Wahid-uddin Mahmud expects World Bank will fund Padma Bridge

The Daily Star August 27, 2012

Eminent economist Dr Wahid-uddin Mahmud has called upon the World Bank to reconsider the funding of the Padma bridge project. Following is the full text of his article on this issue:

The international donor agencies have often been confronted with the question of how to do aid in a corruption-ridden environment such as exists in Bangladesh.

While there are genuine concerns for safeguarding the use of scarce concessional funds from wastage due to corruption, the donors’ approaches in dealing with this problem have hardly been consistent across countries or over the years.

The World Bank’s volume of assistance to Bangladesh, for example, has gone through troughs and highs, which have much to do with the shifts in the Bank’s strategy of how to deal with the country’s governance problems. Thus, at one time towards the end-1990s, the Bank’s aid pipeline to the country nearly dried up because of the Bank’s increasing disengagement from a large number of sectors including infrastructure and energy, where progress in policy reforms towards improved governance had been lacking. But later on, the Bank shifted its stance in favour of working from within critical sectors rather than disengaging from them and waiting for reforms to occur. Most recently, the decision to cancel the proposed funding of the Padma Bridge, unless reversed, will signal yet another shift towards hardening of its stance in dealing with alleged corruption.

There are about 80 low-income countries that are eligible to receive assistance from the IDA, which is the World Bank’s window for concessional loans. The determine the allocations of IDA loans among the eligible countries, the Bank uses a numerical country rating system based on its Country Policy and Institutional Assessment (CPIA). Overtime, the assessment criteria have shifted from a focus largely on macroeconomic performance to include more and more governance-related indicators; as a result the governance factor has now become the predominant determinant of country allocations.

The IDA fund allocations according to CPIA have been criticised by experts for the excessive weight placed on governance that puts countries like Bangladesh at a disadvantage. On top of it, Bangladesh has not been able to even fully access its IDA allocations as determined by its CPIA rating because of the problems related to project implementation. The challenge for the Bank and the government lies in finding aid modalities that can enable the country to fully utilise the allocations, while also trying to improve the country’s CPIA rating. The proposed funding of the Padma bridge project provides an opportunity for meeting such a challenge, for which the responsibility lies on both sides.

The government needs to recognise that, so far as our global image is concerned, perception of corruption is not our strong point (while steady economic growth and progress in many social development indicators are). In this age of intense global competition, making it to the top of any list, be it the Transparency International’s corruption ranking, is not an easy task; it must have required an excellent team work among many government agencies to accomplish such a rare feat. The Padma bridge affair in fact provides us an opportunity to reflect up on how we package ourselves in front of the global community and engage in global economic diplomacy. Here is a chance to improve our image by making every effort to come out clean. A denial mode will not help.

We may be able to construct the bridge using our own resources, but there is the larger issue of further possible damage to our global reputation. In order to achieve the middle-income status, we shall need to raise billions of dollar worth of resources from both domestic and foreign sources to invest in infrastructure building. Both India and China access huge amounts of concessional IDA loans on top of other loans from the World Bank for investment in infrastructure projects. Vietnam currently receives about 2 billion dollar worth of IDA loans annually which is more than double the amount Bangladesh receives despite the fact that it is a middle-income country and its population size is almost half of that of Bangladesh.

On the part of the donor agencies, including the World Bank, they should not be guided by perceptions only, but by facts and evidence. According to an evaluation exercise reported in the World Bank’s Bangladesh Country Assistance Strategy 2006 2009, the Bank’s project portfolio performance in Bangladesh was in fact found to be better than the average of South Asia (and of all countries receiving IDA-only loans from the Bank) in respect of the percent of projects at risk or of completed projects with satisfactory outcomes. Admittedly, there are serious governance-related constraints in project implementation in Bangladesh. Yet, the countries aid-worthiness is considered to be high in terms of the potential contribution of aid in removing poverty and achieving economic and social development. While Bangladesh should learn to be more self-reliant, the international community faces the challenge of helping Bangladesh to achieve its development goals. It is in this light that the World Bank should reconsider the funding of the Padma bridge project.