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BoP support hinges on reforms, says Temple

STAR BUSINESS REPORT
Future balance of payment (BoP) support will continue for Bangladesh provided the reform programmes are implemented, said outgoing World Bank Country Director Frederick T Temple yesterday.
"The interim poverty reduction strategy paper (I-PRSP) provides a sound reform agenda, and we expect that it will guide future reform programmes that International Development Association (IDA) and other donors could support, " said Temple, who has completed his tenure in Dhaka, at a meeting with the members of Economic Reporters' Forum (ERF) at the World Bank office.
Christine I Wallich, newly appointed country director in Dhaka, was also present at the meeting.
Temple said Bangladesh needs to increase the economic growth rate by one and half per cent to two per cent in order to achieve the target of halving poverty by 2015.
"Our view of Bangladesh's growth during the 1990s is that although it has been moderately good, it has been below the economy's potential -- primarily because of structural constraints, especially poor governance."
The key constraints of private sector-led growth in Bangladesh include the limited supply and unreliability of electricity, the inefficiency of Chittagong Port, lagging telecommunications development, high interest rates and the scarcity of credit in the
banking system due to the high level of bad debt, and problems in dealing with bureaucracy, including extortion and corruption, he added.
In the past, the economy has demonstrated the capacity to increase the growth rate in response to policy and institutional reforms, the outgoing director said, adding that the key to raising the growth rate to achieve the poverty reduction target will be to sustain and deepen the recently initiated reforms. The guiding principle should be to 'remove the constraints on the private sector'.
If reforms are explained well and arrangements made to meet the legitimate needs of those affected by them, people are likely to support them, he felt.
"Although growth is essential to reduce poverty, it won't be enough. Both trickle down and bubble up will be required to meet the poverty reduction target."
The transformation occurring at the village level, due to microcredit and various forms of social mobilisation, is also essential for the 'bubble up' side of poverty reduction, Temple said.
Despite its very adverse initial conditions, Bangladesh's progress in human development stands out in cross-country comparisons, particularly within South Asia, while its economic growth has been moderately good, with very low volatility, he went on.
Temple observed Bangladesh will not face major problems in exporting readymade garment after phasing out of multi-fibre arrangement (MFA) as the export-
ers have already established themselves and the private sector has managed to grow despite all constraints.
Rather, RMG depends very much on port problems, power supply and bureaucratic tangles, he felt.
About hartal, Temple said it is very disappointing and the poor are affected by this 'hartal culture'. A poor man cannot earn if there is hartal, he added.