Analysis of Governance Dimensions

Analysis on governance dimensions encompasses positive analysis derived from theory as well as propositions concerning what government ought to be doing (i.e. analysis of normative propositions) on the achievement of development outcomes. Both kinds of research are useful in the analysis and design of governance systems. One has to bear in mind the complications of governance research, given their broad coverage and complexity. Our approach is more modest and more realistic in the analysis and interpretation with respect to three dimensions of governance: political, institutional and technology governance dimensions.

Our analysis for governance dimensions pertains to five years covering the period from 1996 to 2004 due to availability of comparable data. Comparable countries are chosen from South Asia, South East Asia. Some developed countries are also included in our country sample.

The Political Governance Dimension in Bangladesh

As mentioned earlier, political governance refers to a country’s voice and accountability, political stability and government effectiveness. If political governance deteriorates or remains at a low level, it may be reflected in work disruptions, and a poor environment for protecting the rights and freedom of the common citizen. The result may be in chaos.

Table 7 [ PDF 173.7KB | 25 pages ] reports the indices of political governance from 1996 to 2004 for 17 countries. Within South Asia, political governance of Bangladesh is better than in Pakistan and Sri Lanka but lower than in the other larger economy, India. In comparison to Southeast Asia, Bangladesh did better than Indonesia but significantly worse than the other economies, Malaysia, Thailand, Philippines and Singapore (Figure 1 [ PDF 173.7KB | 25 pages ]). As can be seen in Figure 2 [ PDF 173.7KB | 25 pages ], the performance of Bangladesh’s political governance deteriorates despite having a democratically elected government in power. Over the years from 1998 to 2004, political governance dimensions portray a dismal picture. There was some improvement in political governance from 1996 to 1998. It indicates that the political governance in Bangladesh is a problem and political institutions are becoming increasingly dysfunctional due to imperfections prevailing in political markets. Domestic political industries happen to be more inefficient. Political industries, where entrepreneurs are political leaders, do not perform in a reasonable degree of order. As a consequence, good governance is impeded.

The worsening political governance may be a reflection of popular dissatisfaction with the performance of the government in power. It may be noted that the index of political stability, one element of political governance, goes down by 39 per cent over the period from 1998 to 2004 (Table 8 [ PDF 173.7KB | 25 pages ]). The adverse result is due to the main influence of the confrontational politics and non-democratic interventions in political life. There were a number of politically related hartals (work stoppages) in the country.

During the latter half of the 1991-96 period, there was a longer period of strikes to institutionalize a caretaker government after the tenure of five-year period to conduct national elections within three months. An amendment was made to the constitution in 1996 for holding such free and fair elections under a non-partisan, caretaker government. The then opposition Awami League (AL) came to power in 1996 in the fresh election held under caretaker government. The political trouble started again on different political grounds in latter half of 1997 and it continues. The opposition Bangladesh Nationalist Party boycotted parliament and there have been a series of hartals. After 5-year term, national election was held under caretaker government in October 2001. The opposition Bangladesh Nationalist Party (BNP) was elected to power. Their term will end on October 2006. Political difficulties and troubles emerged again on a variety of political grounds such as for the reform of caretaker government and the election process. Out of three consecutive elections, the opposition was elected to power twice.

A viable two party system prevails now in Bangladesh, with the Awami League (AL) and Bangladesh Nationalist Party (BNP). There is a lack of democratic practice within each party and efficient people are not being placed in the deserved positions. The party head is chosen based on historical inheritance.

Political governance in Bangladesh is about exercising different types of power – executive, legislative and judiciary. Power is centralized in the hands of cabinet and head of the government to exert authority and undue power. The head of the government and the party in power behaves as if he/she has dictatorial power and can function without being accountable. Organizations such as Accountability Bureau, and the Comptroller General’s office serve more as the agents of the governments in power than autonomous, non-partisan bodies. Political patronage and weak autonomy of the law enforcing agencies have caused these bodies to often serve as instruments of control and sources of harassment of the opposition political parties and the civil society.

The legislature and judiciary have been relatively weak compared to the executive. The lower levels of judiciary are subject to political patronage and corruption. Within the civil administration, the head of the government and the cabinet exercise almost all authority. Local governments are very weak with very little administrative and financial authority. The political parties coming to power politicize the bureaucrats. Public Administrative Reform Commission, formed few years ago, placed some recommendations for ensuring effective administration, which have not been implemented.

The military had a tremendous influence on politics, civilian decision-making and patronage. The civilian leaders took cognizance of the military to get support on their side. Senior positions in the government, public enterprises and public banks, and allocations of urban land at heavily subsidized rates are offered to them.

Street politics with money and political hooligans ('Mastans') are significant factors in Bangladesh politics. The parliament is largely ineffective due to long series of hartals, parliamentary boycott and street policies. Mastans backed by powerful political personnel organize hartals, mobilize political money by force, and when necessary kidnap and kill political opponents. They are also utilized to gather votes based on threats over life and property. In the 1990s, the mastans caused a near breakdown of the law and order situation. In immediate past, there were grenade attack on the opposition AL rally killing so many persons, including the British envoy to Bangladesh, killing of former finance minister, death of 21 persons by suicide squads including judges and lawyers, and simultaneous bomb blasts in 61 out of 64 districts. There was some improvement in 2005 due to prompt actions by the elite Rapid Action Battalion (RAB) against hardcore criminals, but a number of deaths in their custody and in encounters, and emergence of radical Islamic Party with simultaneous bomb blasts throughout the country in 2005, triggered protests from human right organizations from abroad.

Impact on economy:

The concern with poor political governance has affected domestic resource mobilization. Bangladesh has one of the lowest tax-GDP ratios in the world --- the lowest in South Asia. Raising domestic resource mobilization will raise public investments for infrastructural developments.

In every year, experience shows that there is a revenue shortfall from target with under performance of Annual development program (ADP) and over spending in current expenditure. Under utilization of ADP has been a regular feature since the early nineties. Political Governance failure causes high tax evasion and may be responsible for failure to recover non-performing loans, which are at present 25 percent of total loans. Poor ADP utilization is not simply a problem of resource scarcity but also of implementation failure, which is related to some extent with governance failures.

The deterioration in political governance has an effect on other economic and social fronts such as education and health sectors (see section 4.2). Public institutions through which government delivers services will be in jeopardy. As a result, almost the whole masses of the country have been affected. A malfunctioning democratic system is not a conducive environment for the entrepreneurs (who want political stability) for long-term investment.

Political governance has been most dominant in defining the relative balance of roles between public and private sectors. The present BNP government’s ability to close down the Adamjee Jute Mills (which incur loss Tk. 5 million per day) is a positive step forward, although a generous program of compensation tackled the opposition by labor.

Although macroeconomic performance has been better, there are emerging risks of declining performance due to stagnation of the revenue effort. It might be relevant in this context to quote the following:

"The restoration of pluralist system since 1991 has not fulfilled the promise of accountable governance. Secularism was not only eliminated as a pillar of the constitution but we have since become more communal and intolerant of the rights of minorities in our society." (Sobhan 2004)

Bangladesh is yet to develop a modern system of political governance through a process of debate and consultation. The main factors as emerged to improve political governance, seem to be as follows:

• Independence of Judiciary: Law should not subject to government.
• Effective Parliamentary System: The parliament cannot be paralyzed and be made to play effective control over administration.
• Office of the Ombudsman: The Ombudsman Act is to be enforced to play important role for ensuring political governance.
• Independent Anti-corruption Commission: Anti-corruption commission set up by the government over more than 35 months is to be allowed to function. This should not be to just show to international donors.
• Effective media to perform vigilance functions: Distribution of government advertisements to the media should not be used to control media.

The Institutional Dimension of Governance in Bangladesh

The institutional environment in an economy is fundamental to the development process. The perceptions of the institutions (for definition, see appendix) are likely to be of key importance in shaping overall conditions for investment and growth. Good institutions (quality of private and public institutions) lead to higher incomes, stronger growth, and lower volatility in GDP growth. As stated in section 4.1, good political governance can ease the problem of transforming dysfunctional institutions into good institutions.

The economic literature has mainly focused on public institutions. Available empirical research confirms the importance of public institutions as key determinants of the current level of GDP per capita. But private institutions are no less important elements in the creation of wealth. Quality and transparency of private institutions are crucial for economic efficiency. The quality of a country’s public and private institutions constitutes the framework within which the economy’s main players such as private individuals, firms, and governments interact to generate income and wealth. Regarding the public sector, factors such as the strength of the property rights environment, the prevalence of crime, and its impact on business costs are all of critical importance. Business cannot be carried out efficiently in an economy where property rights are poorly defined. Lack of transparency and corruption undermines business confidence and entails misallocation of resources resulting in a welfare loss to society.

In our study, we have used both public institutions index and all institutions index (includes both private and public together). As can be seen in Chart 3 [ PDF 173.7KB | 25 pages ], there are 27 elements used in constructing public institutions index, which are grouped into two subcomponents: contracts and law, and corruption. Private institutions have four components: honesty of the corporate sector, accountability, transparency, charity and social responsibility. There is no separate index available for private institutions from the World Economic Forum.

We now benchmark the institutional scores of Bangladesh compared to the countries under study. Table 9 [ PDF 173.7KB | 25 pages ] and Figure 3 [ PDF 173.7KB | 25 pages ] provide performance of public institution indices for different countries over three years from 2003/04-2005-06. Bangladesh’s score is the lowest of all the countries including South Asian and East Asian Countries. Similar results are observed in the performance of all institutions (Table 10 [ PDF 173.7KB | 25 pages ] & Figure 4 [ PDF 173.7KB | 25 pages ]). It may be noted that the performance of public institutions improves very marginally from 2003/04 to 2005/06. The lowest performance index on public institution aspect serves as a grim reminder of the governance problems in which the country is enmeshed. A government works through public institutions to deliver services. When the public institution component is classified into contracts and law, and corruption subcomponents, the result does not seem to improve. As can be seen, the performance on contract and law declines from 2003-04 to 2004-05 and then marginally increases in 2005-06 (Table 11 [ PDF 173.7KB | 25 pages ] and Figure 5 [ PDF 173.7KB | 25 pages ]). The corruption index in public institution component provides the gloomiest picture, although its performance improves marginally over the years (Table 12 [ PDF 173.7KB | 25 pages ] and Figure 6 [ PDF 173.7KB | 25 pages ]). The Transparency International rates Bangladesh as the most corrupt country in the world for five consecutive years due to the institutional problems.

Corruption is partly a reflection of underlying weak institutions. Corruption is often defined as the use of public office for private gains. There are cases of abuse of private office for private gains (corporate scandals in USA and Europe, excess export subsidies drawn in Bangladesh from government, etc.). Different indices of corruption from different sources are likely to be correlated. Corruption mostly originates in large government procurements, purchases and in the provision of public service delivery programs. There is a need to do favor to private financiers for financing party and electoral activities. Corruption acting like a tax reduces foreign direct investment, has adverse effects on economic growth by lowering incentives to invest, and disproportionately burdens the poor. The annual rate of procurement is estimated about 10 per cent of GDP (around $ 3 billion) (Ahmed 2002). In Bangladesh, as other countries, the problems of nepotism and perverse client-patron relationships and bribery, deprive the most efficient firms.

There is a plenty of evidence of corruption in the provision of public services in Bangladesh. TIB study (2005) based on nation-wide household survey in 9 sectors in Bangladesh provides information on the incidence of corruption as a consequence of the weak public institutions. It has been found that an average Bangladeshi paid Taka 485 taka per year as bribes. The bribes paid by households for 25 service categories within the 9 sectors (education, health, land administration, police, judiciary, electricity, taxation, local government- shalish & relief, and pension) are Taka 6,796 crore.

It may be worthwhile to highlight institutional problems and the underlying corruption therein in a few sectors of public services, such as education, health and port services. These sectors are chosen in view of their importance in the national economy with regard to trade, poverty alleviation and attaining Millennium Development (MDG) goals. Out of 10 targets set for 2015, four are health related targets (infant and child mortality, under-nutrition, maternal mortality and reproductive health).

Education Service:

There are institutional problems in this education service at the primary and secondary level (for example) in course of implementation of Stipend Scheme, as have been pointed out (Background paper of PRSP, GOB). In some cases it is found that some non-deserving families are included in the list of beneficiary students and getting benefits, depriving some genuine poor. In some cases misappropriation of funds has been found. False enrolment of a single student in several schools is observed at the same time. False attendance of absentee students is noticed in the attendance registers. This is more noticeable in the implementation of female stipend scheme in leakage, efficiency and targeting. The female stipend scheme has raised the ratio of females to males in secondary level institution to 52:48 from 34:66 in 1990. The rate of teenage marriage is reduced and is retaining them in schools for longer period. The huge inclusion of girls not satisfying the criteria may jeopardize the program.

TIB study (2005) has also found in education sector, 40% students at the primary level had to pay admission fees at an average rate of Tk. 209 whereas it is supposed to be free; 32.4% primary school students who were entitled for government stipend had to pay Tk. 40 on an average for enrolment to receive the stipend. In case of girl students at the secondary level 22% had to make similar payments at an average rate of Taka 45 for government stipend.

The country still cannot ensure quality education, although there is significant improvement in primary school enrollment compared to other developing countries. . Government has to set basic education standard in Madrasha (religious education system) as in other school. Quality graduate is not produced. The young people aged between 14 and 18 are easily attracted to extremism due to lack of quality education. The present government has reduced unfair means at public examinations to a large extent as a necessary drive for quality education.

Health care Service:

Good health promotes economic development. Improved health will bring higher incomes, higher economic growth, and lower poverty. The institutional issues in relation to health are to increase availability of doctors, nurses, drugs, facilities and safety net for the poor. Institutional problems are associated with all levels of healthcare system.

Bangladesh has achieved some gains in health outcomes in the areas of population control, reducing total fertility rate, infant and child mortality and malnutrition over the decade. Its immunization program has registered noticeable results. However, the pace of progress has slowed down and outcome stagnates. Though the infant mortality rates (deaths under age 1) decline over the years, the level remains high. The average life expectancy is significantly lower. Only 40 per cent of the rural people have access to the public health care. This indicates that a major proportion of population is out of public healthcare service. Public health services are not the preferred choice for those who can afford private health services. The poor have no choice but to rely on public services.

The institutional problems in the public health service provision result in poor quality of services indicated by staff absenteeism, inadequate attention given by doctors, nonavailability of medicines and supplies, long waiting times, poor maintenance of equipment and unhygienic conditions. In public health facilities, there is widespread incidence of collection of unofficial user fees in hospital admission and other health related service delivery. In most facilities, fees are widespread and almost institutionalized. In some cases, especially surgical cases, fees can be as much as 10- 12 times the expected amount of official fees. The poor patients pay the unofficial fees although the quality of public care is very poor (Mamud, S. 2004).

The World Bank/ Euro Health Study (2004) and other survey (e.g. Ghost Doctors, absenteeism in Bangladesh health facilities, WB 2003) report widespread absenteeism of doctors. A large majority (62%) of the outpatients reports that doctors are not available, while 54% of support staff show hostile attitude. For inpatients, the figure is 44% and 32.2% respectively. Senior doctors of the hospital are found to attend private patients within the facility or in their private chambers/clinics within working hours. The study also finds that 24% of outpatients and 65% of inpatients paid unofficial fees and at district level, it is as high as 94% of inpatients making unofficial payments (Mannan 2005).

TIB nation-wide survey in 2005 corroborates the above findings in that in health sector, 26% outdoor patients had to pay bribes to doctors for receiving medical treatment at the public hospital at an average rate of Taka 60 per visit. 20% indoor patients had to pay bribes for the same purpose at a much higher rate of Taka 478 on an average. 37% patients who had to undergo surgery in public hospital had to pay bribes at an average rate of 1420 taka. 57% of patients who had an X-ray done from public hospital had to pay Taka 516 on average as bribes.

The quality of health care (especially public health, including water quality) is dependent on the quality of institutions. There remains much more to be done in quality management of service provision to improve further aggregate heath indicators. It has been suggested that partnership with NGO has played a positive role leading to significant reduction in infant mortality. Basic health care needs to given priority instead of tertiary care which should be left to the private health sector, which has emerged in response to growing demand. A major policy weakness is the lack of effective regulatory framework for private health care for quality control, accountability and affordability.

Infrastructure (Port)

The infrastructure situation is a significant constraint to a more rapid expansion of economic activities in Bangladesh. Weak institutions resulting from political constraints could not make desired progress on infrastructure development. Efficiency in the utilization of ports can contribute significantly to the efficiency and competitiveness of the economy as well as reducing trade costs and thereby enhancing export competitiveness.

The weak institutional issues are mainly with operational problems resulting in inefficiencies indicated by low productivity and high cost in port operation. The main operational problems relate to poor service delivery, poor security, slowness in trade facilitation (lengthy custom formalities, customs hassles etc.), complications in submitting and clearing documents (lengthy and cumbersome procedures in the process clearance, submission of documents to many desks etc.), problems in auctioning unclaimed goods by customs. The vessel and container turn around time is very high compared to regional ports, thus increasing operational costs for the users, especially the shipping companies.

The cost of moving a container through Chittagong is estimated at $600 as compared to norms of $150-300 in neighboring country ports (World Bank 1998). In 2003, average productivity of the Chittagong port was 196 moves per container vessel per day compared with 220 moves per day in Kolkata, 225 moves per day in Cochin, and 295 moves per day in Mumbai. Therefore, institutional efficiency is much needed in the port sector to improve Bangladesh’s competitiveness and promote export-led growth. There is also restriction on setting up of private off docks within 20 KM from the port and handling of import containers, thereby discouraging potential investors. Recently, in April 2006, all documentations for container clearance (done earlier at different points) have now been brought at one point.

In land port, the situation is not different either. Transparency International, Bangladesh diagnostic study (2005) revealed that officials and employees at the Banepole Land port (BLP) extorted ‘speed money’ worth Tk. 1390 million between 2003-04 and 2004-05 Tk. 990 million went into pockets of custom officials while Tk. 400 million went to the officials of Benepole port authority during the period under review. Further, governance failure with regard to passport issuance procedures, have created scope for a wholesale practice of taking bribes at the city’s passport office. The monthly volume of such illegal pay-offs is around Tk. 26.4 million and a large portion of it goes into pockets of the high officials of the department, in addition to an average of Tk. 1000 per verification.

On the whole, the institutional problems associated with public service delivery are severe. Poor political governance impacts badly on the institutions and vice versa. The worsening institutions affect negatively the government delivery programs, and generate corruption and slower economic growth. In Bangladesh, NGOs participate in the delivery of social programs, thereby mitigating to a great extent the low efficiency and high corruption of public service delivery. Public-private partnership with NGOs has a great potential in Bangladesh for effective use of limited public resources.

Technology Dimension of Governance

Technological readiness, information and communication technologies (ICTs) and technology transfer are sub-components of technology dimension under study in this paper. They can play an important role in enhancing both political governance and institutional governance dimensions, and can also be influenced by governance dimension. They are one of the main driving forces to improve national competitiveness, economic growth and have an impact on poverty reduction. As an example, ICT may have an impact on poverty alleviation, (i) through distance education and greater awareness efforts; (ii) due to malnutrition, unhygienic environment and lack of primary health care privileges, through telemedicine bringing health care to rural areas. We recognize that ICT dimension is more relevant to our study focusing on governance, but governance issues are there in two sub-dimensions: technology transfer and technological readiness.

As stated earlier in section 3, technological readiness (considered from global competitiveness index) relates to the stock of available technology, which incorporates also information and communication technologies (ICT) of the country but not innovation (treated as separate component). ICT is seen as an umbrella term for a range of technological applications such as computer hardware and software; digital broadcast technologies; telecommunications technologies such as mobile phones as well as electronic information resources such as the world-wide web and CD_ROM (Selwyn: www.cardiff.ac.uk/socsi/ict). Technology transfer relates to the diffusion of practical knowledge from one enterprise, institution or country to another. Technology may be transferred by giving it away (eg, through technical journals or conferences); by theft (e.g. industrial espionage); or by commercial transactions (eg, patents for industrial processes) as well as through cross-national exchanges among components of multinational enterprises. ( www.itcdonline.com/introduction/glossary2_q-z.html)

An attempt is made to assess the current position of Bangladesh in terms of technological readiness, ICT and technology transfer. In all of the technology related indices, Bangladesh’s position is below that of its neighbors and other countries under study (Figure 7 [ PDF 173.7KB | 25 pages ],Figure 8 [ PDF 173.7KB | 25 pages ] ,Figure 9 [ PDF 173.7KB | 25 pages ] & Table 13 [ PDF 173.7KB | 25 pages ], Table 14 [ PDF 173.7KB | 25 pages ], Table 15 [ PDF 173.7KB | 25 pages ]). The weak public institutions have an adverse effect on country’s ICT and other technology related dimensions. This also reflects the fact that the country’s exports are produced by low level of technology (Table 16 [ PDF 173.7KB | 25 pages ]). Bangladesh obtains lowest scores on export sophistication among South Asian and East Asian countries. Its scores fall by 11 points (Table 17 [ PDF 173.7KB | 25 pages ]). The low scores indicate specialization in low technology products. It can be noted from Table 16 that the share of exports at the lowest sophistication level increases. One may point out that the country is specializing in low-level technology products. The country’s current respectable growth rate may not be sustained as per unit price of exports may decline in the long run.

As mentioned in section 3, ICT component appears most prominently when all variables in governance dimensions are used together in the principal component analysis. It may be worth looking into status on ICT in Bangladesh (for detail, Background paper, Government of Bangladesh, undated).

Information and Communication Technology (ICT)

ICT, as defined, includes a vast array of technologies such as radio, TV and mobile phones including computers. The ICT Policy of the government of Bangladesh is to build a countrywide ICT-infrastructure to enhance democratic values and norms, and governance for sustainable economic development. A national ICT Task Force was formed with Honorable Prime Minister as its Chairperson primarily to provide support and implement e-Government initiatives throughout the government. There will be a web portal ‘Bangladesh Government’ from which links will be provided to the web sites, for eforms, e-procurement, e-recruitment, e-results etc. ICT-literacy shall also be evaluated in the annual confidential report (ACR) of officials to ensure utilization of ICT in the public services.

Telecom sector’s position

The telecom sector has been liberalized for private investment in early 90s, resulting in appreciable rise in mobile telephone sets in the country. Up to December 2003, the total number of telephone lines is 650,000 and the number of cellular phones offered by 4 private operators is 1.4 million. The tele-density is 1.4%. Chart-4 shows the status of telecommunication benchmark as of December 2003.

Internet Access

The number of computers in the country is about 500,000 with about 150,000 internet users. Due to de-regulation of Very Small Aperture Terminal (VSAT) policy by the government in February 2000, the number of ISPs has grown to 62 with individual bandwidth ranging from 128 kbps to 8 Mbps, offering broadband internet services through DSL/HDSL modems. All 64 districts of Bangladesh has been brought under Internet coverage by BTTB through dial-up connections. The diffusion of mobile phones is at a rapid pace. The charges for mobile phones are the highest in Asia. It would be judicious to use mobile phones for transferring data and other information through the Internet.

A survey-based report highlights some aspects of e-Government applications with regard to hardware resources, connectivity and use of ICT in the government organizations. The report covers 303 government institutions throughout Bangladesh covering a total of 35,658 officers and 103,126 staff during July to September 2003. Some of the salient findings of the report are given below:

Use of ICT

• At the Ministry/ Division level, about 31% of officers and about 33% of staff use PCs.
• At the Department/ Corporation level, about 21% of officers and about 6.49% of staff use PCs.
• In academic institutions, about 40% of officers and about 7% of staff use PCs.
• At the Ministry/ Division level, more than 88% of the offices that are connected to the Internet use it for purposes of official e-mail, about 80% for information search and more than 52% for downloading files.
• At the Department/ Corporation level, about 50% use the Internet for official email purposes, about 42% for searching information and about 32% for downloading files.
• In academic institutions, about 21% use the Internet for official e-mail purposes, about 25% for searching information and about 25% for downloading files.
• At the Ministry/ Division level, a little more than 8% of the officers use e-mail directly and about 5% of the officers use e-mail through computer operators.
• At the Department/ Corporation level, on an average, 6% of officers use e-mail directly while about 6% of officers use e-mail through the help of computer operators.
• In academic institutions, 42% of the officers use e-mail directly and about 38% of the officers use e-mail through computer operators.
• Percentage of offices with websites: Ministry - 24%; Division - 50%; Department - 14%; Corporation - 14%; Academic Institution - 25%.
• Percentage of offices with customized software: Ministry - 24%; Division - 60%; Department - 25%; Corporation - 41%; Academic Institution - 50%.

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