20-22 October 1998
Civil Society Perspectives on Structural Adjustment Policies
Bangladesh held its First National SAPRI Forum in Dhaka on 20-22 October. The Forum was organized by the lead organization in Bangladesh, Proshika, together with a 15-member steering committee of the local civil-society network, SAPRIN. An inaugural session on the first day was followed by two full days in which two plenaries and three working sessions were held. A broad cross-section of civil-society organizations attended, including farmers' and agricultural groups, organized labor, and women's, small business and industry organizations, among others. Organizers were especially pleased to note the large-scale presence of trade-union representatives and agricultural workers, who far outnumbered NGO staff.
Prior to the Forum, over 600 people had already participated in three regional consultative meetings (in Chittagong, Khulna and Rajshahi) and five focus-group discussions. The regional consultations were held to ensure that rural and landless voices would be heard, while the focus-group discussions targeted farmers and agricultural workers, small businesses and cottage industries, industrialists and labor, and women, respectively. The objective of these discussions was to record the adjustment-related experiences of a broad cross-section of civil society and frame the forum and research agendas. The results of the consultations and the issues that emerged from them were written up and made available to all the participants at the national Forum. Participants were also given a document detailing Bangladesh's experience with structural adjustment programs (SAPs) over the past 15 years, which served as an important tool in stimulating informed debate.
The Forum was chaired by the well-respected Professor Rehman Sobhan from the Center for Policy Dialogue (CPD), in his capacity as Convener of the Bangladesh SAPRI Steering Committee. In addition to the formal inauguration, there were opening and closing plenaries and three issue panels, in which policy measures emerging from the prior consultations were addressed in more detail. All sessions were conducted in Bangla, the national language of Bangladesh, to ensure the full participation of all local people, and all of the panels addressed their issues with a special focus on the impact on small producers, workers and vulnerable sectors of society.
The Forum was a great success, sparking lively discussion and debate among members of civil society, government representatives and World Bank staff. Although there was disappointment in the level of participation of the government, the Forum was attended by cabinet ministers of the current and previous governments, as well as by members of Parliament and politicians of all major political parties.
A recurring theme in the plenaries and issue discussions was the country's lack of "ownership" of its economic-policy reforms. Although Bangladesh was one of the first 35 countries in the world to receive SAP lending from the international financial institutions, these adjustment programs have never really been integrated into national policymaking priorities. Civil-society representatives emphasized the need for "home grown" policy measures, and government representatives joined in criticizing the Bank for imposing conditionality on the government.
Mr. Saifur Rehman, member of Parliament and former Finance Minister for two terms during the SAP period, stated that the government regularly agreed to the Bank's Policy Framework Papers, but did not always comply with them because the recommendations were not well suited to the needs of the country. He added that donors such as the Bank had provided an important message that reforms were necessary and resources were misallocated, but argued that the types of reforms they prescribed were not suitable for the socio-economic conditions of many developing countries. Harvard-trained economists were not familiar with the environment in which these policies have to work and therefore, not surprisingly, they don't work. A fundamental flaw with adjustment, he said, has been the fact that most reforms were premised on the belief that the market would deliver, but that in Bangladesh "the market is weak and ignorant, unintelligent and uninformed." Thus, he questioned whether the market is even capable of reducing poverty and increasing employment in Bangladesh. What is needed instead, he asserted, is a government-led, pro-poor, pro-employment and pro-equity strategy. It was within the context of this general analysis that civil-society organizations presented their experiences and perspectives on the following three issues.
I. The Impact of Trade and Industrial Policy Reforms on Small Producer and Laborers
Among the key sub-issues that emerged in the industry and trade session were the questions of industrial capacity and employment, state-enterprise losses, and the fate of retrenched workers. Also discussed were ways to increase efficiency without privatizing and the limits of export-oriented industrialization, including questions related to existing labor laws and statutes and state support of markets. Trade liberalization and the tax structure (including VAT and countervailing duties) and administration were also discussed. Industrial loans (e.g., debt default) was another sub-issue, while the price and quality of utilities and infrastructure, building technological capacity, and the role of trade unions, were others.
Participants in the session noted the failure of adjustment measures to contribute to an indigenous industrialization strategy capable of leading the country in the direction of greater self-reliance, which, it was agreed, is an important element in achieving long-term development in Bangladesh. In fact, they asserted, adjustment had encouraged an unsustainable level of foreign dependence through its emphasis on trade and other forms of liberalization that adversely affect the competitiveness of domestic goods that must compete with the products of better financed transnational corporations. The exclusive dependence on export-oriented industries promoted by SAPs was viewed as unsustainable in the face of such an uneven playing field. What's more, the reduction of tariffs had opened a floodgate of imports, and a distortionary duty structure favored the import of finished goods over raw materials. This was seen by members of civil society as a major obstacle to Bangladesh's ability to develop its indigenous industries or boost export competitiveness.
Most of the discussion in this session focused on the experience of Bangladesh with privatization. There was a critique of the "across the board" promotion of privatization as the only solution to problems associated with public-sector goods and services. Workers vehemently challenged the notion that they were responsible for the problems and losses of state enterprises. Rather, they attributed these problems to inefficient management, a lack of credit, little technological and marketing support, and a misuse of industrial loans. Many workers have not received benefits in newly privatized factories and there have been huge layoffs, especially of unskilled workers.
Participants noted that newly privatized firms had experienced an increase in non-performing loans and defaults. In addition, the failure to assess the capacity of the local private sector, which in Bangladesh is highly underdeveloped, had meant that many of the recently privatized industries have either shut down, are struggling, or grossly exploit labor. Session contributors argued that alternatives to privatization exist and should be pursued, especially since privatization has often failed to meet its goals of increased economic efficiency and productivity.
Perhaps one of the most disastrous privatization schemes was in the jute sector. Civil-society organizations came to the session armed with statistics and their own personal experiences about the devastating impact of the privatization of the sector -- both on production and on workers. Because jute represents the lifeblood of Bangladesh's industrial sector its demise, they claimed, has had negative ramifications throughout the entire economy. Privatization, it was argued, had led to a 50-percent decline in gross production. Most jute factories closed after privatization, with 39,000 workers laid off (the Bank contends half the number). Meanwhile, many of those who have bought the jute mills at bargain prices are major loan defaulters. Participants partly blamed the World Bank for this mess since it gave incorrect advice, and said that the Bank should be held accountable when it provides faulty advice.
In conclusion, participants felt that the economic-reform process had to be redesigned to boost indigenous-led industrialization, since this could lead to industrial dynamism and higher employment. They also insisted that all stakeholders need to be involved in this process because one of the reasons for the failure of the past and current economic reforms has been the exclusion of workers from the decisionmaking process.
II. The Impact of Agricultural Policy Reforms on Agricultural Workers and Small Farmers
The main speaker for this session was the Minister for Food and Agriculture, Begum Matia Chowdhury, one of the country's most senior female political leaders. The session was co-chaired by Advocate Rahmat Ali, Member of Parliament and former President of Bangladesh Krishak League, a well-known national farmers' organization, and Mr. Saiful Haq, General Secretary of Bangladesh Khetmajur Union, an agricultural workers' union. As one participant noted, an estimated 80 percent of Bangladesh's population makes a living from agriculture, making this sector extremely important to any discussion of national development.
The session began with a review of key issues that emerged from the preparatory consultations. Concerns were expressed over the fact that liberalization measures included in the adjustment program had resulted in a disproportionately high increase in the price of inputs (including fertilizers and other import-dependent inputs such as seeds and irrigation), while agricultural output prices have stagnated. The polarization and pauperization of the peasantry as a result of SAPs and the devastating impact of the withdrawal of subsidies for the poor were also noted.
Several concerns were raised involving problems with obtaining agricultural inputs and the reduced government role in the agricultural sector. Participants noted that small farmers had been negatively affected by adjustment measures, such as the privatization of the distribution system for agricultural inputs, the reduced role of the state-owned Bangladesh Agriculture Development Corporation (BADC) in the distribution of agricultural inputs and the subsequent oligopolistic behavior of private input traders. For example, after the privatization of the deep-tube wells for irrigation, the BADC had to abandon its strategy of balanced sales and distribution, leading to random sales of wells that resulted in severe problems, such as reduction of ground-water levels and arsenic contamination. Small farmers also suffered as a result of the lack of price supports and inadequate provision of food-purchase and storage facilities by the government, as well as the reduction in public-procurement and quality standards for fertilizers, seeds and pesticides.
Civil-society representatives also raised other issues in prior consultations regarding measures that have created problems for small farmers and agricultural workers. These include: inadequate agricultural-extension services, which are needed to address the problem of declining land fertility due to excessive use of chemical fertilizers and monoculture; reduced access by the poor to formal credit institutions; low levels of agricultural credit from institutional sources; high interest rates charged on micro-credit; and an overall policy bias against the agriculture sector within the adjustment program.
Agricultural Minister Begum Matia Chowdhury acknowledged that the agricultural sector had been neglected as a result of SAPs. She agreed that the privatization of the fertilizer sector had led to adulteration and cheating and had placed the government in the position of having to protect corrupt business people from angry farmers whose crops had failed. In the future, she said, the government would not import fertilizers such as SSP, despite pressure from overseas. Privatization of the water sector has reportedly increased the number of wells in the country, but the Minister noted that the private sector would not accept management of the deep tube wells that had previously been run and managed by cooperatives and the government. She also questioned why, if transnational corporations can fix their prices and distributors, the government cannot do the same for fertilizer prices and distribution mechanisms.
Finally, there were complaints from participants about a lack of public information regarding agricultural-sector reforms. For example, a policy requiring landlords selling land to first offer it to their tenants goes largely unimplemented because few sharecroppers are aware of it. Citizen representatives at the session recommended that land reforms be included in SAPs.
III. The Consequences of Fiscal Restructuring on Social Development
Due to the fact that the main opposition political party called a "hartal" (strike) between 6 a.m. and 2 p.m. on the last day of the Forum, this last panel, which was to analyze whether user fees have reduced access to quality education and health care, had to be postponed. Nevertheless, there was a presentation of a summary of the key issues that had emerged from the regional and focus-group consultations. These issues included: cutbacks in public services in the social sector; increased income inequality; and reduced access by poor and vulnerable groups to health care and education as a result of a greater emphasis on private providers and increased user fees. There were complaints about the quality of both public and private services and about the lack of an adequate safety-net provisions in the reform package, which contributed to greater pressure on NGOs to become service providers instead of advocates.
The session was rescheduled and took place on 17 February 1999. This additional workshop was attended by doctors, teachers and others working in the health and education sectors, as well as by representatives of the government, political parties and the World Bank. The civil-society participants, including those from grassroots organizations, expressed their concern about the adverse effects of adjustment policies, particularly privatization, on health and education services.
In closing remarks, a representative of the Prime Minister stressed that SAPRI was consistent with the government of Bangladesh's priorities, while civil-society participants noted that their skepticism in the early days of the process had been diminished. Professor Rehman Sobhan reminded the World Bank and government in particular that great expectations had been created among citizens as a result of SAPRI, which was not just another research study or exercise. He urged them to take the outputs of this exercise seriously or else face a further loss of credibility and integrity amongst civil society and the electorate.
A summary of key issues that emerged for further study and research from both the previous regional and focus-group consultations and the Forum was provided. A tripartite "threshold consensus" emerged following the deliberations that, although some reforms are needed for accelerated development, a "home-grown" agenda is required to create a sense of ownership. A number of elements were cited as necessary to achieve this, including: the commitment of a variety of stakeholders (government, public representatives such as parliamentarians and politicians, and citizens' groups); greater transparency, access to information and accountability; genuine scope for institutionalized public participation; the incorporation of local government in policy formulation; and indigenous capacity to build and develop a Bangladesh agenda.
Some issues remain to be ironed out between the Bank, the government and the civil-society organizations participating in the exercise, however. Participants highlighted the need for greater participation from the Bank's operational (not just research) staff, more widespread involvement of key government policy implementers (not just high level politicians), and a broadened scope of SAPRI to include the International Monetary Fund and the Asian Development Bank.