In Support of Bangladesh's Sustainable LDC Graduation - Session 3: Forging Partnerships for Sustainable Graduation - UN-OHRLLS
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In Support of Bangladesh’s
Sustainable LDC Graduation
Session 3: Forging Partnerships for Sustainable Graduation
Christian Eigen-Zucchi
The World Bank
November 29, 2017
1
Outline Distinguishing LDC vs. LIC vs. IDA graduation. Sustaining Bangladesh’s Strong Development Trajectory. The World Bank in Bangladesh.
LDC Classification
LDC status decided by the United Nations Economic and Social Council
(ECOSOC) based on three criteria:
Income
Three-year average of the level of GNI per capita, which the World Bank uses for
identifying low-income countries.
The threshold for inclusion in the LDC category is $1,035 (March 2015 review)
The threshold for graduation ($1,242) is set at 20% above the inclusion threshold
The income-only graduation threshold (which enables a country to be eligible for
graduation even if none of the other two criteria is met) is twice the normal
graduation threshold which is $2,484.
….Criteria LDC
Human Assets Index (HAI) is a measure of the level of human capital
Consists of four indicators: two on health and nutrition and two on education
Inclusion threshold 60 and graduation threshold is 66
Percentage of population undernourished
(1/4)
Mortality rate for children aged five years or
under (1/4)
Human Assets
Index (HAI) The gross secondary school enrolment ratio
(1/4)
Adult literacy rate (1/4)
*Numbers in the Parenthesis indicate the weight in overall HAI
….Criteria LDC
The Economic Vulnerability Index (EVI) measures the structural vulnerability of
countries to exogenous economic and environmental shocks. The EVI contains eight
indicators
Size Population(1/8)
Location Remoteness (1/8)
Exposure
Economic Vulnerability
Index (1/2) Merchandise export concentration (1/16)
Economic
Structure
Share of agriculture, forestry, and fisheries (1/16)
index
Environment Share of population in low elevated costal zones (1/8)
Instability of exports of goods and service (1/4)
Trade shock
Shock (1/2)
Victims of natural disasters (1/8)
Natural shock
Instability of agriculture production (1/8)
*Numbers in the Parenthesis indicate the weight in overall EVI
The inclusion threshold is 36 and Graduation threshold is 32Bangladesh’s LDC Status
2015 2018
LDC Graduation Predicted Predicted
Actual
Threshold Threshold Value Threshold
GNI per capita $926 $1,035 $1,242 $1194-$1198 $1175-$1200
Human Assets Index (HAI) 63.8 60 or below 66 or above 70.9 66
Economic Vulnerability index
25.1 36 or above 32 or below 24.7 32
(EVI)
Source: The Least Developed Countries Report-2017
• Bangladesh graduated to Lower-Middle-Income Country (LMIC) in 2015
(current threshold is $1,005 GNI per capita or less in 2016).
• Government expecting to meet all three LDC criteria by 2018.
• If that happens, Bangladesh can expect LDC graduation in 2024.The World Bank Group
7IDA Cycle
• Bangladesh is a International Development Association (IDA) only country.
IDA provides grant and low interest arm for the poorest countries.
• Bangladesh is among the largest recipients of financing from the IDA.
• During the current IDA 18 cycle (FY2018-2020), Bangladesh is likely to
receive about $4.4 billion of core country allocation.
• In addition, Bangladesh will be eligible to access a number of other innovative
financing windows including the regional window, crisis response window,
the private sector window, as well as IDA Scale-up Facility.
8Different Stages of IDA
Jumps are
possible
Credits more More financing
expensive volume (+ IBRD)
IDA-
Gap Blend IBRD
only
Relative Above operational Creditworthiness: Graduation from
poverty: below cut-off for more Declared IDA
operational cut- than two creditworthy by
off ($1,165) consecutive years IBRDCreditworthiness:
Declared
creditworthy
IDA countries that have graduated at the end of IDA15, IDA16 andby
IDA17 include: Albania,
IBRD
Angola, Armenia, Azerbaijan, Bolivia. Bosnia and Herzegovina, Georgia, India, Indonesia,
Montenegro, Serbia, Sri Lanka, and Vietnam. Since IDA’s founding in 1960, 44 countries have
graduated and nine of these graduates have since reentered IDA. 9Bangladesh’s Journey through the IDA Stages
Bangladesh will continue to access concessional financing from IDA.
Propelled by strong economic progress over the last decade, in FY 2017 and 2018, GNI per person has
remained above the cut off for funding from IDA.
If Bangladesh’s GNI per capita exceeds the operational threshold for a third consecutive year, the country
will be classified as an IDA gap country starting in FY19.
Countries in gap status continue to access IDA resources, but on less concessional terms. This implies a
higher interest rate than the interest-free IDA financing, but the rate is still concessional and significantly
lower than alternative sources available in external and domestic markets for Bangladesh.
Bangladesh will not reach blend status automatically. To do so, a country is required to seek a credit
worthiness assessment.
A country usually stays at blend level for two IDA-cycles, or approximately six years.
The transition to IBRD borrower status, similarly, will begin when, at the country’s request, a credit
worthiness assessment is completed, allowing it to graduate to IBRD-only status.
10Sustaining Bangladesh’s Strong Development Trajectory
Bangladesh at a Crossroads
The economic transformation made a closed, agrarian society into the
world’s second largest exporter of garments and 36th largest economy.
The social transformation reduced the rate of extreme poverty from
34.3 percent in 2000 to 12.9 percent in 2016, lifting millions out of
poverty and bringing 10.5 million from farms to factories and shops
(during 2002-13).
The environmental transformation raised climate concerns as
industrialization and urbanization brought pollution and congestion.
The conditions for next phase of growth are harder.
12Moving forward
Average 6% plus GDP growth over a decade is very good performance! (Only 17 out of
58 countries with 20 million plus population have achieved such growth).
Aspirations have increased—HIC by 2041
There is consensus that Bangladesh can do better than 6% needed to be HIC by 2041.
Why: Strategic geographic location; young population; global connectivity
Over 50% of the world’s consumers live within 3,000 miles of Bangladesh.
Positioned between India and China, Bangladesh is well placed to become the next
generation of export hubs.
57% of labor force under 25.
A domestic market of 160 million people.
As an LDC, duty and quota free access to EU, Japan, Canada, Australia and other
countries. 13What would it take?
Bangladesh is well into third phase of demographic transition; shifted
from a high mortality-high fertility regime to a low one.
A. Reinventing the demographic dividend
Increasing population growth—not desirable and sustainable
Increasing growth of working age population—no room for maneuverability
Increasing employment rate—already 95.7%; little room for further increase
Increase female labor force participation—35.6% in 2016
B. Increasing labor productivity through investments and innovationBarriers to Increasing Investments
Weak institutions and low quality infrastructure
Comparison of GCI Ranking and Score (2017-2018)
Overall Macroeconomic
Country Overall Score Institutions Infrastructure
Ranking Environment
South Asia
Bangladesh 99 3.9 3.4 2.9 4.9
India 40 4.6 4.4 4.2 4.5
Sri Lanka 85 4.1 3.8 3.8 4.3
Nepal 88 4.0 3.6 2.6 5.6
Bhutan 82 4.1 4.8 3.6 4.6
Pakistan 115 3.7 3.5 3.0 4.0
East Asia
Korea, Rep 26 5.1 4.0 6.1 6.6
China 27 5.0 4.4 4.7 6.0
Thailand 32 4.7 3.8 4.7 6.2
Indonesia 36 4.7 4.3 4.5 5.7
Philippine 56 4.4 3.5 3.4 5.8
Vietnam 55 4.4 3.8 3.9 4.6
Cambodia 94 3.9 3.4 3.1 4.6
Source: Global Competitiveness Report 2017-18 15Low quality of infrastructure
Infrastructure Ranking for Bangladesh
Rank Score
Quality of air transport infrastructure 115 3.3
Quality of roads 105 3.1
Quality of port infrastructure 85 3.6
Quality of electric supply 101 3.7
Source: Global Competitiveness Report 2017-18, World Economic Forum
16Difficulties of Doing Business
Comparison of Ranking in Ease of Doing Business, 2018
Ease of
Dealing with Protecting Trading
Doing Starting Getting Registering Getting Paying Enforcing Resolving
Country Construction Minority Across
Business Business Electricity Property Credit Taxes Contracts Insolvency
Permits Investors Borders
Rank
South Asia
Bangladesh 177 131 130 185 185 159 76 152 173 189 152
Bhutan 75 88 82 56 56 77 124 17 26 25 168
Nepal 105 109 157 133 84 90 62 146 76 153 76
Sri lanka 111 77 76 93 157 122 43 158 86 165 88
Maldives 136 68 54 143 174 133 132 118 152 106 139
India 100 156 181 29 154 29 4 119 146 164 103
Pakistan 147 142 141 167 170 105 20 172 171 156 82
East Asia
Korea, Rep 4 9 28 2 39 55 20 24 33 1 5
Thailand 26 36 43 13 68 42 16 67 57 34 26
China 78 93 172 98 41 68 119 130 97 5 56
Vietnam 68 123 20 64 63 29 81 86 94 66 129
Philippine 113 173 101 31 114 142 146 105 99 149 59
Indonesia 72 144 108 38 106 55 43 114 112 145 38
Cambodia 135 183 179 137 123 20 108 136 108 179 74
Source: Doing Business Report 2018
*Ranking among 190 countries. The rankings are in descending order with “1” as the best performer.
17Most Binding Constraints
18A New Normal is Needed
Speed: faster as well as more inclusive and sustainable—require sustained GDP
growth of 8% plus to make visible progress towards Upper Middle Income (UMIC)
and the Sustainable Development Goals (SDG)
Structure: flexible to adapt to changing environment
Market forces need to be made more efficient
Engine: capital accumulation and efficiency driven
Capital per worker needs to increase to increase labor productivity
At the same time, growth will increasingly be associated with taking advantage
of higher economic concentration (agglomeration), greater economies of scale
(specialization) and more efficient allocation of factors of production (mobility).
19World Bank in Bangladesh
World Bank in Bangladesh
Supporting Bangladesh to achieve its vision of becoming an upper-
middle-income country by 2021 (current threshold $3,956 GNI per
capita).
Largest and longest-standing development partner of Bangladesh,
supporting Bangladesh’s aspirations since 1972.
First loan after independence of US $50 million for relief and
rehabilitation.
Since then have committed over $26 billion.
IDA has a portfolio of about $10 billion and includes 41 projects.
All credits to Bangladesh are interest free IDA financing.
21 ;
Yearly Commitments to Bangladesh (in US$ million)
23Forging Partnerships
Working closely with GoB counterparts, partnership with development partners and
other stakeholders will be essential to effective support for Bangladesh’s continued
strong development progress.
The World Bank Group continues to collaborate closely, including:
Lending: Primary Education Development Program III – ADB, JICA, DfID, Canada,
Australia, UNICEF, SIDA.
Trust Funds: Strengthening Public Expenditure Management Program – CIDA, DfID, EU.
Open to suggestions on how to strengthen partnerships further, and requests for more
collaborative engagement.
24Thank You
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