case. A similar pattern of arrests existed during BNP’s rule, though to a lesser extent, and has continued through to the present. Finally, the 2001 election has been marked by a high degree of

Box 2.2: Home grown Management of Institutional Change – Downsizing BWDB

A radical transformation of the Bangladesh Water Development Board (BWDB) has taken place over the past two years. This breakthrough is all the more noteworthy because over the previous two decades the staff had steadfastly resisted changes promoted by donors despite their withdrawal of support. BWDB had acquired an unenviable reputation as a corrupt and inefficient agency -- a law unto itself. It was greatly overstaffed and quite unresponsive to the views of the villagers it was supposed to be helping. All that has now changed. Local ownership of the reforms made all the difference.

By 1996 BWDB had grown to some 18,000 employees by taking on temporary staff hired for projects but never letting them go when projects were completed. Despairing of ever seeing any reform, donors had withdrawn support – the few projects funded were only those that could be contracted out. To pay salaries, BWDB diverted budget allocations to pay contractors. Consequently project implementation slowed or stopped.

The new Minister and his Secretary were faced by strong criticism from the Economic Committee of Cabinet for the poor performance of BWDB, and contractors who had not been paid mobbed the Minister when he went on tour. The Minister and his Secretary hatched a plan for radical reform. A staffing review showed that the number of employees should be halved; they established a downsizing target of 8,860 to be achieved over three years. To encourage downsizing, the Ministry of Finance, with encouragement from the Secretary for Water Affairs, forbade BWDB to use Annual Development Program funds to pay salaries, an improper practice that had been sanctioned by the previous Minister.

BWDB’s first response was to raid the staff pension fund to pay salaries. The Minister and his Secretary explained to employee’s representatives that drawing down the pension fund would leave retirees without pensions. Instead, it was argued, the 2,500-3,000 vacancies resulting each year from normal retirement should not be filled -- these were positions traditionally ‘inherited’ by the sons or relatives of the retirees. After no fewer than 18 meetings, staff reluctantly agreed to the downsizing plan. As BWDB is not a significant revenue earning agency, faced by a determined Minister and Secretary, staff really had no other way to protect their pensions. By mid 1999 BWDB’s staffing had been reduced to around 12,000. The Ministry of Finance agreed to guaranteed pensions provided the planned downsizing is fully achieved.

BWDB was persuaded to rationalize its internal structure, abolishing directorates and staff positions identified as redundant. Staff too young to retire are being retrained. Management consultants hired under the IDA financed Water Systems Rehabilitation Project assisted in designing the restructured organization and provided new job descriptions.

These reform could not have been achieved without strong leadership from the top and close collaboration between the Minister and his Secretary . These two key players built on the bond they had as school ‘class batch mates’ which helped establish a relationship of mutual trust. The Minister at some political cost resisted strong pressures to give jobs in BDWB to his constituency supporters. The donors had a very secondary role in this whole process.

Taming Leviathan: Reforming Governance in Bangladesh

18

violence and intolerance that has further served to undermine public confidence in Bagladesh’s present political system.

All in all, the political discourse falls far short of democratic norms and, as a consequence, great political uncertainty prevails discouraging investors and development more broadly. Since Bangladesh is still in the early stages of establishing a democratic political culture, these teething problems could be expected. Unfortunately, the general population is becoming alienated from political process and increasingly disillusioned. This is not a favorable environment for tackling the massive development problems confronting Bangladesh in an increasingly integrated and competitive global economy. Experience world-wide shows that unless democracy is consciously and actively nurtured, political institutions can easily return to authoritarianism. To avoid this, Bangladesh’s politicians have a special responsibility to both preach and practice democratic behavior. The role of the leaders of public opinion in all sections of society – the Press, business, universities, NGOs and the like -- in insisting on respect for democratic norms is crucial.

The impediments to efficient bureaucratic performance noted above in no way condemn Bangladesh to poor governance. In every country – developed and developing – public bureaucracies must struggle to instill disciplined adherence to the formal rules at the expense of informal personal networks. Everywhere in the world, the behavior of public officials derives from a balance between the prevailing social norms and the institutional incentives he or she faces. The latter in turn depend on an individual’s perception of his or her self-interest given the system of rewards and punishments he or she faces. This ‘rationality’ is conditioned by a set of complex calculations as to how best to survive and prosper given the realities confronting each individual. The governance challenge in Bangladesh is no different – it is to recognize the realities in each situation and establish incentives which will achieve the desired outcomes (see Box 2.2).

Notwithstanding the difficult environment, the same incentives to good performance apply in Bangladesh as anywhere else. Notably, these include

Rewards that are consistently and fairly given for good performance and poor performance sanctioned

Transparent and monitorable performance benchmarks that are agreed and tracked

Rigorous enforcement of the rule of law.

The task in Bangladesh, as elsewhere in South Asia and in many other developing regions, lies in bringing about these conditions in a social context where, in the absence of strong formal institutions, relations are highly personalized and where personal loyalties are valued more highly than the “rules” of formal organizations. This is not such an unrealistic proposition as might appear at first sight. The Bangladesh Supreme Court is a good example of a public institution functioning according to its own distinct and well established rules. Thus, the distance (in terms of social norms) between home and office, though significant, can nonetheless be bridged satisfactorily. This requires a conscious decision by the political and bureaucratic leadership to establish and enforce clear institutional rules of conduct backed by rewards and sanctions firmly but equitably administered. The government already has “rules of business”, but they seem honored more in their breach than in their practice. These rules urgently need to be updated and then applied consistently and firmly. In reality, in Bangladesh, as in most countries, government leaders are hardly likely to volunteer to introduce measures that will limit their freedom of action in any way. Historically, such reforms have only come about when forced on political leaders by public opinion, as happened for example in 1996 when a

Incentives for Public Officials to Perform Better

Obstacles to Governance Reform 19

non-stop hartal forced the government of the day to introduce a constitutional amendment providing for elections to be run by a neutral caretaker government – a remarkable innovation with strong popular support that has gone a long way to protecting Bangladesh’s still fragile democracy from electoral fraud. This constitutional device has contributed crucially to building public confidence in the elections, giving legitimacy to elected governments and hence political stability to a country prone to political upheaval.

There is wide recognition that at present there is a serious disconnect between what is supposed to be the behavior of public officials and their actual conduct. Judging from the local Press over the past three years, the voice of informed public opinion has become increasingly vocal in calling for greater adherence to the rule of law and, more generally, for more honest, open and responsive government. Fortunately, from within the elite there is a significant group of individuals advocating reform who may be termed ‘reform champions’. While still a small minority, the pressure of public opinion led by these reform champions can bring about change. Reform programs need to recognize the importance of supporting this group through deliberate measures that strengthen civil society and build respect for rules of modernized public institutions and the rule of law.

In this context, development can be seen to be dependent on promoting alliances among the ‘champions’ for better governance through judicial and police reform, greater transparency in public transactions, and strengthened systems of accountability. The reformers are the agents of change who will move Bangladesh from a closed to a more open society where individual rights are more secure. If they are indeed to be vehicles of change they will need ‘fuel’ – the commitment of resources to activities which vested interests would not support on their own, namely:

Mobilization of the voice of ordinary people through genuine democracy in all institutions, including the political parties

Participation of all stakeholders in development programs and projects

Pluralism and competition in markets and service delivery, and

Basing public service on merit rather than political clientalism and a strict age hierarchy.

The successful implementation of such a strategy, which is further elaborated later in this

report, will depend on building a wide public consensus on the need for and importance of such change – implying the need for a new discourse within civil society focussed on establishing viable modalities for reform. This discourse would recognize corruption, nepotism, cronyism, arbitrary discretion, secrecy, rigid hierarchies and the like as intrinsically inamicable to the sound functioning of modern public organizations – as ‘bad’ attributes to be overcome in order to achieve better governance. In their place, there would be clear rules firmly imposed, rewards based on measured performance, fair competition, inclusiveness, and a high degree of transparency.

Democratic development requires an active role by conscious citizens…The emergence of Mafia-type groups, who acquire power both through political patronage and involvement in arms smuggling and drug trafficking, pose a

threat to democracy and the rule of law. Again, it is only by spreading legal awareness that coalitions of citizens can be developed to combat these

powerful groups.

Dr. Kemal Hossain, Senior Advocate of the Supreme Court, Minister of Justice (1972-73) and Foreign Minister (1973-75)

(The Daily Star , September 21, 1997)

Chapter 1 noted the huge economic and social costs of an inefficient and an

unresponsive public sector. In Chapter 2 we have argued that despite a formidable array of vested interests obstructing reform, there is nonetheless a vocal public opinion demanding better governance. In Bangladesh, the key agents for holding public officials accountable are: parliament, the courts, the Press, civil society organizations, progressive private business and the donors. The principal cross-cutting element for the effective functioning of all these mechanisms is transparency. Without transparency, the mechanisms are critically handicapped. This Chapter discusses the role of these agents. Chapter 4 addresses in more detail issues of financial accountability. Chapter 5 discusses decentralization as a way to bring responsibility for public service delivery closer to the client and to involve the client more in its management.

Accountability lies at the very heart of good governance. Accountability is not optional in a properly functioning democracy. It is the price rulers are required to pay in exchange for power. Political scientists distinguish two types of accountability – one involving a differential power relationship where the Executive can be forced to change course or be dismissed (referred to as ‘vertical accountability’) and the other (‘horizontal accountability’) relates to situations where neither party has over-riding power (Schedler, Diamond and Plattner, 1999). In Bangladesh, the electorate has the sovereign power to dismiss governments but, in between elections, which must be held at least every five years, the electorate has absolutely no ability to influence government actions.

Consequently, holding the Executive accountable on a day-to-day basis depends on the

numerous horizontal accountabilities which, in Bangladesh’s case, are still weak. It is, of course, true that in a democratic system the government in power is constantly aware that it will eventually be judged on its performance. But, as we saw in Chapter 2, in Bangladesh there are many other considerations that heavily influence a government’s performance.

CHAPTER 3:

Taming Leviathan: Reforming Governance in Bangladesh 22

Figure 3.1 summarizes the various checks on the Executive. Below, and in Chapter 4, we discuss the effectiveness of these various institutions of accountability. In all cases, there are three stages to consider – access to information, capacity to act, and ability to enforce a response. Effective horizontal accountability depends on having systems and processes in place that are understood, accepted and respected by everyone concerned, with credible sanctions applied when transgressions occur. For this to happen, the responsibilities and assignments of every agency and official need to be clearly spelt out, performance benchmarks set and systematically monitored. And this whole process should be an open one that can be tracked and debated by the public.

In Bangladesh, these conditions are largely absent. Public officials’ relative lack of accountability goes a long way to explain Bangladesh’s weak governance and poor service delivery. Government has a long tradition of operating in secrecy and surveys have shown that the public has very low expectations of government. For those who are poor and lack social connections, their greatest hope is to escape harassment by public officials and, especially, the police (see Voices of the Poor).

There are, however, two areas where Bangladesh has achieved notable progress in making government more accountable. These have been very significant in improving the long term prospects for achieving better governance.

First, despite the political difficulties, as noted in Chapter 2, an innovative constitutional amendment adopted in early 1996 has greatly increased the likelihood of fair elections and, in this important respect, democracy has been strengthened. This happened following long drawn out street agitation. The amendment provides for a neutral “Caretaker Government” headed by a former Chief Justice to oversee elections. This helped ensure fair elections in 1996 and a smooth transfer of power from one government to another. In 1997 the present government held reasonably fair and well run local elections for the Union Parishads which are the lowest level of local government. The recently concluded national elections in October 2001 have also been heralded as largely free and fair.

Strengthening Accountability 23

Second, recently the Supreme Court has shown a willingness to take the initiative in holding public authorities accountable for actions, which they judge to contravene the law or provisions in the Constitution. Opposition politicians arrested under the Special Powers Act have been quickly released by the Court with damages ordered to be paid by government. The Prime Minister was also cautioned by the Supreme Court for criticizing a court decision to release Opposition party workers on bail. The Court has ruled that the government’s appointment of magistrates was ultra vires , has held hearings on its own initiative on the legality of hartals, and has intervened to deal with unfair election practices. In 1999, the Court issued an injunction to stop the Government bulldozing squatter settlements in Dhaka. Most

dramatic of all, the Court has very recently declared the independence of the lower judiciary, thereby asserting the higher Court’s advice as taking precedence over that of the Executive on the appointment of judges.

Below we look more in detail at the various institutions on which Bangladesh’s system of

horizontal accountabilities must be built.

“The non-cooperation of the government and air of secrecy often inhibit the oversight function of the Parliament.” Report of the Public Administration Reform Commission, para 8.19

Parliament is the appex institution in Bangladesh’s accountability system. It is Parliament that

empowers the government and gives it its legitimacy. It is through Parliament that the enfranchised citizens determine who is to rule. But, Parliament is also the place where the Prime Minister and the Cabinet ministers are supposedly subject to constant oversight and the actions of the Executive are scrutinised in committee. In practice, under the present Constitution, strong ties of party loyalty make it unlikely that Parliament will become an effective instruement for holding the Executive to account. This is because the party with the majority controls both the executive and the legislative branches. Why would the Parliamentary members of the party in power investigate their own party’s ministers? If they turned up evidence of incompetence or wrongdoing, they would be undermining their own party with the electorate. They would also be jeopardizing their own positions. The internal organizations of the AL and BNP are tightly controlled by a handful of party leaders. Those in power can direct government largess away from the districts of MPs who become too zealous in their oversight activities, and, in extreme cases, party leaders can deny renegade members the right to stand for re-election on the party’s ticket.

Parliamentary reluctance to vigorously oversee the workings of a government formed from members of the majority party in the legislature is not a phenomenon limited to Bangladesh. It has been a problem in the United Kingdom since the rise of strong parties in the late 19th century. It became more pronounced after World War II as government intrusion into the lives of its citizens expanded and thus the need for oversight and accountability became more pronounced. For two decades reformers campaigned for a reinvigorated Parliament. They sought more aggressive questioning of ministers, and in particular the Prime Minister, more time during parliamentary debates for the opposition, the creation of Parliamentary committees that could dig into the affairs of individual ministries, and the establishment of a Parliamentary ombudsman.

Reform proceeded slowly in Britain. An ombudsman was created in 1967, but even then he was confined to investigating complaints referred by MPs and was given no enforcement power. The questioning of ministers during Parliamentary sessions has become more pointed, but opinion among students of British politics is divided on how effective a method for overseeing government

Parliament: Reinforcing its Role as a Key Instrument of Accountability

Taming Leviathan: Reforming Governance in Bangladesh 24

question time really is. Committees with the power to hold ministries accountable were finally established in 1979, but their record of ferreting out mismanagement is mixed.

It took decades before the British Parliament began to play a more active role in overseeing the government. And this in a country where a vigorous media and strong civil society organizations were pressing for reform and where traditions about government and government service created a favorable environment for reform. All this suggests that the parliamentary process in Bangladesh will have to evolve further, as it has in India, before Parliament as currently structured can be expected to be a more powerful force for accountability.

Institutional differences between the U.K. and Bangladesh may make it even more difficult for Bangladesh’s Parliament to emerge as a vigorous force for accountability. The most significant is the method by which candidates for Parliament are selected and supported. In the U.K. party members at the local level have a major say in who will be the party’s candidate. Because ruling-party backbenchers can be elected without depending on help from party leaders, they can demand changes in government policy and can work with Opposition members to expose matters that the leaders in power would prefer remain hidden. In Bangladesh all MPs of the major parties are slated by the party leader and in most cases their campaigns are funded in large measure by the party. Backbenchers in Bangladesh thus mostly have no independent power base and consequently little influence over party policy or ability to buck the leadership.

Another factor working against Parliament emerging as a force for accountability is the pay and career structure of Parliamentarians. In the U.K. a MP can chose to remain on the back-bench for his or her entire career and still have a rewarding job, both financially and professionally. For these, the promise of moving to the front bench is insufficient to force them to toe the government’s line. By contrast, the only future for most back-bench members in the Bangladesh Parliament is the eventual possibility of securing a ministerial appointment, something not likely to happen if one emerges as a critic of one’s own party’s senior members.

This is not to say the picture is entirely bleak. Some government MPs are substantial figures who come to Parliament after long careers in government or are prominent businessmen. They have not been content to remain idle until a ministry opens up. For example, the chairmen of the Defense Committee and the head of the Public Accounts Committee have both sought to use what power they have to at least nudge government policy in positive directions.

Some political leaders in the Westminster system have seen benefits in parliamentary oversight. A committee that gets to the bottom of why, say, health services in some areas are inadequate performs a valuable service for the government in power, alerting it to problems that could cost it votes at the next election. Interestingly, Mrs. Thatcher had such a view, and this led to committee reform in Britain. Until her time, the Opposition front-bench had opposed committee oversight as vigorously as those in government. She backed committee reform while Opposition Leader, and when she came to power, one of the first initiatives her government took was to support a measure that established committees to oversee individual ministries.

In developed countries the combined power of the media, civil society, the parliamentary

Opposition is likely to dissuade a government from shutting down an investigation that began to probe too deeply for its comfort.1 But in Bangladesh these forces are not strong enough to prevent the government from stopping investigations that threaten to raise embarrassing questions about its stewardship of public resources.

1 Recent examples in Europe include the disgrace of ex-Chancellor Kohl and the investigation of President Chirac for corruption

Strengthening Accountability 25

Despite the fact that Parliament and its committees are unlikely to embark on the kind of

wide-ranging investigations of government and the administration that their record call for, if committees are headed by strong, independent-minded MPs, they can still make a contribution to achieving greater government accountability. They could be encouraged first to concentrate on problems of mal-administration and incompetence in the bureaucracy, areas where the threat to the government is less.2 There is a precedent for such efforts. During the fifth parliament both the PAC and the PUC issued a number of reports critical of the way various ministries and public sector organizations were being run.

In India, as in many other parliamentary democracies, there is a firm tradition that government responds in writing to committee reports. In Bangladesh government does not. One reason is that the committees generally do not file written reports. Committees should also be strongly encouraged to put their recommendations in writing and make them public, and government should be expected to treat the recommendations seriously by, at the least, issuing formal written responses. These actions are prerequisites for ensuring that public resources are properly used. The government could make a useful start by responding formally to the outstanding reports of the PAC and the PUC.

Another measure would be to open the space between policymakers and the bureaucracy. At present, criticism of the process of administration is treated as equivalent to criticism of the ministers and of their ability to govern. Ministers therefore resist any kind of investigation of alleged incompetent administration, maintaining a shroud of secrecy over what goes on. Government ministers in effect cover for the bureaucrats in Parliament.

All this is justified on the principle of ministerial responsibility practiced in Bangladesh that ministers are held responsible for all that goes on in their departments. In fact, an alternative view has emerged in a number of parliamentary democracies that recognizes that no minister can possibly be on top of all the activities of his or her department. The acceptance of this view, for example, in Australia, Canada, and Britain, has made ministers more willing to let Parliament have greater direct oversight of bureaucrats. Current Australian practice recognizes this reality very explicitly; the Australian National Audit Office automatically sends copies of all its efficiency reports to the appropriate parliamentary committee and bureaucrats are regularly summoned, by name, to appear before parliamentary committees and justify their actions. Revisions to the doctrine of ministerial accountability are in the interests of the politicians. Why should a minister be held to account for the workings of bureaucrats he or she cannot possibly control? This, at least, is the view that has taken hold in Australia. These are all modest recommendations. All avoid engaging on the more serious issues of constitutional structure that retard efforts by Parliament to act independently of government. These issues include: 1) the provision in Article 70 of the Constitution barring MPs from voting against their party, 2) the first-past-the-post electoral system3 which permitted BNP in 1991 to form essentially a single party government with 31 percent of the popular vote, and 3) weak local government which contributes to the concentration of power in the hands of the leaders of the majority party.

Some in Bangladesh are beginning to appreciate the structural flaws inherent in these arrangements. A modest level of research could move that debate forward. This might include

2 The PARC Report, June 2000 noted that “Par liamentary committee system could be the most effective instrument of parliamentary oversight” (para 8.10) 3 Under this system only one round of voting takes place and the candidate with most votes wins regardless

of whether he has an absolute majority of the votes.

Taming Leviathan: Reforming Governance in Bangladesh 26

studies of the impact of bicameralism and proportional representation on parliament’s ability to hold the executive accountable. The experiences of Australia and New Zealand, two of Bangladesh’s Asia-Pacific neighbors that share its heritage of British political institutions, could serve as the focus of this work. The Australian Senate has been an important force for government accountability there, and in New Zealand the recent jettisoning of a first past the post electoral system in favor of a proportional one appears to have enhanced its Parliament’s ability to hold the executive accountable. There is indeed an emerging body of research suggesting that, at least for new democracies such as Bangladesh, bicameralism, proportional representation, decentralization, and other institutional arrangements that diffuse power among organs and levels of government are strongly correlated with government performance. If true, this would suggest that significant improvements in the Bangladesh government’s ability to deliver services and otherwise meet its obligations to its citizens may not be possible without modifying the present institutional structure.

Bangladesh is not a large country in terms of territory, but its population is very large. It is not reasonable to expect that a unitary state can efficiently provide services to 130 million citizens. One solution would be to create five provincial governments (based on the five administrative divisions). For this to succeed, the Constitution would need to be amended to include a guarantee with regard to the distribution of revenues (say, 60 percent would be allocated directly to the provincial governments in proportion to their populations). Each provincial government would have an elected provincial assembly of, perhaps, around 150 representatives and a Chief Minister with a small Cabinet (limited to, say, 7 Ministers) and delegated responsibility for all services except defense, foreign affairs, currency, macro-economic policy, national highways, railways, and waterways, and international trade and economic relations. The provincial assemblies could each provide, say, 10 delegates to an Upper House of the National Parliament, which would share power with the directly elected Parliament.

The important point being made here is not the precise composition of a more decentralized system of government, but rather the need to have more devolved power structure which would help dilute the present heavily centralized system based in Dhaka. This would help bring government closer to the people, facilitate accountability, and create a more balanced sharing of political power. The provincial governments could be made to compete for discretionary development funds on the basis of their performance. Transparent and well-publicized performance measures would enable the public to track and assess how their provincial administration was doing compared to the others. Provincial administrations that were weak would need to be strengthened with technical assistance from the centre.

While Parliament, as it is currently structured and operates, is unlikely to be very effective in holding the government accountable between elections, the Supreme Court is another matter. It has shown an increasing readiness to issue orders requiring the government to come before it and justify its actions. In this respect, the Court may be taking its cue from evolving practice in India, which has seen the emergence of a highly activist Supreme Court in the defence of citizen’s rights and civil liberties.

An important illustration of the Bangladesh Supreme Court’s growing activism is to be seen in its ordering the release of individuals detained under the country’s preventive detention act. Whereas in 1982 the Court freed only 54 of the 1548 persons held under the act, by 1996, the last year for which figures are available, they had ordered that 3376 of the 5413 individuals detained be released.

This assertion of judicial power has now spread beyond individual human rights cases. In 1995 the Appellate Division, Bangladesh’s highest court, ruled that an environmental NGO had a

The Supreme Court: The Strongest Link in the Accountability Chain

Strengthening Accountability 27

sufficient interest in the impact of a proposed flood action plan to bring suit on behalf of itself and those who would be displaced by the plan’s implementation. Since then, there have been more than 30 major public interest litigation(PIL) cases brought in Bangladesh. Many appear to have had a significant impact.

In some instances, the mere bringing of the action has been sufficient to affect government policy. After suit was brought alleging irregularities in the lease of land to a shell company incorporated in Singapore, the government cancelled the lease. In another case, during the pendency of an action claiming that the government had failed to control emissions from leaded gasoline, regulations were issued banning its use and phasing out two stroke engines.

Other times, the Court has ordered the government to refrain from certain actions. In April 1999, in perhaps the most far reaching case to date, the police were enjoined from arresting or detaining a member of an opposition political party without first seeking the court’s permission. This is an extraordinary order by common law standards and it was only issued after the court found a troubling pattern of police harassment, including an incident in which the police stripped off a woman’s clothing during a public demonstration. Other cases have arisen from government efforts to illegally sell public land to private interests for development. In one instance, the development authority for Dhaka was ordered to cancel the sale of land set aside for public use to private developers.

Gauging the impact of this litigation is extremely difficult. Litigants in the case that led to the injunction against the Dhaka development agency argue that the court’s order sent a powerful message to the leaders of the agency and its staff. While strictly speaking the order only prevents the sale of the parcels that were the subject of the suit, those who brought the suit argue that the agency is unlikely to try and sell other parcels designated for public use. Personnel within the agency in favor of such sales know they are likely to again be blocked by the courts while those opposed to further sales can now advance an additional argument in opposition.

All these cases are filed directly in the Supreme Court under what is called its writ jurisdiction. Unlike ordinary commercial and criminal cases, cases that originate in this way do not have to wend their way through the lower courts first. They are taken up immediately by a Supreme Court justice, and at most there is one appeal, to the Appellate Division.

A recent example of the Supreme Court's assertion of judicial power is its decision on the independence of the subordinate courts. In a far reaching opinion released in May 2000 the Court decreed that, in accordance with the Constitution, the executive and legislative branches must take a variety of measures to free the lower courts from their dependence on the Executive. Among other steps, the Court ordered the creation of a commission on judicial pay and the establishment of a judicial service separate from the civil executive and administrative services and directed that effective May 31, 2000, the executive cease controlling the judiciary's budget. While compliance with these and the other steps described in the Court's opinion will not guarantee the independence of the judiciary, their implementation would represent a major step toward this objective.

The growing role of the Supreme Court in holding government accountable underlines the importance of moving forward with the government’s proposed judicial reform program4. While an original rationale for the reform was to support private sector growth through better enforcement of contracts and greater protection for property rights, many of its components are aimed at strengthening the judiciary generally. To the extent that the program succeeds in improving the operation of the Supreme Court, by automating its case handling procedures, upgrading its facilities

4 This program is supported by a World Bank project

Taming Leviathan: Reforming Governance in Bangladesh 28

and equipment, and so forth, the Court’s ability to act as an accountability agent will be improved. The 2001 Caretaker Government undertook important preparatory work so that the new government may if it so chooses move rapidly to implement the full separation of the Judiciary from the Executive.

The reform program is ambitious. Reform of virtually every entity associated with the courts as well as overhaul of numerous laws is contemplated. Even with the full cooperation of the government, the judiciary, and civil society, it will take years to fully implement the needed reforms. As important as the Supreme Court is in the accountability equation, and as pressing as the accountability issue is, care will be needed to establish clear priorities and phase the project in line with implementation capacity.

Priority elements would include computerizing the Court’s writ jurisdiction cases, upgrading its facilities, supporting initiatives to improve management of physical and human resources, and better training for the judges. This latter element deserves stress. As the Court becomes more involved in the policy process, its members will be required to make difficult trade-offs between competing policy goals sometimes with far reaching consequences. How much credence should be given to government’s arguments about the costs of complying with an order involving, say environmental goals? How should the court assess arguments about the effect a ruling might have on investment, both local and foreign? The Indian High Court has stumbled in several areas because its judges lack even rudimentary training in law and economics or policy analysis. So has the Philippine Supreme Court. Reformers in both countries, and some members of the bench themselves, are pushing for training programs that would equip the justices to deal with such issues.

The judicial reform aims to improve the management of the Supreme Court’s case load through a number of measures that begin with the collection of baseline data. The project’s training component will support workshops and seminars for judges on a variety of topics including “commercial” law. At all stages it will be essential to secure strong stakeholder support and to give close attention to the incentives at work in the system.

A reform aimed at strengthening the Supreme Court’s role as an accountability agent should also update the antiquated procedures that litigants must now navigate when seeking a review of a government action. Among other things, this hampers the bringing of public interest litigation (PIL) cases. Current law is largely based on British practice as it stood when the nations of the subcontinent became independent. Since then Australia, Canada, and the United Kingdom have all revamped their laws governing judicial review. A debate over such reform in Bangladesh at least needs to be started.

A final advantage of targeting the Supreme Court in either the first phase of the judicial reform is that there are important constituencies in Bangladesh that would support these measures. One is the Supreme Court bar itself, a group of 2000 of the country’s best lawyers, many of whom have held high positions in government in the past and are influential figures in Bangladesh society. A second is the group of NGOs involved in human rights work and public interest litigation (PIL) litigation. Experience counsels that unless there are groups outside government, which will survive no matter who the minister is or what party is in power, that strongly support the contemplated legal reforms, they are doomed to fail. Genuine reform takes many years and even those that can be implemented quickly can be reversed quickly. Thus outside support from groups with staying power is essential.

Dramatic and rapid improvement in the ability of Parliament and the Supreme Court to oversee the executive is unlikely. Accountability is about power, the power to demand information, to require explanations for bad performance, and ultimately to sanction those who do not meet the

Strengthening Accountability 29

expectations of the public at large. Power in Bangladesh, as in many societies, is tightly held by a self-perpetuating self-enriching elite. But to the extent that changes can be promoted to speed the process of empowering Parliament, and enhancing the courts’ present power, it can make a crucial contribution to making government more accountability in Bangladesh.

The courts are but part of the system of administration of justice. Effective and accountable policing is another. The poor, and allegedly deteriorating, law and order situation reflects a deep malaise within the police and the prosecution service. Police abuses are reported almost daily in the Press. The poor are particularly the victims of police brutality as they have little recourse. It was reported in mid 1999 that a group of poor villagers, when told that the government was planning to hire more police and purchase more police vehicles to improve law and order, responded by saying that that was the worst possible response as it would simply mean that more police would be able to visit their village more often to harass them5. Several serious cases have been reported in recent years of police raping women in custody, so much so that this has become a major issue with women’s rights groups. The constant extortion of tolls by traffic police is well documented6. More serious are the cases of police arresting men on false charges with the object of collecting a ransom from their families – this was brought to public notice in 1998 when a student died at the hands of the police7. A public opinion survey undertaken by Transparency International (Bangladesh Chapter) in 1997 reported that over 90 percent of those questioned have no confidence in the police.

All of this underlines the urgency for implementing comprehensive and fundamental police reform as a priority component of any governance reform program8. A first and critical step would be to establish a citizens’ Police Watch Committee to be composed of highly respected citizens selected through a bi-partisan process with oversight responsibilities reporting both to Parliament and the Minister of Home Affairs. Second, a new Code of Police Practice needs to be framed and approved by Parliament. Third, a major effort is called for to upgrade police training with appropriate external assistance.

Of all the informal checks on the abuse of Executive power, the Press is undoubtedly the most important. An unfettered, virile and professional Press is central to good democratic governance. Bangladesh is blessed with a free and out-spoken Press. Despite difficult conditions, the Press has played a significant role in the life of the nation, particular during the periods when democracy was suspended by military rulers. There are over 1,100 daily and weekly publications – newspapers, periodicals, magazines published in both English and Bangla. Only 19 dailies, out of the 300 published, have a noticeable circulation throughout the country.

While most newspapers have some political slant affecting their objectivity, professionalism is gradually taking root. A few leading newspapers are trying hard to set standards for professional journalism and are taking the lead in generating public debate on pertinent national issues. With varying degrees of accuracy, they frequently criticize public figures, including the prime minister and ministers. But the Press’ effectiveness as agents of accountability is constrained by a number of serious weaknesses.

First, the newspapers’ profitability, even existence, depends heavily on public sector advertising. The public sector is still the largest advertiser. Theoretically, the circulation of a

5 Focus group discussion, June 2000 6 See, for example, the World Bank’s 1999 country economic memorandum 7 See, for example, Who will police the police? The Daily Star, August 2, 1998 8 See PARC Report which emphasizes this point

The Press: Free But Not Wholly Independent

Taming Leviathan: Reforming Governance in Bangladesh 30

newspaper is supposed to determine the allocation of advertising. But in practice, political orientation can be a decisive factor. If a publication is critical of the government, it may be quickly disciplined by the withdrawal or curtailing of state patronage. In contrast, a pro-government newspaper, irrespective of its circulation, can be sure of generous support. This serves to curb the independence of the Press. Fortunately for Bangladesh, two positive trends are at work, both a function of the growing wealth in the private sector and the changing role for government: (i) the emergence of businessmen sufficiently endowed to be able to bankroll newspapers; and (ii) a steady growth in private sector advertising as a share of total advertising. The development strategy which calls for a withdrawal of government from business activities serves also progressively to limit this abuse.

Second, with weak rule of law, individual journalists and editors are easily threatened by politicians who control and may be willing to use thugs to further their ends. Strengthening the rule of law will help strengthen the role of the Press.

Third, journalists are easily bribed, while some extort money by threatening to write unfavorable stories. Although compared to other jobs with similar qualifications in Bangladesh, journalists are not significantly underpaid, in an environment where corruption is rife, they are nonetheless easily tempted to accept bribes or even extort payments. Victims mostly have little chance of seeking redress through the courts, which in any event is costly. This is a weakness that may diminished over time with the proliferation of newspapers competing vigorously for readership. And having a prolific Press increases the cost of those who wish to bribe. Rising professionalism and strengthened rule of law should eventually limit this abuse, but for the present journalists are able to make mischief with impunity for those unable or unwilling to use countervailing force.

Fourth, journalists are poorly trained in the art of investigative reporting. They are generally deprived of opportunities to learn to understand better the matters on which they are asked to write. Besides, investigative reporting depends on the willingness of newspapers to invest in the time journalists require to do a thorough job. So far most newspapers have not been able to spend the money needed. Upgrading the quality of journalism is essential to strengthen the role of the Press as an agent of accountability.

The remaining informal checks include trade unions, private business, political parties and

other interest groups that can be broadly captured under the heading “civil society”. Each interest group and association will have its own agenda.9 But ultimately it is public opinion expressed through organized civil society that holds a government accountable.

People depend on networks, associations and other social organizations to reduce life’s risks, access services and resources, and protect themselves against the depredations of their fellow human beings. It is this “social capital” which must serve ultimately to hold governments accountable and thereby enhance their performance. Consequently, improving governance depends on progressively building the networks of civic associations and other positive forms of social capital, which extend people’s range of institutional choices in accessing public services, and strengthen their ability to influence policy formulation and implementation.

9 This report will not address the role of either political parties or trade unions as it has not been possible to undertake research into these topics.

Strengthening Civil Society: The Ultimate Source of Accountability

Strengthening Accountability 31

Systematically increasing poor people’s participation in the design and implementation of service delivery programs must be a key component of an effective strategy to reduce poverty in Bangladesh. The poor are generally least able to insist on access to public services and participate in holding public agencies accountable for the delivery of services to them. For example, Dhaka’s slums dwellers report that their children are often turned away from school as preference is given to the children with parents who are better off and have more ‘clout’10. Typically the poor have weak social networks -- they lack social capital – and are therefore relatively excluded from mechanisms which would allow their voices to be heard. Traditionally, they have sought a patron who would help them. The very poor – the old, the abandoned women with small children, and the infirm -- tend not to have patrons because they have little to offer in a client-patron relationship.

NGOs have sought to help the poor who are excluded from public services in two ways: by enhancing their voice or by assisting their ‘exit’ by furnishing substitute services (e.g.: BRAC schools and clinics). PROSHIKA has taken a lead in enhancing the voice of the poor via ‘people’s organizations’, an initiative that has become controversial within the NGO movement.

Despite the usual applause which can be justifiably given to the NGO movement in Bangladesh, their significance needs to be placed in perspective. Six sets of issues can be identified:

First, as NGOs move into more generic service delivery roles, sometimes with government contracts, in sectors such as primary education, primary health care, agricultural services, fisheries, micro-finance, rural infrastructure and so on, they increasingly place themselves between the state and its citizens. But because of the ‘voluntary’ nature of NGOs, the public has no recourse to challenge service deficiencies; beneficiaries are in a charitable, dependency relationship to the service providers rather than having rights to a public service. In such cases, the accountability link between the service provider and the citizen is weak.

Second, one cannot be sure that the internal governance and management of NGOs will be superior to government in terms of the transparency of power, recruitment and management styles. Personalized power and patrimonialism, reflecting the society at large, are often present. Without a rights-based relationship with their clients, there are few incentives to move away from the clientelist character of that relationship.

Third, among the large number of NGOs in Bangladesh there is enormous diversity of mission, purpose and stance within the national political system. They often attempt to establish territorial monopolies and to confuse their clients through their territorial turf wars.

Fourth, within this heterogeneity, a debate exists concerning the respective merits of large and powerful national NGOs like BRAC and Proshika compared to smaller, local ones like Samata, as well as other grassroots initiatives. Indeed some observers argue that NGOs are crowding out local, ‘genuine’ civil society or organizations such as peasants and workers associations, as well as local NGOs. There is evidence of the organized poor acting together around local issues (i.e. collaboration between different sizes of NGOs such as the ‘people’s rally’ in Brahmanbaria in 1999, Thana level mobilization around labor rights and resource allocation issues; the defense by BRAC members of their non-formal primary schools in the mid 1990s when attacked by fundamentalist forces). However, peasant and rural workers associations are largely a phenomenon of the past, connected to radical Marxist political parties, often regionally based. They can no longer claim significant active membership, and certainly do not provide any substantial service functions to their members.

10 The source of this observation is focus group discussions with Dhaka slum dwellers , 1997

Taming Leviathan: Reforming Governance in Bangladesh 32

The criticism that larger NGOs are crowding out the smaller locally based ones may have more validity, but is partly compensated by the fact that larger NGOs can offer better and more reliable services to the poor. For example, they can offer more diversified financial products including, crucially, savings opportunities and provide more reliable overall banking services to people with a high risk aversion. Large NGOs attract greater donor support, giving them a competitive advantage over smaller, local ones. Given the risks of poor accountability to beneficiaries, it is important to nurture small local NGOs as one way to encourage healthy competition among NGOs in the provision of services to the poor. In this context, the proposed Social Investment Foundation is an important initiative as a special organization that will intermediate in favor of small NGOs.

There is a strategic interdependence between national level NGOs which can provide heavy-weight support for local struggles and local NGOs which can contribute crucially to the mobilization of the poor in such matters as opposition to the eviction of slum dwellers, access to khas land, and so

Box 3.1: Combating Corruption with Information in Rajasthan

According to panchayat records, Rs. 56,000 had been spent on water channels in Lasani village in Rajasthan. At a public hearing in January 19 1998 it was revealed that the water channels existed only on paper. In truth the money had been stolen by officials.

The public hearing was led by the Mazdoor Shakti Sangathan (MKSS), a people’s organization struggling to ensure the people’s right to information. On that day 23 development works – dams, culverts, latrines, schools and so on -- reportedly completed recently in the panchyat were reviewed in public. The examination started by the MKSS activists disclosing the detailed information they had culled from official sources and checked by site visits. Not surprisingly the panchyat leaders were reluctant to allow MKSS access to the records but the Rajastan State Government had recently issued an ordinance allowing the public access to official panchyat documents. A Gazette notification entitles any member of the public to a certified photocopy of the these documents for a small fee. This landmark legislation resulted from a sustained campaign led by MKSS culminating in a 53 day sit in Jaipur in 1997.

As the MKSS activists presented their evidence, excitement built up. To Dood Singh’s surprise, his name was on a muster roll, when he had not even been paid his due wage. So was Devi Singh’s name though he had died 30 years ago. Bhanvri Singh was shown to have received Rs. 570, whereas she testified she had actually only received Rs. 300. And so on. Out of Rs. 3.3 million recorded as spent, it was shown that at least Rs. 500,000 had been siphoned off with the complicity of the sarpanches or village council heads, who must sign off on all items of development expenditure. One third of the missing funds was accounted for by fake bills for cement.

The sarpanches joined this meeting voluntarily, though previously they had stayed away. The force of public opinion in the face of public exposure gave them little option. Some challenged the accusations, while others agreed that fraud had occurred, but blamed others. At the end of the meeting, all agreed to assist in recovering the misappropriated funds, and some promised to return the money themselves. For example, the sarpanch of Rawatmaal returned the Rs. 56,000 related to the non-existent water channels.

The remarkable feature of the public hearing was the orderly and constructive tone. While there was no hint of willingness to compromise with fraud, the meeting was not confrontational and participants did not lose their tempers. This may be explained by the very professional way the MKSS conducted themselves at the hearing. The outcome is of great significance because it signals to contractors and officials alike that looting public funds will no longer be tolerated. This experience demonstrates the power of transparency at the local level; self-evidently, the right to information is the key.

Strengthening Accountability 33

on. Thus, there is a complementarity between the local and the national levels in the mobilization of the voice of the poor. The impact of NGOs as watchdogs of the local public interest has been dramatically demonstrated in Rajasthan where freedom of access to information has been the key (see Box 3.1).

Fifth, some NGOs – most notably PROSHIKA -- have become pro-active on behalf of the poor by forming ‘People's Organizations’ in the hope that over time they will develop the capacity to represent themselves without inter-mediation. The jury is still out on the latter process, while others are concerned about NGOs as the new patrons in their other roles11. These NGOs, especially the larger ones, constitute significant centers of power, as the super-organized part of the only partially organized civil society, both in the sense of controlling agendas, manipulating voice, and influencing the outcome of elections. The longer term concern must be whether this process will eventually result in a political backlash which will endanger the service delivery role of NGOs which have brought tremendous benefits to the poor.

NGO activism has clearly had a positive impact in securing greater access for the poor to Khas land (e.g. Samata in Pabna, and Proshika and Caritas in many other parts of the North-West). The principle has now been accepted by government that the poor should have preferential rights to lease such resources on a long term basis sufficient to stimulate productive investment in the land. However, NGOs have had less success in tackling other issues such as rural indebtedness, tenancy/sharecropping rights, wage levels (including for women) which have been the traditional arenas of struggle. Some NGOs have retreated from confrontational activism, preferring to concentrate on service delivery. Nonetheless, some crucial issues – especially those involving women’s rights (dowry, divorce and child custody) -- remain at the forefront. A fierce debate has arisen among NGOs on what is the best strategy to achieve lasting change which favors the poor. The donors, on whom the vast majority of NGOs depend, seem at least implicitly to be opposed to confrontation, by preferring to support service delivery activities. This raises troubling issues about the often unwitting role of donors in helping or hindering the campaign for structural reform.

And finally, how do the urban middle classes connect to the political process? What civil society organizations, outside the party 'machines', adequately represent their interests and potential impact upon improving governance? Unions for some; professional associations for others (e.g. law, medicine, banking); Chambers of Commerce and other businessmen's clubs (Rotary, Lions and so on); Press club for writers; University graduate associations. But not NGOs in the pro-poor, development sector. The NGO discourses largely fail to encompass this key group of potential political allies. Some efforts are now being made to establish stronger relations between NGOs and the business community. The legal aid/advice and advocacy organizations have developed important relations with local lawyers and the Press (at national level too).

ADAB, the NGO apex organization, has launched a Social Watch program through its NGO member People’s Organizations, in conjunction with a number of local civil society associations on issues where there is wide consensus, such as: violence; women’s rights; corruption; environmental degradation; and fundamentalism (e.g. denial of women’s rights). However, it is also clear that alliances with the business community representatives of the middle classes is a mixed blessing, given their corrupt practices and collusion with agents of the State (e.g. through high default rates to the NCBs). It is also clear that across all of these civil society organizations, including the NGOs, the major competing political parties are eager to build alliances and co-opt where possible. 11 See J. Devine, Ph.D disertaion, Bath University, 2001.

Taming Leviathan: Reforming Governance in Bangladesh 34

In November, 1999 the leaders of over 40 chambers of commerce and industry appealed to both government and opposition to work together to break the political impasse that was viewed as “crippling the national economy”. This is but one of a series of appeals for better governance coming from the chambers in recent years. Their impact has been diluted by the sharp divisions in the business community along typically party political lines and, consistent with Bangladesh as a patrimonial society, businessmen have sought political patrons who would channel business in their direction and provide protection when needed against predatory bureaucrats and mastans. In practice, even though businessmen make sizeable contributions to party coffers, they have so far had little constructive influence on governance. On the contrary, they seem to be bogged down in a form of crony capitalism and the short-term pursuit of commercial advantage.

Despite this gloomy picture, there are signs of promising if slow change. The role of the formal modern private sector in the economy has grown rapidly during the 1990s following the liberalization measures introduced a decade or so ago. In the process, a class of dynamic young better educated entrepreneurs has emerged whose attitudes differ markedly from the small group of ‘crony capitalists’ who thrived under the martial law regimes. Most importantly, there are a significant number of export oriented enterprises that can only survive and thrive if they can compete in global markets. For them it is crucially important to reduce transaction costs; they need efficient transport, ports, financial services, telecommunications, power and the like. They cannot afford to pay large bribes to public service providers and the tolls extorted by the police and mastans. Consequently, they are potentially a powerful lobby for improved governance.

So far this group is poorly organized. The many chambers of commerce and industry and trade associations are, as may be expected in a patrimonial society, dominated by the elder generation of corrupt businessmen. But change is coming as the younger generation with MBAs from the United States, United Kingdom, and Australia gain confidence and build their businesses. The challenge is to find ways to speed it up. A focus on improving corporate governance is interdependent with a efforts to improve public sector governance. The way forward must be for the existing chambers, however flawed, to work for improvement in the standards of integrity within the business community and help them mobilize as powerful advocates of better governance. The modest grant made by the World Bank in 1997 to assist the FBCCI to create a small policy analysis unit was a small step in the right direction; this needs to be followed up.

As everywhere, the quality of public services depends to an important extent on the ability of

intended beneficiaries to have their views and needs taken into account by the service providers. For this to happen three conditions must be fulfilled. First, there must be transparency and good access to reliable information. Second, beneficiaries must have effective means to provide feedback to the service providers both at the design stage and during implementation. Third, the service providers must have good incentives to respond to the feedback from beneficiaries. At present all three conditions are hardly met in Bangladesh. For example:

Government frequently introduces new ordinances, regulations and the like with little public consultation.

Once promulgated, information about the new requirements are not well disseminated; citizens face a wide array of regulations, leaving them very much at the mercy of the public official charged with their application.

Private Sector: Conflicting Lobbies

Weak Channels of Accountability for Service Beneficiaries

Strengthening Accountability 35

Service providers have no well established practice of regular reporting on their activities in a way that would allow the ordinary citizen to asses performance and provide critical commentary. More generally, the Bangladesh public lacks the information that would allow it to track agency performance. This issue is taken up again in Chapter 7. Even where service provision failures are successfully highlighted by citizen groups, it is generally rare for corrective action to be taken. The bureaucracy is not responsive to citizen concerns. The necessary incentives and sanctions are quite simply absent (see Chapter 7) and there is no institutionalized oversight (or government inspectorate) which would encourage responsiveness. Moreover, staff associations are effective in discouraging mangers from taking disciplinary actions.

Recourse to the courts is costly and possibly risky. Despite the activist Supreme Court noted earlier in this Chapter, for most instances of bureaucratic abuse citizens rarely have the capacity to bring suit. If they do, the hearing would generally be held first by the lower judiciary which up to now are under the thumb of the Executive. It is not unknown for such litigants to end up themselves the subject of some false accusation.

Faced with these obstacles, one might wonder whether the aggrieved citizen might turn to his

or her Member of Parliament. But as we have seen above, the MP has little incentive to pursue the concerns of individual constituents unless they are prominent in the locality. The MPs’ energies are more profitably directed to lobbying public agencies to undertake public works in their constituencies, for which they can subsequently claim credit. This is abundantly clear from the stream of questions raised in Parliament by MPs. Moreover, party control over MPs is tight. This discourages ruling party MPs (the majority) from questioning the Executive. At the time of election, most candidates are highly dependent on party financing for their campaigns, and there is always the risk that an MP could lose his party’s endorsement.

Finally, an organized group of aggrieved citizens may decide to gherao the public officials who have offended them ( i.e. surround them in their offices and prevent them from leaving).. This happens frequently and may lead to concessions being made, most often when it involves junior public employees who have a tendency to become violent. But this is a very clumsy way to conduct public business and indicates an absence of more effective ways to channel citizens’ grievances, such as the appointment of an Ombudsman.

Over the years, a great dependency on donors has grown up in Bangladesh. This is no more

evident than in matters of accountability, where the public often seems to look to the donor representatives to raise issues of poor governance with the authorities and are often expected to insist on reforms as a condition of their assistance. At the same time, the imposition of conditionality is widely and deeply resented. This somewhat schizophrenic attitude springs from the public’s frustration bordering on despair that their rulers don’t govern better and are underexposed to public opinion.

The truth of the matter is that donors inevitably do impose extensive conditionality and that although this kind of pressure is often ineffective or the measures promoted prove to be unsustainable, over time a great number of important reforms have been successfully adopted as a result of donor interventions. As critics of the role of donors would be quick to point out, some of the ‘reforms’ promoted by the donors and accepted by the government have proved to be misguided (e.g. the creation of DESA as another public agency, in contrast to Rural Electricity Board which

The Contentious Role of Donors

Taming Leviathan: Reforming Governance in Bangladesh 36

successfully adopted a cooperative ownership system). On matters relating to governance, the resistance of the government to donor pressure for reform has been particularly obdurate. For example, very few of the reforms set out in the report Government That Works have been implemented even though they were welcomed at a major workshop in 1996, which was attended by a wide range of prominent personalities both in and outside government, were favorably reviewed by Cabinet and there was and still is widespread public recognition of their validity.12

At the regular Aid Group meetings, the donors have expressed with increasing force their great unhappiness at the general lack of government transparency, poor accounting, absence of follow up on audits and the reports of the Public Accounts Committee of Parliament, the failure to appoint an Ombudsman despite the Awami League’s 1996 election pledge to do so, and more generally the failure to impose and respect the rule of law, but these views of the donors have had little impact on the actions of the government13. Moreover, on matters of corruption, the government has been particularly slow to act and, when action was taken, it was often perceived as partisan or personalized – a way of settling political scores rather than an attempt to be objective and neutral. Poor donor coordination, compounded by opportunism driven by short term commercial and political interests, has weakened the ‘voice’ of the donor community.

The more indirect actions of the donors seem more effective, particularly their support for civil society. These are of course long term processes, but is important to remember that donor support for the training of journalists, for research institutes such as the Centre for Policy Dialogue, for the chambers of commerce and industry to improve corporate governance, and for NGOs all contribute profoundly to the institutional development of Bangladesh and the nurturing of a pluralist society capable of providing a critique of the failures of governance. In the long run this may have a deeper and more sustainable influence on the quality of governance than program conditionality.

Although issues of sovereignty are often raised by the donors’ critics within and outside government, the legitimacy of donor advocacy comes not only from universal ethical principles but, more significantly, directly from the political leaders’ own rhetoric. A review of the Prime Minister’s and Ministers’speeches over the years, both promises made while in Opposition and subsequently policy statements while in power, provide ample support for reform – to combat corruption, to improve the functioning of the bureaucracy, to support civil society, and to fight poverty. The donors are simply asking for words to be translated into deeds.

Effective institutions for public accountability are the key to good governance. Authoritarian

governments whether on the political right or left, typically lack such institutions and therein lies the seeds of their eventual destruction. Bangladesh, as a parliamentary democracy, has the potential to build such institutions but as yet for the most part has not done so. Too little attention has been given by the political leadership across the spectrum to strengthening key institutions. While no government in power is likely to show enthusiasm in adopting measures to limit that power, the welfare of its citizenry depends on such action being taken. Thus, it is up to civil society to take the initiative, not to side with one party against another, but to demand that all parties recognize that once in power they rule only by the will of the people and consequently have an unquestionable obligation to account for their actions, not just at each election, but also on a continuous basis between elections. The legitimacy of a government derives from its social contract with the country’s citizens implicitly entered into after each election, reinforced by the oath of office, to respect the rule

12 The PARC Report, 2000 quotes extensively from the report Government That Works 13 see reports of the recent Development Forum meetings.

In Conclusion

Strengthening Accountability 37

of law and all that that implies. The guardians of this contract are Parliament, the Supreme Court, the Supreme Audit, the Press and the institutions of civil society. In Bangladesh, all these need to be strengthened. Above all, for these institutions to be effective, the government must be willing to set aside its long tradition of secrecy inherited from colonial rule and be open in all its dealings, except for a narrow range of matters where national security is demonstrably at risk.14

14 See PARC Report, June 2000 (p.16-26) for an excellent discussion of this issue.

“This administrative system shall have to be efficient, transparent, accountable, corruption-free, cost-effective, disciplined and dynamic.”

Prime Minister Sheikh Hasina, March 14, 1999

Central to good governance is the sound and accountable management of public

funds. So much so that it merits a chapter on its own. This is an area of great weakness in Bangladesh as was explained in the Report of the Public Administration Reform Commission (June, 2000). In this chapter we take a closer look at the various components of public financial accountability. The starting point must be a sound system of planning and budgeting, followed by reliable and timely accounting and auditing, and ending with a process that leads to corrective action where mismanagement is found.

Public financial accountability derives from openness, and sound internal controls, accounting, auditing, financial reporting and, where justified, effective sanctions. In Bangladesh, the lack of financial accountability is particularly acute. The chain of accountability from the public through the legislature to the executive appears to have broken down. The media and Parliament’s Public Accounts Committee have repeatedly documented waste, fraud, and misuse of public funds, but to little effect.

Sound public expenditure management requires the achievement of three inter-related performance objectives: maintenance of an aggregate fiscal balance (Level 1); resource allocations according to the government’s strategic policy priorities (Level 2); and efficiency in the use of budgeted funds and assets (Level 3). The challenge is to develop an institutional framework that facilitates the achievement of all three objectives. From 1992 to date Bangladesh has performed quite well at Level 1 (see the three charts below), though there are worrying reports of recent heavy recourse to suppliers’ and domestic credit which may eventually undermine good overall fiscal management. With regard to Levels 2 and 3, there are major deficiencies.

In Bangladesh, the system of checks and balances on which democratic governance depends is inadequate. The Ministry of Finance carries the whole burden of financial management from raising revenues (the responsibility of its National Board of Revenue), to preparing and managing the budget (the responsibility of its Finance Division), to preparing and auditing the accounts (both the responsibility of the Comptroller and Auditor General). The Ministry of Finance also has oversight of the central bank and, by extension, the supervision of the banking system, as well as of non-banking financial institutions and the Securities Exchange Commission. One may well question

CHAPTER 4:

Taming Leviathan: Reforming Governance in Bangladesh 40

Chart 4.1: Gross Reserves (Quarterly)

500

1000

1500

2000

2500

3000

3500

95-I

95-I

II

96-I

96-I

II

97-I

97-I

II

98-I

98-I

II

99-I

99-I

II

00-I

00-I

II

01-I

01-I

II

02-I

Fiscal Year Quarters

mill

ions

of U

S$

Chart 4.1: Gross Reserves (Quarterly)

500

1000

1500

2000

2500

3000

3500

95-I

95-I

II

96-I

96-I

II

97-I

97-I

II

98-I

98-I

II

99-I

99-I

II

00-I

00-I

II

01-I

01-I

II

02-I

Fiscal Year Quarters

mill

ions

of U

S$

Chart 4.3: Exchange Rate Movements (Monthly)

8085

9095

100

105110

Jan-93

Jun-93

Nov-93

Apr-94

Sep-94

Feb-95 Jul

-95Dec-9

5May-9

6Oct-9

6Mar-9

7Aug-

97Jan

-98Jun

-98

Nov-98

Apr-99

Sep-99

Feb-00 Jul-

00Dec-0

0May-0

1

Index

REER (1990 = 100)

NB: Increase = appreciation

whether such a concentration of responsibilities is either prudent or appropriate. The task of reform is truly daunting because each one of these functions has serious shortcomings.

Serious deficiencies, which will need to be addressed in a phased manner:

The budget is not framed within a consistent macroeconomic and medium-term expenditure framework. This delinks the level and composition of expenditures from other macroeconomic aggregates such as GDP growth, inflation and interest rates. It also erodes allocative efficiency and undermines effective macroeconomic management.

The development budget (ADP) and recurrent budget are prepared and approved on

parallel tracks. This separation creates a mismatch between the capital budget and the recurrent budget and government is frequently saddled with a sudden spurt of claims for unanticipated recurrent expenditures which it is unable to meet. As a consequence, the country is not able to benefit fully from some asset already built – for example, a hospital is left without medicines or a school without a teacher.

The recurrent budget is formulated on an

incremental basis. The previous year’s allocation is used as a base for next year’s budgetary submissions, resulting in an automatic upward ratcheting of expenditure. Since several components of expenditure, such as salaries and debt servicing, are non-discretionary in the short-run, much needed expenditures on operations, maintenance, supplies and services get crowded out.

Quality and relevance of projects in the ADP needs improvement. Projects under the

ADP are approved if they conform to the sectoral strategy and targets outlined in the Five Year Development Plan. In practice, the sectoral strategies contained in the plan document are so broadly defined that they enable almost every project that is presented for consideration to be justified. As a result, scarce resources are spread thinly across a large number of projects, several of which are of questionable priority. This limits development impact; for example, a review of the Roads and Railway portfolio indicated that at current levels of funding ongoing projects would require about 11 to 12 years to be completed.

Cash and resource management needs strengthening. Shortcomings in formal cash

management have caused wide month-to-month fluctuations in government borrowing from

Planning and Budgeting

Chart 4.2: Inflation (Twelve-monthly moving average,

National CP 1985/86=100))

0

2

4

6

8

10

FY90

FY92

FY94

FY96

FY98

FY00

12 m

onth

ly m

ovin

g av

erag

e

Chart 4.2: Inflation (Twelve-monthly moving average,

National CP 1985/86=100))

0

2

4

6

8

10

FY90

FY92

FY94

FY96

FY98

FY00

12 m

onth

ly m

ovin

g av

erag

e

Tightening Financial Management 41

the Bangladesh Bank. This also results in increased, and avoidable, interest costs to Government and undermines monetary management. For example, the sales of savings certificates, which are available on tap at high rates of interest, has added to the Government’s debt service burden and worsened domestic indebtedness.

Policy and expenditure evaluation is limited. The focus of audits is almost exclusively

on inputs and compliance; little attempt is made to assess impact or the effectiveness of service delivery. Audit reports have been several years in arrears; consequently, the feedback that an audit can give to improve budget formulation and implementation is lost. An effort is now underway to catch up.

Over the years, there have been many donor-supported initiatives to improve financial

management, but with limited success. The most notable exception is the RIBEC project (See Box 4.1). This past experience suggests that technocratic interventions alone are not sufficient and need to be complemented by institutional and structural reform. Reforms should attempt to alter or build on existing systems, rather than create new ones. For example, the ADB funded technical assistance that has made many valuable contributions to the Ministry of Finance’s policy work, but has not yet been integrated as part of the Ministry of Finance and hence the sustainability of its impact is in doubt.

Addressing the entire spectrum of problems identified above will require a phased, medium-

term, program of 3-5 years. The highest priority measures needed are be the following:

Economic Adviser’s Wing. The capacity of the Economic Adviser’s Wing in the Ministry of Finance should be strengthened in order to (i) conduct macroeconomic analysis; (ii)

Box 4.1: RIBEC – A Successful Reform Initiative Modernizing the existing public financial management system has demanded a fundamental change in organizational culture, habits and traditions. Such a challenging task requires a carefully phased process aimed at building up stakeholder support. The Reforms in Budgeting and Expenditure Control (RIBEC) Project is one of the rare examples were this has been achieved in Bangladesh. In 1995 the Bangladesh government lacked adequate timely information on public expenditure. The budgetary system was repetitive and overlapping. The classification system was antiquated. The manual processes were inordinately cumbersome and excessively centralized. Rules and regulations were totally out-of-date and of labyrinthine complexity. Accounts staff were very poorly trained. By the end of 1999, a computerized budgeting and accounting system was in place, supporting a new government wide classification capable of supporting economic analysis and budget forecasting. Financial rules have been updated and consolidated. Over 500 accounts staff have been trained. This success was built on failure. The original project was so vast in scope that it was not possible to confine the project activities within the Ministry of Finance. The multiplicity of objectives led to a dispersion of effort. This was compounded by poor management. After a year‘s implementation the project had succeeded in producing only a few reports and some unstructured training. The consultants were then changed and the project reconfigured to emphasize incremental change, focussed on outputs and well defined building blocks, and careful attention was given to change management (See Box 7.1). This approach recognized the importance of achieving short term ‘wins’ to maintain momentum and strong management support. Within a flexible framework, the project was able to concentrate on a few key deliverables, which could be replicated and later extended.

Taming Leviathan: Reforming Governance in Bangladesh 42

operate and regularly update a macro model of the economy encompassing fiscal, monetary and external sectors which can serve as a basis for a medium-term budgetary framework; (iii) adapt the ADB-funded CGE model for macroeconomic and policy analysis; (iv) prepare quarterly and annual reviews of the macroeconomic situation and (v) increase outreach with academic institutions, interest groups, and organizations like the Bangladesh Institute for Development Studies and the Center for Policy Dialogue. On-the-job training; participation in tailor-made seminars, both at home and abroad; and working with local consultants on special assignments are some of the instruments that could be used to accomplish these objectives.

Chief Economic Advisor. The Ministry needs a highly respected and top-notch Chief

Economic Advisor (CEA) to the Minister of Finance who should be appointed through competitive recruitment for, say, a five year period. Following the example of several countries which have tried this approach, including India, such a position could be filled by a Bangladeshi economist of international standing. In addition to ensuring that the outputs produced by the Economic Adviser’s Wing are of good quality, the CEA could oversee the training of economics staff.

Economist Development Program. In recent years, as Bangladesh has integrated itself

within the global economy, the demand for skilled professionals within government with training in economics and finance has increased, resulting in a widening skills gap within the civil service. Conditions of employment are such that the best professionals choose to go abroad or to work in the private sector. While civil service compensation may be improved over time, in the interim a group of 20-25 competitively selected civil servants could be put through a program of specialized training each year. This program, which would act as a non-monetary incentive, could include a distance learning advanced degree in economics1; participation in EDI and IMF courses; special courses organized through the Academy for Development Planning, Public Administration Training Center and the Financial Management Academy. A similar program has been pioneered under the RIBEC initiative with some early success.

Resource Management Unit. A Resource Management Unit should be established in the

Budget Wing of the Ministry of Finance to monitor the implementation of the budget and improve the quality of budget data presented to the Budget Monitoring and Resource Committee (BMRC) and its technical committee. It could also provide the interface between the Ministry of Finance and Bangladesh Bank. Through detailed monitoring of the budget, the unit will provide the Ministry of Finance with an early warning system of divergences from budget projections and a capacity to handle exogenous shocks. It would also work closely with the Economic Adviser’s Wing to ensure that the medium-term expenditure framework is compatible with other macroeconomic targets.

Programming Division, Planning Commission. The staff, both in the Planning

Commission and in the Planning Cells of the line ministries, will need training in identifying and appraising projects, so that the quality of ADP projects can be improved. The RIBEC project has provided a sound accounting framework2 for recurrent expenditures which should be gradually made compatible with the ADP.

1 For example, the University of London’s Masters program in Economics allows students to receive a post-

graduate degree in-country with only one, brief visit to the university for the defense of the dissertation. 2 This framework is consistent with IMF’s (Global Financial Statistics) accounting standards

Tightening Financial Management 43

Computerization and rationalization of the payroll and pensions systems. This is a high priority because the potential gains are tremendous. The government workforce is large, about a million, and so the volume of transactions is very large. The huge payments task is compounded by the need to keep track of a large number of allowances and the need to recover various sums from government employees relating to charges for housing (for those who have access to public accommodation), repayment of loans (for housing, car, motor cycle, etc), and contributions to a provident fund. The current payroll record is unreliable, and a significant number of ghost workers or deceased persons may still be receiving payments. There is a need to reconcile various sources of payroll accounts. Computerization and streamlining of the payroll system would make it more transparent and greatly reduce the scope for abuse. There is also synergy between reform of the government payroll system and that for pension management, given that pensions are linked to last pay drawn. No doubt those now misusing the system will oppose the reform, but it will be difficult to voice opposition directly. Automation of the payroll system could make it possible to cut the number of staff who now manually do the work by up to two-thirds. Consequently, those involved with the manual preparation of payrolls are likely to feel threatened and may well oppose reform unless the issue is handled with skill.

Other measures that merit consideration. These include linking the development budget

to the recurrent budget by more closely coordinating the budget preparation process; asking line ministries to link their budgetary proposals to sectoral strategies; increasing the autonomy of ministries to shift resources between recurrent and development expenditures, subject to agreed targets; making the budget formulation process more participatory by involving civil society groups, sectoral experts and parliamentary sub-committees in pre-budget and pre-appraisal project hearings (the 1999/2000 budget formulation process represented a step in this direction); presenting mid-term reviews to parliament indicating budgetary performance to date and setting the stage for next years budget.

There are many serious shortcomings in the current public finance management system. The

most important are noted below.

Public Accounts. The Bangladesh government accounts are poorly maintained. They are kept on a cash basis and also are not always complete. Assets and liabilities are not appropriately recorded in the books of the government. Payments required on an emergency basis are often recorded in unknown or suspense accounts. It is not uncommon to find a lack of reconciliation and misclassification of expenditures that lead to inaccurate financial data. The true financial position of the government is consequently impossible to establish.

The accounting records, in many cases, do not include direct disbursements for goods and

services by donors for projects supported by external aid. Grants, loans, and aid funds for development projects involving millions of takas are not recorded in the public accounts as required by law. They are passed on directly to project or special accounts and reflected separately in the accounts of development projects.

There is no constitutional requirement for the development of an audited consolidated statement

of assets and liabilities. The government’s overall financial position is not prepared for parliamentary scrutiny. Therefore, significant changes in the nation’s overall financial position go unnoticed.

Accounting and Internal Control: The Nuts and Bolts of Sound Financial Management

Taming Leviathan: Reforming Governance in Bangladesh 44

The receipt management system is also unequal to the task. Reportedly, there are over 100 different revenue collection systems in various departments, each with its own peculiarities. None of the systems has the built-in checks and balances needed for effective monitoring and control. Thus, the consolidated receipts and expenditures of the state may not be accurately or consistently reflected in the government’s public financial accounts3.

Bangladesh Bank acts as the custodian of all government funds. In the recent past significant

unreconciled differences between the government’s records and the records of the Bangladesh Bank have arisen. In one instance, the reported discrepancy was as large as 10 billion Taka. Furthermore, monitoring of financial and operational activities is weak. Management information systems are unreliable, modern monitoring and evaluation capacity is practically non-existent, and any useful information that may be available to support judgments on the nature and extent of malfeasance is unlikely to be released to the public given the widespread lack of transparency.

There is a conspicuous absence of any effort to strengthen the quality of the budgeting process and make it more transparent. And the same may be said of the accounting for and the management of the national debt. There are also no significant initiatives aimed at building and strengthening the capacity needed to maintain the physical asset base of the state and to oversee the process of privatization, or to assess the quality of foreign aid projects. Another neglected area is tailoring of investments in information technology to strengthen financial accountability.

In sum, the public accounts presented to Parliament are almost always late, unreliable, and of limited use to parliamentarians. Moreover, the Minister of Finance does not officially sign off on the presentation, so there could be serious inaccuracies, amounts unrecorded, and irregularities that are going unchecked. As such, they are of scant use in the budgeting process. And the responsible ministry does not provide any representation on the accuracy or completeness of financial information provided to Parliament.

Internal Control. The Ministry of Finance (MOF) acts as the budget authority and overall supervisor of public sector transactions. The Secretary for each ministry is delegated power to transact business under his or her jurisdiction. The Secretary is designated the “principal accounting officer” and is charged with the responsibility to ensure that all transactions are duly approved and authorized under law. He or she is expected to be answerable to the Minister and to Parliament for prudence and propriety . The Office of the Chief Accounts Officer (CAO) was created in the early 1980s to assist the Secretary in the discharge of his or her responsibility as principal accounting officer.

The concept of ministerial accountability to Parliament for the sound financial management of public resources is not well appreciated by the bureaucracy. In addition, the role of the Ministry of Finance is blurred. The division of rights and duties between the line ministries and MOF is not clearly stated or understood by the stakeholders. The risk of a breakdown in internal financial control and consequent mismanagement is always high when roles and responsibilities are unclear.

An example of the failure to exercise financial control is the operation of the much-abused “Personal Ledger Accounts” —pools of funds maintained outside the books of accounts — which are not permitted under the financial rules of the state. These accounts are used to make withdrawals of funds without any reference to approved budgets. This abuse of power appears to be extensive. The accounts and the audit trail of these funds are very weak. The Comptroller and Auditor General (CAG) reported in 1999 that about 300 billion takas were believed to be in “suspense”.

3 The World Bank’s Country Financial Accountability Assessment has recently assessed the magnitude of

the problem.

Tightening Financial Management 45

The reasons for these suspense accounts merits further investigation and the matter brought to

the attention of the Parliament’s Public Accounts Committee (PAC). There appears to be a clear breakdown in internal control. There is little information available to the public on how the government intends to resolve the issue, or even if it is willing to do anything quickly about this obvious breach of parliamentary control. The CAG has publicly observed that “there exists practically no effective internal control system in ministries since 1983.” The internal control system is required by law but has not been put into practice by the government. In the CAG’s view, the huge number of irregularities and incidents of malfeasance in public expenditure and investment can be directly attributed to the failure to establish a well structured internal control and accountability system.

There are outstanding allegations of systemic corruption in the pre-audit function carried out within the Ministry of Finance by the staff of the Comptroller General of Accounts. In addition, certain departments, such as Public Works and Highways, that operate independently of the CAG are reportedly even worse offenders. Internal control is an area that has been identified as the biggest gap in the financial accountability process. This goes to the heart of the issue of fraud, waste, and abuse, and is the main cause of the high number of irregularities and the malfeasance pointed out by the watchdogs4. It is curious to note that the government has not identified this specific area for further scrutiny and reform. There is no clear indication or articulation of a demand for the Ministry of Finance to take responsibility for the strengthening internal control within the government.

The Implementation Monitoring and Evaluation Department (IMED), for instance, does not provide any useful information to the public on the results of its monitoring activities. Nor does it claim to have conducted systematic ex-post evaluations of the results of government programs and activities. IMED lacks the capacity to undertake independent evaluations.

There is also no specific requirement for the government to periodically self-assess its accounting and internal control systems and to publicly disclose the results of such assessment. This is unfortunate, because the real test of capacity is a willingness to reform from within.

The internal control system of government is so weak that not much corrective action can be expected without determined leadership at the highest political and civil service levels. The principal accounting officers have not taken ownership of the responsibility assigned to them by law. The secretaries examine neither monthly nor annual appropriation accounts prepared by the chief accounts officers and they have not established any significant form of performance reporting. As such the effectiveness of the stewardship function of the Ministry of Finance comes into question. In addition, the Audit Office maintains the payment function and compiles accounts of the government. This pre-audit function reporting to the CAG continues, and it raises questions about the independence and effectiveness of the Audit Office.

There is also little attempt to publish ministerial objectives on a department basis and to provide funds on that basis. The absence of such control muddies the accountability relationship between Parliament and the bureaucracy; and responsibility for results remains unclear. Systemic issues of internal control and accountability are largely neglected, despite repeated warnings form the CAG, media, and civil society. This lack of control implies that there is no assurance that projects, including Bank and other donor funded, and related procurement are immune from corruption, waste, fraud, and abuse.

4 Watchdogs include the Securities Exchange Commission, PAC, CAG, BB, Transparency International

(Bangladesh) etc..

Taming Leviathan: Reforming Governance in Bangladesh 46

In all countries, public procurement is a potential source of major corruption and a huge waste

of public resources. Bangladesh’s current procurement system has particularly grave defects5. The annual volume of public procurement is around $3 billion. Much of this is handled by public corporations and semi-autonomous bodies, though their authority to award contracts is very low – under $2 million. Contracts between $2 and 5 million may be decided by a Ministry; larger contracts are subject to the approval of a Cabinet committee. Actual implementation is far from satisfactory. Not only do substantial delays occur, but also the procedures used are seriously deficient, and there is a widespread perception of extensive corruption, political influence, and pressure from union CBAs effecting procurement decisions. Public trust in the process is generally lacking.

The Constitution has no direct provision relating to public procurement, nor is there any formal procurement law or decree. A Compilation of General Financial Rules, originally issued under British rule and revised in 1954 under Pakistan rule, was reissued in 1994 and again 1999 with few changes. The Rules refer to a Manual of Office Procedure (Purchase) dating back to the 1930s which has been little revised since then. The 1994 version of the Rules refers to Guidelines for foreign funded projects issued by the External Relations Division, modeled on the World Bank’s procurement guidelines.

While no major conflict exists between the government procedures and the World Bank’s guidelines, actual implementation is far from satisfactory with, for example, inadequate advertising, poor specifications, non-disclosure of selection criteria, award of contracts by lottery, and re-bidding without good cause. The inordinate delays are particularly serious, as they add substantially to the cost of contracts, generate complaints, and reinforce the impression that the process is being interfered with. More than a third of the procurement cases handled in FY97-98 took over a year. A fifth took over 500 days.

In this respect, the selection of consultants is especially defective, with review by layers of committees often each overturning the recommendations of the lower layer. Decisions tend to be postponed until postponement is no longer possible. Consequently, limiting the permissible elapsed time, is one measure to bring discipline to the whole process.

Lack of staff well grounded in handling public procurement is one deficiency that may easily be corrected by instituting a crash training program with suitable technical assistance. Once initiated, training should be a continuous process, with substantial of attention given to the selection of training institutions, preparation of curricula, hiring of trainers and the like. Making the whole process more transparent is another important way to improve the practice and enhance the integrity of the system. Promulgating a new public procurement law and regulations based on best practice (a model law has been drafted by the UN Commission for International Trade), supplemented by a set of standard bidding documents is also needed to eliminate the present ad hoc procedures and restore public confidence in public procurement. The Country Procurement Assessment Report has a set of detailed recommendations that merit the government’s priority consideration.

In theory the CAG is independent of the government but, in practice, this independence is

severely circumscribed, and the Office of the CAG acts like a department within the Ministry of Finance, subject to all the rules that apply to the civil service. Its budget is tightly controlled by the government. There is no fixed tenure for the appointment of the CAG except that he must retire at

5 See Country Procurement Assessment Report , World Bank, November, 1999

Procurement: A Source of Major Corruption and Waste

The Comptroller & Auditor General: Two in One

Tightening Financial Management 47

age 60. The President appoints the CAG based on the recommendation of the government. The criteria for selection and the process for selection and appointment have been kept secret. This failing is representative of the attitude of the Administration toward concepts of openness and accountability. In the interests of good governance and ‘open’ government, selection criteria applicable to appointments to such an important independent public office should be made more transparent and consultative.

The CAG does not have the authority to hire the qualified and professional auditors and

accountants he needs. He cannot restructure the office, promote staff, or purchase equipment without prior approval from the Ministry of Finance and/or the Ministry of Establishment. Flexibility to enhance methodology and productivity is limited. This limitation is inconsistent with the notion of a truly independent supreme audit.

The CAG conducts audits of about 22,000 administrative units of different ministries, government departments, public utilities, public sector corporations, state owned enterprises, and local government institutions. The audits are largely compliance-oriented. There are 9 audit directorates. In the traditional format, the directorates send audit teams consisting of 2-3 junior level auditors to the audited organizations to check transactions, vouchers, and other records on test basis and to comment on the transactions. Due consideration is given to the responses of the audited organization.

A welcome shift nevertheless has been taking place in the approach of audit in the last three years. The CAG is now placing more emphasis on issue-based rather than transaction-based audits. The audits are noteworthy in that they focus increasingly on serious weaknesses in internal control and irregularities that impact the system as a whole, rather than focusing on individual transactions. The emphasis is on “value for money” (VFM), or special audits in areas of public interest.

Since January 1996, over 100 such special audits have been completed and are being reported to

the PAC6. In its second report, the PAC has requested the auditor general extend VFM auditing to at least 1 percent of public sector organizations by the year 2000. Gross irregularities, involving 900 million takas, were revealed in this kind of audit alone.

There are many irregularities being reported, and while some may be trivial and dated, they

reflect the widely held belief that the problem of internal control has hardly been taken seriously. There is no doubt that the quality of audit could be improved; but it is the lack of capacity at the Ministry of Finance to implement sound internal control in areas of public interest within government that is the central issue at this time, not the quality of audits.

Notwithstanding its limitations, the Audit Office has been highly critical of the government’s performance. Although the quality of the audit work needs much improvement,7 given the operational environment, the CAG has done more in recent years to promote financial accountability than any other state institution. The Audit Office reports and highlights areas of concern regularly; and it is working with various development partners to improve its methodology and welcomes ideas for further improvement.

Two technical assistance projects have been initiated to strengthen the CAG audit directorates, improve the skills of audit officials, and raise the quality of audit reports. It is likely to be a slow

6 Special audits have been carried out at several organizations including Bangladesh Biman Airlines, the

Agricultural Rehabilitation Program, Dhaka Leather Complex, Education Boards, Telephone & Telegraph Board, and so forth.

7 Problem areas include delays in reporting and overly transaction-oriented compliance audits.

Taming Leviathan: Reforming Governance in Bangladesh 48

process given the enormity of the job, but the importance of modernizing the office has been recognized, and corrective action has been initiated in line with the offices’ absorptive capacity.

The CAG has correctly identified four areas for improvements: computerization of payroll, provision of new offices for the Audit Office, improved training facilities, and establishment of the Office of the Ombudsman as a complementary pillar in the integrity system. The CAG has also taken the initiative to help the government strengthen its accounting through the Reforms in Budgeting and Expenditure Control project, mentioned earlier. However, the sustainability of these various efforts is uncertain, given the lack of emphasis on strengthening internal control, the lack of independent legislative audit, and the limited use of modern audit, reporting and computing techniques.

The CAG is one of the few departments of the government to publish an annual performance

report. That it does so demonstrates a praiseworthy concern about transparency. The Annual Report provides information on the operations of the Audit Office – the costs of both auditing and accounting. The coverage of audit is explained well, the role of audits is clearly communicated, and the services provided to the PAC and other parts of Parliament and the government are described. It is noteworthy that the amount of money recovered or adjusted from the results of audits exceeds the amount allocated for conducting audits.

The Annual Report clearly highlights the shortcomings in management of public funds: expenditures incurred without budget allocation; excess expenditures in various contingency and miscellaneous categories; and the provision of enhancement for budget allocations that appears to be inconsistent with past requirements. A key concern is that the executive departments failed to give satisfactory explanations for instances of mismanagement identified by the Audit Office.

For example, in the Ministry of Agriculture,

financial irregularities amounting to Tk.210 million were reported in one fiscal year; 2 percent of this amount involved improprieties; 96 percent involved loss, damage or wastage; and 2 percent was attributed to theft, embezzlement, fraud and misappropriation of funds. The CAG report gives many such examples from various departments. The problem of financial management appears to be pervasive. Interestingly, the CAG Annual Report highlights that the category of waste, damage and loss is the major contributor of

financial irregularities, not necessarily misappropriation, theft and fraud (see Figure 4.18).

8 The estimates are based on test audits of all transactions of a ministry for a selected time period. They do

not represent annual estimates, nor do they claim to be statistically representative of the population. Source for Figure 4.1: Annual Report 1997, Office of the Comptroller & Auditor General of Bangladesh.

Figure 4.1: Types of Financial IrregulartiesOthers

Improprieties

Theft, Fraud,Embezzlement &MisappropriationLoss, Damaage &waste

Tightening Financial Management 49

The CAG does not normally provide press releases on his findings, nor can staff explain the

contents of the report to the media. This is a sharp contrast to practice in countries such as the United Kingdom and Canada, where media relations and communication are integral parts of audit methodology.

In conclusion, for the auditor general of Bangladesh to be effective, the Audit Office must be competent and objective. The country needs an independent Audit Office, with the auditor general reporting directly — administratively and functionally — to Parliament. To perform his constitutional role effectively, the auditor general must have secure tenure (a minimum of five years), adequate resources, and freedom from restrictions that impact on quality of staffing and auditing. The rules that apply to the bureaucracy should be examined by an independent third party to see if they unduly restrict CAG work. The constraints to the effectiveness of audits appear to be overwhelming. The office requires trained professionals that can conduct sound, control-oriented financial and value-for-money audits.

The need to strengthen the capacity for audit should be kept in perspective. Strengthening may only have a marginal impact at this time. The quality of audit is not the main issue; rather it is the failure of the internal controls, which should be exercised by government, that is the more fundamental problem. More or better audit reports, by themselves, cannot solve this.

Remembering that bureaucracies do not reform without external pressure and politicians do not react to “ professional” advice, there is no real substitute for public opinion calling for change. Many CAG staff do not favor any structural change, such as the separation of accounts from audit because

Box 4.2: Making the Budget and Public Accounts Transparent The Example of Guatemala

Guatemala has made impressive strides in modernizing its public finance management, making its operations more transparent and focussing on results under the strong leadership of the Minister of Finance. The most noteworthy features are: • A unique computerized database provides immediate detailed information on all recorded transactions,

individually or aggregated in a variety of ways (by supplier, authorizing agent, budget classification, program region, etc), providing timely budget execution information to managers and a clear audit trail

• Budgets and up-to-date expenditure data by detailed budget category are available to the public and Press on

the internet (www.siafsag.gob.gt) • Once authorized by the line agency, payments are made by the Ministry of Finance within 72 hours, arrears

to suppliers have been eliminated, and over 50 per cent of payments are now made electronically, eliminating discretion as to who gets paid

• The number of government bank accounts has been reduced from 1,300 to under 600 • The cost of the budgeting and accounting system has been dramatically reduced • The Minister of Finance has used these efficiency gains to obtain public support for a fundamental reform of

tax administration. Note: this account describes the situation in Guatemala in 19999.

Taming Leviathan: Reforming Governance in Bangladesh 50

they see such reforms as making them personally worse off. A successful reform strategy will need to take full account of this resistance and find ways to make reform attractive to the staff concerned.

To build a constituency for reform, stakeholders, particularly civil society and the poorest groups need to be better informed on the impact of waste, fraud, and abuse of public funds. Transparency could be a powerful instrument for creating public pressure for reform. To this end training Bangladesh’s financial journalists to better understand and report on the issues would be helpful.

The shift from purely compliance-based auditing to Value-for-Money auditing requires reorganization and development of the human resources in the new type of auditing skills and techniques. The CAG is trying to train his staff in new skills and techniques of auditing with his existing resources, and external assistance. The Financial Management Academy has been upgrading its capacity with computers and audiovisual equipment. A program to enhance training capacity and the quality of the training courses offered by the academy is under way. There is a strong justification to provide enhanced donor support to help overcome the shortage of teachers and other costs.

Under the Bangladesh Constitution, the legislature has the ultimate responsibility and the authority to hold government to account for its performance and this is particularly true when it comes to accounting for the use of public funds and assets. But, as we have seen in Chapter 3, the Bangladesh Jatiyo Sangsad (Parliament) does not perform this function openly and effectively. The Public Accounts and Public Undertakings Committees have issued reports that are critical, yet little corrective action has resulted. The government does not respond on a timely basis. Waste and corruption seem accepted and have become institutionalized.

A crucial link in the accountability process must be the independent and impartial

assessment of the financial and performance information provided to Parliament by the government. The CAG is expected to carry out this third party verification function. The Constitution requires that the CAG’s reports be submitted to the President who in turn shall cause them to be laid before Parliament.

The PAC has been especially active in recent years. The number of hearings held in the last

two years has reportedly increased from the previous two years. The Committee despite some flaws discussed below, has generally functioned as intended, but the government has taken little action on its recommendations. This represents a breakdown in the accountability system — the government reportedly has “had a tendency to bypass and/or defy directives”9.

According to the third report of the PAC: “the committee has noticed with great regret that no

ministry has complied with its directives to regularize excess expenditure. This not only shows that the clear directives of the committee are violated, but also reveals the extent of indifference of ministers to check financial irregularities in government. It is the considered view of the PAC that this indifferent attitude hinders the prospect of ensuring accountability and transparency at every level. Ministries are urgently directed to comply with all directives issued in the past.” This is striking evidence of the ineffectiveness of legislation aimed at good governance when the spirit of the law is disregarded by the Executive itself.

The effectiveness of the PAC is limited by several factors. First, PAC hearings are not open to the public, despite the public interest and the supposedly non-partisan nature of its mandate. This

9 Nizam Ahmad, “Committees in the Bangladesh Parliament,” Legislative Studies 1998, V 30, N1(1), pp.

79—94.

Giving Teeth to Parliamentary Oversight

Tightening Financial Management 51

lack of transparency is in sharp contrast with comparable committees in more developed democratic countries such as the United Kingdom, Canada, and the United States. In these countries, the public has right of access and any member of the public can attend hearings unless for special reasons (e.g. security) the hearings are “in camera.” In such cases, the public is informed of the reason for the decision. Without such transparency, the accountability loop is incomplete. The consequence of the closed-door approach is reduced public pressure for change. Furthermore, the public is not fully aware of the performance of their representatives in Parliamentary committees.

Second, there is a perceived conflict of interest. PAC is chaired by the ruling political party, not the Opposition. This contrasts with the practice, for example, in the United Kingdom, India, and Canada. The procedure is not fully consistent with best practice and should be changed.

Third, the PAC has not formally requested special audits in specific areas of public concern.

Nor has the Committee had much influence on the nature and scope of the work undertaken by the Audit Office. The risk here is that the work of the less than fully independent public auditor may not always cover matters of current interest to the members and the public. There is also an issue about the timeliness of the CAG’s reports and related PAC scrutiny. In many countries, the Audit Offices welcome general direction from parliamentarians, especially dealing with scope of work and resources. But the procedure is easier to implement when the Audit Office is fully independent of the government and acts as a servant of Parliament — an idea that may be worth pursuing in Bangladesh. 10

Fourth, the PAC suffers from lack of adequate staff and research capacity to support their

activities. This is a serious concern; the quality of the PAC work would be considerably enhanced if some reallocation of resources were made in favor of the committee. For instance, the PAC is unable to follow up on its work because of a lack of continuity and permanent staff.

Fifth, PAC has an urgent need for greater research capacity (staff and equipment) to assist

the committee in strengthening its follow-up actions.

Sixth, the effectiveness of the PAC is further constrained by lack of any legal requirement for the Executive to respond to the PAC’s report within a set period of days. This, too, is a major failing, and it is inconsistent with best practice. Moreover, PAC has submitted several reports to Parliament in the past few years, but these have never been discussed and the Executive has chosen not to present any response to the reports of the PAC. Time limits need to be set otherwise the necessary discipline will not be there.

Seventh, PAC, contrary to best practice, does not invite professionals and specialists from

outside the government to act as witnesses or provide advice as needed. This practice, if adopted, would allow the Committee to formulate recommendations with greater insight into areas that would enhance financial accountability and efficiency. It would add a great deal of value to their work.

Such weaknesses may not appear to be significant if viewed one by one, but the collective

impact on the effectiveness of parliamentary scrutiny is to leave Bangladesh without an effective system of public financial accountability. Strengthening the PAC in a sustainable way would help induce a demand for changing current public financial management practices, and is therefore a goal worth pursuing.

10 In Australia the public auditor is an “officer” of Parliament. In the UK the budget of the Audit Office is approved by a commission that is independent of the government. In the United States over 75 percent of the work of the Auditor (i.e. the General Accounting Office) is conducted at the specific request of members of Congress.

Taming Leviathan: Reforming Governance in Bangladesh 52

Though less well documented, the weaknesses in the functioning of the PAC are mirrored in

those of other parliamentary committees. The Public Undertakings Committee (PUC) reviews the performance of state owned enterprises and public authorities. There is quite limited published analysis of the detailed workings of the PUC. Apparently the committee has met infrequently in the past 18 months and has not issued any written reports. Here again, the workings of the Committee are in camera which again is not conducive to achieving accountability and transparency.

During the Fifth Parliament (1991-95), the PUC produced a vivid report describing the

nature of the corruption, irregularities and mismanagement that plagued public sector organizations. In its first report, the Committee observed that most organizations were involved in corruption. It reported that corrupt officials had illegally appointed relatives and large numbers of employees in return for cash and other benefits, in defiance of the directives of the government.

In its second report, the PUC reportedly unveiled widespread corruption in the largest

nationalized commercial bank. The allegation was that rules were manipulated and large loans granted to friends and relatives. The Committee also noted that despite repeated requests, many organizations failed to supply relevant documents and respondents refused to turn up to give evidence. Other lapses identified by the PUC included rewarding reported culprits and granting contracts without tenders to friends and relatives at much higher rates than actual cost. The committee identified organizations and persons responsible in the public sector and made specific recommendations to rectify the lapses. The absence of any effective follow-up by Parliament or any response from the Executive reflects the power of the respective vested interests and, in contrast, the weak voice of public opinion.

The work of a number of other parliamentary committees might be expected to reinforce the legislature’s imposition of financial accountability:

The Committee on the Estimates is expected to scrutinize government’s budget estimates and identify where economies, improvements in organization, efficiency; or administrative reforms may be effected.

The Committee on Assurances has the duty to scrutinize the assurances, undertakings, and

promises given by government ministers to Parliament and to report on the extent of their implementation.

There is a Privilege Committee and a Standing Committee for each ministry. Members

of Parliament head these ministries, although the ministers are reportedly permitted to be members of the committees. The committees are expected to convene regularly and to be active participants in the process of ongoing scrutiny. The committees have the power to gather information submitted in writing or to accept verbal contributions from an authorized representative of the ministry concerned with their findings.

In practice, these committees have been weak instruments of public financial accountability.

They need to be greatly strengthened. There is considerable scope for Bangladesh’s development partners to assist parliamentary committees in developing and adopting best practices and improving their capacity and operational performance beyond the support now being provided by UNDP. Progress in this area will inevitably take time, but it is crucial to improving accountability in Bangladesh.

Tightening Financial Management 53

Public financial accountability does not exist in isolation. While clearly separated from practices in the private sector, it is nonetheless influenced by the general accounting environment in the country. Moreover, the country’s development is greatly dependent on having a strong and reputable accounting and auditing profession. The low standards of professionalism in this regard in Bangladesh is clearly a major brake on the country’s development, discouraging foreign investment and hampering financial intermediation and the functioning of the stock market.

While acknowledging these serious shortcomings, the professional body responsible for the maintenance of accounting and auditing standards, the Institute of Chartered Accountants of Bangladesh (ICAB), has a long way to go in accomplishing this task. Malpractice is practically never sanctioned and the level of training is far below par. Priority attention needs to be given by ICAB to setting up a national accounting and auditing standards board and formulating a action plan to improve standards11.

This chapter has set out a detailed analysis of Bangladesh’s current public financial management

and accountability system. A number of serious weaknesses have been highlighted. These are mostly well known to the government. Unfortunately, to date there has been little appetite for reform. The vested interests which oppose reform are of two types. There are those both within and outside the bureaucracy who benefit materially from lax financial controls. They clearly have no wish to see the system strengthened. Then there are those officials who oppose reform because either they are comfortable in their present jobs and dislike change or they may fear that reform would result in loss of jobs.

For this situation to change two things must happen. Firstly, public awareness of the seriousness of the deficiencies needs to grow leading to an increasingly vocal public demand for reform. And, secondly, the political leadership must be convinced that reform will bring political dividends that out-weigh the vested interests. These dividends come from improving management of public resources resulting in strong macro-economic management and higher quality public services.

This chapter has made many recommendations, not all of which are of equal importance. Those likely to have to largest impact relate, first and foremost, to government:

greatly strengthening the quality of the budget analysis and formulation process within a

medium term expenditure framework

completing and reinforcing the RIBEC reforms and modernizing its internal control and accountability systems

taking audits seriously by responding promptly to audit queries and recommendations and

severely sanctioning wrong-doing

11 See Bangladesh: Country Financial Accountability Assessment, World Bank, 2001.

Building an Accounting and Auditing Profession

Conclusion

Taming Leviathan: Reforming Governance in Bangladesh 54

providing greater transparency in the interest of more ‘open government’ by publishing the

budget, accounts, audit and PAC reports on a public website

making the CAG independent of the Ministry of Finance and, lastly,

opening up the PAC process to the public.

“Very little devolution and delegation of central government functions were allowed. One reason…is the lack of conceptualization of the various forms of decentralization. In the name of decentralization, administrative and local government reform initiatives have largely produced rhetoric” Report of the Public Administration Reform

Commission, June 200 (para 5.01)

Democratic decentralization is increasingly seen in Bangladesh as one means to

improve the public service delivery and strengthen democratic governance. The government is moving ahead to put in place a new democratically elected local government system. Past experience both in Bangladesh and elsewhere suggests that such initiatives may have both positive and negative consequences. To be effective local government must be delegated genuine decision making powers and must be given adequate resources to fulfil their mandated responsibilities. At the same time effective systems must also be put in place to hold local officials accountable to those they are supposed to serve.1

Popular support for decentralization is based on the expectation that by bringing government closer to the people, the intended beneficiaries of local public services may have a greater opportunity to influence the management of those services in ways that better meet their needs. However, there is a substantial risk that, with the empowerment of local elected councils, available resources will be captured by local elites to the detriment of the poor as happened in the 1980s. Experience suggests that the oversight role of central government is largely ineffective in curbing such abuses because the local representatives of central government are easily co-opted by the local elite, especially where the elite is connected to powerful political figures at the center. These risks may be partially mitigated if a way can be found to better articulate the “voices of the poor”, in other words, if local civil society groups representing the poor – community based organizations and NGOs – track the performance of the local bodies and seek to hold them accountable. Also, increased transparency (e.g. posting information about funds allocated to the local authorities and for what purpose, as has been done in Uganda with regard to primary schools) can also be very effective. Such mechanisms for enhancing accountability would need to be built into the decentralization process and could be supported by the donor community.

The rapid expansion of primary education and the growth in literacy is creating a more aware

and self-confident population, making it increasing possible for the poor to participate in holding public agencies accountable. Consequently, one may envisage from now on a process of local participation, representation and empowerment which, taken together, may progressively improve governance. At a minimum, we might hope to see emerge over time a convergence of view among both the poor and the

1 See Local Government Reforms in Bangladesh, Habibur Rahman, World Bank background paper, 1999

CHAPTER 5:

Taming Leviathan: Reforming Governance in Bangladesh 56

better-off on matters of shared interest, such as improved primary education and health delivery, public sanitation, environmental protection and the like.

NGOs have a dual function being both public interest watchdogs and service delivery organizations, either as franchised contractors for central or local government or acting on their own account. In the latter role they may actually compete with public service delivery agencies – for example, running clinics or schools or distributing micro-credit. Because of this dual function, there may be a conflict of interest.

In this Chapter we review past experience with decentralization and consider how in the future an effective partnership can be built between the newly created elected local authorities, community organizations, and NGOs to achieve a more accountable delivery of public services.

The existence of Village Councils or Panchayats can be traced to as early as the Vedic period three

thousand years ago. The British created Choukidari Panchayats in 1870 and partially elected Union Boards in 1919 . In 1959, during Pakistani rule, General Ayub Khan created a Basic Democracy system, with a four-tier local government structure with elected Union, Thana, District, and Divisional Councils. The system was a blend of devolution and deconcentration, but it was careful not to give substantial powers over personnel and finance to the elected representatives.

After independence in 1971, the Basic Democracy system was dissolved by Sheikh Mujib; the Union Council was renamed the Union Panchayat, the Thana Council became the Thana Development Committee, and at the District level Zila Boards were established. A District Administration Act was passed in 1975, upgrading the sub-divisions into districts and changing the Zila Boards into a District Administration Councils to be headed by a centrally appointed 'Governor'. However, local government bodies were not truly empowered in terms of giving them personnel and financial autonomy and functional authority. Moreover, the governor system was designed to consolidate the party's position in the local power structures.

The next President, General Zia, modified the system and introduced Union, Thana and Zila Parishads. and brought some structural and functional changes, but the Chairmen's dominance in terms of executive powers continued. In 1980, Gram Sarkars (village governments) were created in each of the 68,000 villages with a view to gaining political support for the military regime in its process of civilization. General Ershad, the succeeding President, allowed the Union Parishads to continue, but decentralized rural administration to the thana level where Upazila Parishads (Sub-District Councils) were created with directly elected Chairmen, giving this level of local government popularly elected heads for the first time. Although the upazila structure gave the appearance of genuine democratic decentralization, it was in fact used as an effective tool for centralizing the real exercise of state power, specifically by retaining the central government’s control over personnel and finance. Paradoxically, despite this flaw, Ershad’s Upazila system represented a greater degree of local participation in decision-making and a sharper focus on local level development than had been achieved before.

In 1992, the democratically-elected government led by Khaleda Zia abolished the upazila system and replaced it with a Thana Development Coordination Committee, a body controlled in practice by central government appointed officials, even though the elected union chairmen took turns to chair the Committee. However, local government issues were not high on the reform agenda during this period and there was political and bureaucratic resistance to devolution.

Reforming Local Government: Learning from History

Decentralizing to Improve Service Delivery 57

Sheikh Hasina, came to power in June 1996 on a platform of local government reform. She set up a Local Government Commission three months after taking office. In its report, the Commission recommended establishing, once again, a four-tier local government structure of Gram, Union, Upazila, and Zila Parishads.. This was done in the face of substantial opposition from major opposition political parties in Parliament. On the constitution of Upazila Parishad in particular the opposition raised two questions: a) why should the Union Parishad Chairmen become ex-officio Members of the Upazila Parishads, and b) why should the MP become the advisor of the Upazila Parishad, given that both the Upazila Chairman and the MP would eventually represent the same constituency?

The changes brought about by Sheikh Hasina’s government set aside some of the prerequisites for democratic local government and embodied arrangements that allow central government to assert control. First, Gram Parishad Members are to be selected by a 'directing authority', which goes against of the principles of democracy2.

Second, the Union Parishad Act did not relax central control of finance, administration and personnel management. The Upazila Act, while providing for the direct election of the chairmen, also made the MPs all powerful ‘advisers’, which will greatly diminish the autonomy of this important tier of local government, since the councils will be obliged to accept their “advice”3. Likewise, the powers of the elected council over finance and staff are very limited. The Cabinet Division will depute staff to be put at the service of the councils, but will retain responsibility for preparing their Annual Confidential Report. And all Upazila Parishad decisions on finance will be subject to central government approval.

As one can see from this brief resume of the evolution of local government in Bangladesh, historically the central government has always been reluctant to relinquish control over local bodies. Between 1959 and 1990 almost all local government bodies were used by the central regime (mostly military rulers) to bolster their political support. Ayub's Basic Democrats provided him with the needed support from the countryside. Zia used the Union Parishads to create a civilian support base for his Bangladesh Nationalist Party (BNP). In the same way upazila elections in 1985 served Ershad's strategy of consolidating the support of the local power elites. Furthermore, corruption and patronage has engulfed these institutions. The intervention of state in the name of 'decentralization' has over the years promoted a new pattern of dependency between the central state, the local elites and the rural poor.

The inability of local government to deliver effective services is due to a range of institutional weaknesses. The existing Union Parishad councilors (both Chairman and Members) and their support staff (e.g. Secretaries) lack the necessary management and financial skills, and awareness of the social and economic development potential. Despite these constraints and abuses, there is scope to make the local bodies more participatory and people-oriented, and thereby more able to play a useful development role. After all, they have been in operation for more than a century and villagers are familiar with them. This is the greatest strength of this tier of local government.

Union Parishads frequently lack the capacity to collaborate effectively with other development partners, such as NGOs. Because of their shortage of resources — they have limited scope to raise taxes to improve the resource base – potential partners tend to discount their role. Nonetheless, there is room for resource mobilization by increasing fees collected at the bazaars and from businesses, and by leasing khas land and bodies water. A survey undertaken in August, 1999 by the Center for Applied Policy Research for this Review (see Box 5.1) found that there was popular support for collecting revenues in

2 The Report of the Public Administration Reform Commission states that Gram Parishad members will be elected under the supervision of the Directing Authority but the practice seems to be that they are selected, not elected 3 “(Members of Parliament as the UPZ’s Adviser) is an infringement of the fundamental concept and principle of Local Government” Report of the Public Administration Reform Commission, June 2000.

Taming Leviathan: Reforming Governance in Bangladesh 58

those Unions where the Chairman was perceived as being honest, especially if there were matching grants from the central government. Improved training of Chairmen and staff are also prerequisites.

The new Upazila Parishads can usefully learn from the experience of the 1980s. At the other levels, (i.e. village and district) there is less solid experience to draw on. These local government councils, to the extent that they are elected bodies representing local people, offer an important opportunity to improve local service delivery. They are well versed in the needs, problems and priorities of local communities, and they are not profit-making agencies or volunteers. Strengthening local government must be seen as an imperative for broad based development, not an option for reformers.

Box 5.1: The Good, the Ordinary, and the Ugly -- Portraits of Three Unions

Villagers in a random number of Unions were interviewed on their perceptions of the effectiveness of their Union Parishad. The responses showed that their performance varied across the spectrum. Much depends on the quality of the Chairman.

In Monakosha Union, the Chairman was seen as honest, elections were stated to have been fair, as was the distribution of VGD cards. He played a positive role in defending villagers in the frequent cases of harassment by Thana police, reported by survey respondents as being corrupt and using torture. The Shalish was active in conflict resolution. The Union Parishad was effective in mobilizing people and seeking help in times of flooding or other emergencies, but it had few resources and played little role in development, leaving the initiative to the central government agencies located at the Thana headquarters. This is a conservative area and civil society is weak; there is no established mechanism for consultation between the Union Parishad and poor people. Thereseemed to be little awareness of a need to organize collective action to improve community welfare.

In Anwara Union, the survey found the new Chairman to have a very autocratic style, making decisions without consulting his fellow Parishad members. Yet villagers had easy access to him, and he was perceived as doing his best for the Union using his party contacts in Dhaka to obtain additional resources for the community. He was also preparing a list of taxpayers and intended to collect taxes and fees to pay for Union projects. One of the Parishad members was also a member of a CARITAS poverty group, but the NGO had not followed up with that person in her new role. Although resources are few, there is a general impression in the Union that service provision is slowly improving. Most respondents identified the Shalish (informal conflict resolution) as the main service provided by the Parishad. Road maintenance was another.

A first reading of the responses to the survey in Najani Union (not its real name) produced an image of a stern but popular UP chairman, who in 1994 (under the BNP government) had received the gold medal for his development efforts as the best such official in the country. People seemed fairly satisfied with the level and delivery of services. A second more in-depth round of data-gatheringproduced a very different picture. This chairman is a full-fledged ‘godfather’. His monopoly of violence makes the Union a ‘state within a state’. Civil society organizations and other institutions in the Union are effectively under his control: he was the chairman of committees managing the local college, primary school, madrasha, mosque and other local institutions. He was an archetypal “robber chairmen” of a kind that is found all over Bangladesh regardless of the political party in power. He had been in control of the area for many years and had links with networks reaching way beyond the Union. This is a clear example of the “new clientelism” emerging in Bangladesh . Violence is used to control the strongman’s ‘territory’ and the central government officials turn a ‘blind eye’ to smuggling and other illegal practices. His ‘subjects’ dare not criticize him openly. They are dependent on him and therefore are loyal. Source: A CAPRe Survey undertaken July-December, 1999

Decentralizing to Improve Service Delivery 59

Municipal government runs in parallel with the district, upazila, and union councils and suffers

from similar generic weaknesses. Nonetheless, their capacity is generally much greater. A Municipal Development Fund has been established which channels resources to the town councils on a matching grant basis. An innovative set of conditions accompany this assistance designed to promote improved municipal governance. The special institutional needs and problems of the municipalities are discussed at length in the World Bank’s 1998 urban sector report.

To strengthen the democratic character and development role of the local authorities,

consideration should be given to the following measures:

To reduce the inevitable tension between the MP and the Upazila Chairman built into the present institutional arrangements, Upazila Chairman, MPs should stand for election at the same time; this should help reduce the discrepancy in the political, policy and program stances of these two key local personalities. As proposed in the report of the Public Administration Reform Commission (p.76), the role of MPs as Advisers to the Upazilas should be reconsidered.

For efficient service delivery and ensuring accountability the centrally appointed Thana-based

officials and staff (extension workers) should be placed fully under the control of Upazila Parishads. This would include police, primary education, social forestry, fishery, livestock and health staff. And the transfer should be phased so as to ensure that the acquired the necessary capacity and established the procedures to avoid discontinuity. The central government would need to provide the required finance on a grant basis. This will ensure better accountability as well as improved service delivery. Initially, this approach could be piloted in a few Upazilas.

There should be a legal compulsion for elected local government to maintain regular contact

with their electorate and consult them with regard to the planning and implementation of their development projects. Such practice has been instituted in West Bengal and has worked well.

Union Parishads, as an elected local body of people, could be legally empowered and

institutionally strengthened to conduct shalish (village level arbitration).

Annual reports on the performance of the local government bodies should be prepared by all local government bodies and made public, as well as submitted to the Ministry of Local Government, Rural Development & Cooperatives. Civil society organizations should be encouraged to track and publish report cards on public service delivery, part of which could be based on surveys of citizen’s views and experiences. NGOs can be mobilized to help with this.

Mechanisms for recognizing, highlighting and rewarding the innovative and successful projects/

collaborative programs should be initiated as a means of motivating and encouraging the local government bodies. The present practice of performance appraisal of Union Parishads by only measuring their efficiency in tax realization should be changed. Their efforts on planning, innovative schemes for rural development and best practices should be used as parameters for performance rating and rewarding.

Purposive interaction and networking of local government institutions with the rural

development agencies operating in the public and private sector would be useful in achieving their goals. For a for this need to be established at the local level.

Measures to Strengthen Local Democracy

Taming Leviathan: Reforming Governance in Bangladesh 60

The central government has a poor track record in overseeing local authorities. Consequently, as

noted earlier, crucial to the strengthening of local government is the role of civil society in helping to hold the local authorities accountable through participation in elections, in tracking performance (see Box 5.2) and through direct community involvement in the management of local schools, health facilities, and the like. For this to happen, there must be effective mobilization of the intended beneficiaries of local government services through community based organizations (CBOs) and NGOs. The activities of NGOs are key , since the main agents for building CBOs are in fact the NGOs, and NGOs also interact directly with the local authorities on behalf of poor. However, it is important to remember that NGOs have a strong presence in less than half of all villages. The effectiveness of NGOs in this role has already been discussed in Chapter 3.

Of all Bangladesh’s governmental institutions, local government impacts most directly on the lives of ordinary citizens. Consistent with Bangladesh’s patrimonial society, it is hardly surprising that local government is characterized by pervasive clientalism. The more powerful members of the community, with greater wealth, more education and stronger social networks are inevitably better placed to secure whatever benefits the local authorities have to offer. Nonetheless, there is some evidence that ‘people’s organizations’ (otherwise called ‘grassroots organizations’ or trimonul groups in Bangla) have had modest success in a few areas in championing the interests of the landless poor. People’s organizations are in essence loose federations of poverty groups; typically 20 to 30 poor

BBooxx 55..22:: PPuubblliicc EExxppeennddiittuurree TTrraacckkiinngg iinn UUggaannddaa –– PPrroommoottiinngg TTrraannssppaarreennccyy Public expenditure tracking was initiated in Uganda when it was noticed that actual service delivery was much worse than might reasonably have been expected had budget allocations actually reached the intended beneficiary facilities. A survey of primary schools carried out in 19 districts revealed that less than 30 per cent of funds for non-salary expenditures actually reached the schools. Furthermore, schools were permitted to keep only a third of the tuition fees collected from parents; the remainder appeared to disappear into the district education offices. The survey also revealed that enrolments were as much as 60 per cent under reported which had misled the budget managers. Finally, the survey showed that despite a steady increase in budget allocations, the parents continued to bear the brunt of the cost of education –contributing as much as 70 percent. To tackle these problems the authorities have decided to post on public notice boards at each school information on the annual budget allocations for that school. This enables the parents’ associations to question the district officials on the use of the funds. A survey of health clinics showed a very different situation; in this case most supplies were sent directly from the capital without being handled by the local authority and most arrived. However, villagers reported that a large part of these drugs were expropriated by the staff and sold privately. The result was that the very poor who could not afford the parallel market prices were deprived of drugs. From this it may be concluded that it is unlikely that the situation can be remedied unless the drug supplies are managed by a locally chosen community management committee. Source: PREM Note, World Bank 1999.

Holding Local Government Accountable

Decentralizing to Improve Service Delivery 61

families will form a poverty group meeting regularly to undertake joint projects such as establishing a fish pond, managing micro credit or participating in literacy training. According to ADAB, the NGO apex organization, some 8854 candidates for the Union Parishad elections held in December 1997 were members of people’s organizations, of whom 3237 were successful. Since this amounts to no more than 8 percent of the Union Parishad members, it is clear that the rural elites continue to dominate the local councils. Only 19 council chairman were from people’s organizations. Nonetheless, this level of representation amounts to a significant departure from the past when the poor had no elected representatives at all. With the steady growth of NGOs, the participation of representatives of the poor in locally elected councils may be expected to grow. Whether this will provoke a backlash from the elite remains to be seen.

As noted in Chapter 2, the larger, more powerful NGOs are more capable of providing support to the representatives of ‘people’s organizations’ who are by definition at least partial ‘escapees’ from the normal patron-client social structures. The position of these representatives is precarious, as they may easily be threatened or excluded by the local elite. Women union parishad members are in a

Table 5.1: Adequacy of Services and attention received from UPs

Type of Respondent Adequate Inadequate Total

# % # % #

1. Landless 39 33 78 67 117

2. Small farmers 51 58 37 42 88

3. Medium farmers 46 62 28 38 74

4. Large farmers 44 65 24 35 68

Totals 180 51 167 48 347

Source: CAPRe survey

Taming Leviathan: Reforming Governance in Bangladesh 62

similar predicament and, indeed, after the elections they frequently complained of being excluded from the decision making process. The government has responded commendably by insisting that they be made chairman of certain parishad committees. ‘People’s representatives’, having no official recognition, have not fared so well.

Applied Policy Research (CAPRe) interviewed 347 villagers in 20 Unions drawn from three

different regions of Bangladesh4. They were asked whether they considered the services they received from the Union Parishads (UPs) to be adequate. The responses are set out in the Table 5.1. Two-thirds of the large farmers were satisfied, while two thirds of the landless were dissatisfied; clearly the UPs are mainly serving the interests of the rich, or at least those with land which is exactly what one would expect. Yet, the relatively high satisfaction of the more affluent is surprising given the general ineffectiveness of the UPs. The range and nature of the services mentioned by respondents partly explains this result, as is shown in the Diagram 5.1. The rich are principally interested in the role of UPs in administrative services --settling disputes especially with regard land, providing moral support, and issuing certificates. For the poor, receiving relief was the major benefit. The range of services is very limited. No one mentioned health or education services. This compares with the long list of functions of the UPs spelt out in the legislation and contrasts with the many services provided by

NGOs.

The survey revealed that all groups of respondents complained about the lack of availability and detachment of the UP Chairmen. All wished to see greater responsiveness and accountability. It is interesting, though not surprising, that the Chairmen’s view of the importance of the various services they provide differs markedly from the perceptions of the villagers (see Table 5.2). The Chairman seem to undervalue their administrative functions and over-emphasize their provision of economic services.

Lastly, it is worth noting that the villagers have quite a different perception of the problems and constraints faced by UPs from those of the UP officials, as is evident from Table 5.3. That such a high proportion of the respondents

4 To obtain a better understanding of the actual situation in the rural areas, the Bank sponsored field work

carried out by the Centre for Applied Policy Research.

Table 5.2: Services rendered by UPs --comparative views of demand- and supply-siders--

Respondents

Functions/ Services

UP Officials (1)

Villagers (2)

Dispute solving

+ Advice and moral support

20.0 %

nil

39.3 %

10.9 %

Economic development functions 63.0 % 30.8 %

Certificates and other administrative functions nil 19.0 %

Other 17.0 % --

Total 100.0 % 100.0 %

Source and Basis (Column 1): survey of 69 UP chairmen and members (Column 2): CAPRe’s GBS fieldwork

Assessing Local Government Services – Survey Evidence

Decentralizing to Improve Service Delivery 63

stated that the real issue was not the lack of resources but rather that UP officials were unavailable and uncooperative, is revealing, as is the fact that so few respondents saw political conflict as the cause. In the view of villagers, changing the quality of leadership comes well ahead of their concern to see more resources given to the UPs.

In commenting on how services might be improved, it is noteworthy that UP officials heavily stressed their need for training, something villagers did not mention. The importance of enhanced training has already been picked up by UNDP, which is assisting the National Institute for Local Government to mount a major training program. Without doubt, the need for training is massive. Whether the quality and content of the training is adequate is an issue that can only be solved by carrying out more in depth surveys of the needs villagers wished to participate much more in defining and implementing local development programs. This may be regarded as a proxy for the respondents’ feeling of lack of inclusion in local development activities. Not surprisingly, the rich feel much more included than do the poor. This leads the poor to call for more central control over UP officials, while the rich argue for strengthening the UPs’ role.

The survey also looked into the collaboration between the UPs and NGOs. Exactly 41 percent of both UP officials and NGO representatives called for more joint activities, but attached quite different meanings to what that entailed. UP officials would like to share in using the resources mobilized by NGOs, while NGOs want more help from UP officials in implementing their projects. Nonetheless, there is considerable space for mutually satisfying cooperation, as is illustrated in Table 5.4. NGOs are seen by UP officials as being endowed with technical and material resources that they could share with local government and in return the UP officials could facilitate NGO programs.

The existing institutions at the local level have poor capacity to deliver services and the

communities lack resources, organization, leadership, and know-how to fend for themselves. In a few instances, a powerful local patron may fill this gap in the way that zamindars sometimes did in the

Community Management of Services

Table 5.3: Problems in their relations plus obstacles and constraints faced by Ups – comparative views of supply and demand-siders

(plus key informants as control group) —

Respondents

Obstacles and Problems

UP Officials (1)

Villagers (2)

Key informants (3)

Inadequate funding plus funds crisis 45.0% 4.0% 13.0% UP officials do not give importance to villagers’ problems, they are unavailable, uncooperative

Nil 65.0% Nil

Management and supervision problems

25.0% Nil 32.0%

Political conflict 9.0% 13.0% 16.0% Total 100.0% 100.0% 100.0% Source and Basis (Column 2): CAPRe’s GBS fieldwork. (Column 1): survey of UP chairman and members (Column 3): survey of key informants

Taming Leviathan: Reforming Governance in Bangladesh 64

past. But, more often than not, this is not the case. Moreover, there is a great physical and psychological distance between the lowest administrative level where professional government services are found (generally at the thana) and the village communities where the needs exist. This problem is brought out most dramatically in the effort to confront arsenic contamination of tube well water. Although NGOs have gone some way to fill this institutional vacuum, they are still relatively thin on the ground and remain excessively dependent on foreign funding, which raises issues of sustainability.

The private sector is an alternative to the NGOs, but in the absence of effective demand backed by financial resources, local private service providers will not emerge. In these circumstances, parallel with the strengthening of elected local government, there is great need and much scope for promoting direct community participation in the management of certain facilities such as schools, clinics, sanitation services, and water supplies (see Box 5.3). Mobilizing and empowering communities to manage their own services and solve their own community problems is the only viable long term solution to improving service delivery. At the community level the incentives for self-help are very great. This concept has long antecedents – there are many secondary schools, for example, which have been started and remain under the control of local communities – but the tendency over the years has been rather to reinforce central control. In an effort to reverse this trend, UNICEF has piloted community management of health facilities in a few districts in the

Table 5.4: Possibilities of mutual support between Union Parishads and NGOs – Expectations of NGO staff/ UP staff

Ups (1) Activities NGOs (2)

72/48% • Program implementation (a) 47/27%

12/10% • Targeting (selection of areas and beneficiaries)

Nil/nil

7/6% • Sharing information Nil/nil

Nil/1% • Technical and financial assistance 1/33%

Nil/5% • Training 3/11%

4/27% • General support 33/20%

5/3% • Other 16/9%

100% Totals 100%

Source: Survey of NGO supervisory staff and UP officials Note: The left column shows the percentage of UP officials who favor cooperation by topic and the right column the percentage of NGO staff. (a) Examples provided included programs in the sectors of education, employment-generation, health and sanitation, credit, afforestation and agricultural extension

Decentralizing to Improve Service Delivery 65

recent past. These efforts need careful evaluation, support and development. Much more attention needs to be given to this end of the service delivery chain.

Ideally, one would like to see communities build their own capacity to organize and manage their own affairs. This was the dream of the Comilla program launched in the 1960s. The same ideas have been picked up again by the government and are being tried out in Kishorenganj (see Box 5.4). The fundamental challenge in such programs is to overcome the deeply entrenched power structure and hierarchical patron-client nature of social relations typically present in the rural areas. CAPRe’s survey mentioned above reported that these relations had become more polarized in the 1990s with the heavy politicization of life in the villages. Any community driven development program must establish at the same time effective new mechanisms of accountability to prevent elite capture. Dependence on close supervision by dedicated staff under inspired leadership, which is what has happened in Kishorenganj, is neither sustainable nor affordable on a large scale. Such programs are also costly to initiate. Already UNDP has contributed substantial sums and a $5.5 million expansion project was approved in 1999. If all thanas were to be endowed with this level of resources, one may well wonder where all the funds needed would be found.

VVooiiccee,, EExxiitt ,, SSoocciiaall CCaappiittaall CCoonnssttrruucctt iioonn aanndd tthhee RRoollee ooff NNGGOOss Box 5.3: Overcoming Arsenic Poisoning of Water Supplies -- A Community Approach

Arsenic contamination of tube well water is threatening the lives of millions of Bangladeshi villagers. To overcome this problem each well must be tested and an alternative source of drinking water found wherever the water is poisoned. Each case presents a unique set of circumstances that require a tailor made solution. Therefore, community based approaches are essential -- experience tells us that unless the community is fully involved the solution will fail. In the past, villagers, in conjunction with local private sector enterprises, have been able to install and operate both shallow and deep-tube wells. But the appearance of arsenic contamination has made the provision of rural water supplies technically, socially, managerially and financially more complex. The government’s arsenic mitigation program, which IDA is supporting, is to work through NGOs to create community based organizations (CBOs) which could benefit from central government’s technical advisory services. Critical to the design of these CBOs are arrangements to ensure legitimacy, accountability and transparency. No one is sure how effective CBOs may be created and nurtured; there is not a strong tradition of village based institutions to build on, perhaps in part as a result of a dependence on NGOs that has arisen in recent years. Even traditionally, collective action has occurred mostly in response to an immediate emergency, whereas arsenic has the character of a ‘slow-onset’ disaster. The process envisaged is one of trial and error – a learning process driven by the urgency of finding an institutional solution for the provision of safe drinking water. These organizations may eventually be absorbed by the proposed gram parishads, once they are established, to become water and sanitation units within the village level local government. Source: Alaerts, G, Arsenic Mitigation Project Case Study, 1999.

Taming Leviathan: Reforming Governance in Bangladesh 66

To a casual observer poor villagers would seem extraordinarily tolerant of poor service delivery.

This apparent passivity is a function of the opportunities, or lack of opportunities, they have to express their ‘voice’ within a patrimonial society. Given the chance, the poor are highly vocal about the oppression and deprivation they experience in their everyday lives. Thus, strengthening the

BBooxx 55..44:: VViillllaaggee OO rrggaanniizzaattiioonnss iinn KKiisshhoorreennggaannjj

In an effort to mobilize villagers, and as an alternative to the efforts of NGOs. the government has launched with UNDP support an impressive pilot project in Kishoreganj Sadar Thana aimed at creating and supporting self managed village organizations (VOs). Between its inception in 1994 and April 1999, 467 VOs for men and 434 VOs for women have been formed encompassing a total of 41,370 villagers. There are now VOs in all of the 202 villages in the Sadar Thana, covering 65 percent of the households. Each VO has a President and a manager with training in village plan formulation, book keeping and credit management, but in most other respects they are left to organize themselves as each VO sees best. The project dispenses credit to both individuals and group projects and promotes saving. In all credit totaling some $4.5 million has been dispensed, while savings amounting to $686,500 have been collected. The project has supported productive sub-projects run by the villagers including nurseries, beef-fattening, poultry, fisheries, food processing and the like, as well as various social investments (schools, sanitation, etc).

A crucial issue has been to ensure that the VOS were inclusive of the poor. A recentassessment reported that most members were landless or marginal farmers, and that a particular effort was being made to include the poorest in the community. However, the extent to which the poor members of the village were allowed to express views and participate in decision making was less certain.

The second principal concern is whether the VOs were likely to become sustainable institutions. Here the verdict is less clear. The assessment found that the records were not well kept, that leadership was not being rotated, the local banks were not much interested in providing credit, the relationship to the Union Parishad ward committees was not established, and extent to which all members were well informed about the future plans was also questioned. There were also signs of continuing dependence on the ‘project office’ in a number of respects. Sustainability needed to be established not only at the level of VOs, but also at the Thana level by institutionalizing a democratically run ‘federated’ structure which could pay its own way and not be captured by the local elite.

From the viewpoint of the villagers, the pilot project has been a great success. The VOs have been a vehicle for promoting tremendous economic and social change within the community. There ahs been a marked improvement in a number of key indicators such as school attendance, adoption of family planning, use of sanitary latrines, etc. Incomes have increased as a result of the activities supported by credit

The viability of the VO approach and its cost-effectiveness merit careful study. The assessment report emphasized the need to document and analyze the work and activities of the VOs more thoroughly. This should allow benchmarks to be established against which progress of the program could be better measured.

Source: UNDP Field Visit Report from Kishorenganj, April 1999.

Decentralizing to Improve Service Delivery 67

articulation of voice is central to nurturing local democracy, as is expanding the opportunities for exit, for example sending their children to non-governmental schools. This in turn depends on empowering groups of poor villagers and increasing the presence and effectiveness of spontaneous associations or samities. The scaling up of social capital has been a major function of NGOs, but unfortunately the impact of NGOs on social capital creation is not always wholly benign.

NGOs can help communities help themselves, or they can become de facto monopoly suppliers of services. One must remember that the target beneficiaries of NGOs are those with lowest articulation of voice and the least opportunities for exit, even though this group constitutes about half the population. There is always a risk that NGOs, mirroring the prevalent patron-client structure of social relations, will themselves become oppressive and undemocratic in their mode of action. This problem is perhaps more likely in the case of the very large NGOs which are, after all, massive bureaucracies with complex management hierarchies. Some small local NGOs may also go astray, especially if they are an expression of the ego of one principal promoter/founder. In short, there is an unresolved issue of accountability that the NGO movement has still to tackle. The answer lies in establishing explicit codes of behavior and instituting effective self policing overseen, perhaps, by a reformed ADAB, the NGOs’ apex organization – ‘reformed’ because ADAB has yet to be seen as a fully inclusive, democratic, and representative NGO umbrella organization.

From the donor perspective, this analysis would argue for much greater attention to the manner in which support for NGOs is provided. The relatively spectacular performance of the more prominent NGOs easily lulls the donors into complacency. As the first line in the accountability system – since it is mostly donor money that NGOs are spending – it behoves the donors to scrutinize their NGO clients very carefully and to insist not only on transparency (so far sadly lacking), but also accountability to their intended beneficiaries.

The donors need to give much more attention also to the issue of who they support. It is easy to support a few large NGOs that have great visibility in Dhaka – 20 story office buildings and prominent citizens at the helm – and much harder to get to know what really happens in the field, something that cannot be discovered by the occasional field visit carefully orchestrated by the top NGO managers. What is needed are field surveys to obtain good data on the actual performance of NGO recipients of donor grants. Reaching and assisting a much larger universe of smaller NGOs, often not represented in Dhaka, and helping build their capacity is also important. This has been done successfully in the field of micro-credit using PKSF as an intermediary. The proposed Social Development Foundation is also an important initiative for the same reason; it would be a way to assist small NGOs who are active in areas other than micro-credit. The role of the Foundation in building social capital raises its significance immensely for all the reasons enumerated in this chapter – going far beyond the simple purpose of delivering improved social services to the poor.

Improving the welfare of the poor is critically dependent of improving the effectiveness of local government institutions to which greater responsibilities could then be devolved. In situations were the communities are fortunate enough to have active, honest and conscientious leaders progress is being made, but it is not reasonable to make people hostage to such chance. The system itself should have built in incentives and an accountability system that promote good governance. Where they are present NGOs do, of course, play a remarkable role in supplementing public service provision, but this no substitute for actions to reform the system of incentives and accountability of the local authorities. Councils should be given the responsibility and the resources to provide

IInn CCoonncclluussiioonn

Taming Leviathan: Reforming Governance in Bangladesh 68

for improved service delivery and be held accountable for their performance. In addition, local community management of local schools, clinics, water supplies and the like should be piloted.

In the first instance, it is the community in the form of civil society which needs to be empowered to exercise voice and hence oversight over the new local government institutions. Aside from their role in service delivery, it is as important, if not more important, that the activities of NGOs serve to build social capital and thereby help strengthen the voice of civil society. But to play this role they too must adopt codes of conduct which make their actions transparent and accountable. Progress at the local level will come slowly, step by step, if on the one hand the government is willing to devolve responsibilities and resources and on the other the donors make a concerted effort to back the decentralization process across the board -- to support training through the National Institute of Local Government and assist NGOs both small and medium sized, as well as large.

Lastly, there is a great need to improve data and analysis on local conditions and on the functioning of local level institutions. Hard facts are few and far between, while opinions are plentiful. The donors should back assistance for decentralization with resources for empirical research such as that undertaken by CAPRe reported above. Here the rural development academies at Bogra and Comilla could make a major contribution.

“The general perception is that members of the public are harassed and humiliated by public officials. …The large scale non implementation of the rules and regulations has created an environment of laxity …The existing laws and rules

prohibit access to almost all kinds of information….An outmoded hierarchical structure, slow decision-making process and cumbersome procedures diffuse responsibility and nullify the sense of accountability. Centralism is complimented by

a high degree of discretion – a formula for arbitrary action and possible abuse of authority as well as a fertile ground for breeding corruption.

Report of the Public Administration Reform Commission, June 2000 (paras 2.02 – 2.07)

Whatever the visions of the political leadership, what actually gets implemented

depends on the government administration. This chapter reviews the present status of administrative reform, on which much has been written, but little done. Recognizing that incentives are key in motivating public officials, the chapter highlights what are seen as the most crucial components of the reform agenda.

Bookshelves in Dhaka are lined with reports – Government That Works, The Four Secretaries Report, The Nurunnabi Report, etc -- which spell out in great detail the actions that need to be taken to reform Bangladesh’s public administration. There is considerable consensus too on the key components of the reform agenda. Over the past three years, the Public Administration Reform Commission (PARC) has identified measures culled from these reports, reinforced by its own extensive enquiries, which it recommends should be taken immediately. But in practice little is changed and the performance of the civil service is in decline.

The few ‘agents of change’ inside government seem hamstrung by career concerns. These problems are compounded by the politicization and corruption of the civil service, the lack of strategic planning, inadequacy of the training of staff, and confrontational politics creating pervasive insecurity leading to arbitrary decision making, lack of respect for the rules of business, and timidity in imposing discipline. In the absence of a strong effective demand for reform emanating from civil society and lack of decisiveness on the part of the government, the reform champions who are scattered sparsely within the bureaucracy can only make limited progress within their areas of control.

The Report of PARC, to which many references have already been made in this report, is

particularly relevant to the matters discussed in this chapter. The Commission was composed of distinguished persons with years of public service experience to draw on. A huge effort was made to collect information and views and to review the experience of other countries. The matters discussed

CHAPTER 6:

Findings of the Public Administration Reform Commission

Taming Leviathan: Reforming Governance in Bangladesh 70

so cogently in the PARC Report deserve priority attention. Failure to take them seriously and to act promptly would be disappointing as they address fundamental weaknesses in the country’s public administration that is adversely affecting the welfare of all it citizens.

The new government is fortunate to have in their Report a very solid basis for preparing an action plan for administrative reform. This should be done quickly so that difficult decisions can be taken early in the life of the new administration and before worries about the next election have started to appear. This will take courage and imagination on the part of the political leadership. Some of PARC’s recommendations have already been considered by the Cabinet and could be implemented without delay. What follows in this chapter should be viewed as complementing the PARC Report’s findings, reinforcing some of its recommendations, and, in some instances, adding to them.

The majority of civil servants do not feel they have sufficient authority to carry out their responsibilities properly. This is just one key finding of a survey of the views of a randomly selected sample of 821 Class I and II officers interviewed in 1999, undertaken as part of this Review. The survey covered the Secretariat, Departments, Districts and Autonomous Agencies. The questionnaire sought the views of public officials on a range of issues from the way staff were recruited, promoted, disciplined and compensated through to their earnings from bribes and other forms of corruption1.

The most surprising finding was that on average officials would need to be offered a salary at least double what they were currently earning before they would resign to take a job in the private sector - 79 percent wanted double or more, and 47 percent wanted three times their present levels of compensation. Only 8 percent stated that they were actively looking for a job in the private sector. This implies a level of satisfaction with their overall salary and benefits, formal and informal, which seems to belie the commonly accepted view that civil servants are underpaid. Since salaries are indeed extremely low, one must assume that the other benefits and ‘informal’ receipts are very significant indeed. Yet, when questioned about corruption, only 6 percent admitted to receiving bribes, though it is perhaps not surprising that the majority would deny taking bribes when directly asked. When asked how much corrupt officials obtained from bribes, the response was a stunning sevenfold increase over the official salary. Over a third of those interviewed admitted that they had not filed a ‘wealth report’ with the National Board of Revenue. Implicit in these results is an admission of a very high level of ‘petty’ corruption to augment pitifully low salaries. Just under half stated that corruption prevented their organization from achieving its objectives.

A critical factor determining the effectiveness of all organizations is recruitment. It is therefore noteworthy that 82 percent of the respondents considered that “almost all” Class I recruits were hired on merit. Less than half thought this to be the case for Class III and IV staff. Two-thirds stated that in those cases where recruitment was not merit-based politicians helped their ‘clients’ get jobs. When the question posed asked why the patrons helped their clients, family, village and personal ties predominated. Only 16 percent reported payments as the principal reason, and 18 percent political ties. This underlines the strength of the traditional social networks.

The perception of corruption is twice as high among those who consider that recruitment is not merit-based. Similarly, twice as many of those who see recruitment as merit based view personnel management as fair, not arbitrary, as do those who consider recruitment not to be merit based. This may be interpreted as evidence that when recruitment is not merit-based, staff confidence in the

1 see The Experience and Perceptions of Public Officials in Bangladesh, World Bank, May 2000

The Current Reality: Views of the Civil Servants

Energizing Administrative Reform 71

public service is undermined. Likewise, corruption is perceived to be greater and morale worse among those who consider they lack the authority to carry out their responsibilities.

When asked about other factors undermining their organizations ability to fulfill its mission, 46 percent identified insufficient or unpredictable budgets, and only 14 percent saw lack of skills to be the main cause. The shortfall between the budgeted amounts and actual receipts varied between 15 and 26 percent, with the larger shortfall being reported by officials in the districts. A majority thought that the audits were thorough and only 24 percent felt that audits were occasionally triggered by personal or political motivations. It was noteworthy that 88 percent of respondents reported that suppliers are paid within two months; and clearances from the Ministry of Finance are not generally viewed as holding up payments. Suppliers having connections with senior officers are thought to enjoy a special advantage by a third of the respondents.

The sentiment that staff lacked the authority to do their job properly is reinforced by the finding that 87 percent of respondents reported that managers have no choice in selecting staff. Another somewhat negative finding is that nearly half see staff who are re-employed after reaching their retirement age being rewarded for political ties, rather than in recognition of their skill and expertise.

Lastly, on the subject of incentives and sanctions, fellowships are quoted as the most

common reward. Respondents reported that staff were disciplined most often for poor performance and occasionally for insubordination; in the case of officers embezzlement is singled out as cause for discipline, but rarely in the case of Class III and IV staff. These findings provide a factual backdrop to the discussion of administrative reform that follows.

No one can question that a competent and well- motivated bureaucracy is central to

achieving Bangladesh’s development objectives whatever the development model. A necessary, though far from sufficient, condition is providing public officials with adequate pay and benefits both to be able to compete with the private sector for talent and to reduce the incentives to be corrupt. These pre-conditions for an honest and productive public service are not present currently in Bangladesh, as is well illustrated by the results of the survey reported above.

After independence, the salaries of class I officers were first reduced to Tk.1,000 in 1972, soon thereafter raised to Tk.2, 000, and finally restored to the old the pre-independence pay scales (in nominal terms) in 1985. However, by then inflation had reduced the purchasing power to about one-fourth. Meanwhile, the pay of other public employees was revised to take account of inflation. Consequently, the ratio between the lowest and the highest salary was compressed from 46 in 1969 to 10 in 1997.

The real comparison of pay between the highest and the lowest should nevertheless be between the lowest pay of the lowest-salary group and the lowest pay of the highest-salary group at points of entry and exit from the civil service. This ratio has fallen to as low as 3 and 5 respectively at entry and end points.

Another way of looking at the efficacy of the pay structure is to compare nominal pay to CPI-indexed pay of a normal base year. Pay should ordinarily slowly rise in real terms as time passes and general standard of living improves. What happened in reality was that the highest pay was allowed to erode by 73 percent between 1969 and 1997. The pay of Grade 2 and 3 officers eroded nearly to the same extent. Even the Grade 5, one-step higher than the entry grade of class I officers,

Incentives for Better Performance

Taming Leviathan: Reforming Governance in Bangladesh 72

got 49 percent less than the pay of 1969. The pay of the lowest grade (grade 20) registered a rise in real terms of 11 percent over the pay of 1969.

To help compensate for this dramatic lowering of living standards for Class 1 officers the government gradually introduced a range of fringe benefits. Salaries were made tax exempt, which created an awkward situation vis-a-vis the rest of the population. The decision to assign a government car full time to top officers costs the government about Tk.27, 000 a month, while the equivalent costs a private person not more than Tk.10, 000. In addition, the government took responsibility for providing residential accommodation to all government servants, although with no further financial burden government could have helped civil servants own their own homes, thereby freeing itself of the responsibility of building and managing residential accommodation.

In earlier years, civil servants priority access to urban land developed by government (RAJUK) proved to be an enormously valuable perk as the price of plots in Ghulshan, Baridhara, Banani, Dhanmondi and Uttara has soared. Land has become very scarce, and while there still exists a quota for civil servants, the number now receiving plots is substantially reduced. This benefit is self-evidently inequitable and needs to be reconsidered.

A number of other perks also may have significant monetary value. For example, access to a vehicle, use of a telephone, trips abroad, public enterprise board directorships, and the like are all subject to possible abuse and waste. To rationalize the current pay structure, the government should consider the monetization of fringe benefits. This would also help raise the effective compensation of top civil servants at little or no cost to the Exchequer. At the same time, it would be possible to encourage civil servants to acquire their own houses and cars and look after them better. In any event, increases in the remuneration of the Class 1 officers is essential if corruption is to be curbed. These could be linked to specific posts by using a system of post allowances.

Annual salary increments should normally be used to reward good work. In Bangladesh’s case public employees are routinely awarded salary increments without reference to performance. Performance based increments should be introduced.

To be affordable, civil service salary reform must be combined with measures to rationalize the civil service. This does not mean the massive lay-off of staff, but rather a general freeze on hiring Class 2-4 officers and all other categories of employees, combined with a massive effort to train and restructure. New hiring of Class 1 officers would then be highly selective. Much greater use should be made of consultants who would be hired at market rates but have no entitlement to permanent employment.2

Salary is but one of the components of the incentive system. Prominent among the others are promotion and status. This is discussed in the next section.

A system of appointments and promotions on merit is central to creating effective incentives for good performance. Recruitment is based on a quota system and special preferences are given to

2 “Inadequate salary is not an economy, but an expense. Market based salaries should be given to all officials and this should be linked to rightsizing the government.” PARC Report, June 2000 (para 2.09, p.9).

Appointments and Promotions to be Based on Merit

Energizing Administrative Reform 73

specific groups of candidates.3 Particularly at the lower levels, political pressures improperly influence hiring decisions. Far greater transparency is needed to build public confidence in the impartiality of the recruitment process. 4

Promotions are perceived as being based on time served and good contacts (tadbir). Promotion of all Class I officers are given effect on approval by the Prime Minister. Promotion of junior officers and other employees are dealt with at lower levels. In these case promotion is automatic on completion of 8,12 and 15 years of service. For posts at the level of Deputy Secretary and Joint Secretary there is a quota overwhelmingly (80%) in favor of the Administration cadre. This is a cause for long standing dissention within the public service which remains to be settled. Besides, quota reservations cannot draw the best available to the key policy making posts in the Ministries. The recruitment and assignment of officers in this system undermines the building professionalism. The replacement of the quota system by the principle of equal opportunity for all is recommended and time scale promotion should be replaced by a system of promotion strictly on merit.

For the administrative cadre, timely promotion to the level of a deputy secretary is critical if the officer is to eventually reach the rank of secretary. The Superior Selection Board takes into account length of service (10 years is the minimum), ‘batch’ seniority, a minimum ‘score’ of 80% in the officer’s Annual Confidential Report (ACR), and a clean record from the Anti-Corruption Bureau. The final decision rests with the prime minister who may take into account other information. While the key element in this process is seniority, ambitious officers will be keen to ensure a good ACR, which in Bangladesh’s social context loyalty will be a significant factor and may lead to providing personalized services to one’s supervisor. Private secretaries to ministers are known to score very well on their ACR. The scope for abuse is considerable.

A recent change in the promotion system is the selection of officers from amongst Deputy Secretary for training, as a prelude to promotion, on the basis of a minimum of 80 percent marks in the ACR and a minimum of 8 years of service before retirement. The group of Joint Secretary is selected on the basis of a minimum of 85 percent marks in the ACR and a minimum of 5 years of service before superannuating. Each group is then given 2.5 months training – one month at home and 1.5 months in the UK to make them eligible for promotion. The first batch is undergoing training already. This is a welcome development in that it recognizes the urgent need for training at this level and it introduces an element of meritocracy. However, given the flaws in the ACR system, open competitive exams for training overseas is to be preferred. This has worked as a powerful incentive in the training of accounts staff (See Box 6.1).

To overcome the disincentive effect of being passed over for promotion, consideration should be given to introducing a well-ordered system of pay scales of longer duration at lower levels at the time of the next pay revision together with annual increments related to the achievement of clearly measurable performance targets. Indeed assessment against annual performance targets needs to be built into the ACR process for every public official.

Two ways to enhance the capacity of the ministries would be to allow, indeed encourage, lateral entry at various levels from the private sector and to greatly reduce job rotation. Greater staff mobility between the public and private sectors would enhance mutual comprehension and increase the ministries awareness of the needs of business. Excessive job rotation in the Ministries obstructs

3 “Geographic quota was introduced for restoring the balance of employment from all districts, but in practice, it is doing the opposite. … Quota is a poor substitute for provisions of adequate facilities that can result in equality of opportunity and ability to all sections of society.” PARC Report, June 2000 (p.30) 4 “Merit should be the basis for appointments. Posting and promotion at all levels in all spheres of public administration.” PARC Report June 2000 (para Bi. on p.44)

Taming Leviathan: Reforming Governance in Bangladesh 74

the acquisition of professional expertise of that particular Ministry. For example, in recent years the tenure of an Assistant Secretary in the Ministry of Post and Telecommunication has varied from 2 months to 22 months, averaging 14 months. The Deputy Secretary averaged 27.5 months, Joint Secretary 13.5 months and Secretary 12 months in the same Ministry. The situation is similar in other ministries. That this clearly has a very damaging impact on the quality of work has been frequently pointed out by the donors, but to no positive effect The practice continues unabated.

Another negative development has been the creation of the posts of Additional Secretary and Administrative Officer, two unnecessary layers have been added to the process of decision making in the Ministry. The practice of passing files slowly up and down an inordinately long hierarchy of officers, combined with a distaste for taking decisions, and lack of client service orientation makes dealing with the bureaucracy a nightmare for the ordinary public. The way out is to use tadbir and pay bribes, which means that decisions are not taken on their merit and those with poor social networks and few resources (i.e. the poor) are at a great disadvantage.

Box 6.1: Motivating Accounts Staff to Work Better The RIBEC Project demonstrates that remarkable levels of performance and ‘team playing’ can be achieved within the Bangladesh government where there is imaginative leadership and well designed incentives. RIBEC stands for Reforms in Budgeting and Expenditure Control. In three years this project has successfully initiated the transformation of public expenditure accounting (See Box 4.1) The present project team inherited dispirited and frustrated staff who lacked ownership and commitment to the project. Stakeholders were not supportive and the project had no champions. All this was turned around. What was the secret of their success? Inclusiveness, openness and equity: Key project staff – government officers on secondment –were included in all work planning; scarce computers were taken from the consultants and given to them; consultants were accommodated in exactly the same way as other staff and other privileges equalized. Everyone from peons up were treated with respect. Even drivers participated in the log frame processes. Team-building: A flat management structure was adopted, hierarchy discouraged, and all staff were included in social gatherings and sports events which were frequently held. Traditional social values were played on to build mutual respect among different staff – respect for elders who were invited to lead discussions, -- and cultural commonalties between local and foreign staff used to reinforced respect. Humor was used to overcome problems, and inter-cadre rivalry turned into an incentive to move forward together. Successes were celebrated. RIBEC staff became one happy family. Incentives: Ministries selected to pilot the reform were given benefits, so that others clamored to be included. Staff who did well in local training were given computers on completing; the best sent overseas for further training. Competition between retiree consultants and officers on secondment and between different cadres was encouraged. Staff who did poorly were returned to their departments. A performance pay scheme was extended to all staff; bonuses were cut regularly when performance was below par. Nurturing management support: Priority was given to meeting the needs of the Finance Secretary for example in devoting all resources to producing two budgets – one before and one after the elections – in mid-1996. This also demonstrated that the project could deliver and could be immediately helpful. The project was genuinely co-managed by the local and expatriate project leaders.

Energizing Administrative Reform 75

Measures to overcome these deficiencies would include:

introducing fixed-tenure posts for all secretariat positions and heads of departments to develop professionalism

abolishing posts of Additional Secretary and of Administrative Officer in the secretariat

establishing flatter structures of team-based work centers, particularly at the point of service delivery.

devolution of public services of concern to the local community to local government bodies e.g., Education, Health, Police (see Chapter 6).

The key incentive associated with postings are better ‘perks’. The preferred postings include those empowering the office-holder to influence decisions related to contracts and provide patronage, and accompanied by good housing, the exclusive use of transport, nice office space (preferably air conditioned), scope for foreign trips, having the power to offer patronage. Postings abroad usually bring with them allowances that can be partly saved, as well as useful contacts. All these perks are legitimate; it is the scope for taking improper advantage of them which gives rise to corruption. And in a context were abuse is the norm, the challenge is how to redesign the system to limit the abuse.

Along with improved pay, the government should take more determined steps to directly combat

the corruption within the public service.5 One instrument for enhancing integrity used in many countries is an anti-corruption unit. And, indeed, Bangladesh has its Bureau of Anti-Corruption, but unfortunately it is widely perceived, not without cause, to have degenerated into an instrument of intimidation, itself extremely corrupt.6 In response to public criticism, the prime ministers office has taken direct charge of the Bureau. This is quite the opposite of what experience elsewhere has shown to be desirable, namely establishing a truly independent body that is perceived by all to be impartial and principled, working with a clear legal mandate to deal with corruption wherever it is found. No one should be above the law. To ensure its independence, the Anti-Corruption Bureau should report to Parliament, for example, through an Ombudsman appointed by the President, or some similar arrangement which will ensure the Bureau’s autonomy and hence its ability to investigate and prosecute any official or political appointee whatever the individual’s status. This arrangement has been adopted successfully in Peru (See Box 6.2).

Along with giving the Anti-Corruption Bureau autonomy, steps need to be taken to consolidate the various anti-corruption laws, pruning what is unnecessary and incorporating new elements to make the agency more effective. Employment of specialists on renewable contracts with market-based remuneration would also help to maintain the agency’s integrity. A fuller discussion of 5 “Corruption pervades public life and public administration in Bangladesh. Corruption takes place at both political and bureaucratic levels, occasionally independent of each other, sometimes in collusion…..Underhand transactions for private gain have become the rule in public and private sectors’ transactions.” PARC Report, June 2000 (para 6.01, p.83) 6 “(BAC) has already tainted itself as the most corrupt department. They (BAC Inspectors) very often use their office to harass other public officials, extort money from them, threaten them and rope them in an anti-corruption case. There has been an emphatic outcry against the Inspectors of Anti-Corruption.” PARC Report, June 2000 (para 6.37, p.89)

Postings: Perverse Incentives

Fighting Corruption

Taming Leviathan: Reforming Governance in Bangladesh 76

corruption and the actions needed to curb it are set out in the PARC Report (June, 2000) which devotes a whole chapter (Chapter 6) to the topic. Once again, there is no shortage of analysis and recommendations, simply a lack of action.

Responsive public service depends on having in place effective mechanisms ensuring public

accountability. In Bangladesh, public service delivery is input-oriented rather than results directed and regulations-driven. The relationship has taken the form of benefactor-beneficiary (consistent with the patron-client character of society noted in Chapter 2) rather than of service provider and customer. Information on services provided is extremely scanty and effective procedures for receiving complaints and settling grievances hardly exist.

Political parties regularly pledge themselves to provide people-oriented public services, which should mean customer-satisfying services, accountable to the intended beneficiaries. In practice, the public is obliged to endure neglect and harassment from service providers. In the face of abuse by officials, the ordinary citizens feels helpless. For the most part their expectations are extremely low; surveys indicate that the poor would be happy simply to be left alone. But for the more educated, this situation is changing, as may be seen from the recent uprising of Dhaka utility consumers and the large demonstrations against the police rape of women, and the police kidnapping and killing of a student.

In Chapter 3, ways to achieve greater public accountability were discussed in detail. The only question not explored was the role of an Ombudsman, which is particularly aimed at giving citizens a means to seek redress for abuses committed by the administration.

The Constitutional provision, the necessary Act of Parliament and full political support from all parties (judging from public statements) for the appointment of an Ombudsman have all been in place for sometime. Government has stated repeatedly that it is committed to fill the position. But the post

Box 6.2: Protecting the Common Citizen from State Abuse The Peruvian Ombudsman: Defensoria del Pueblo

The Peruvian Ombudsman has attracted both local and international recognition for his efforts to protect Peruvian citizens from mistreatment by state officials and for fostering greater accountability in the public sector. Responding quickly to petitions, he has handled on average 15,000 cases a year, supported by a small team of dedicated officials. He has also worked with other interested stakeholder to reform the Judiciary. He investigates allegations of public corruption. And he has maintained a watching brief over the resettlement program in the rural Andean region where there have been serious human rights abuses. Because of his considerable stature, the government has felt a compulsion in most cases to accept his findings and to comply with his recommendations. The Ombudsman is appointed by Congress (i.e. the Peruvian parliament) on the basis of a two-thirds majority for a five year term and reports only to Congress. The Ombudsman’s Office is a fully autonomous state agency, preparing its own budget for approval by Congress. The main office is in the capital Lima, but subsidiary offices are being set up in district (departmental) headquarters too. The Office has 130 permanent staff, 30 technical assistants and 160 volunteers. Donors have assisted the Ombudsman to meet the heavy demands on his services by providing additional resources to enable him to hire more staff and to better equip his Office.

Establishing a Credible Oversight System

Energizing Administrative Reform 77

still remains vacant. Without question, the nomination of a person of courage, wisdom and integrity, who commands bi-partisan political support, is crucial.

The 1980 Ombudsman Act authorizes a wide scope of inquiry. Even cases where grievance settlement procedures are available have not been excluded, whereas abusive delivery of service by civil servants has not been made a possible subject of inquiry. This omission needs to be corrected. Once some experience has been gained, the legal framework might be re-examined and appropriate modifications introduced. To start with, it is important that an adequate budget be guaranteed to meet the costs of inquiry and to provide competitive remuneration sufficient to attract competent and honest staff.

The work of the Ombudsman would be complemented by the Administrative and Appellate Tribunal which hears the grievances of civil servants against the government on terms and conditions of service. This is an internal system of accountability and has been functioning quite well.

Transparency is the handmaid of accountability, and performance indicators are part of her

toolkit. Bangladesh is in a position to benefit from the considerable experience that has been gained across the globe in recent years in the use of indicators to track the performance of public service agencies. Bangladesh has just begun to make valuable use of these techniques, for example, in conducting feedback surveys in the health and family planning sector. The opportunity exists to greatly expand the use of such instruments.7

Systematically and openly monitoring the performance of public agencies is a simple put powerful instrument for increasing their efficiency and customer satisfaction. However, this approach presupposes a government’s willingness to embrace greater transparency and to take corrective action as needed. The discipline is salutary. First, an agency must clarify and specify precisely the outputs and outcomes expected from the inputs used, together with a clear schedule. A reliable monitoring system must be put in place.8 In the first instance, none of this need be complicated. Simple indicators easily measured and made public will suffice. Occasional independent verification – a form of citizens’ audit -- is also important to give credibility to the process. Indeed, citizens’ organizations should be encouraged and assisted to undertake their own monitoring, including carrying out public surveys to establish the facts in a transparent way. The Bangladesh chapter of Transparency International has already initiated this work. The objective, agreed by all, should be the preparation and publication of regular ‘score cards’ on the performance of public agencies which can be publicly debated (see Box 9.2).

Greater transparency is needed in other spheres. Public accountability is seriously handicapped by the outdated (colonial) government practice of classifying all government business into Top Secret, Secret, Confidential and Restricted. All other matters are official but cannot be disclosed unless specially or generally authorized. In fact, Government Servants Conduct Rules forbid disclosure of information that has come into his/her possession in course of his/her official duties. The Official Secrets Act makes unauthorized disclosure a criminal offence. Secrecy is therefore the key to all

7 “There is no audit of “results”; the process focuses on conformity and implementation of the rules….A results-oriented performance audit should be introduced into all offices” PARC Report June 2000 (para 2.10, p.9 and p.14) 8 “The Ministries/Divisions should set up performance standards/targets…and monitor their performances regularly.” PARC Report June 2000 (p.13)

Transparency and the Use of Monitorable Performance Indicators

Taming Leviathan: Reforming Governance in Bangladesh 78

government business. If the Bangladesh citizen is to benefit from accountable government all this needs to change, as is happening elsewhere in the world.9

It is true that in a number of important areas government processes are already known to the public. The proceedings of the judicial and parliamentary organs of the State are largely transparent. Laws, rules, regulations of the government, appointment of senior officers of the government, procurement decisions relating to goods and services on contract are made public. However, much of what government is doing remains shrouded unnecessarily in secrecy. Citizens adversely affected by government decisions have no means of learning about the reasons and the processes by which the adverse decisions are arrived at and the only means of redress is to activate personal patron-client networks, which is highly inimicable to good governance, since it personalizes decision making and is, by definition, inequitable.

In the absence of open government, the media cannot properly play its role of public watchdog and ‘whistle-blower’. Investigative journalism is obstructed and newspapers encounter difficulty in fulfilling their role of keeping the public informed about major issues and government’s role in them. Occasional press conferences and interviews with the concerned Minister to a limited extent mitigate the problem, but are far from satisfactory, as there is no tradition of keeping the public well informed.

In the interest of instituting more open government, the following measures needed to be considered:

Amendment of the existing law to permit public access to all but secret information other than that relating clearly to national security or financial risk at nominal fees

Reports of all government appointed Committees and Commissions to be put on public sale

at convenient places

annual performance reports of all government agencies to be prepared and published in a timely manner to include audited accounts, an assessment of the past year’s performance indicators, and the specification of next year’s indicators

All regulatory and service providing laws, rules and regulations and all detailed information

on delivery of public services to be made accessible at nominal prices at convenient locations e.g., large post offices

Designation of trained government spokesmen in all government agencies for providing

information to the media, and

Arrangement of regular and full briefing for the press at a central point on important government policies and decisions instead of occasional press conferences and interviews with Ministers.

The training of public officers is seriously deficient, as has been well documented in a recent study by an ADB sponsored expert team10. The failure in this area is particularly worrying as it has

9 The PARC Report June 2000 (p.15) proposed a draft Freedom of Information Act noting that “Adequate and free flow of information about government functioning makes the government accountable to the people.” (para 2.05, p.8) 10 ADB, 1999.

Better Training is Indispensable

Energizing Administrative Reform 79

gone on for a long period with the result that the public service is now seriously short of capacity to fulfil its basic tasks. The lack of skills in government is a major drag on the country’s development. Although this deficiency has been recognized for a long time, no adequate corrective action has so far been taken.11

Foundation, ACAD and SSC are the three core courses on management for senior officers in the civil service. The Foundation course is compulsory for all twenty nine-cadre officers on entry into civil service. Yet, a huge backlog of officers are waiting for this training, even though the duration of the course has been reduced from ten months to two months which might not be adequate. The Advanced Course in Administration and Development (ACAD) are meant for mid level officers in management positions. The Senior Services Course (SSC) is designed for officers of Joint Secretary and above. Both courses are conducted at the Bangladesh Public Administration Training Centre (BPATC). Both have curricula which are badly outdated and poorly taught.

Training courses are not organized on the basis of training needs of individual officers and organizations. No attention is given to developing specific specialized competencies for the jobs to be done. Training institutions are not given adequate powers to manage their own affairs. On the job and in-house training are conspicuously absent. This report endorses the following main recommendations made in the ADB sponsored study that have yet to be taken up by the government:

BPATC should be developed as the premier training institute with additional responsibilities

of guiding other training institutes to run them professionally and to undertake quality control of their training

BPATC to exclusively run ACAD and SSC courses as at present for the same clientele Modular training courses in managerial competencies should be arranged for officers as and

when needed, instead of running long duration broad general courses Training institutions to provide pre- and post-training materials for self-learning The civil service training institutions should be reorganized with adequate delegated powers

and governing bodies for policy guidance and setting standards of performance. Training officers in Departments and Ministries should undertake training needs

assessments and training evaluation, select officers for training for appropriate courses and organize in-house training courses. 12

Secretariat Instructions state that there should be no interference by a ministry in the day-to-day

operation of a department. An Office Memorandum of the Ministry of Finance in 1985 delegated to departments and subordinate offices clear-cut financial powers set out in a "Model", designed to ensure uniformity. It categorically provides specific financial powers to Heads of Department and Heads of Subordinate Offices at divisional, district and thana levels. There are as many as 48 items of financial powers which include re-appropriation of funds, administrative approval to new works to non-development account, disposal of government property, write off of irrecoverable value of stores or public money due to losses on account of fraud, theft etc, purchase of vehicles in replacement of old ones, purchase of office stationary and equipment, utility charges, taxes, allowances to non-official members travel grant and so on (appended in GOB, 1992).

11 "A fundamental issue is that government gives training very low priority.” PARC Report June 2000 (para 3.46, p.38) 12 “attending certain courses on job competence may be made a prerequisite for promotion at different levels.” PARC Report June 2000 (para 3,48, p.38)

DDeelleeggaattiioonn ffoorr IImmpprroovveedd EEffffiicciieennccyy

Taming Leviathan: Reforming Governance in Bangladesh 80

In practice, despite these instructions, the extent of delegation of powers - both administrative and financial - to departments and other organizations is quite limited. The Public Administrative Efficiency Study (PAES) Working Group (1989) found that the key constraint on effective departmental operations and the major cause of delays in their activities was a lack of adequate delegation of authority over personnel and financial matters. Though some administrative and financial powers were delegated to Departments, but they had to pass matters to the Ministries for decisions when these involved routine, non policy decisions which they should have been able to decide. Regrettable, this remains the case today and is the cause of costly inefficiency.13

The Administration Reorganization Committee (1996) also identified a number of problems and constraints in the nature of delegated authority in departments, corporations and other subordinate offices. These have severe adverse implications for efficiency and management. In practice, the departments are not permitted to purchase new or replacement of cars and vehicles for official use although budget provision was made for them. The problems affecting delegated authorities range from policy to implementation. The consequences of withholding delegated powers include a lack of policy guidance from Ministries; indecision within departments and subordinate offices micro-management of the activities of departments by the supervising Ministries; heads of departments lacking the authority to manage staff (e.g. to post and approve leave of class I officers). Junior Ministry officials who lack the relevant technical knowledge scrutinize technical proposals received from forwarded by Heads of Departments. The Departments have no independent authority to purchase needed office equipment and other things (e.g. repairing a car, purchasing a car etc.).

The Corporations also do not enjoy delegated powers to any significant degree – the head of Chittagong Port lacks the authority even to buy an air conditioner for his office. Review of administrative and financial powers of Corporations indicate that in cases of purchase of vehicles and equipment and acquisition of land they seek approval of the concerned Ministry rather than from their respective Boards. The power of approval of budget, structure and list of equipment, bonus of companies with Corporations is vested with relevant Ministry rather than with their Boards.

In view of the above, the Schedule of the Rules of Business concerning the distribution of powers between the Ministries, Divisions, Attached Departments and other offices should be reinstated as the basic guide to government operations. The Guidelines of 1976 defining the relationship between government and Corporations and Resolution of 1983 concerning operational autonomy of the Corporations should likewise be implemented. The Rules (including government orders and instructions) should be revised to bring them in line with the functions mandated by the Rules of Business and consolidated in one place.

Evaluation from time to time should be undertaken by the O&M Wing of the Ministry of Establishment and the Ministry of Finance to ensure that the new Rules are followed by all Ministries and Divisions. Delegation carries with it an obligation to be accountable. For this reason Ministries, Divisions, Departments, Corporations and other offices should prepare annual reports of performance for timely publication and public debate, as mentioned earlier.

Reform of Bangladesh’s system of public administration has repeatedly been postponed. A

competent and well-motivated public administration lies at the core of good government. Without

13 “the decision-making process should not involve more than three tiers. But regrettably sometimes it involves ten tiers ….all Government offices must delegate adequate powers to the officers at various levels in such a way that no decision entails more than three tiers.” PARC Report June 2000 (para 2.08, p.9).

CCoonncclluussiioonn

Energizing Administrative Reform 81

urgent and radical action along the lines set out above, and elaborated authoritatively in other reports, it is hard to see how the pace of development can be accelerated or even maintained. The recent decision to establish a cell within government to implement the 137 recommendations made by PARC, announced by the Prime Minister in Parliament on July 4, 2000, is encouraging evidence that the reform process may be re-activated. In the past such announcements have not be followed through effectively; hopefully, with a new government in place there will be prompt and significant reform actions.

“Modern information technology is poorly or scarcely utilized in the public agencies of Bangladesh. …It is imperative to make more budgetary allocation to get optimum use of IT and undertake comprehensive training

program for its rapid and effective use. PARC Report June 2000 (para 2.21, p.12)

The extraordinary development of information and communication technologies

(ICT) in recent years has largely by-passed Bangladesh’s public sector. The easy availability of a huge range of user friendly software, the robustness and rapidly falling cost of hardware, the growing familiarity with the use of computers worldwide (and Bangladesh is no exception) all combine to create significant opportunities for the use of informatics for improving governance and the efficiency of government. Unprecedented new possibilities for addressing longstanding weaknesses in governance are emerging. These are available to low income as well as rich countries.

Bangladesh can benefit from numerous examples of ICT applications at the national, state and

local government level in other developing countries. These often serve to smooth the interface between citizens and government and to improve the quality of services. An example close to Bangladesh is Calcutta’s highly successful computerization of some 15 different services including solid waste collection, revenue collection, budgeting/accounting, digital/GIS mapping, property valuation, assessment, hearings of appeals, and collections, recording of births and deaths, water supply billing, and building plan storage and retrieval. A mass of evidence from case studies around the world graphically demonstrate that introducing ICTs as part of a reform effort, if implemented in a supportive institutional environment, with the backing of key stakeholders and in coordination with other projects, can have a dramatic impact on the quality of governance and services from the local to the national level (see Box 7.1)

The challenge for the public sector in Bangladesh, no less than in any other country, is to find the best ways to adopt and use modern ICT solutions: as a productivity tool and as a platform for improved service quality; to ‘formalize’ public management processes and so reduce rent-seeking opportunities; and to strengthen government information flows, both inter-agency and with the private sector and civil society. Despite the absence of any informatics policy or strategy for the

CHAPTER 7:

LLeeaarrnniinngg ffrroomm GGlloobbaall EExxppeerriieennccee

Taming Leviathan: Reforming Governance in Bangladesh 84

public sector, public agencies at many levels are already implementing reforms involving the increased use of ICTs. For example:

There are a number of ongoing projects using computerized information systems including PMIS in the Ministry of Establishment, the national databank, the Central Banking Automation System, and RIBEC’s accounts consolidation system. The UNCHS/World Bank Urban Indicators Program (UIP) is considering supporting the development of Local Urban Observatories (LUOs) in Bangladesh. One of the key functions of the LUO will be to ensure that citizens have better access to information on how successfully or poorly their local government is performing. Transparency International (Bangladesh Chapter) has a proposal for establishing Advice and Information Centres, Committees of Concerned Citizens, and Municipal Rating Systems. Dhaka City Corporation (DCC) has made a proposal to support the introduction and development of ICTs to improve its planning, operational and monitoring capacity. DCC will also decentralize a number of core services to the ward level (initially 5 pilot wards), representing a radical departure from the existing highly centralized organizational and management structure of the Corporation. The project will also aim to build the capacity of

Box 7.1: E*Government in Andhra Pradesh

Popularly known as the CEO of Andhra Pradesh, Inc. Chief Minister Naidu’s reform program is impressive. He is downsizing government, benchmarking his state against global standards, constructing a hi-tech city, IIIT Hyderabad; creating a networked information-based society and branding it as Andhra Pradesh - the promised land for global investors. Naidu’s IT radical program of e*governance is being keenly watched by other states in India. The goal is to interconnect the state secretariat and the offices of 23 district collectors by next year; in the second stage he plans to add to the network 112,200 centres with an average population of 30,000; and eventually link all the 19,499 panchayats to the system to create India’s first wired state. Naidu has also formed a joint venture between AP and the Singapore Network Services to cover 30 departments under a pilot network. The resulting system will assist citizens in paying their utility bills, obtaining certificates, permits, licenses, and information 24 hours a day, seven days a week. Among the projects that are already on, there is computerized registration of land deeds, transfers, and valuation of properties and imaging of documents to replace the archaic corruption-infested manual system in sub-registrars offices. Land registration offices throughout Andhara Pradesh are now embellished with computerized counters. The project is directed at altering the antiquated procedures that have governed the registration of urban and agricultural properties. Citizens now complete registration formalities in less than an hour, whereas previously it took up to 7 days. Certified copies of documents now take 10 minutes compared to 1-3 days. Other procedures have been similarly speeded up. Launched in 1998, about 80 percent of all transactions are now done electronically in one of the 214 functioning sites across the state. As a passionate believer in the power of IT for better governance and a leading crusader for IT and the Internet, Naidu’s relentless drive has set other state governments thinking about IT and how to adopt new changes in the state’s working order. Already, Karnataka, Tamil Nadu, West Bengal, and Maharashtra are coming up with proactive IT policies, while others will continue vying for a slice ofthe IT pie.

E*Government for Better Governance 85

DCC to engage citizens in the governance process at the ward level. Several Ministries and Departments, as well as the Prime Minister’s Office, have established websites as a way of disseminating information to the public. These have hardly begun to exploit the potential for keeping citizens informed and do little to assist individuals to get better services.

While these early efforts to integrate ICTs into the operation of government are important first steps, they were not conceived in a context of a coordinated, comprehensive strategy for establishing information-based governance and government services. If Bangladesh is to reap the full benefits of the ICT revolution in the public sector, ensuring that the ICT strategy, presently under preparation, is dynamic and in line with similar strategies being developed in other parts of the word, will be a central element of the public sector reform agenda. This would be consistent, but distinct from, a national strategy for ICT development which would spell out national policies for promoting the use of ICT more broadly.

The public sector ICT strategy needs to lay out what should to be done to establish inter-operability, standards or economies of scale and scope. This will necessitate reform of ICTs management within the government. For example, while overall responsibility for ICTs in government rests with the Bangladesh Computer Council in the Ministry of Science and Technology, the Establishment Secretary is responsible for the Public Administration Computer Centre and the Personnel Management Information System for the Bangladesh Civil Service. The first step toward reform of ICTs use in government is to ensure high-level coordination and the support and cooperation of high-level stakeholders. A unified program and oversight between ministries is needed to ensure (at the very least) compatibility between management information systems. Without this confusion and waste is inevitable. In the context of preparing an ICTs Strategy, the full range of possible uses of ICTs in government should be examined, and areas for priority implementation established. Areas to be covered would include:

Clerical systems including office automation and email communication, high volume transactions networks (including revenue collection), immigration, utility payment and licensing systems.

Management systems such as statistical analysis, information management, monitoring networks and planning models.

Public systems such as participatory interfaces to revolutionize service delivery.

Selected priority ICT programs should be introduced, taking advantage of scale and scope

economies wherever possible. Possible priority programs might include:

Making all Statutory Regulatory Orders available on the Web for easy public access.

Creating a secure bilingual Intranet within the Government of Bangladesh for email and document handling facilities.

Procurement managed via the Internet to reduce the opportunities for manipulation and

increase transparency

Computerized payment of utility bills

The Need for an Informatics Strategy for the Public Sector

Taming Leviathan: Reforming Governance in Bangladesh 86

Computerization of the payroll and pension schemes

Further computerizing and reform of the income tax, customs and port handling systems

Use of GIS in the collection of land taxes and computerization of land registration

Computerization of stores management to reduce pilferage and optimize inventory

Pilot public information kiosks in thanas Computerization of government stores management

Extension of existing inter-city rail ticketing and reservation systems

It should be noted that the use of ICTs in government itself is only the first step, and the impact

of e*goverment will be greatly dampened if the broader environment is not ‘ICT-friendly.’ Here, government has a central role in:

Development of the ICT skills base

Supporting the development of an information culture through, for example support for local language content development

Supporting business and civil society interaction with ICT-based government services through access, training, support (especially important if access to services is to be equitable)

Opening the ICT sector to well-regulated competition and reducing tariff and non-tariff barriers to foreign supply

Supporting business use of Internet e-commerce through regulatory and judicial reform including privacy encryption issues

Venture capital and/or coordination support for community information centers, Internet backbones and startup firms.

The development of ICT is very fast moving. In this area more than any other, the government must facilitate the private sector in the exploitation of ICT, not compete with it. Regulation needs to balance carefully the value of state coordinated development and the need for competition, while allowing the private sector the freedom to innovate and the incentive to invest.

Use of ICTs is dependent in large measure on efficient telecommunications. Thus, the

continued reform of the telecommunications sector is crucial. Despite improvements (for example, 20,695 nationwide dialing circuits are currently in operation, compared with 11,410 in 1997/98), and the presence of innovative operators such as Grameen Phone, access to domestic and international telecommunications remains poorly developed and inadequate to meet the growing demands of commerce and industry. Bangladesh cannot afford to allow its development to be hamstrung by giving a protected role to a lethargic, resource starved and poorly trained public telecommunications utility.

The reform agenda should include:

NNuurrttuurriinngg aa DDyynnaammiicc TTeelleeccoommmmuunniiccaattiioonnss SSttrraatteeggyy

E*Government for Better Governance 87

Privatization of Bangladesh Telegraph and Telephone Board (BTTB) and the introduction

of full competition in all services

Quick implementation of and strong political support for the new independent regulator

Licensing practices designed to roll out services rather than maximize government licensing revenues, and

Strong support for universal access programs including subsidy auctions.

Recognizing belatedly that ICT is a neglected area, the last government instructed that a national

informatics strategy be prepared for Cabinet consideration. An important component will be a strategy for the public sector. To support this latter exercise, it is important that an early decision be taken to establish a focal point within government with competent leadership to coordinate the public sector informatics work. The responsibility for establishing policy and support for ICT use within the public sector must be distinguished from responsibility for a national ICT policy, which is the responsibility of the Ministry of Science and technology.

Among the many matters that need attention, priority attention should be given to establishing an integrated ICT network within government, with the appropriate choice of standardized software, hardware and related information systems and databases, to facilitate and support electronic communications and transactions. This would link not only the ministries, departments, and agencies in Dhaka, but also staff in the districts. These innovations would need to be supported by strong technical backup from the private sector and intensive staff training.

Establishing a Focal Point for Public Sector Use of ICTs

“Administrative reform is a long and continuing exercise and calls for solid political support” Report of the Public Administration Reform Commission, June 2000 (Letter of Transmittal)

Building on the proceeding analysis, this final Chapter recapitulates the priority

themes that emerge from the Review that would constitute the core of a longer term strategy for improving governance and establishing better performing institutions in Bangladesh. We then outline the main actions that would need to be initiated by the government, by civil society, by private business, and by Bangladesh’s development partners to implement the proposed strategy.

This Review has explored in some detail the current state of governance in Bangladesh and has reviewed efforts to build institutions over the past decade. The two concerns – improving governance and building institutions – are complexly inter-connected. Institution building cannot fully succeed unless the governance environment is supportive. Alternatively, this may be stated in terms of progress being dependent on political commitment. If the political leadership lacks conviction about the desirability of change, public sector reform is much more difficult, though that is not a reason for others to give up. There are almost always some agents of change even in the bleakest situations. Hopefully with a newly elected government taking office, the long delayed reforms so essential to improve the welfare of the population will be undertaken with vigor and determination.

As Jeremy Bentham once observed, and history makes clear, governments rarely if ever initiate reforms that serve to hold them more accountable unless compelled to do so by the strength of public opinion.1 This we have seen to be true in Bangladesh when, in the face of escalating street violence in early 1996, the BNP government felt obliged to amend the Constitution to provide for a Caretaker Government to oversee general elections, a measure the government had previously resisted strenuously. Given Bangladesh’s long history of ‘managed’ elections, the general public recognized the Opposition’s call for a Caretaker Government as legitimate and supported street action to this end. Consequently, a strategy for governance reform must envisage actions and interactions between the government and civil society. To these must be added two other groups: 1 Bentham, J. Constitutional Code quoted in Parekh, B (Ed.) Bentham’s Political Thought (pp. 212-213) “Public

opinion may be considered as a system of law, emanating from the body of the people. …To the pernicious exercise of the power of government it is the only check.”

CHAPTER 8:

Taming Leviathan: Reforming Governance in Bangladesh 90

private businessmen, who are the principal financiers of the political parties, and the donors because of the prominent role they play in financing Bangladesh’s development.

Given the entrenched power of the Bangladesh civil service, the effective implementation of reforms depends in great measure on the willingness of the bureaucracy to be co-opted. Given the present social and political environment, bureaucratic behavior cannot be expected to change rapidly, or to be easily co-opted. Yet, change is surely if slowly taking place as new recruits are drawn increasingly from the ranks of second and third generation urban dwellers with a more modern outlook. Some of these younger staff, some of whom are very able, are disillusioned with current practices and impatient for change. Many new social and economic pressures are emerging in Bangladesh that will force faster change in the way the public bureaucracy functions. But this is still a very slow process. More importantly in the near term, civil servants may be expected to respond to incentives just as anyone else.

The four major themes of this Review relate to redefining the role of the state, holding government accountable, decentralization and improving public sector efficiency. These constitute the principal components of the proposed strategy for reforming governance. The strategy envisages important roles not just for government, but also for the business sector, civil society, and the development partners. These roles are complementary and reinforcing. The key elements are set out below.

This Review strongly reiterates the main theme of GTW [Chapter 2] that the state should

first and foremost concentrate on delivering efficiently those services that are truly needed and cannot be provided by others. The logic of this proposition is that the state should, firstly, disinvest its commercial activities, which are better left to the private sector, and, secondly, it should rigorously review the need for its myriad control activities and related procedures. As GTW clearly documented, so many of the existing procedures and regulations seem redundant, outdated, or unnecessarily cumbersome. Those that are redundant and outdated should be cancelled, and the relevant legislation repealed, while those that are excessively cumbersome should be streamlined and simplified.

The government has been slowly disinvesting its state owned enterprises (SOEs) for years. Yet, as we saw in Chapter 1, there is still a very large state commercial sector which racks up several hundreds of million dollars of losses each year (Tk4.7 billion in FY1999-2000). This is a massive and unnecessary drain on the government exchequer. Privatization has been controversial, partly because of the unions’ opposition to the job redundancies that inevitably arise in the short term (though in the longer term with efficient management employment may well expand), partly because of the public’s distrust of those businessmen who seem most likely to take over the enterprises, but mostly because of the bureaucrats reluctance to let go. The present government gave enhanced status to the Privatization Board, but in the past four years few enterprises have in practice been handed over to new owners. The Board has encountered strenuous bureaucratic opposition to implementing its mandate, as the Chairman has made clear on several occasions. The issue of redundancies is often exaggerated. In a number of cases over the past 20 years, significant downsizing has been successfully handled – most notably in the jute industry, railways and the Water Development Board – using a combination of generous severance packages and natural attrition. It may be recalled, too, that in 1981 President Justice Abdus Sattar dismissed several thousand bank employees for indiscipline with little serious backlash. With determined leadership many of the reforms thought impossible are in fact achievable.

Re-define the Role of the State

A Strategy for Improved Governance and Better Performing Institutions 91

Public officials questioning the competence and integrity of the potential private purchasers of SOEs can become to a large extent a self-fulfilling prophecy. If these same officials contrive to make the process of bidding for enterprises and negotiating contracts of sale to be unpredictable, lacking in transparency, and endlessly drawn out, as has too often been the case, it is hardly surprising that those businessmen who remain interested are often the least reputable. If Bangladesh could establish a reputation for processing privatizations in an efficient and reliable way, it is likely that the interest from investors would soar. The mishandling of concessions in the energy sector is a good illustration of the way solid private investors, even when they have a strong interest in doing business, can be progressively discouraged.

GTW, under the heading “strangulation, not regulation” [Chapter5], described in some detail how the Bangladesh private sector is in some areas excessively regulated, while in other areas, such as the environment or in the case of collusive trading arrangements, is in practice damagingly under-regulated. The uncontrolled abusive practices of some businessmen have served to give the private sector a bad name. The issue is not so much one simply of deregulation (though that may often be what is needed), but also of putting in place appropriate regulation. GTW spells out in some detail the characteristics of a sound regulatory system 2

The second major theme of this Review is that Bangladesh has very weak institutions

holding the Executive accountable. Thus, a key challenge is to find ways to strengthen the accountability system. And the measures to bring this about would constitute one of the four core components of the proposed strategy to improve governance. The strategy must address several dimensions of accountability. The arrangements for ensuring ‘vertical’ accountability – namely, periodic general elections -- have been enormously strengthened by the provision for a Caretaker Government noted above. The proposed strategy therefore focuses on ways to strengthen the set of ‘horizontal’ checks on the Executive between elections. Significantly, the same checks will also help to ensure fair elections. These checks can be seen to operate through institutions at two levels: at the national level (e.g. through institutions of accountability such as the Judiciary, Parliament, C&AG, the Press, etc.) and at the program or micro level (i.e. how to make the service providers responsive to their intended beneficiaries through mechanisms such as decentralization, participation, community oversight, and performance tracking). Thus, the accountability mechanisms must span the range of situations from basic issues related to the rule of law, checking the constitutionality of government actions and investigating cases of grand corruption by senior members of the government down to addressing a myriad petty abuses at the interface between public agencies and the citizen.

In summary, as elaborated in Chapter 3, the specific measures needed to strengthen government accountability include: reform of the judiciary and the police, making Parliament and its system of oversight committees more effective and fair, and making government processes and actions transparent and responsive to the publics they are intended to serve. Chapter 3 noted that there are six significant countervailing forces which serve to hold the government in check or can be counted on to press for governance reform. To summarize:

First is the pro-activism of the Supreme Court in accepting public interest litigation and, when justified, ruling against the government; this has undoubtedly put a break on the authorities’ more serious abuses. The Supreme Court is the keystone to Bangladesh’s formal accountability system.

2 see GTW, pages 82-85.

Government to be Made More Accountable

Taming Leviathan: Reforming Governance in Bangladesh 92

Second is the phenomenal growth of private voluntary development organizations (usually referred to as NGOs) which are now mobilizing and empowering millions of poor people to improve their welfare and personal security. These activities are giving the poor and the disadvantaged “voice”.

A third arises from the steady growth of genuine wealth-creating private sector activities and the concomitant growth of a class of entrepreneurs and managers who are increasingly demanding a more supportive environment for business.

The fourth countervailing force is the growth of other private not-for-profit organizations, such as independent research institutes (e.g., Centre for Policy Dialogue and Bangladesh Unnayan Parishad) and public advocacy groups (e.g.: Bangladesh Environmental Lawyers Association and Transparency International [Bangladesh Chapter]) which have become increasingly articulate and numerous in recent years.

Fifth is the rapid expansion of basic education, which is opening the minds and raising the awareness of ordinary citizens, enabling them to participate more effectively in the protection of civil rights and in monitoring the performance of public agencies.

Sixth is the thriving and increasingly independent Press.

In light of this analysis, the objective of supporting improved governance and public sector management reform would be pursued through a strategy that aims to nurture proactively all these positive forces.

Notwithstanding all the above, a sustainable improvement in governance can ultimately only come from an alert public that forces the government to be transparent and accountability. In the process, the role of the State would be progressively transformed. It would obstruct the public less and facilitate more. Instead of commanding its public, it would seek a partnership. In place of coercion, there would be cooperation and public service. The conditionality of foreign aid may encourage and support governance reforms, but the changes will not last without forceful public demand for them.

To achieve effective accountability, each public agency should be required to establish clearly defined objectives and responsibilities, specific time-bound and monitorable action plans and performance benchmarks, and a transparent tracking system to measure progress. This approach must be backed by effective incentives and credible sanctions to condition official behavior.

The reform dynamic envisaged above will depend first and foremost on the development of a better informed public brought about by the spread of education, the strengthening of the Press, public awareness campaigns, empowerment of grass roots organizations and, more generally, the construction of social capital. Measures that serve these objectives would be part of a strategy for improving governance. By its nature, this will be a gradual process that is certain to be persistently, and sometimes violently, opposed by the many entrenched vested interests that benefit from the status quo. These vested interests have a strong, but not invincible, grip on the existing political processes.

There can be no instant cure for the cancer of poor governance that is now corroding the Bangladeshi State, disabling civil society and obstructing private sector activities, as the PARC Report has so eloquently made clear. It is both widespread and deep-rooted. But, there are some very practical steps that may be taken to improve governance. While the vision must be long term, actions may be immediate.

A Strategy for Improved Governance and Better Performing Institutions 93

A third major theme of this Review is that the quality public service delivery could be

improved if the responsibility for service provision were closer to the intended beneficiaries and if the community were given a greater role in its management and oversight. Aware of the huge psychological distance between central government officials and the citizen in a village or an urban slum, reformers have for long seen decentralization as helping to improve public sector responsiveness. The last government embraced local government reform as one of its key policy objectives. However, as we saw in Chapter 6, actions taken and proposed to implement decentralization fell far short of truly empowering local communities. Nonetheless, the decision to create elected Upazila and Zila councils is a good one. The challenge now is to establish mechanisms at the gram, union, Upazila and Zila levels which will serve to hold the local authorities accountable for their performance. Key here will be the mobilization of community based organizations that will genuinely give ‘voice’ to the poor. In this process NGOs have a key role to play.

NGOs have established an impressive presence in the rural areas and, increasingly recently, in the urban slums. Nonetheless, no more that an third of the poor benefit from NGO services. Their coverage needs to be expanded. While competing for clients in the more accessible areas might serve to improve services, in reality it often leads to undesirable practices. At the same time more remote areas often go unserved. An enhanced role for NGOs must be accompanied by better governance practices and full transparency and accountability. ADAB has responsibility to convert itself into a more inclusive and more effective umbrella NGO organization that is able to inculcate a rigorous code of conduct into its members.

An issue arises on the interaction between small, medium and large NGOs and the related role of donors. Large NGOs obviously have more clout in Dhaka; it is less obvious that the large national NGOs are always more accountable to their clients than are the more locally based NGOs. For reasons of convenience and risk aversion, donor support has tended to gravitate to the larger NGOs whereas, for reasons spelt out above, it is clear that there is a need to support both large and small, as well as those in between. PKSF was established to help ensure that the smaller NGOs received assistance and has proved to be very effective intermediary.

The fourth component of the proposed strategy aims to exploit the tremendous scope for

improving the efficiency and effectiveness of public agencies simply by learning from the lessons of past experience both in Bangladesh and worldwide. The PARC Report contains many sound recommendations to this end, especially in Chapter 7. In large part these improvements would come from better-motivated staff, greater delegation of responsibility, and by adopting a more participatory approach. To achieve better performing public institutions, institutional design needs to be based on a full understanding of the way the existing incentive systems, both formal and informal, function. Annex 1 argues this in some detail based on 11 case studies. Taking more explicit account of the winners and losers in the implementation of a reform strategy would help achieve greater success in implementing reforms. The benefits are not just higher incomes; it involves questions of status, recognition, job satisfaction, and the exercise of power.

Decentralize for More Responsive Service Delivery

Improve Public Sector Efficiency

Taming Leviathan: Reforming Governance in Bangladesh 94

A large part of motivation derives from the work environment. Failure at the project or agency level can often be traced to systemic weaknesses. Chapter 6 of this Review3 and the PARC Report explored in some detail the inadequacies of the present system of public administration, inadequacies that pervade most public agencies that follow the same salary structure and conditions of service and the same rules of business and administrative practices. These two chapters include a list of important recommendations for improving the performance of public institutions, which will not be recapitulated here. Suffice to say that the need for a major overhaul of the current administrative system has become increasingly urgent as performance has progressively declined. The rules of business require revamping, the cadre system needs overhaul, and a massive program of training should be undertaken. Human resource management needs to be modernized. And the compensation of Class I and II staff must be made compatible with the goal of recruiting appropriately trained and motivated officers. These are difficult but not impossible tasks. The reform measures adopted in the past few years are merely tinkering at the margin. The time has come for the government to get serious about endowing Bangladesh with a public service that is equipped and motivated to meet the challenges of the 21st Century.

The themes summarized above would constitute the four main components of a strategy for better governance in Bangladesh. The previous Chapters, to be read together with GTW, have set out in some detail a list of priority actions. The most important are summarized below. A. Re-orienting the Public Sector

Systematically review and take prompt decisions on the recommendations in Chapter 4 of the PARC Report for restructuring and re-organizing government.

Accelerate the privatization of SOEs, by delegating all necessary authority to the Privatization Board to complete negotiations and ensure the smooth hand-over of those enterprises that have been sold.

Issue a policy statement making it clear that, as a matter of principle, government will not invest in any new commercial enterprises however promoted.

Initiate the systematic review of all government regulations to identify and cancel those that can no longer be justified and to simplify those that are unnecessarily burdensome.

Explore exhaustively all possible avenues for reducing the role of public agencies by

depending more on private suppliers operating in competitive markets and on such devices as contracting out to private sector or NGO providers (e.g., implementation of the infant nutrition project, garbage collection, higher education, etc.).

B. Increase public accountability

Give special priority to judicial reform (including separation of the Lower Judiciary from the Executive) and law enforcement (police reform), strengthen Parliament’s oversight committees and the Comptroller and Auditor General’s Office, reform other watchdog agencies such as the Anti-Corruption Bureau (to be made independent of the Executive) and appoint an independent Ombudsman.

3 As did Chapter 7 of Government That Works

Towards Better Governance

A Strategy for Improved Governance and Better Performing Institutions 95

Introduce the use of IT/computerization to “formalize” public management processes

which are presently “hand done” with a view to substantially curbing the way the present system can be manipulated and delayed as a means of obtaining “rents” following, for example, the recent reforms successfully adopted by Andhra Pradesh (see Box 7.1) – this work would include elaborating an IT/informatics and communication strategy for Bangladesh’s public sector and the identification of a number of priority areas where computerized management systems may be introduced, building on those areas where a start has already been made (e.g.: Customs, Income Tax, central government budget management and accounting, road maintenance planning etc.).

Promote more transparency and accountability in public agencies and NGOs by requiring

that they all produce regular annual reports to be made public based on clearly established performance measures and full financial disclosure together with timely audits – failure to meet the reporting deadline should result in immediate suspension of financial support;

Issue Citizens Charters in which each public agency spells out the citizens’ rights to public

services and the performance targets that are sought as recommended by the PARC Report4; and

Train journalists in investigative reporting.

C. Decentralize

Complete the process of establishing a three tiered system of elected local government. This must include the provision of adequate fiscal transfers without detailed controls, genuinely empowering the elected councils and the delegation of full control over staff and budgets. The district administration should not be allowed to micro-manage the councils. And the ambiguous role of the Members of Parliament needs to be corrected. The MPs place is in the national legislature, not in the local councils.

Track public expenditure with full transparency along the lines of the Uganda primary

education pilot study (see Box 5.2).

Ensure full transparency and accountability into the activities of the NGOs both to donors and beneficiaries. This needs to be self-imposed by the NGO movement, rather than by edict from the NGO Bureau.

Promote community involvement in the management of schools and health facilities on the

basis of three-cornered partnership – community, local council, and NGO. D. Increase Public Sector Efficiency

Undertake a greatly strengthened program of training of civil servants, who need to become far more professional. This calls for radical measures. As the ADB/Goldsworthy report makes clear, civil service training is anachronistic and totally inadequate; a major effort is required to raise the knowledge base of civil servants. Skills need to be comprehensively and rapidly upgraded

Improve the incentives for public officials to perform better. As part of such an initiative, undertake

research on the informal incentives within the bureaucracy (using a combination of opinion

4 PARC Report p.15

Taming Leviathan: Reforming Governance in Bangladesh 96

surveys and focus groups) and the establishment of an “action planning” process whereby the civil servants themselves initiate a reform planning process (seek to promote the process through non-threatening “ring-fenced” pilot exercises, which may later be replicated);

Select for priority attention a number of key parastatal agencies where the need for reform is urgent

and the cost of delay is great and the potential political gains seem substantial owing to substantial public dissatisfaction, (e.g., Chittagong port, PDB/DESA, BWDB, BTTB, etc.), and undertake a detailed diagnostic of the informal power structure and incentive system in each case in order to identify promising entry points and define a set of ‘doable’ reforms; based on the above, establish a list of priority reforms where the chance of success seems highest;

Support opportunistically “reformers” in the system and penalize aggressively those agencies which seem to be

particularly delinquent (e.g., REB versus PDB, or “progressive” municipalities versus “backward municipalities” as is being done in the Municipal Services Project and could be done in the case of the Social Investment Fund);

E. Increase the ‘Voice” of Civil Society

Promote the development of the healthy part of the private sector, and encourage the private sector to acquire better corporate governance and a stronger and more thoughtful policy ‘voice’ (e.g., by funding an enhanced policy research capability in the various Chambers and workshops on corporate governance);

Support the emergence of civil society institutions such as independent policy research

institutes, Transparency International (Bangladesh Chapter), responsible professional associations and the like, especially by undertaking joint economic and sector studies with reputable external researchers or consultants with a substantial in-built high caliber mentoring;

Facilitate the expansion of NGO activity, accompanied by greater transparency and

accountability to the public they serve, and encourage their partnerships with CBOs and union parishads and urban pourishavas through projects such as the Social Investment Fund.

In all of the above there is a need for an better-educated population. Consequently, attaching

higher priority to education in the public expenditure program is fundamental to public institution building, as well as to more rapid and sustained private sector development.

As noted earlier, effective implementation of the proposed strategy will depend on establishing a

strong partnership among the government, the private business sector, civil society, and Bangladesh’s development partners. Each has a part to play, though without question, the government has the principal role. The critical factor will be the willingness of the political leadership to take the initiative in driving the reform process forward. This is more likely to happen if there is strong and vocal public support to counteract the lobbying of selfish vested interests. This “voice” must be orchestrated by civil society organizations. “Voice” could in part be expressed through the regular preparation and publication of a government score card (See Box 8.1).It is important to have a focal point within the government to champion public sector reform. Thus, the recent government decision to transform the Public Administration Reforms Commission into a permanent body to be called the Public Administration Reforms Implementation Commission (PARIC) is very much

PPrroommoottiinngg RReeffoorrmm

A Strategy for Improved Governance and Better Performing Institutions 97

welcomed. It is important for the new government to reaffirm PARIC’s important role in overseeing the reform process. Preferably it should work under the guidance of a small Cabinet Steering Committee, with the mandate to initiate reform proposals as well as oversee the implementation of those reforms that have been approved by the Cabinet. The new Commission should devote its energies to only a few reforms at a time, working on a continuing basis, moving forward step by step. This is much preferable to attempting to launch a whole program of reforms at one time, with the result that their efforts are likely to be dispersed, opponents will be encouraged to form coalitions to obstruct progress, and in the end little will be achieved.

The proposed strategy for governance reform will face many obstacles. Particular attention will need to be given to the following issues:

First, the inertia of the bureaucracy. To date, despite widespread recognition within Bangladesh that the public sector is failing in its roles of service delivery, regulation and policy making, there has been a marked disinterest on the part senior officials to take any initiative to bring about reform. It is axiomatic that bureaucracies rarely reform themselves, but this takes an extreme form in Bangladesh. Some explain this by the trauma of repeated military rule; others say that it is due to the disaffection that exists between the bureaucrats and the politicians. The fact of the matter is that in recent times, with a few notable exceptions, there has been little leadership from government secretaries even to try to make the existing arrangements work better, never mind embark on radical reform. Not infrequently, Cabinet decisions are ignored, or at least implemented with great delay. This must be because the senior officials see taking initiative as more risky and less rewarding than maintaining the status quo. New incentives are needed to alter this calculus. The rules of business badly need updating and modernizing. The proposal elaborated above aimed at motivating senior officials through a system of rewards for sound proposals for reform should also help energize the reform process.

Box 8.1: Governance Score Cards The Governance Score Card/Citizen Report Cards have proved to be a highly effective way of measuring the performance of public service providers. Its main objectives are to: (i) obtain citizen feedback on the quality and adequacy of public services; (ii) catalyze citizens to adopt a pro-active stance by demanding accountability, accessibility and responsiveness from service providers; (iii) compare service providers across various indices; (iv) identify what services people demand most from the public, what services they would like to have from the private sector and how much they would be willing to pay for each type of service1; (v) identify areas in which citizens experience high levels of stress in accessing the service; (vi) estimate the hidden costs incurred by the citizens; and (vii) measure the efficiency and effectiveness of the grievance redressal mechanism. A distinct advantage of focusing on these indicators is that weaknesses in particular institutions can be identified, pointing to discrete actions that can be taken to resolve the problems. Score cards were pioneered by the Public Affairs Centre (PAC) in Bangalore in 1993 and have since received international attention. Score cards have now been prepared, in collaboration with committed local community based organizations, for the cities of Ahmedabad, Calcutta, Chennai, Delhi, Mumbai and Pune. So far PAC has focused on urban areas in an effort to improve public service delivery with particular attention being given to health and similar public services. More recently, their scope has been broadened to include issues such as enhancing electoral transparency and probity. Following this successful model, Transparency International (Bangladesh Chapter) has already taken the initiative to pilot a citizen’s report card in Mymensing. A similar exercise has been completed for Dhaka, Chittagong, Khulna and Rajshahi by PROSHIKA and a group of donors.

Taming Leviathan: Reforming Governance in Bangladesh 98

Decision-making is absurdly centralized. All official overseas trips, for example, are sanctioned

by the Prime Minister. An outside observer would simply note that the ingrained bureaucratic culture is one that severely discourages initiative, and, consequently, urgent attention is needed to change the system of rewards and sanctions. The goal must be the professionalization of the civil service, linking of promotion to performance, and ending the ‘job-for-life’ mentality.

Remembering that the key to motivation is incentives, the PARIC could invite Secretaries and department heads to come forward each month with at least one efficiency reform or simplification of procedure within their organization aimed at improving service to the public. To give officials a personal incentive, the Commission should establish a substantial prize (say Tk. 500,000) every quarter for the best initiative for improving service to the public to be shared by those directly involved in the design and implementation of the initiative – not just ideas about what might be done, but action taken which has resulted in demonstrable improvements in performance. A distinguished citizens committee should be formed to judge the contest and award the prize. If the prize is large, it will attract a lot of attention. Interest will build up, creating considerable positive publicity for reform which, in turn, will foster enthusiasm and creativity.

Second, the predatory behavior of some workers in the public sector. A major reason for the absence of reform in the public sector is the opposition of militant Collective Bargaining Agents (CBAs) that seem determined to preserve the massive “rent” collections of some of their members. The pressures are such that it is very difficult for the senior officials to avoid complicity. The irony is that much of what goes on hardly seems in the long-term interest of ordinary government workers, since the spoils are allegedly not shared equally and the inefficiencies delay the wealth creation that over time would allow salaries to rise faster. Only a trickle of rents is retained by or reaches the junior employees who are kept in place by fear rather than money. In some of the agencies the “takings” are reportedly massive -- millions of dollars -- and the most lucrative posts are “bought” for a high price. A credible reform strategy will need to include a well articulated time-bound anti corruption action plan. As elaborated in Chapter 7, many opportunities exist to make innovative use of informatics/ICT to curb or control the day-to-day ‘rent-seeking’ of officials and extortion from the public simply by computerizing and automating the transactions. This is not a fantasy; there are ample examples where these kinds of measures have already been successfully introduced in other countries, both developed and developing.

Third, the absence of the rule of law. Though linked to the above, as noted in Chapter 1, this shortcoming is pervasive and effects everyone. The problem has deep social roots, since few seem aware of what the term ‘rule of law’ truly means and have no expectation that the current situation will change. Acceptance of the ‘rule of the strong’ (just watch the way trucks and buses are driven with total disregard for the rules of the road) and fatalism within the society combine to perpetuate what will only change if there is a powerful demand from ordinary people for reform. It is hard to believe that those in commanding positions will voluntarily accept to have their power curbed. The politics of “muscle power” will only change if there are forces in society which perceive a self-interested need for change. This is likely to be a long drawn out struggle. The Judicial Reform Program is one important step in the right direction. Radical reform of the police is another. Public education, a more independent and better-trained media and popular mobilization at the grassroots through NGO activism are other important steps.

Fourth, more accountable civil society organizations. The NGOs are seen as the creatures of the donor community, on whom they are heavily dependent, and are criticized for being insufficiently accountable to the publics they serve. These concerns need to be addressed by the NGO community. NGOs should lead the way in making their activities fully transparent and by adopting more democratic processes within their management and staff. The private business sector face the

A Strategy for Improved Governance and Better Performing Institutions 99

same problems in a more acute form; the Chambers, and especially the FBCCI, need to become more democratic and more transparent in their activities and management.

Throughout this report there are recommendations on ways for the Bangladesh’s development partners to usefully assist in the implementation of a governance reform strategy and help build stronger institutions. In a situation where there is great bureaucratic inertia combined with political stalemate, the dilemma for the donors is to find an appropriate way to support reform without displacing the government from the ‘driver’s seat’ or undermining local initiative and ownership. For sure, without ownership the reforms are rarely sustainable.

Rather than attempt to summarize the many suggestions for donor assistance, this concluding chapter will highlight a number of key considerations for donors related to the creation of a stronger accountability system and improving the performance of public agencies.

Accountability depends on greater transparency

Actions that would encourage reforms aimed at increasing accountability which donors might support include: fostering a free and active media, promoting the capacity of parliamentary oversight committees to conduct research, parliamentary debate of the reports of the Public Accounts Committee and, more generally, greater openness and transparency of government business (e.g. put all government accounts and audits on a website regularly updated; and all government agencies to prepare and publish annual performance reports and summary business plans). Donors, too, need to become more transparent, explaining their programs, assistance strategies, and policies to the population at large, and not just to public officials.

Tradeoffs between institution-building and project implementation need to be explicitly recognized:

In many instances in the past donors and government historically agreed that the rapid achievement of particular sector objectives was more important than organizational and institutional reforms. For example, this was true in the health, education, and power sectors, as well as in the cases of LGED and RHD. Occasionally donors have withheld resources in the absence of urgently needed reforms, but generally have preferred instead to disburse against physical achievements, even when there is great risk that sustainable development calls for much more than that.

At the same time, the government has strongly resisted donor efforts to create stronger incentives for institutional reform. During the late 1990s donors sought to structure the Primary Education Development Project as a sector investment program rather than as a collection of specific project activities, each with its own Project Implementation Unit. This sector approach would have entailed a joint annual government donor review of the education sector budget, and would have linked donor disbursements to improvements in the management of the sector. The government resisted this strategy, in part because it disliked ‘putting all its cards on the table’. Undoubtedly, an important factor behind this reluctance was a fear that officials would lose the many perks enjoyed by a number of project directors. The final outcome was an umbrella project structured on traditional lines, but retaining the concept of an annual comprehensive program review. The donors saw this as a step towards a unified sector approach, while the officials retained their project directorships. One consequence of this compromise is six different donor-supported training programs within the Department of Primary Education – hardly an ideal outcome.

TThhee RRoollee ooff tthhee DDeevveellooppmmeenntt PPaarrttnneerrss

Taming Leviathan: Reforming Governance in Bangladesh 100

Even in those cases where donors have recognized the importance of committing time and resources to institution building, there has been a tendency to exaggerate the potential of particular institution building strategies. For example, the importance of the consensus-building, participatory strategy followed with RIBEC or with the planning reforms of RHD have led some practitioners to draw the incorrect lesson that time and consensual approaches are all that is necessary to achieve difficult organizational and institutional changes. This is clearly not the case. The RHD and RIBEC reforms that have not been accomplished after considerable efforts at consensus-building, such as improved financial audits, are precisely those that attack the interests of public sector officials. More than consensual approaches will be needed to accomplish these reforms. These might include heightened and sustained support for the organization of user or beneficiary groups (who suffer when financial mismanagement detracts from service delivery).

Where beneficiaries have little voice, donors can be particularly helpful. For long-run sustainability of reform objectives, donor support for greater beneficiary role is critical.

Taxpayers, utilities customers, and service beneficiaries, particularly the poor, regularly pay the price for the inefficient use of public resources. Their poor organization, and apparent lack of electoral clout, has meant that there has been few curbs on inefficient resource use in Bangladesh. If reform is intended to serve the public’s interests better, then its sustainability will depend on citizen’s ability to hold government accountable over the long run for service provision.

In the short run, donor pressure may partially, if inadequately, substitute for these interests. While there is some awareness of this, of course, there may also be a mistaken belief that such devices as legal autonomy for boards and greater discretion for managers are shortcuts to accountability. This is true only to a limited extent at best; if beneficiaries have no voice, political decision-makers may easily circumvent legal guarantees of agency independence. Moreover, the professionalism of autonomous boards is not yet something to be taken for granted, as the experience of Dhaka-WASA demonstrates. Independent agencies are an excellent mechanism to improve performance only provided that their independence is not subverted by a central power determined to have its own way regardless of legal niceties. In Bangladesh the reluctance of officials and Ministers to ‘let go’ has been marked.

In the longer run, as the Arsenic Mitigation Project recognizes, donor efforts need to be focused on assisting these groups to articulate complaints and to force officials to recognize their rights. Such leverage may come through the courts, through the ballot box, through demonstrations, or in many other ways. Meanwhile, those providing finance have every reason to condition their assistance on fulfillment of the conditions necessary for the objectives of the programs to be successfully achieved.

Reform champions outside of government may be more successful than those inside. The modest impact of PARC so far should not be taken as prima facie evidence that supporting internal reform champions is the wrong strategy. However, PARIC will need to seek full public involvement and strong donor support. if The development partners should also strongly support reform groups within civil society. Ideally, the two – PARIC and civil society -- would work constructively in tandem – pressure from public opinion - may help to achieve acceptance of solutions developed by PARC within government. Identifying and nurturing change agents is also indispensable. The successes of the Jamuna Bridge Project resettlement and the LGED would not have occurred without strong leadership by convinced reformers. This is the strongest argument for adopting an opportunistic approach to reform.

A Strategy for Improved Governance and Better Performing Institutions 101

In certain circumstances withdrawal of support may be the only justifiable posture, even though the suspension of donor activities may not trigger reform.

Donors generally confront one of two situations. Most commonly, government agencies are

mainly interested to work with donors to achieve physical project goals, without the institutional and organizational goals that would ensure the achievement of sustainable outcomes. Only rarely are government agencies willing to adopt organizational changes, such as financial management strengthening, and to provide new ways for beneficiaries to hold agency officials accountable. In these situations, a simple rule would for donors to allocate more funds to the latter agencies. If donors were to refuse to fund public agencies known for financial mismanagement – as has been the case with the Facilities Department of the Primary and Mass Education– they would create an incentive for reform. At present, there are few visible sanctions for wrong doing, and no effective dialogue to strengthen financial accountability.

Since sustainable institution building implies changes in bureaucratic norms and behavior, it must be viewed as a long-term endeavor.

Institutional reform must be viewed as taking decades rather than years. To be successful all parties must be willing to commit themselves to supporting a long term process. For this reason the World Bank’s adjustable program lending approach (which has a 10 year horizon) is more appropriate for institution building than projects with a 3-5 year time horizon. Traditional single project TA, even if it succeeds in initiating changes in process or organizational structures, is unlikely to result in sustained improvements in institutional performance unless it is supported over a longer period (e.g. the IDA’s experience in assisting the Public Administration Training Centre).

Donors should do far more to help build civil society, both as a means of fostering greater pluralism and accountability, as well as an important source of development initiative

In addition to assisting the government with money and expertise, the donors have a significant potential role in fostering the development of a vigorous civil society so essential for good governance. Already the donors are heavily involved in funding the NGO sector. Several dangers arise. First, funding attracts both the good and the bad. The donors need to insist on a rigorous standard of performance and accountability to ensure funds are well spent and not ‘eaten’ by the unscrupulous. Furthermore, accountability to the donors is not sufficient. Foreign funded NGOs need to be transparently accountable to their beneficiaries. At times donors have seemed lax in their oversight of the NGO programs they support and uncoordinated. As a start, the donors need to transform the Local Consultative Sub-Group on NGOs into an effective forum for defining a joint strategy and coordinating their assistance in this area.

Donors have focused heavily on those NGOs that sometimes prefer to be called private voluntary development organizations to the relative neglect of four other civil society partners – the advocacy NGOs, the Press, the research community and the private corporate sector. Advocacy NGOs, such as the Bangladesh Environmental Lawyers Association and Transparency International (Bangladesh Chapter), are critically important partners in a healthy democracy. As far as the Press is concerned, considerably more support is needed to nurture investigative reporting and, more generally, to help raise the professionalism of journalists. With regard to the research community, it is not sufficient to provide a steady flow of lucrative contracts. A more explicit strategy is needed to develop the quality of independent research through twinning, training and mentoring. And in the case of the private sector, the donors need to engage with the reputable chambers of commerce and industry in a concerted effort to improve corporate governance and to help strengthen the capacity

Taming Leviathan: Reforming Governance in Bangladesh 102

of the private sector to do quality policy analysis in order to have a more informed and effective voice on matters of national development policy.

In the past Bangladesh’s development partners have had considerable capacity to encourage reform. This is partly, though decreasingly so, because they contribute substantially to available public resources, particularly discretionary public resources a share of which may be captured by rent-seekers. It is also partly because of an ingrained aid dependence. Despite many good intentions and hard work by many dedicated staff, the strong positive contribution that development partners could make is diminished by the way they operate and by their failure to work in a well coordinated way on many key strategic development issues.

The aid agencies have many weaknesses. Their staff rotate frequently, with the result that often soon after an official has become familiar with the county’s situation and conditions they move on. Very often key decisions are taken in the donor capitals were more global considerations overshadow the local needs which anyway, from a long distance, are only dimly perceived. And short-term diplomatic considerations often out-weigh the need to be firm. The development partners’ impact is also undermined by muddling their aid with their commercial and strategic objectives. Lastly, often for personality reasons, instead of cooperating with each other, donors tend to compete.

The development partners have the potential to play a more constructive role if they would only work more closely together and with their counterparts in the government. The World Bank has the hard task of ‘leading’ the Consultative Group and coordinating action with the government. As a politically neutral partner, the Bank is well placed to carry out this task; it is also well equipped to lead as its range of interventions are greater than any other development partner and it invests considerable resources in policy analysis backed by its global knowledge base.

In Bangladesh the mechanisms for donor coordination are well developed, with annual development forum meetings and regular meetings of the local donor representatives. In addition, there are some 18 donor or more sub-groups on specific sectors or themes which meet on a regular basis. However, two of the least effective have been those addressing governance and NGO activities. This is unfortunate, since these meetings have the potential for providing fora for in depth exchanges on these important matters that could lead to the formulation of joint positions, which would provide a basis for a more proactive and coordinated donor stance in encouraging governance reform. Despite the staff intensity, and therefore cost, it would be worthwhile for the donors to invest greater effort in this process if they truly wish to optimize their individual and collective effectiveness. Concomitantly, it would be worthwhile for the World Bank to invest more resources in its leadership role. But it is important to recognize that this approach is predicated on a willingness of donors collectively to stand firm on difficult and sensitive issues.

If the donors are to be the true development partners of Bangladesh, then the nature of the relationship with the government needs to change. This was recognized to some degree at the last Development Forum meeting held in Paris in April 2000. To date, in place of a partnership, meetings with the donors have been ill-disguised battlegrounds where the government makes ill-prepared demands and the donors too often respond with ill-disguised frustration. There is too rarely a genuine ‘meeting of the minds’ either in diagnosing the issues to be faced or in determining what solutions or strategies should be adopted. Too often there is a defensive retreat into the ‘sovereignty’ lager on the part of the government, while the development partners are less than candid. This is the

AAiidd EEffffeeccttiivveenneessss

A Strategy for Improved Governance and Better Performing Institutions 103

very antithesis that is called for under the proposal for a Comprehensive Development Framework (CDF) endorsed by the World Bank’s Board and the Development Committee.

Under the CDF concept, the government representatives would play the lead role not just in the formal meetings of the Local Consultative Group, but in all the sub-groups. But this is only workable if there is a true spirit of partnership, with all parties willing to engage in frank and substantive discussions. If this were so, then it would be possible to move quickly to a programmatic approach, with agreed sector development programs supported by annual aid tranches, as is being proposed in Uganda (see Box 8.2). This would definitively place the government in the driver’s seat, and to do so on a basis that built donor confidence as has already been done in the case of the health and population sector. This approach would strengthen local institutions, as well as local ownership.

Box 8.2: Moving from Projects to Program Support in Uganda Uganda’s approach to public management reforms, supported by programmatic donor support, is establishing a new relationship with its development partners that empowers the government, strengthens institutions, and builds donor confidence that aid will bring more sustainable results. The outcome should be improved service delivery across the board. The main advantages of this new approach are the following: • By moving away from a project-based approach to programmatic budget support, it supports

systemic, institutional and policy reforms. • By separating money flows from specific activities (i.e. projects), it allows greater support and

empowerment of Uganda’s budget system and processes. Most importantly, it will eventually ensure that all aid monies are channeled through a unified budget and that each expenditure proposal is subject to competitive scrutiny within a transparent medium term expenditure framework.

• By establishing a common basis for donor support, it helps reduce the duplication and inefficiency implicit in uncoordinated multi-donor efforts at the project level. The donors will share documentation.

The proposal is for IDA to provide $100 million of budget support each year – to be called a Public Expenditure Reform Credit -- with a firm commitment for the first two years and subsequent support still to be determined, dependent on a successful outcome. Other donors are also committed to provide budget support. Certain preconditions must be in place to justify such arrangements. First, the country’s financial management, accountability and procurement systems must be sound and transparent. Second, there must be sector programs in place which are coherent and well conceived, allowing the donors to have reasonable confidence that they will successfully deliver specified monitorable outcomes. As a step towards a more comprehensive approach, in the first stage two PERCs are envisaged – one focussing on the social sectors and water supplies, the other on rural development and related sectors. Nonetheless, there will be no earmarking of funds. In each sector, the government will put in place a well-defined strategy and related expenditure plan. This sector-wide approach places the government firmly in control and abolishes the fragmentation and fiefdoms associated with a multitude of separate donor supported projects. In this way external support is rationalized, transaction costs between government and the donors are minimized, resource flows are more predictable and local institutions and management systems are strengthened.

Taming Leviathan: Reforming Governance in Bangladesh 104

And the key to genuine ownership is to have in depth participation in both program design and implementation involving all the main stakeholders. Likewise, both donor and local stakeholder confidence is best built by processes that are genuinely transparent and accountable. And so we have come full circle back to the central theme of this report which is building accountability.

This Review has attempted to sketch out both the causes of weak governance and what might realistically be done to bring about reform. Many of its recommendations are also to be found in the PARC Report. In many respects the concerns and proposals are not new. Indeed, the diagnosis is one that is easily gleaned from reading the local Press and listening to the active debate going on in Bangladesh on public sector reform – a debate which is conducted with great frankness, but to little effect. The fact that Bangladesh has an open society where candid and free debate can take place augurs well for the future. It means that the issues are being put on the table and that is a necessary starting point. It would be naive, however, not to recognize that the malaise of governance has deep roots and change will require major painful adjustments to the way Bangladesh conducts its business. A better coordinated partnership between government, the NGOs and the donors can help change. But, change must come primarily from within – from a discourse among the actual and potential ‘change agents’ within government, business and civil society.

So far the public debate on governance reform has not touched much on the more fundamental matters that relate to the nature of interpersonal relations in public institutions – relations that are highly hierarchical, patrimonial and distrustful. It is these matters that go to the heart of how a society functions and determine the incentives that motivate behavior. These need first to be more explicitly recognized and more deeply understood so that a strategy may be crafted in the light of that understanding. All societies operate through elaborate interpersonal networks and in all cases where the rule of law is not firmly in place, people depend primarily on their networks – their personal social capital – for security and advancement. Governmental agencies, in meeting their obligation to provide fair and objective public services, need to operate above all impartially and in accordance with the rule of law, transparently and openly, and public officials must respect the ‘rules of business’.

Ultimately, better governance comes from changing attitudes and practices, a tough and gradual process even in the best of circumstances. In the short and medium term there will be both winners and losers. In the long term there are only winners.

The new government has both a historic opportunity and a heavy responsibility to implement solid measures to make reform a reality. The diagnostic work, the research, and the public consultations have all been done and redone. Now is the moment to act. The future welfare of Bangladesh depends on the leaders having the courage to bring about genuine reform.

Concluding Thoughts

The discussion of accountability in Chapters 3, 4 and 5 related largely to

Bangladesh’s main national institutions – Parliament, the Supreme Court, Central Government and the like – and local government. This Annex looks at the performance of institutions at the sector and agency level to identify what makes for success. The social and political context summarized in Chapter 2 may be taken as the backdrop to the review of a decade of institution building through projects set out in this Annex .

The performance of public agencies in every country is to a large extent influenced by the social and political context. It also depends greatly on the administrative structure and culture and the quality of the leadership in each agency; together these determine the nature of the incentives that motivate staff. In this Annex we summarize the lessons of a decade of institution building, looking particularly at 12 agencies.1

1 Of 24 IDA assisted projects completed between 1990 and 1999 the audit reports noted repeated failure of

the institutional development components. The over-riding impression given by these reports is that most often, though with some notable exceptions, the institutional aspects were treated relatively lightly in project preparation and institutional weaknesses have dogged their implementation.

Table: Summary of Reported Outcomes of the Institutional Development

Aspects of Completed IDA Assisted Projects

None Minimal Modest Substantial

Institution Building 11 5 6 2

Technical Assistance 7 7 8 2

Stakeholder Participation 0 14 10 0

Operation & Maintenance 23 0 1 0

While a few IDA assisted projects have had institution building as their primary focus, for the most part these projects have had much more tangible objectives, such as: building infrastructure, expanding education, improving health and nutrition, strengthening family planning, improving water management and agricultural services, and the like. Institution building has tended to be subordinated to the more technical aspects of project implementation and treated somewhat as an after-thought. There was no clearly articulated institution building strategy. In practice, there is no escaping the need to work through institutions – projects succeed or fail depending on how the institutions perform; more specifically, the

ANNEX I:

Taming Leviathan: Reforming Governance in Bangladesh

106

Infrastructure degrades rapidly if poorly maintained. Service delivery is ineffective if the

agencies responsible are poorly managed. Two reasons for lack of action to remedy poor service delivery and policy may be identified: first, the intended beneficiaries have extraordinarily little opportunity to influence official decisions and, second, political decision-makers operate under a set of constraints and incentives that often lead them to pursue objectives that are contrary to the public interest. These problems are deep-seated and difficult to change. However, there is still scope for successful reform, as long as these constraints are taken into account. The challenge is to improve ‘voice’ and bring about greater convergence of political and social objectives.

To better understand the issues encountered in reforming public agency performance, eleven case studies were prepared2. These illustrate attempts to overcome poor performance in three distinct ways. One emphasizes changing the decision-makers, either by introducing new actors into the decision making and implementation process, or by attenuating the role of actors who have traditionally been dominant to allow the poor to have a significant voice. Examples include (a) creating more autonomous agencies run by independent boards, and (b) inserting community groups to give voice to the intended beneficiaries. The second category covers measures to improve the capabilities of the agency – supporting reform champions, and introducing organizational reforms or various other measures to improve efficiency and incentives. The third category of reform strategy is to avoid institutional dysfunction altogether, for example, by enclaving. We examine these options in more detail below.

Policy and service delivery failures are common in Bangladesh in large measure because those responsible receive few or no rewards for efficient policy and service delivery, and they receive substantial benefits from inefficient policy and distorted service delivery. The incentive distortions are often great and rooted in fundamental political and social conditions. Not surprisingly, existing decision-makers resist major changes in the constellation of authority, and often succeed in derailing them entirely. To solve this problem, one solution that has been pursued is to undertake a major change in the decision making structure of the sector.

The assumption underlying such proposals is that the incentives of existing decision-makers are too difficult to change through less drastic action. For example, improved training in the power sector is unlikely to have an effect unless the role of current beneficiaries of millions of dollars of diverted funds and unaccounted-for power deliveries is reduced. Similarly, given current electoral incentives and the nature of political competition in the country, no attempt to devise and adhere to a more rational planning model for road construction is likely to take root unless road users have a greater voice in decision making and political and bureaucratic officials less.

The key question that was investigated drawing on the evidence provided by the 11 case studies that were reviewed was how change was accomplished, given the potential for resistance from vested interests within the agencies. One strategy for changing the behavior of the key actors was to create more independent implementing agencies. The second involved giving effective voice to the intended beneficiaries to enable them to participate in project design and management.

sustainability of the outcomes of projects is dependent on whether the institutions are strong enough and efficient enough.

2 See Volume 2 of this report

Changing the actors

Annex I: Learning from a Decade of Institution Building

107

One of the most successful examples of an independent board comes from PKSF, the government-sponsored apex institution that lends to organizations engaged in micro-finance. PKSF is well regarded; between its inception in 1990 and 1999, the organization on-lent $115 million in 170 loans to partner organizations that covered 1.4 million borrowers. The repayment rate was 98 percent. The independence of PKSF’s board and its incorporation as a not-for-profit company rather than being a government agency are an important reasons for its success. The governing body has seven members, three appointed by the government, three appointed by the General Body of PKSF (which is itself comprised of 25 members appointed by the government, although at least 10 of the 25 must come from outside government), and the seventh is the managing director.

The strongest indication of the independence of this board emerged soon after the creation of PKSF. Originally, the Governing Body was obligated by PKSF articles of incorporation to choose the Managing Director from government ranks. The Governing Body decided that this was excessively restrictive of its ability to find the best candidate to run the foundation. As a consequence, it agreed to change the charter and delete the provision. Now, anyone from the private or public sector is eligible to be a candidate for Managing Director.

Dhaka-WASA and the Silk Foundation provide two examples where similar statutory protection against political interference have proven to be less effective. In 1996 the government approved an ordinance creating an independent board for Dhaka-WASA, allowing for the international and open recruitment of a managing director (ultimately, a Bangladeshi was chosen who was working in Sri Lanka prior to his recruitment to Dhaka-WASA). The objectives of this project were to ensure that Dhaka-WASA collections at least covered operating and maintenance requirements, and that at any rate unaccounted for water would fall dramatically and collections as a fraction of billing would rise dramatically. To improve the chances of meeting this objective, contracting out of billing and collections in at least two of the five main water districts of Dhaka was part of the project, as well, and occurred from September 1997 through August 1998 (Chowdhury, 1999).

Progress was made, for example with respect to cash flow. Nevertheless, huge performance gaps remained. In June 1998, unaccounted for water remained high at 41 percent; collections were only 74 percent of bills issued (and, of course, bills were issued on only 59 percent of water that left the system, given the unaccounted for water). Slow progress was due in part to the lack of independence accorded to the Managing Director. Even as late as June 1999, the board impeded the appointment by the managing director of his deputy managing directors; the union and civil service regulations hindered other personnel movements; recruitment continued to be plagued by political pressures. Contracting out, which preceded the recruitment of the managing director, was implemented only on the condition that the union was given one of the districts.3 The previous managing director was assaulted in his office by union members, no doubt improving their bargaining position on contracting out. 3 Data describing the experience with contracting out is difficult to interpret. Aggregate figures suggest that

the union-contracted district performed much better, increasing collections by 50 percent over the contract period compared to the previous year, while collections actually dropped somewhat in the district where service was contracted out to a private company. At the same time, in the year following the contracting out, collections in the union district stopped increasing; billing and collections in the private district reverted to Dhaka-WASA, and proceeded to show improvements of over 100% in some months over year-earlier periods.

Autonomous Agencies

Taming Leviathan: Reforming Governance in Bangladesh

108

The Silk Foundation was established in 1998 to provide the silk producers with improved worms, extension services and marketing assistance. Its operations are only in their early stages. To ensure the proper use of funds and to increase the flexibility of its response to sector needs, the Foundation was endowed with an independent board, explicitly modeled after PKSF. However, after the board was selected and a chairman was chosen who was a strong advocate for the Foundation, a new Minister decided to appoint his own Secretary as chairman, in contravention of the authorizing legislation for the Foundation. The incumbent Chairman, being a government official, was not in a position to challenge the Minister’s action, nor did the board members want such a direct confrontation with the Minister.

What explains these different outcomes? It is clearly the case that legal provisions alone are insufficient protection from ministerial intervention in contravention of the legal statutes. Nearly identical protection was available to both PKSF and the Silk Foundation. In the case of Dhaka-WASA, the legally independent board and internationally recruited Managing Director were not sufficiently insulated to secure more than the most modest incremental reforms in a highly dysfunctional organization.

PKSF exhibits several attributes that were key complements to legal independence. First, its clients were themselves well-organized entities. Micro-finance organizations have strong links to donors and to their ultimate clients, and are clearly better organized than the water users who pay for water but get only irregular service, or silk producers. Second, a very strong board was appointed to PKSF, one that could on its own resist ministerial intervention. It included, for example, Mohammed Yunus, the founder of Grameen Bank. It was not only important that the board members had independent standing enabling them to resist political interference. It is also vital that they understood and valued the institutional objectives of their organization sufficiently such resist the inevitable social and political pressures to use their positions to distribute benefits.

Third, it is noteworthy that PKSF was established initially without donor funding and consequently with a high level of local commitment. In contrast, although the Silk Foundation had strong support from the intended beneficiaries, it effectively displaced an existing organization. Consequently, there were strong vested interests determined to sabotage the venture. These were able to exploit a change in the leadership of the Ministry of Textiles which had general oversight of the sericulture industry.

Fourth, more recently, significant quantities of donor funds – the IDA credit for use by PKSF amounted to more than $100 million – have been made available precisely because PKSF has a solid reputation as a well functioning institution. The Silk Foundation involved relatively little money and, therefore, less was at stake. In the case of Dhaka WASA, the union strenuously obstructed contracting out meter reading and billing (the main source of “rents’), while the Ministry bureaucrats resisted delegation of authority for hiring and procurement and the board constantly misconstrued its statutory responsibilities. Even though donor financial support was large and very crucial, it has required constant effort from the donors to sustain the reform, a process that is still ongoing. There was a disingenuous refusal on the part of all parties to “play by the rules”. Attempts to improve the performance of Dhaka-WASA confront massive resistance from insiders and outsiders who collude in stealing water from the company, siphoning off collections, and fraudulently interfering in procurement, contracting and staff hiring. It is noteworthy that PKSF, as a new organization, with no entrenched interests used to doing business in a corrupt manner and with extensive organizational capacity to resist interference, was largely spared such problems.

The importance of these key complementary characteristics of PKSF is underlined by two observations. First, although its Governing Body can choose a managing director from anywhere, in practice they have all come from the government. Second, the high turnover of managing directors

Annex I: Learning from a Decade of Institution Building

109

(five in nine years) has been a weakness, as has the tendency to select civil servants for this post, a vivid indicator of the dominant position civil servants hold in Bangladesh. One may conclude that PKSF owes its success to the unique circumstances in which it operates – no political opposition, a strong board interested in the efficient operation of the organization, well organized beneficiaries and, latterly, a keen donor interest in its success.

That organized beneficiaries are crucial to the effective delivery of services has for long been a recurring theme among NGOs. This is now increasingly recognized in the growing acceptance by government officials of the potential role of community-based organizations and participatory forms of service delivery. In the first instance, the assumption has been that this means consulting beneficiaries. However, experience has shown that consultation alone is not enough. Therefore, ways have been sought to insert beneficiaries more fundamentally in the decision making process. This section considers experience with both narrow consultative activities and deeper reforms that aim at increasing the decision making leverage of beneficiaries.

The idea that ordinary people – generally poor – should, as intended beneficiaries, have a say in the design and management of public service delivery is somewhat novel in the context of Bangladesh’s patrimonial and hierarchical bureaucracy. Nonetheless, learning from NGO experience and encouraged by their development partners, public agencies are increasingly using stakeholder analysis and adopting participatory approaches to program design and implementation.

A good example of an organization that has adopted a participatory approach is Local Government Engineering Department (LGED). As one of its many innovative practices, LGED has begun more actively to solicit the input of local community groups (especially the Union Parishad ) on such issues as the location of rural road works and the establishment of local markets. There is encouraging evidence that this input has persuaded LGED engineers to change plans and priorities. In this case the idea was suggested by a development partner, but the concept was quickly embraced by the LGED management and they have started training engineers in the use of participatory techniques.4

In the past, participation of any kind, including consultation, was relatively absent in the public delivery of social services. However, recently, with donor and NGO encouragement surveys and focus groups have been used to provide feedback to improve the design of the health, population, and nutrition programs. This has enormously increased awareness of public dissatisfaction with the shortcomings of public services, and has opened the way to changing program priorities, as well as the practices of health officials who tend to be particularly resistant to change.

In education, School Management Committees (SMCs) are an old idea that has been given a new lease of life. SMCs nowadays consist of 11 members, with the head-teacher serving as a Secretary, five parents, two teachers and three members of the local community. In theory, SMCs were seen by the government not only as a consultative device, but also as a way to allow the community to hold public officials accountable for education services. However, in practice SMCs report to the Thana Education Officer and support implementation of government programs (such as textbook distribution). They have no real say in the management of the schools. The constitution and the terms of reference of the SMCs are determined by the central government. Moreover, they

4 see OED’s report on Participation ( World Bank, 2000)

Increasing the Voice of Intended Beneficiaries

Taming Leviathan: Reforming Governance in Bangladesh

110

are denied a role in one important area in which participation could make a difference -- the hiring and disciplining of teachers. In reaction to earlier corrupt practices, when teachers obtained positions by paying kickbacks to Union Parishad members or to Thana Education Officers, the government centralized teacher recruitment at the district office level, far removed from SMCs.

The Bangladesh Water Development Board Systems Rehabilitation project, funded by the World Bank, also had as one of its many objectives to increase involvement of beneficiaries and other stakeholders in project planning and operations and maintenance. Resistance to such consultation (and to reforms of the BWDB in general) has been great and according to observers, recent progress in this respect has been a consequence of Bank insistence on conditioning funding for the Coastal Embankment/River Protection projects on greater participation of stakeholders. The importance of this insistence is not to be underestimated. Duyne (1998) has documented a large number of impressive informal local water management practices that differ from those pursued by BWDB officials. For example, communities have often made cuts in BWDB embankments for flood control purposes contrary to the wishes of BWDB engineers. These community actions are frequently proved crucial to prevent widespread flood devastation and sometimes involve quite complex collective action. They are based on local knowledge of past patterns of flooding outside the experience of the BWDB engineers.

Another example of successful beneficiary involvement in service delivery is found in the Agricultural Support Services Project (1991). This project aimed to improve the relevance of extension services to farmers by transferring extension program planning out of Dhaka to the Thana and district levels, and tailoring programs to farmers' own identification of their needs. While success indicators are incomplete, there are several encouraging indicators: the range of demonstrations that respond to farmers’ expressed problems have increased; the demonstration program is no longer dominated by major crops; and 50 percent of those attending demonstrations adopt the demonstrated technologies.

While potentially beneficial, consultation requirements are easily ignored if beneficiaries have no way to insist upon them. If they are unorganized, this outcome is more than likely. Hence, explicit support needs to be given to community-based organizations for this purpose. The most thorough-going example of this comes from a new project, the Arsenic Mitigation Water Supply Project (see Box 6.2). Apart from their cost, solutions to massive arsenic contamination in the country are complicated by three phenomena, all of which underline the need for community-based organization.

First, most of the free hand pumps distributed by the government were in fact “sold” by officials for one third to two thirds of the market price. Mostly, they ended up in the hands of the community elite5. That is, efforts to address the needs of the poorest were circumvented by officials and local decision-makers. The hazard of diversion is potentially greater for the more expensive solutions that will be required to substitute for existing contaminated water sources. Community-based organizations – existing alongside traditional power structures – are proposed as a means of enabling targeted beneficiaries to monitor and influence the final allocation of services.

Second, hand pumps supply at most five families, placing correspondingly few organizational demands on them. Alternative supply sources, such as surface pond and rainwater collection structures, supply many more families, and require significant investments and maintenance to prevent contamination. This requires large numbers of households to tax and to enforce rules on themselves. In rural Bangladesh such capacity is mostly absent. A new community-based organization is therefore a pre-condition of the success of all strategies to mitigate the consequences

5 Alaerts (1999)

Annex I: Learning from a Decade of Institution Building

111

of arsenic contamination. It is particularly important where households are spread across multiple government jurisdictions (formal or informal).

Third, the extent of arsenic problems varies dramatically from well to well, as do the most appropriate solutions for them. Technical interventions therefore have to be engineered from the most local level. This requires community input. However, it also creates certain economies in supporting community-based organizations: since technical interventions have to be handled locally in any case, it is likely to be cheaper to provide support to the organization and sustainability of community-based organizations.

The full-fledged integration of support for community-based organizations into the arsenic mitigation program is unique in its scope. There are more than 9 million hand pumps in Bangladesh. The intention of the project over the next three years is to inspect all of them and, over the next 10 – 15 years, to have teams visit each location, help develop mitigation strategies, and work to build up sustainable community organizations that will, among other things, provide crucial co-financing for interventions. Such co-financing will be a requirement of project support for mitigation efforts in a locality.

The potential spillover effects of this organizing effort are tremendous, however. Problems of service delivery, as the example of the hand pump and numerous other examples from other service sectors indicate, can usually be attributed to distortions in local institutions that vest power in a small group of elite (landowners and local, usually non-elected, officials). Satisfactory targeting of services therefore often requires the oversight of outside groups, whether donors or NGOs. This in turn demands resources of a much larger order than donors have been willing to expend. The community-based organizations that are to be built up under the arsenic mitigation project, however, have the potential to better represent local disenfranchised families over a wide range of service issues. Their development should be a concern not only for the particular sector interests, but for all projects that intersect with rural development.

What are the keys to success of consultation and community-based organization? The Agricultural Extension and LGED experiences suggest that crucial conditions for successful consultation might have been that the interests of officials (including the potential for kickbacks) were not challenged by consultation; significant effort was spent persuading officials of the benefits of consultation, through pilots and continued interaction with reform champions; and the staff feared that (in the case of agricultural extension) budget allocations would drop if effectiveness did not improve.

Support for community-based organizations to take a greater role in decision making would be expected to trigger a correspondingly greater degree of resistance from officials and the local elite. In the case of the arsenic project, this resistance may be mitigated in two ways. First, the current plan is to offer intensive outside support for building these organizations. Without such support, it is unlikely that currently unorganized groups of households could overcome resistance to their efforts to increase their own voice. Second, the local elite are as vulnerable to arsenic contamination as the local poor. As a consequence, they stand to benefit from the Arsenic Mitigation Project – and therefore, they would lose if they obstruct the community-based organizations that are the condition for project activity in a locale. Nonetheless, this project has already encountered sever difficulties that may only be overcome by the intermediation of the better organized NGOs.

Taming Leviathan: Reforming Governance in Bangladesh

112

The creation of community-based organizations is one way to support reform champions – who better to champion reform than its beneficiaries? However, there is also a role for supporting reformers at the center of government. Reformers within government are often handicapped by a lack of technical support, by career risks, or by lack of access to highest level decision-makers. Efforts to support reform champions aim to overcome these disincentives. One such initiative is the Public Administration Reforms Commission (PARC). The intention behind the creation of PARC was to establish an independent commission with direct access to the Prime Minister that would have the high level leadership, resources and mandate to be capable of effectively framing, designing, advocating and overseeing the implementation public administration reforms.

To date, the fruits of this strategy have been few. PARC has submitted to the Prime Minister a list of priority public administration reforms, but rarely with detailed implementation plans that would drive the process forward. Public administration reforms ultimately require the consensus of the affected public agencies and support from the general public. Finally, more effort is needed to trace the connection between selected public administration reforms and improved outcomes.

The reasons for slow progress are varied. PARC has not enjoyed the authority and respect within the administration to enable it to fulfil its mission. In addition, government officials are reluctant to take the lead in pushing for reform, because getting ahead of the Prime Minister and Cabinet in such matters has in the past created significant career hazards. Indeed, there is no real substitute in the Bangladesh context for the Prime Minister herself directing the reform effort, as Mrs. Thatcher did in the UK. In the absence of a clear and unequivocal lead from the top, officials inevitably shy away from the vigorous pursuit of reform.

Although the donor community has been outspoken about the need for public management reform, their lobbying has been much more effective in liberalizing the economy than in any other aspect. Those changes came at a time of economic crisis and were strenuously backed by the IMF and structural adjustment lending. They were also supported by the then Minister of Finance who was personally convinced of the need for reform and carried considerable authority in Cabinet. Nonetheless, the Minister’s association with the reforms nearly cost him his job when the ruling party was heavily defeated in a by-election. Privatization, reform of civil service practices, restructuring public agencies, “rightsizing” of the bloated bureaucracy, and imposing greater accountability and transparency on the functioning of the public bureaucracy have all been strenuously resisted. So long as those in power believe that they can avoid reforms which makes them more accountable, such reforms are unlikely to be implemented. Public opinion if mobilized can bring about even radical reforms as happed in 1996 when the Constitution was amended thereby greatly strengthening democracy, even though the change was much to the disadvantage of the regime in power.

Local advocates of reform, outside the government, are not subject to these constraints, and indeed the volume of their advocacy can be a positive influence on their ability to attract resources. While they are subject to other disadvantages (lack of access to officials or to information, and the threat of government efforts to suppress their activities), their activities are at least complementary to those of internal champions, and should not be ignored by donors. In the absence of a strong and well-endowed civil society, there is a strong case for donor support for independent research centers to undertake in depth analysis and related activities to raise public awareness and promoting specific legislative and administrative reform.

Supporting reform champions

Annex I: Learning from a Decade of Institution Building

113

Despite the intractability of an entrenched bureaucracy and highly unionized government employees, individual champions of reform if courageous and determined, can bring about considerable change. For example, dynamic leadership was decisive in building up LGED (not withstanding certain obvious flaws). The successful completion of the Jamuna Bridge on time and within budget was in no small measure due to the dedicated leadership of Chairman of the JMBA, qualities demonstrated subsequently in reforming the Customs and Income Tax Departments. The success of the Non-Formal Education Program is again attributable in large measure to strong leadership of the official in charge. The existence of such people, who can achieve change against the odds provides important “windows of opportunity”; these may not always conform exactly to priorities objectively set, but they do allow progress to occur. They are opportunities that should not be missed.

Organizational objectives are traditionally at the core of reforms aimed at improving the design and implementation of government policies. The argument, usually correct, is that ill-trained or badly chosen officials operating without the correct information and lacking proper procedures for decision making cannot design and implement policies adequately. Many government projects have attempted to address such shortcomings through training, improved management information systems, better planning and making better use of technical assistance. The same measures are called for to improve service delivery.

Strengthened training. Training is an especially pervasive element in projects, naturally enough given the importance of technical skills to successfully implement most sectoral or institutional reforms. A common complaint about training in the civil service is that soon after a civil servant has been trained in some specialist skill, he or she is often transferred to work in an area which requires quite different skills and the training becomes irrelevant. An equally important issue is whether better trained officials have the incentives to use their new skills to improve performance. Both of these problems have affected the training efforts in the case studies analyzed here.

The Public Administration Training College, founded with IDA funding in 1982, was meant to anchor a steady increase in the professionalism and modernization of the Bangladesh public sector. It has not fulfilled these ambitions. Curricula emphasize knowledge of out dated rules and laws (in some sense, perpetuating the legalistic rather than service orientation of the civil service) and there is little evidence that time spent at the college offers a career boost, or that posting at the college as either a professor or student is a worthy or rewarding goal. This issue is addressed further in Chapter 7.

Training is evident as part of sector projects with an institutional reform component. As an example, the General Education Project (GEP) had as one objective increasing government capacity to train education cadre civil servants in essential management skills (Miwa, Case Studies 1999). The actual outcome, however, was that directors or more influential people received the training, not those doing the work. Moreover, trained staff transferred out of the project implementation unit before training their replacements. Incentive reforms were also meant to be part of the GEP, linking promotion to teacher in-service training. These have not materialized.

Training and monitoring of teachers continues to be poorly funded. Assistant Thana Education Officers are each responsible for 15 – 20 schools; their responsibilities range from administrative oversight and the distribution of food and textbooks, to teacher training. It is not surprising that teacher training receives little emphasis.

Organizational reforms

Taming Leviathan: Reforming Governance in Bangladesh

114

On the other hand, in LGED training has been used as an incentive as well as an instrument to increase productivity. Training expenditures amount to eight percent of staff costs, a significant amount; these opportunities are allocated selectively to better performers and denied to weaker officials (Pankaj 1999). Undoubtedly attention to training has had a noteworthy impact on LGED’s productivity.

What explains the success of LGED training success against the general record of failure? The most important is that LGED placed a much stronger emphasis on performance, both of individuals and of projects, than other sectors. That is, training resources are complemented by strong internal incentives to use training productively. These incentives are not broadly present in the civil service, so it was always unlikely that PARC would be successful. Nor are they present in education, handicapping the productivity of training in that sector.

The obvious lesson from these experiences is that broader incentive reforms need to be in place prior to introducing expanded training options. That is, proper incentives should precede adequate capacity, rather than the reverse and more typical strategy. The less obvious lesson, however, is that better incentives and effective training seem to be found together in sectors where there is significant accountability to groups or individuals with leverage over an institution. LGED is heavily accountable to donors and confronts relatively few organized countervailing interests. In contrast, no such accountability mechanism has been present in education and public administration more generally, and countervailing interests that create incentives contrary to effective operation are much stronger.

As noted in Chapter 4, one of the most successful reform projects in Bangladesh has been the RIBEC project, Reforms in Budgeting and Expenditure Control (see Box 4.1 and Khan et al.). Training was an essential component of these reforms, since entire new systems were developed. RIBEC, like LGED, has used training, first locally then overseas for the best students, very successfully to motivate staff (see Box 7.1).

Strengthened financial and management information systems. Similar issues emerge in information systems. Where incentives for good performance are present, reforms to improve information systems (financial, quality or otherwise) have been implemented effectively. In the absence of these incentives, reforms have been slow and partial.

The RIBEC project experience is instructive. It has resulted in greatly improved accuracy and timeliness in the production of accounts, budget reports and budget presentations and allows actual expenditures to be compared with budgets at the ministry and national levels. Both the effectiveness of training and the implementation of these information reforms could be traced back to the desire of top policy makers, particularly in the Ministry of Finance, for more accurate financial information. Again, here strong leadership both from the Ministry of Finance and the consultant supporting the project, has been crucial for the program’s success.

RIBEC has not yet achieved some other key objectives. For example, the development and non-development budgets are still separately elaborated; the quality of financial information and cash management is still low; financial management within line ministries remains weak; and there has been little improvement in internal control (including internal audit) systems. All of these involve changes in policy and, unlike the successful reforms, more directly threaten the ability of high level officials to divert resources to unbudgeted uses.

RIBEC is rare in its unique focus on information. However, improvements in information collection and analysis were relevant to most of the 12 cases examined here. In contrast to RIBEC, though, the record of reforms to improve information on project performance, including the

Annex I: Learning from a Decade of Institution Building

115

collection and analysis of appropriate financial data and output quality, is disappointing. In education, the General Education Project made little headway in improving the quality and analysis of information (Miwa, Case Studies 1999). Although considerable efforts are given to data collection, these are uncoordinated and do not encompass indicators of educational achievement. Moreover, the data are mostly not analyzed nor is policy or feedback to schools conditioned by data that are collected. Not surprisingly, most observers believe that data accuracy is very low, since no sanctions flow from inaccuracy.

The Primary and Mass Education Division is not the only department with defective information systems. Even sectors that have reputations for greater innovation and a positive reform impact generally exhibit little in the way of systematic information collection. The Agricultural Support Services Project, many health projects, and LGED all can claim notable successes. However, in none of these cases is there evidence of systematic information collection and analysis that would permit the cost-effectiveness of different interventions to be assessed. Instead, monitoring and evaluation are focused strictly on outputs.

In the case of health, prior to the current fifth health project, there was no emphasis on monitoring and evaluation of staff performance or other organizational reforms. Instead, the focus was on specific family planning targets, usually at a level of aggregation that made it impossible to judge individual or unit productivity, and lacking financial information that would permit cost-effectiveness criteria to be employed. Nor was there much attention paid to quality assurance and processes (Thornton, Case Studies 1999).

LGED and the Agricultural Support Project exhibit similar weaknesses in information collection and analysis. LGED, especially, despite a yearly flow of funds in the hundreds of millions of dollars, has yet to develop an adequate financial management system. Donors are compelled (and apparently content) to accept as indicators of success the fact that roads are built (or, in the case of health projects, that family planning targets met,) and that funds are disbursed promptly, and have not asked for information that would allow them to evaluate the cost-effectiveness of projects, or to compare the efficiency of some roads or health interventions relative to others.

There are good reasons why LGED officials might have been reluctant to push hard for financial management reforms. Obviously, the diversion of funds to unapproved uses is among the most important. Even without considering the possibility that high-level officials of the department might have sought to create financial security for themselves through such diversion, there are numerous reasons why they would have preferred opacity in their financial management.6

First, training incentives alone are unlikely to have offset low civil service salaries to stimulate the high productivity of LGED professionals (engineers and others) that has been observed. Training expenditures are high, but still amount only to eight percent of staff costs. However, civil servants who occupy positions similar to those of LGED engineers (e.g., in the Roads and Highways department) are thought to earn a large fraction, if not a large multiple, of their salaries through informal payments. It is likely, therefore, that to ensure good performance high LGED officials would have found it convenient to be able to divert substantial funds to good performers; since they could not do this transparently by adjusting the compensation system (which would have violated civil service rules), transparent financial management would have made such a system impossible.

6 Expatriate consultants, of which there are many in LGED, are quoted in one recent review of LGED

(Sida 1998) as saying that the technical expertise that they bring to bear is not particularly important, since the roads that LGED builds are uncommon in industrialized countries. Instead, they claim that their value-added is ensuring that funds are used properly.

Taming Leviathan: Reforming Governance in Bangladesh

116

Second, LGED has survived as well by making sure that politicians remain happy, while still maintaining its ability to meet donor objectives of timely completion of quality projects. This, also, has surely involved the diversion of projects to favored contractors, for example, which again would be more difficult with more transparent financial management.

The lessons from attempts to improve information flows run parallel to those for training. Incentives to improve quality and cost-effectiveness, and therefore to collect and analyze the information necessary to accomplish these goals, must precede information reforms. Incentives flow from accountability. This suggests that the reform of accountability mechanisms should therefore be more pervasive in all sectors. Thornton argues that, specifically in the health sector, information gaps can be directly attributed to low levels of accountability. Those most interested in good outcomes – parents in the case of education, patients in health, taxpayers in the case of RIBEC – have very little influence over decision making in these sectors. However, most project designs have not internalized this requirement. In health, for example, only in the fifth health project has community involvement in service quality issues been introduced, but there has been little progress in actual implementation of participation or in promoting community management of clinics and health centers.

The experience of RIBEC indicates the types of changes that give rise to incentives for reform. The first three years of the project saw little progress; reform efforts were jump-started, however, after the project goals were simplified and, importantly, during the caretaker government. Not only was the caretaker government more positively disposed to financial management reforms, the caretaker period created a special need for such reforms. Both the caretaker and the successor government were required to submit budgets, which was not possible in the short time available without greater computerization and consistency of accounting standards.

Training under RIBEC also served to defuse opposition. Its purpose was not only to prepare officials to use new processes, but also to convince them that change would be in their interests. Opposition to change is often due to ignorance of the consequences of change; RIBEC training made clear to officials that the financial management changes that were introduced would make their lives easier, after an initial transition period.

At the same time, RIBEC offers a cautionary note about the hazards of incomplete reform. Without the auditing and other reforms intended to boost the quality of financial data collected and supplied by line ministries, the pressure to continue and improve the system will be lacking. When the interest of the key policy-makers wanes, as it inevitably will sooner or later in the absence of greater public pressures to be accountable, then they will be disinclined to continue technical support to accounting units or to maintain information technology infrastructure that may start to deteriorate, and progress to date could be reversed.

Improved planning. Planning can be thought of as the collection and analysis of information to identify needs, to assess cost-effective interventions, and to establish priorities for those interventions across different populations. It is in this sense that we are using the term in this Review it is clearly related to information systems, community participation, and other reforms identified above.

The absence of effective planning within government agencies has two consequences. One, of course, is inefficient decision-making. When planning processes obstruct the collection and analysis of relevant data, or impose irrelevant or inappropriate criteria on priority-setting, government services end up being targeted at the wrong groups in the wrong quantities and fail to meet more pressing needs that could have been met if the same resources had been re-directed. The second consequence of poor planning is that it opens up the decision-making process to abuse. Officials can

Annex I: Learning from a Decade of Institution Building

117

more easily influence outcomes to further private objectives, because agency officials have no analysis from the planning process that they can use to show the consequences of pursuing the officials’ private goals rather than social goals. Among the 12 agencies analyzed in this Review, those connected with infrastructure – the Roads and Highways Department and LGED – have paid the most attention to the need for planning.

The Roads and Highways Department (RHD) has traditionally exhibited a fractured planning process that has resulted in ad hoc decisions, usually made at the behest of interested politicians, and a plethora of unfinished projects. That is, planning processes have been so disrupted that even politically-driven decisions do not result in completed roads. Instead, they result in projects that are funded only as long as the concerned politicians are in office or are paying attention. One reason for this is that politicians seem to be less interested in the road itself than in the payments made to friendly contractors for road works, finished or not.

This reflects deep problems in the ability of the electorate to hold elected officials accountable as we saw in Chapter 3. Reforms have therefore focused on contracting. Bank and government officials have noted that politically connected contractors tend to be small. To limit political influence, therefore, donor funds are being restricted to mid-level and larger contractors, who can handle the construction of at least 5-10 kilometers. While it is likely that mid-level contractors will themselves have extensive political contacts, they will also have greater interest in establishing a track record of good works; they will be more eager than small contractors to ensure that their portfolio of works does not consist of a trail of half-finished roads.

The second part of the strategy with respect to RHD has been to attack deficiencies in the planning process directly. Originally, technical assistance loans were used for this purpose. However, their timeframes were too short, consensus-building was not possible (that is, they were donor-driven), and coordination problems emerged. Coordination problems, in this case and in many others, tend to be one description for conflicts between achieving project objectives (e.g., new roads) quickly, and institutionalizing deliberative processes (e.g., better planning) that would be sustainable into the future. Under the Second Road Rehabilitation and Maintenance Project (RRMP), a new approach has been taken, co-financed by DFID. This takes a longer term approach to encourage greater RHD staff ‘buy in’.

Taken as a strategy to improve planning processes, the new participatory approach will no doubt prove more successful – in much the same way as extensive training associated with the RIBEC project fostered readier acceptance and more complete implementation of its financial management reforms. However, the reform objectives associated with the Second RRMP are more ambitious, and extend to converting RHD into a maintenance rather than construction-oriented organization, improving monitoring and evaluation, and strengthening financial management. This will inevitably conflict with the interests of a large section of RHD staff. They will lose opportunities for side payments that new construction offers; they will lose the professional rewards to engineers that are greater with new construction than with maintenance; and they will lose positions, as lower staffing levels are pursued. Participatory processes are unlikely to overcome these objections, as was seen in the case of BWDB.

Leaving aside the Jamuna Multipurpose Bridge Authority, which was a unique operation, poor planning is characteristic of virtually all infrastructure management in Bangladesh, from power to water, and for much the same reason as is the case in RHD: officials gain little from good planning. The major exception is LGED. There, significant innovative leaps have been made, extending to the integration of GIS data into planning of new rural infrastructure. However, these efforts stem directly from the unique circumstances that have allowed LGED to pursue higher than customary performance targets and forge a results-oriented operation, and therefore to manage

Taming Leviathan: Reforming Governance in Bangladesh

118

political interference and avoid the staff apathy that undermine infrastructure planning elsewhere in Bangladesh.

Although the lesson drawn by close observers of RHD and other agencies is that a long timetable and participatory decision making is crucial to successful reform, the lesson of planning reforms at RHD should be that these are insufficient – and LGED suggests that they may not even be necessary. If incentives of top leadership are aligned with efficient performance, and they have the leverage to fend off political interference, or at least hold its costs down, good planning is likely to follow naturally. In the absence of these conditions, reforms focused on planning are likely to take significant time with uncertain chances of success.

Making Better Use of Technical Assistance. While there is no ready measure of the amount of technical assistance provided to Bangladesh over the past decade, there can be little doubt that it runs to hundreds of millions of dollars. Judging from the poor results of institution building, the productivity of this immense investment must surely be very low. In practice, a large part of the technical assistance was primarily to get a job done and was not strongly linked to training or capacity building. In that respect, the outcomes have been generally better, though there is always an issue as to whether the output is properly used or the results sustainable.

In some case the outcomes have been wholly positive; for example, the design and supervisory engineers provided to the JMBA performed in an exemplar way, and the result was one of the world’s major bridges (not only the twelfth longest, but also one of the most elegant) completed on time and within budget. In other cases where capacity building was a central objective, the outcomes were often almost negligible despite major expenditures. The usual reason has been that the technical assistance was urged on an agency by one or more development partners. The technical assistance provided in the mid 1990s under the financial sector reform project falls into this latter category. Unlike the case of the JMBA, the Bangladesh Bank was not particularly receptive to the technical assistance provided by the donors. The same may be said of the IMF’s assistance to the Bangladesh Bank to strengthen banking supervision. Manuals were prepared but not used.

This experience leads to some clear conclusions, obvious in many ways, but surprisingly frequently overlooked. In all circumstances, there must be a strong government commitment to the objectives of the technical assistance, a commitment that must be maintained when the key government managers who have initiated the request for assistance are rotated to new jobs or retire (as so often happens). This implies that the commitment to the task is shared by several of the responsible government officials from the Minister and his Secretary down to those who will be directly involved. It is not sufficient for the ownership to be just one key person who may be here today, but gone tomorrow. In those circumstances, the risks of failure are too high.

Often both objectives are present – getting a job done and building capacity. And, in such cases, all too often the latter objective is sacrificed to achieving the former. Moreover, often those officials who are delegated as counterparts are not particularly motivated to learn new skills and see no reason why the much more highly paid and better equipped technical assistance should not do the job on their own. This was evident in the case of the technical assistance team brought in to develop the planning model in the Roads and Highways Department.

For successful capacity building several conditions need to be fulfilled. As noted above, essential but far from sufficient is strong local ‘ownership’ and commitment to the objectives. This must also extend to the choice of consultant or adviser. Beyond that there must be local counterparts who are present from the start and committed to remain in place throughout the presence of the technical assistance and well beyond to ensure continuity and sustainability. For this to happen there must be both strong incentives to motivate the local staff and a management commitment to keep

Annex I: Learning from a Decade of Institution Building

119

those trained in place for long enough to ensure sustainability. Moreover, arrangements must be in place to train follow-on staff. The RIBEC project has done an exemplary job on all these counts (see Box 4.1 and 7.1). Use of training abroad as an incentive is one way round the problem of low salaries and low motivation, as we have seen in the case of LGED, as well as RIBEC.

There are many additional detailed lessons to be culled from recent experience with TA that can help ensure that the foreign specialists are used effectively. For example, detailed terms of reference must be carefully and thoroughly prepared with the full participation of all the key stakeholders. Counterparts with the right background, skills and motivation must be identified punctiliously. For skills to be genuinely transferred, the TA specialists should not act as substitute staff, doing the work on behalf of local staff. On the contrary, the local staff should be in the ‘driver’s seat’ from the start; the role of the TA is be to train on the job. This is why periodic visits are often better than a continuous presence so that the work must be done by local staff and reviewed periodically by the visiting specialists. Progress needs to be monitored fully against pre-agreed benchmarks and regularly reported to the managers concerned. At the same time, full flexibility must be built into the process to allow program adjustments as and when needed and agreed.

The difficulties of institutional reform, and of implementing projects in the face of severe institutional dysfunction, have more often than not led reformers to set up parallel systems rather than to reform existing agencies in Bangladesh. Circumvention of existing institutions can take many forms: enclaving; (as in the Roads and Highways Department); contracting out (for example, to NGOs); and shifting resources to agencies that work (for example, from DPHE and PMED’s Facilities Department to LGED). This strategy generally succeeded, from the point of view of accomplishing time-bound sector objectives (such as a certain quantity of roads constructed or schools built).

Even when there was some hope that competition would trigger reform, there is little evidence that this has happened. As a consequence, the circumvention strategy has done little to ensure that the public sector agencies in Bangladesh, when left without donor oversight and aid resources, have the incentives and organizational attributes necessary to effectively provide such services on their own. In some cases this has not mattered, since the parallel services are potentially self-sustaining. In most cases, though, the parallel services are dependent on outside funding.

There are numerous examples of the circumvention strategy among the twelve case studies commissioned for this Review. Enclaving in the Roads and Highways Department has meant that donor projects are managed in a completely different manner, and by a different group of people, than domestically-funded projects. Among the significant differences: foreign technical assistance and oversight is constant for donor-funded projects; foreign consultants supervise the quality of donor-funded road projects, while for domestically-funded projects there are generally no consultants whatsoever, making collusion between government engineers and contractors much easier; bidding and tender documents differ across donor and domestically-funded road projects (although this is changing under the latest roads project); and government personnel in the enclave group specialize while those in the mainstream department are involved in multiple activities, from design to contracting to planning and inspection.

In education, circumvention has taken on more positive characteristics. Government has delegated a significant fraction of its education portfolio to NGOs, which have in turn taken the lead

Circumventing dysfunction

Taming Leviathan: Reforming Governance in Bangladesh

120

in innovation and in bringing education to those whom government schools have not reached. This trend has been encouraged by donors: for example, greater involvement of NGOs was planned in the General Education Project with several objectives: to expand the role of NGO provision of non-formal primary education; to involve new and inexperienced community groups and NGOs so that grassroots expertise is developed; and to provide block grants to communities and NGOs to make schools more attractive.

The case studies show that government tolerance of the circumvention strategy is lower when it involves a sensitive sector such as education; in this case, the government limited the reach of the NGO component of the GEP. The NGO activities represented less than 3 percent of total costs of the project; government negotiators channeled NGO activity into areas that were non-competitive with government schools (e.g., rural, non-formal primary schools); and donors were required to assure government officials that NGO programs were meant to be experimental and only to supplement public education in rural, hard-to-reach areas. Even this level of NGO involvement was likely a result of public government commitments to expand access to public education, commitments that it could not reach without NGO assistance. In the end, although the government agreed to channel resources to NGOs in the first phase of the project, this component of the project was dropped in the subsequent Primary Education Development Project (PEDP).

While there has been improvement in education enrolments, there seems little evidence yet that the content of education and the quality of teaching in public schools have been much influenced by the pioneering work of NGOs. For example, there is little evidence that problems of teacher absenteeism, lack of curriculum innovation, the absence of quality control and the information necessary to monitor and evaluate, are closer to resolution in public schools than before the expansion of NGOs. Fortunately, these are all issues that NGO schools seem to have dealt with successfully.

Another circumvention strategy has been to expand the responsibilities of good-performing agencies. LGED has been the biggest beneficiary of this approach; it has grown significantly over the last fifteen years in part because its superior performance has led donors to expand its mandate. It is now involved directly in a vast program of market construction, rural roads, water projects, and sanitation, compared to an original mandate of providing technical assistance to local authorities. At the same time, there is evidence of many of the characteristics of enclaving. The most important is the significant role of donor-financed technical assistance: in 1997–98, there were 152 local TA staff, constituting at least half of LGED headquarter staff (SIDA p. 123). Sustainability of LGED success is not only an issue because of the lack of organizational financial and other controls, but also because of dependence on donor-financed staff.

Several of the case studies illustrate both the effectiveness of donor willingness to walk away

from non-reforming sectors, and the necessity of doing so in certain circumstances. Reforms in LGED, mentioned earlier, seem clearly to have accelerated in the late 1980s after the threat by Nordic donors to abandon their commitment to the LGED predecessor and related agencies. The contrast between the Bangladesh Water Development Board and the Power Development Board also demonstrates the important role that suspension of donor activities can play in spurring reform – and the conditions under which suspension is likely to have an effect.

Prior to 1998, there was little progress in improving the rehabilitation, operations and maintenance activities of the BWDB. BWDB was focused on new works. The last two projects assisted by IDA, before suspending activities with WDB, were the BWDB Systems Rehabilitation

Withdrawal of Donor Support

Annex I: Learning from a Decade of Institution Building

121

Project and the Coastal Embankment and River Bank Protection Projects, the latter focused on new works, the former on larger maintenance operations. The former project had as its objectives the separation of staff and responsibilities for operations and maintenance from construction, improved personnel policies, stakeholder involvement, and accounting reforms, especially related to procurement. Little progress was made towards these goals, and what progress there was seems to have been triggered only by Bank resistance to funding the new works (Coastal Embankment/River Protection projects) without greater institutional reform.

The Power Development Board, on the other hand, has resisted change even after the withdrawal of donor support in 1993 (Iqbal, Case Studies 1999). There are three likely reasons for this. First, the funds misused in the PDB are arguably far greater than in the BWDB; second, donor resources are a smaller fraction of misused funds in PDB than in BWDB, since PDB’s own revenues are far greater than those of BWDB (annually over $100 million of revenue is diverted fraudulently); finally, the capacity for disruption by power employees is potentially greater than that of BWDB staff. Taken together, these suggest less donor leverage in PDB.

Once donor attention turns to organizational reforms, resistance to reform increases substantially. BWDB indicates that where donor support is a sufficiently large fraction of the resources that agencies have at their disposal, the threat of or actual suspension of donor activity can succeed in stimulating reform. However, where donor funds are a small fraction of agency resources, as in the PDB, donor leverage is correspondingly less. Nonetheless in this case, it is inconceivable that the PDB can succeed in its mission without substantial foreign funding and even private investors in the sector will look for reforms that curb the waste and place PDB’s operations and finances on a sounder footing the. Consequently, in the absence of satisfactory reform, it is inappropriate for the donors to resume lending.

Donors are not alone in objecting to poor service delivery by BWDB and PDB. One might hope that donor influence, in conjunction with the sometimes violent protests from abused customers, would be enough to trigger reform. Not surprisingly customers are poorly organized and are able to mobilize only sporadically, in response to grievous and exceptional service breakdowns, but without great effect. Consequently, and ironically, donors remain the first line of accountability for many service providers in Bangladesh.

In Bangladesh, obligations dictated by hierarchy, family and social group are strong counter-weights to organizational rules. Formal rules that dictate punishments for wrong-doing, for example, are often outweighed by personal ties and obligations to the official concerned or to the patron of that official that cannot easily be ignored. Similarly, the political and financial success of elected officials bears scant relation to their actions to improve the performance of service delivery by public agencies, while both can be much enhanced by actions that are counter to the interests of their constituency. Elected officials therefore have little motivation either to exercise their oversight role to ensure good performance by the public administration, or to campaign for organizational reforms in the public administration that would enhance performance.

It is hardly surprising, then, that the most striking lesson observers tend to draw from experiences such as those documented in the case studies is the importance of outstanding and visionary leaders who can overcome all the obstacles standing in their way. At the same time, the very paucity of examples among the countless projects and reform efforts in Bangladesh over the last 20 years should give one pause before suggesting depending only on champions. Among the cases

In Conclusion

Taming Leviathan: Reforming Governance in Bangladesh

122

studied, few managers established a history of high quality, timely service delivery. One exception discussed above was LGED, but even there it is now evident that some very negative practices thrived: most notably, extreme centralization of decision making and corruption. In the case of LGED, exceptional circumstances, including an entrepreneurial and far-sighted leader, who enjoyed high esteem as a freedom fighter, a massive donor presence and a credible threat by donors to withdraw without evidence of significant performance improvement, came together to create a strongly performing organization. This is not a replicable model on which to base a strategy for institutional development in Bangladesh. Although one cannot rely for progress on champions alone, all is not lost. The case studies reveal that progress was made, even if slow and modest, in a number of instances where there was no outstanding leader.

Perhaps the best example is in the health sector, where through a persistent dialogue between the development partners, government and the NGOs, a radical new program was put in place based on defining clear objectives and a strategy to achieve them, elaborated through extensive consultation with all the key stakeholders. The success of the national infant nutrition program is another case in point. And so is the Rural Electricity Board.

To the above may be added the following generic conclusions:

Since sustainable institution building implies changes in bureaucratic norms and behavior, it must be viewed as a long term endeavor covering a decade or more and to be effective all parties must be willing to commit ourselves to supporting a long term process. Moreover institutional reforms should be phased, even piece meal, so as pace them with the commitment and capacity of the key stakeholders and in recognition of the fact that all change is intrinsically threatening and major changes are likely to be perceived quite simply as too risky.

Stakeholder participation, including not only the intended beneficiaries but also both the

managers and staff of the organization concerned, is indispensable for successful institutional building. This is dramatically demonstrated by the cases of BWDB, MOHFW and PMED. While the first step is in depth stakeholder analysis, unless this is followed by genuine stakeholder participation in problem solving and decision-making, institutional reform is unlikely to succeed. The problems encountered by the Agriculture Research and DWASA vividly illustrate this point.

Realistic analysis of incentives (formal and informal) is also critical for success. The winners and losers must be identified and the losers taken care of one way or another so that they do not obstruct implementation of the program. The way drastic downsizing is being managed in BWDB by the Minister and his Secretary is exemplary in this regard (see Box 2.3). Rewards for good staff performance also need to be built in, as has been done so well in the RIBEC project and in LGED where training and public recognition are the main carrots used. Thus, incentives need not be monetary; they can also be opportunities for professional development, greater security and enhanced status and public recognition.

While it may get an urgent job done, technical assistance used to substitute for local expertise, even if linked to the training of local counterparts, is likely to have little institution building impact as has been evident with in RRMP2, FSRP and the TA for banking supervision provided by the IMF to the Bangladesh Bank. RIBEC demonstrated how important it is to have the local staff as much as possible in the “driving seat” and engaged in a hands-on way using the new skills they have been taught.

Annex I: Learning from a Decade of Institution Building

123

Considerable effort must be invested up-front in building a consensus on what changes are to be made. This requires patience and a willingness to invest time in building ownership of a reform program. The failure of the Agricultural Research Management Project is testimony to the heavy cost of an impatient top-down approach. Here again the restructuring of BWDB is exemplary.

1. Governance and Civil Society: Focus on the Local Level by Jorge Barenstein 2. Reform of Public Administration: Next Steps by Mohammad Nurunnabi Chowdhury 3. Pursuing Local Government Reform by Mohammad Habibur Rahman 4. The Social Dimensions of Governance by Geof Wood 5. Financial Accountability in Bangladesh: A Governance Perspective by Vinod Sahgal 6. Country Procurement and Assessment Report by Raghavan Srinivasan 7. Consultations with the Poor by Rashed un Nabi, Dipankara Datta, Subrata Chakrabarty, Masuma

Begum, Nasima Jahan Chaudhury 1. The Bangladesh Water Development Board by S.A.M.Rafiquzzaman and Jan Weijenberg 2. The Power Sector by Mohammad Iqbal 3. PKSF by Reazul Islam 4. Local Government Engineering Department by Thampil Pankaj 5. Roads and Highways Department by Mohi Uz Zaman Quazi 6. The Arsenic Mitigation Program by Guy Alaerts 7. The Education Sector by Keiko Miwa 8. The Health Sector by Paul Thornton 9. Public Administration Training Centre by Helen Abadzi 10. Agricultural Extension by Jan Weijenberg, Tajul Islam and Hank Gassner 11. Dhaka Water Supply and Sewerage Authority by Asarul Islam Chowdhury 1. Abdullah, A.; Khan, A. R. State, Market and Development 1996 University Press Limited 2. Ali, Q. A. Decentralized Administration in Bangladesh 1995 University Press Limited 3. Bangladesh Legal Aid, ASK, MLAA Human Rights in Bangladesh 1997 University Press Limited 4. Barenstein, J. Overcoming Fuzzy Governance 1994 University Press Limited 5. Hasanuzzaman, A. M. Role of Opposition in Bangladesh Politics 1998 University Press Limited 6. Halim, M. A Constitution, Constitutional Law, and Politics 1998 University Press Limited 7. Hollaway, R. Supporting Citizens’ Initiatives: Bangladesh’s NGOs and Society 1998 University press

Limited 8. Huque, A. S. Public Administration Dimensions of Development 1990 University Press Limited 9. Husain, A.M. Poverty Alleviation and Empowerment 1998 BRAC 10. Huq, W. (Ed.) Pursuing Common Goals: Strengthening Relations Between Government and Development NGOs

1996 World Bank and University Press Limited 11. Hye, H. A. Below The Line: Rural Poverty in Bangladesh 1996 University Press Limited

ANNEX II:

Background Papers

Case Studies

Other Publications

Taming Leviathan: Reforming Governance in Bangladesh

126

12. Jansen, E. G. Rural Bangladesh: Competion for Scarce Resources 1987 University Press Limited 13. Khan, M. M. Administrative Reform in Bangladesh 1998 University Press Limited 14. Khan, S. I. , Islam, S. A., Haque, M. I. Political Culture, Political Parties and the Democratic Transition in

Bangladesh 1996 University Press Limited 15. Kochanek, S. A. 1993 Patron-Client Politics and Business in Bangladesh University Press Limited 16. Kramsjo, B., Wood, G. Breaking the Chains 1992 University Press Limited 17. Maloney, C. 1988 Behavior and Poverty in Bangladesh University Press Limited 18. Matin, M. M. A. Memories Formed; Memories Re-formed 1996 Sheepa Publications 19. Muhith, A. M. M Thoughts on Development Administration 1981 BRAC 20. Panandiker, V.A.P. (Ed) 1999 Problems of Governance in South Asia Konark Publishers Pvt. Ltd. 21. Rahim, A. Politics and National Formation in Bangladesh 1997 University Press Limited 22. Rahman, T. The Rural Homeless in Bangladesh 1993 UNICEF 23. Rahman, Z. H.; Hossain, M.; Sen, B. (Ed.) 1987-94 Dynamics of Rural Poverty 1996 BIDS 24. Sattar, Z. (Ed.) 1998 Bangladesh 2020 World Bank and University Press Limited 25. Siddiqui, K. Towards Good Governance in Bangladesh: Fifty Unpleasant Essays 1996 University Press

Limited 26. Sobhan, R. Bangladesh: Problems of Governance 1993 University Press Limited 27. Sobhan, R. Towards a Theory of Governance and Development: Learning from East Asia 1998 University

Press Limited 28. Sobhan, R. (Ed.) 1997 Crisis in Governance, A Review of Bangladesh’s Development, 1997 Centre for policy

Dialogue and University Press Limited 29. Thiagarajah, J. (Ed.) Governance and Electoral Process in Bangladesh 1997 Ankur Prakashani 30. Ullah, M. Land, Livelihood and Change in Rural Bangladesh 1996 University Press Limited 31. Wood, G. Bangladesh: Whose Ideas, Whose Interests? 1994 University Press Limited 32. World Bank 1996 Government That Works University Press Limited