Bangladesh must strengthen local govt bodies to join middle-income group: WB

Bangladesh must strengthen local government institutions through reforms to become an upper middle-income country, says a new World Bank report pointing to the present sorry state of the LGIs. 

“No systematic efforts were made in recent decades to strengthen local government bodies except for the establishment of the Upazila system in 1990s,” reads the report.

The LGIs are currently playing a limited role due to limited decision-making and financial authority, lack of resources and staff and weak capacity, according to the report unveiled on Thursday.

It stated that the LGIs’ spending in Bangladesh remains nearly five-times lower than the developing countries’ average, according to the report.

Thought the LGIs’ spending as a share of GDP increased from 0.67 % in 2001 to 1.1 % of GDP in 2013, a well-functioning LGI still does not exist in Bangladesh.

In Bangladesh, spending by LGIs accounts for 7 percent of total government expenditure, whereas on average it is 19 percent in developing countries and 28 percent in industrial countries.

The relatively low share of the LGIs spending in government’s total expenditure indicates to limited fiscal decentralization.  

Bangladesh dreams of achieving the status of the middle-income country by 2021, upper-middle-income by 2031 and high income by 2041. It expects to graduate from the least developed country group in 2024.

The Policy Research Institute (PRI), a Dhaka-based think-tank, conducted the study titled ‘Local Government Public Financial Management System Assessment’ on behalf of the World Bank.

While in power, former Finance Minister MAM Muhith had empathized on empowering LGIs.

Several times in his budget he made some pledges and said that the poor state of local government bodies remains a major impediment to a sound economy.

“It would be difficult to infuse dynamism in development initiatives to achieve 10 percent GDP growth unless an enabling environment is created by devolving power,” he stated in his 2016 budget speech styled “Marching towards Growth Development and Equitable Society.”

The WB report states that the local government institutions suffer from weak public financial management practices, hindering their service delivery capabilities.

“Several factors constrain the effective functioning of the LGIs, including lack of political, administrative and financial autonomy, weak governance and poor capacities,” said PRI Executive Director Dr Ahsan H Mansur while presenting the report at a city hotel.

He said while all LGI entities face tremendous financing challenges, some are relatively better off than others. For example, the number of union parishads is about 4, 553 but they are getting only 27 per cent of LGIs spending, while eight city corporations have been getting 32 percent.

Demanding fiscal decentralization, Mansur said tax collection in developed and developing countries were 22.7 percent. That for Bangladesh is only 1.6 percent in our country, which reflects a huge gap and calls for strengthening revenue collection by the LGIs.

Mohammad Muslim Chowdhury, Comptroller and Auditor General of Bangladesh spoke as a special guest while PRI Vice Chairman Dr Sadiq Ahmed moderated the seminar.

“Only empowering the local government officials is not the solution. The LGIs should be accompanied by the expert bodies, while bureaucratic power and interference must be reduced,” said Muslim Chowdhury.

He also requested the WB to conduct a follow-up research and to come up with an action plan for the local governments.

Among others, Begum Roxana Quader, additional secretary to the Local Government Division, and Dandan Chen, WB’s Acting Country Director for Bangladesh and Bhutan spoke at the seminar.