The State of Governance Bangladesh 2014-2015: institutions, outcomes, accountability

Abstract

The current report, i.e. SOG 2014-2015 uses a set of simply constructed quantitative indicators supplemented by qualitative assessments to 'gauge' governance performance of Bangladesh around three broad analytical categories, i.e., political, economic and social sectors. It is a pioneering study in that, it is the first attempt to investigate governance performance using quantitative indicators across a wide range of sectors, to the best of our knowledge. The research underpinning the report was challenged by both complex methodological and empirical issues. 'Governance' is not an easy term to define, let alone 'measure.' Not surprisingly therefore, there are an impressive array of methods which specialists have used to address governance performance, depending on the definition used and the particular context in question. The current report chooses to deploy indicators of governance performance which are outcome or output based and do not consider the processes at work which produce the outcomes, with some exceptions. The indicators may not represent governance variables directly but rather may be inferred from them. Hence the claim in the report is not that the set of indicators bear a causal relationship with governance outcomes, but rather that they represent credible association with the underlying status of governance in each area being considered. In cases such as these, the choice of indicators is critical to the analysis. Measuring the complex processes at work which, perhaps more accurately represent governance variables, would be far more difficult to measure, resource intensive and at least equally challenged by availability of data. To be credible such methods would involve large scale perception surveys which are well beyond the scope of the current investigation. Given the pioneering nature of the current report, the method of analysis used is adequate, except that the benefit of a longer set of comparable data is a major limitation. The findings and conclusions thus come with caveats. Nevertheless, the report yields interesting results and we intended to spark greater public debate on an issue of seminal contemporary concern for Bangladesh' political and economic future. Chapter two investigates some important dimensions of democratic governance such as voice and accountability by analysing the legislative productivity, freedom of expression measured by media freedom, the rule of law by as reflected in the judicial work and activities of law enforcing agencies of Bangladesh as well as an assessment of the national elections. The section on legislative productivity assesses the three universal parliamentary functions: representation, legislation and oversight. A striking finding with regards to representation in parliament, is the sharp increase in the share of MPs from among the business community in course of four parliamentary elections. Their representation rose from 38.4 percent in the fifth Parliament to 61.3 percent in the ninth Parliament. Although there has been an increase, it is not meaningful as it is still very low. Less than 10 women were directly elected in the fifth, seventh and eighth Parliaments, though the ninth Parliament registered some progress with 19 directly elected women members. Minority representation has also increased in the last (ninth) Parliament compared to the previous Parliaments. While the youth have a large share in the country's population, the percentage of youth MPs (below the age of 30) has been low as may be expected. Due to political inexperience, they are less likely to win party nomination. Thus their under representation in the Parliament excludes the 'voice' of a a large segment of the country's population in the legislative process. Reflecting youth aspirations in legislation is important to protect their right and address their specific needs, i.e. advance their welfare. Another feature to note is that persistent boycott of the main opposition party in every national Parliament to date has seriously undermined the quality of representation in Parliament and hence its effectiveness. In Bangladesh, though the number of bills passed in the Parliament has increased gradually in the successive Parliaments, the session wise and yearly legislative outputs is lower than other countries. Additionally, most legislation has been introduced as amendments while new bills constitute only onethird of the total. The executive dominance in the legislative process is also prominent in the country's parliamentary functions. The effectiveness of parliamentary oversight in Bangladesh has been limited due to a series of factors, including limited independence of parliamentary committees, the capacity of parliamentary staff and the lack of responsiveness of ministries to parliamentary recommendations. The majority of the committees have failed to report to the House on a regular basis; one-third nver submitted any reports on the workings of ministries. In some cases, a remarkably large number of reports were prepared; even then, however very few of the recommendations are accepted. The lack of effective scrutiny by the standing committees remains a matter of concern despite an active democratic process which has lasted over 2 decades. Over the last decade, both print and broadcast media have increased remarkably in terms of numbers. Significantly, media growth has also been characterised by close links between the business community and the political parties. However, it must be recognised that freedom of expression however is undermined by personal security concerns exemplified in the statistics on physical assaults on journalists. In this context, it may be noted that the recently passed National Broadcasting Policy 2014 also raised concerns among national and international civil society organisations on specific aspects of it. Apart from policy related impediments, actions of law enforcement agencies on journalists is a major deterrent for journalists in doing their work. The section on rule of law analyses the performance, efficiency and integrity of the judiciary and the law enforcement agencies of Bangladesh. Regarding judicial governance in Bangladesh, it is observed that, the case disposal rate is generally low. Shortage of judges is also a major reason for the case backlog in Bangladesh. Currently there are 104 Judges in the Supreme Court of Bangladesh, of which 97 judges serve in the High Court Division and only seven judges are allocated to the Appellate Division. Moreover, the number of benches in the High Court Division is also inadequate to deal with the huge number of pending and newly filed cases. Grossly inadequate infrastructure facilities also remain a major constraint to progress in speeding up disposal of cases and hence offer quicker dispensation of justice. About four to five judges at a duty station have to use one court or chamber room on rotation basis which is also a limitation as these judges cannot utilise their working hours properly. Besides, lawyers' tendency to prolong case proceedings is another major reason for the delay in disposing off litigations. About the law and order situation, the number of criminal cases in Bangladesh is on the rise. The lowest number of criminal cases was recorded in 2004 with 119,323 cases, whereas the highest was reported in 2014. There has been an alarming increase in the number of murder cases, above three thousand every year, with the highest number at 4514 being recorded in 2014. The rise of disappearances is a recent phenomenon in the law and order scene of the country, with serious implications for the overall status of the rule of law in the country. Credible electoral management is a pre-condition for sustainable democracy which stands on the democratic principles of universal suffrage and political equality. In order to do a meaningful assessment of the electoral system of Bangladesh, there is a need to observe it through multiple lenses, each of which allows a deeper look into the intricacies of the nation's political context. Four major indicators are used for this purpose- integrity, participation, representation and competition to understand the state of the electoral system. Both the constitution and the Representation of the People Order (RPO) of 1972 (amended 2008) includes enough provisions for holding a credible election. Despite the many issues cited and allegations made by the losing opposition parties since the beginning of the democratic process in 1991, the successive national parliamentary elections were deemed to have been held in a free and fair manner, with acceptable standards of accountability and transparency. Bangladesh' transitional caretaker system of government which oversaw the elections from 1991 to 2008 had won credibility locally and won acclaim internationally. There was widespread acceptance among the intellengsia and civil society institutions that the democratic process was being consolidated as a result of the successful administration of elections. However, the experience of the elections to the tenth Parliament has been very different. The major opposition party boycotted the polls, and as consequence a large number of candidates won their seats uncontested. The political event was criticised by several influential analysts locally and internationally, and raised concerns about the democratic gains made till then through competitive elections and the exercise of the rights of franchise, as well as the seminal institution of democracy in this regard—the Election Commission. Chapter three assesses the economic governance of the country by considering three key sectors of the economy, i.e. financial institutions, infrastructure and macroeconomic stability. The section on financial institutions includes both banks and non-bank financial institutions. The findings show that all the key indicators of banking sector performance have improved over the years, though the rate of improvement has slowed in recent years. The share of non-performing loans (NPLs) in total loans was about 40 percent in 1998-99 which declined to about 10 percent in 2014. The NPL values do not indicate any improvement if looked at the absolute values, rather the fluctuation depends on how the supervisory regulations are enforced. The capital adequacy ratio also increased from 7 percent in 2001 to around 11 percent in 2014. The overall trend in profitability measured in terms of rate of return on equity and rate of return on assets show considerable improvement from 2000 till 2011 which deteriorates thereafter. In all the indicators, state owned commercial banks (SCBs) are lagging behind. The government's decision to recapitalise the SCBs has not been free from criticism. It has increased its fiscal pressure while easing liquidity and enhancing capital adequacy of the banks. More significantly it has reduced their NPLs and pushed down the sector NPL average as well. However, there is a palliative- the situation will worsen unless the SCBs undertake serious reforms. The overall bank governance index shows an improvement by seven percent in last ten years. However, this must be viewed in the back drop of the rescheduling. From December 2013 to September 2014, 100 billion taka was rescheduled without which NPL would have been more than Taka 82 billion for the last quarter of 2013. Compared to banks, the non-bank financial institutions (NBFIs) account for a relatively smaller share of the financial sector. The classified loan ratio fluctuates around seven percent on average. Over a 10-year period, nonbank financial institutions have succeeded in managing their quality of loans, which records an improvement of 26 percent as reflected in their classified loan ratio. Their profitability and earnings decreased by 42 percent and 54 percent decline compared to the base year. Access to and coverage of electricity in Bangladesh has improved significantly in the last ten years. The percentage of population with electricity increased from 36 to 68 percent from 2004 to 2014 and per capita power consumption increased from 150 to 250 kWh. At the same time, the average cost of supply more than doubled in value. Subsidy in the power sector has increased to bridge the gap between production cost and the income generated from electricity. In spite of this increase, load shedding remains a major problem affecting service quality, and both aggregate demand and supply in the economy. System loss has decreased but it is still higher than the internationally accepted rate of seven to eight percent. The expenditure-income ratio of the power development board is still very high, implying high losses. The electricity governance index shows that in 2014 there has been an overall improvement of 19 percent. Even though Bangladesh has high land to road ratio, if road availability is viewed in terms of population, it shows that road (kilometres) per thousand people improved marginally. The data also reveal that the increase is largely due to improvements in local road network (LGED roads), and per capita highways and zila roads actually decreased in the last ten years. Quality of roads has generally decreased over the years. One estimate, suggests that the country lost almost USD 400 million in asset value per year due to lack of maintenance; without maintenance the road network would be largely unusable in 20 years. BRTA revenue collection target was at 90 percent on average annually, though in most years the revenue collection rate was below the target rate. The aggregate road indicator registers a decline of 11 percent from 2004 to 2014. The section on macroeconomic review shows that private investment shows a steady increase over the years in last two decades though the rate of progress was slow. Public investment was at around six percent or more until 2000, but decreased to four to five percent after 2005 and then improved in the last three years. is noted that to achieve a growth rate of over 7.5 percent, the required share of investment in GDP should be 28 to 32 percent whereas the current rate is on average 22 percent which “given the present political situation, even the most optimistic do not see happening in the near future”(ibid). A similar trend is also observed with respect to foreign investment. The contribution of remittance to GDP has increased steadily over the years. However, in 2013 and 2014, the number of migrant workers dropped compared to the previous two years, following problems in labour market in housing and agricultural sectors in Saudi Arabia and some some other Middle Eastern countries. Problems with legal documentation Bangladesh workers remain unresolved despite efforts by Bangladesh. Bangladesh experienced a rapid increase in trade in terms of volume and as a percentage of GDP. The worldwide recession led to declining trade as a share of GDP from 2008 to 2010 and recovery in recent years has been modest. However, it is important to note that besides RMG no other industry has exhibited similar growth and the excessive reliance on one industry for export earnings carries risks to the economy. The external economic governance indicator is 1.36 meaning that compared to 2004 the external economic performance, measured in terms of remittance inflow, number of expartiate workers and trade openness increased by 36 percent. The chapter also shows that tax revenue as a share of total revenue increased and the tax-GDP share also registered steady improvement 2008 though the rate of growth fluctuates. ADP utilisation has improved over the years though 10 percent of the budget still remains unspent every year. Aggregation of fiscal management variables (including tax-GDP ratio, budget deficit and ADP utilisation show overall performance marginally improved by four percent in 2014 from 2004. The contribution is positive mostly because of improvements in the tax-GDP ratio by 13 percent. In ten years, the trade- GDP ratio records the maximum improvement of 13 percent. Budget deficit went down five percent and utilisation rate of ADP improved marginally. Chapter four comprises an assessment of governance in the education sector taking into consideration some important dimensions of education in primary, secondary and higher secondary education. The findings of the study confirm that the performance indicators of education at different levels have improved rapidly over time, in terms of increasing pass rate, enrolment, higher scores in public examinations and lower dropout rates, and class repetition rates. For instance, the pass rates in both SSC and in HSC which was 48 per cent in 2004 increased markedly to 89 per cent and to 71 percent respectively in 2014. At the primary level, the pass rate increased from 92in 2010 which increased to about 99 percent in 2013. As expected, the chapter found a positive correlation between the pass rates of SSC and HSC in the period 2003— 2013. The dropout rate and number of repeaters at primary and secondary level also decreased. The training of teachers and student -teacher ratio are two important indicators of education quality. The analysis in this chapter also shows that the share of trained teachers in primary and secondary education increased over time. However, the student-teacher ratio still shows a serious in adequacy in the number of teachers. This, despite a doubling of the ADP allocation (budget outlay) between FY 2013-2014 compared with FY 2006-2007. On the demand side, The utilisation of ADP allocations at all levels was highest in last month (June) of FY, ie, the spending peaks at the end of the fiscal year due to a rush to use the budget outlays to prevent it from being downsized in the following year. Such acceleration in a short period of time repeated almost every year reflects inefficient management of scarce resources and almost certainly risks the quality of expenditures. The study also assessed the training of SMCs as a 'process' indicator of education sector governance and found limited impact of such such training over time. The data shows that percentage of schools with at least 3 members of the SMC who received training moderately increased. However, for government primary schools it decreased compared to registered non-government primary schools. Finally, this chapter constructed a composite indicator based on seven variables including resource, process and output of education. The indicator shows that governance of the education improved 6 percent in terms of resource and process and 72 percent for output over the last 10 years. Despite the improvement in various aspects of education sector in Bangladesh, quality of education remains a concern. Further, the education sector shows frequent changes in many areas, including books, curricula, examination system and grading systems. Such high frequency of changes is likely to affect the quality and school performance adversely, while at the same time it makes measuring performance more difficult. Data and interviews conducted for this research show that even though grades have improved significantly, the performance of the students (who achieved high grades) in subsequent public university examinations are very disappointing. Many educationists expressed their disappointment about the overall education system, curricula, retention rates especially of female students beyond primary school, grading standards, examination methods, physical facilities and government policy. On the other hand, the chapter also shows that frequent question paper leakage in public examinations has become a serious concern for the education sector in Bangladesh. These observations reflect poorly on the sector's governance, and remain challenges which public policy must address in the coming years. In brief, judged by numbers alone, the picture on many dimensions of education sector performance in Bangladesh appears bright. Admittedly Bangladesh has made commendable strides in some areas of education such as access, enrolment, gender gaps in school education, etc. in the past two decades. The research in the present report, suggests that assessed by several other qualitative indicators, the performance of the sector seems less bright. If Bangladesh is to attain higher and sustainable growth and to realise its dream of becoming a middle-income country by 2021, it must address the governance challenges of the sector by channelling more resources and improving both policy and its implementation. Chapter five concerns health sector governance by considering maternal health, child health, health financing and the availability of health sector professionals which require specialised skills (e.g. doctors, nurses, technicians, etc) in the health sector. The analysis in the chapter suggests that over the last two decades maternal mortality rate has declined by more than 66 percent i.e. at the rate of 5.5 per cent each year. The percentage of women receiving antenatal care and those availing of services from skilled birth attendants have increased gradually over the last decade. However, the adolescent fertility rate still remains a major concern for Bangladesh. One important finding is that though the trend in contraceptive use is improving, the gender parity and women/girls' autonomy is yet to become a grass roots level reality in decisions regarding use of contraception. Despite substantial improvement in a number of maternal health indicators noted above, other important indicators such as adolescent fertility rate, rural-urban inequalities in access to maternal health services, etc. remain challenging areas in Bangladesh. In terms of child health performance, the combined trend in the indicators (infant and under-five mortality rates) shows that under-five mortality rate have improved more compared to infant mortality rate. Significantly, the decline in infant mortality rates has been higher for males than females. Anthropometric measures suggest that the number of children with lower weight and height measurements in relation to their age is increasing. Bangladesh suffers from one of the highest levels of malnutrition (42 and 31.9 for stunting and weight respectively for children under 5 years). The prevalence of malnutrition is greater in terms of height as opposed to weight and malnutrition prevalence rate (weight for age) has affected female children more than males in the last decade. Regarding human resources for health, the overall trend is positive—the aggregate human resource indicator shows an increase of 28 per cent in 2013 relative to the base year of 2004. However, the 'story' is more complex. The findings also suggest thatthe number of nurses per 1,000 persons in Bangladesh is the lowest in the world. The density of physicians (number of doctors per square kilometre) still remains highly inadequate and the trend shows that the improvement rate is slow and less noticeable in recent years. Similarly, increase in the number of community health workers has not shown significant improvement compared to the base year, ie, 2004. Though the health sector is considered a high government priority, the statistics on health financing shows a declining trend in budget allocations in recent years. The present health sector expenditure level is nominal compared to that of a number of other developing nations in the region. The data also shows that the gap between public healthcare expenditure and per capita expenditure increased over the last decade. The finding of this section confirms that currently in Bangladesh, the major share of health expenses are covered from individual savings or borrowings. In summary, the financing of health care in Bangladesh is dominated by out of pocket payments. This means that the poor are often forced to pay while seeking health services even if their ability to pay is at its lowest. Chapter six of the SOG 2014-2015 concludes that this report is a first step towards preparing a much more comprehensive and meaningful set of 'governance indicators' which would enable a more solid 'guage' of the country's progress in governance outcomes in key areas. Efforts to improve the methodology and and empirical analysis (quantitative and qualitative) using both secondary and primary data will continue to this end. The findings of the current report suggest that despite progress in several indicators of governance performance, there remain key vulnerabilities and challenges to be addressed by public policy in the future, and that, the much needed public action ought to be more broad based through involvement of civil society institutions as well as other important stakeholders. The analysis also suggests that while quantitative indicators are crucially important, it is important to complement these with qualitative assessment to yield a richer and more comprehensive understanding of governance performance.