Productive, transformative
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will remain unfulfilled.
The conditionalities covered a wide ground including privatisation, import liberalisation, pricing reforms such as removal or reduction of subsidies, improving tax collection, financial sector reforms and improved public financial management.
Many Bangladeshis believe that many, or most, of the conditionalities imposed by the WB have been inappropriate and possibly harmful to the country.
They believe that successive governments have accepted these conditions due to their undue dependence on the donors and their inability, or lack of inclination, to push back on donor demands.
While valid in some cases, by and large, such concerns are misplaced, as reflected in the case of the closure of the Adamjee Jute Mills, one of the most contentious policy actions asked for by the WB.
In the 1970s and 1980s, the WB provided several loans to help modernise the state-owned jute industry. The results were not satisfactory.
The WB then concluded that it will be better for Bangladesh to privatise some jute mills and close the rest. The most significant example of closure is that of Adamjee Jute Mills. This happened in 2002, leading to a job loss of 26,000.
Many people in Bangladesh were critical of this decision and accused the WB of supporting the de-industrialisation of the country.
However, it is not widely known that an export processing zone was subsequently developed on the land of the former Adamjee Jute Mills and that, by mid-2019 (the latest period for which I have data), more than 55,000 people have been employed in the zone. This is double the number of jobs lost when Adamjee closed.
A dynamic economy requires a regular process of reallocation of resources from activities that are no longer profitable to those that are more promising.
The WB’s advice to close the Adamjee Jute Mills was in line with this important lesson of economics and the performance of the Adamjee EPZ has vindicated this position.
The WB Group has also played an instrumental role in the development of the economic zones program of the country. This is a good example of how the WB Group can bring together its rich set of instruments, spread across its various parts, in the service of a transformative agenda.
In 2007, the International Finance Corporation, the private sector arm of the WB Group, published a report where it argued for a more organised and environmentally friendly industrialisation process in Bangladesh through the establishment of several economic zones in the country.
Once the government accepted the arguments and decided to go for an ambitious economic zones programme, the IFC helped draft the Economic Zones Act and associated rules and regulations, and supported the establishment and institution building of the Bangladesh Economic Zones Authority.
Later, the WB stepped in with loans to help build the infrastructure in the zones. Now there is some talk of the Multilateral Investment Guarantee Agency (MIGA), another arm of the WB Group, coming in with guarantees to encourage foreign investment in these zones.
Going forward, the emphasis will increasingly be on creating the enabling environment for private sector investment, whether domestic or foreign.
This would involve assistance in improving the investment climate, catalysing private foreign investment and de-risking private investment.
While the traditional lending and knowledge work of the WB will remain important, we are likely to see an increased engagement of IFC and MIGA in Bangladesh.
In summary, despite some frictions and tensions, the relationship between the Bangladesh government and the WB Group has been largely productive.
The often strived to develop a common vocabulary to communicate with each other, trying to understand each other’s positions and limitations.
And, when they did find a common vocabulary, as they often did, the deliberations turned out to be productive and the results positive and, at times, even transformative.
The author is a former global lead of the World Bank Group’s regulatory reforms and public-private dialogue