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World Bank Document R M aisuddin A Also from UPL ohinder S. edited by Hasnat Abdul Hye GOVERNANCE South Asian Perspectives Public Disclosure Authorized Government and M Kamal Siddiqui hmed TOWARDS GOOD GOVERNANCE IN udahar BANGLADESH Rural Fifty Unpleasant Essays Ahmed Shafiqul Huque et al. DEVELOPMENT THROUGH DECENTRALIZATION IN BANGLADESH Transformation Evidence and Perspective edited by Kamal Siddiqui Rural Transformation Government and Role of Public Spending and LOCAL GOVERNMENT IN BANGLADESH Policies in Bangladesh Kamal Siddiqui et al. MEGACITY GOVERNANCE IN Public Disclosure Authorized SOUTH ASIA A Comparative Study • OVERCOMING THE GOVERNANCE CRISIS IN DHAKA CITY The World Bank BANGLADESH: PURSUING COMMON GOALS Strengthening Relations between Government and Development NGOs • ECONOMICS AND GOVERNANCE OF NONGOVERNMENTAL ORGANIZATIONS Public Disclosure Authorized IN BANGLADESH Mohammad Mohabbat Khan FROM GOVERNMENT TO GOVERNANCE Expanding the Horizon of Public Administration to Public Management ISBN 978 984 8815 13 7 Mohinder S. Mudahar and Raisuddin Ahmed Public Disclosure Authorized Government and Rural Transformation i Government and Rural Transformation Government and Rural Transformation iii Government and Rural Transformation Role of Public Spending and Policies in Bangladesh Mohinder S. Mudahar Raisuddin Ahmed The University Press Limited iv Government and Rural Transformation The University Press Limited Red Crescent House 61 Motijheel C/A P. O. Box 2611 Dhaka 1000 Bangladesh Fax : (88 02) 9565443 E-mail: [email protected], [email protected] Website: www.uplbooks.com First published 2010 Copyright © 2010 The International Bank for Reconstruction and Development/The World Bank, 1818 H Street, NW, Washington, DC 20433 The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/ The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. All queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; Fax: 202-522-2422, e-mail: pubrights@ worldbank.org. Cover design by Ashraful Hassan Arif ISBN 978 984 8815 13 7 Published by Mohiuddin Ahmed, The University Press Limited, Dhaka and book design by Ashim K. Biswas. Produced by Abarton and printed at the Akota Offset Press, 119 Fakirapool, Dhaka, Bangladesh.a Contents v Contents Abbreviations and Acronyms xv Glossary xix Acknowledgements xxi Preface xxv Chapter 1 Introduction and Overview 1 1.1 Socio-Economic Transformation 2 1.2 Bangladesh in the South Asian Context 14 1.3 Emerging Development Challenges 19 1.4 Focus and Framework of the Study 23 Chapter 2 Role of Government and the Public Sector 29 2.1 Theoretical Approach to Define Public Area 29 2.2 The Real World Complexities and Diversity 31 2.3 Special Focus on Agriculture and Rural Development 38 2.4 Role of Government in Information and Economic Intelligence 39 2.5 Government Programmes should reach all Corners of the Country 41 Chapter 3 National Strategies for Rural Prosperity 43 3.1 Historical Perspective of National Policies 43 3.2 AVision for the Future of Agriculture and Rural Development 83 Chapter 4 Size of the Government, Financing Options and Public Expenditure 89 4.1 Size of the Government 90 4.2 Determinants of the Size of Government: Demand Side Factors 93 4.3 Determinants of the Size of Government: Supply Side Factors 94 4.4 Budget Deficit and Development Financing Options 99 vi Government and Rural Transformation 4.5 Taxation and Public Expenditure Trade-Off 106 4.6 The Budget Process 107 4.7 Trend of Public Expenditure 108 4.8 Sector based Distribution of Public Expenditures 116 4.9 Regional Distribution of Public Expenditure and Poverty Traps 124 4.10 Alternative Uses of Public Resources 126 4.11 Composition of Government Spending in the United States 131 Chapter 5 Public Expenditure in Agriculture and Rural Development 145 5.1 Definition of Agriculture and Rural Development 145 5.2 Expenditure in Agriculture and Rural Development 146 5.3 Investment in Water Resources 153 5.4 Investment in Agricultural Research 156 5.5 Rural Development and Local Governance 168 5.6 Priorities in Agriculture and Rural Development 174 Chapter 6 Efficiency and Impact of Public Expenditure on Rural Growth and Poverty 179 6.1 Goal Setting and the Strategy: The Case of PRSP 179 6.2 Leakage of Public Resources: Corruption, Transparently Speaking 190 6.3 Impact of Public Expenditure 204 6.4 Targeted Public Programmes for the Poor 214 Chapter 7 Institutions, Rural Credit and Input Subsidies 225 7.1 What is an Institution? 225 7.2 Development of Rural Credit Institutions 230 7.3 Competitiveness of Agriculture and the Role of Input Subsidy 242 7.4 Coordination across Institutions 254 Chapter 8 Free Market and Public Intervention for Food Security 263 8.1 Rice Markets 263 8.2 Public Food grain Distribution 270 Contents vii 8.3 Market Liberalisation and Price Management 272 8.4 Managing a Sudden Food Crisis 281 Chapter 9 Monitoring and Evaluation of Public Interventions 291 9.1 Governance, Transparency and Accountability 291 9.2 Effective Monitoring and Evaluation System 293 9.3 The State of Monitoring and Evaluation System in Bangladesh 304 9.4 Need for an Effective Monitoring and Evaluation System in Bangladesh 307 Chapter 10 Summary of the Past and Vision for the Future for Greater Rural Prosperity 311 10.1 Initial Conditions at Birth 311 10.2 Rural Transformation since Independence 314 10.3 Government and Rural Transformation 326 10.4 Impact of Public Expenditure on Growth and Poverty 336 10.5 A 2030 Vision for Bangladesh and Rural Prosperity 339 10.6 Challenging Tasks for the Government: An Agenda of Reform 348 References 367 Index 377 viii Government and Rural Transformation List of Tables, Figures and Boxes Tables 1.1 Selected Indicators of Transformation: Structural Change in the Economy of Bangladesh 2 1.2 Growth Rates of GDP in Agriculture, Industry and Services Sectors in Bangladesh, 1981–2004 4 1.3 Selected Indicators of Transformation: Agriculture and Rural Transformation in Bangladesh 5 1.4 Shares of Rural Non-Farm Sector in Rural Employment and Income in Bangladesh, 2000 7 1.5 Income Elasticity of Demand for Major Product Groups in Bangladesh 9 1.6 Comparative Static Indicators of Development for South Asian Countries, 2003 13 1.7 Comparative Dynamic Indicators of Development for South Asian Countries 17 1.8 Comparative Per Capita Income Index in South Asian Countries 18 2.1 Government Ministries/Divisions and their Functions in Bangladesh, 2004 33 3.1 Selected Macroeconomic Policy Indicators in Bangladesh 45 3.2 Rice Production and Use of Modern Inputs in Bangladesh, 1980/82–2002/04 49 3.3 Release of High-Yielding Varieties from BRRI and Variety Attributes 51 3.4 Financial and Economic Profitability of Selected Crops in Bangladesh, 1996/97-1998/99 55 3.5 Estimated Net Returns for Selected Crops in 2006 in Bangladesh 56 3.6 National Average Monthly Wholesale Price of Aman Coarse Rice in Bangladesh, 1990/91–2004/05 58 3.7 National Average Yearly Wholesale Price of Aman Fine Rice in Bangladesh, 1999/00–2004/05 59 3.8 International Prices of Rice and Wheat (f.o.b.), 1980/81 to 2004/05 61 3.9 National Average Wholesale Price of Potato (local best) in Bangladesh, 1989/90–2004/05 62 3.10 National Average Wholesale Price of Ruhi Fish in Bangladesh, 1980-2005 64 Contents ix 3.11 National Average Wholesale Price of Local Chicken (live, big size) in Bangladesh, 1980-2005 66 3.12 National Average Wholesale Price of Hilsha Fish in Bangladesh, 1980-2005 67 3.13 Sources and Growth Rate in Fish Production in Bangladesh, 1997 through 2004 68 3.14 Projected Output of Fish in Bangladesh, 2012 69 3.15 Trends of Production in Livestock Products in Bangladesh, 1980 to 2000 69 3.16 General Characteristics of Surveyed Poultry Farms in Bangladesh, 1999/2000 72 3.17 Costs and Returns on Poultry Farms, Per Bird, in Bangladesh, 2000 74 3.18 Structure of Production of Forestry Products in Bangladesh, 1983/85 and 1992/95 75 3.19 Matrix of Post-Harvest Management Problems and Suggested Principal Agents for Solution in Bangladesh 77 3.20 Development of National, Regional and Rural Road Network in Bangladesh, 1998–2004 79 4.1 Size of the Government and Aggregate Public Expenditure to GDP Ratio over time in Bangladesh 91 4.2 Government’s Revenue Receipts over time in Bangladesh 95 4.3 Central Government Revenue Collection Efforts in South Asian Countries 96 4.4 Structure of Tax Revenue (NBR Component only) in Bangladesh, 2001/02 to 2003/04 96 4.5 Overall Budget Deficit and Modes of Financing Deficit over time in Bangladesh, 1993/94–2003/04 99 4.6 Annual Flow of Foreign Aid to Bangladesh, 1980/81–2003/04 102 4.7 Annual Disbursement of Foreign Aid by Type in Bangladesh, 1980/81–2003/04 104 4.8 Trend in Development, Revenue and Total Public Expenditures in Bangladesh, 1989/90–2003/04 108 4.9 Development (ADP) and Non-Development (Revenue) Public Expenditure (in real terms) in Bangladesh, 1989/90–2003/04 109 4.10 ADP: Actual Expenditures and Allocations in Bangladesh, 1989/90–2004/05 111 4.11 Actual ADP Expenditure, Project Aid and Gross Public Investments in Bangladesh, 1990/91–2003/04 114 x Government and Rural Transformation 4.12 Sector based Development (ADP) Expenditures and Project Aid in Bangladesh, 1990/91–2003/04
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