AID EFFECTIVENESS AND HEALTH SECTOR DEVELOPMENT IN BANGLADESH

AID EFFECTIVENESS AND HEALTH SECTOR DEVELOPMENT IN BANGLADESH BY PROFESSOR FRANKLYN LISK AND RAFI HOSSAIN

Objective and Outline Objective: • Analysis of ODA trends and indicators in Bangladesh, in with specific focus on the impact of aid on the health sector, and exploring whether or not aid going to the health sector has been effective, in terms of contributing to health sector development and transformation Outline: • Bangladesh: Growth path and development impact • Overview of changing global aid landscape and implications for development assistance to Bangladesh • Aid dynamics and trends in Bangladesh • Aid and Health sector development: The SWAp transition from aid effectiveness to development effectiveness • The Health, Nutrition and Population Sector Programme (HPNSP) 2003 2011: Performance, constraints and challenges • Fiscal commitment in the Health sector

Bangladesh’s Impressive Growth Path • Bangladesh has made significant progress in respect of economic growth – achieving an annual GDP growth rate in excess of 6 percent in recent years and contributed to reduction of poverty. • The economic transition process that began in the mid 1980 s has been spearheaded and driven mainly by the ready made garment (RMG) industry. Bangladesh’s RMG exports have increased to more than $20 billion, accounting for about 80 percent of the country’s total export earnings, and the sector currently employs about 4 million workers. • Mass employment of women in this flagship export sector has greatly empowered Bangladeshi women, contributing to improvements in the country’s key demographic and social indicators (e. g. mortality and fertility rates and female participation rate in the labour force) and helping to keep Bangladesh on track towards achieving a number of the UN Millennium Development Goals (MDGs) (Dreze and Sen 2013).

Growth but need for more inclusive development to address widespread poverty • The benefits of stronger growth Box 1: Trend in Poverty Reduction 70 Percent Head Count performance do not appear to have made much impact on poverty overall; nor resulted in a more inclusive development for the country’s 154 million inhabitants, especially those living in the rural areas. • Bangladesh still suffers from widespread poverty and is classified among the poorest countries in the world, with the majority of its population lacking in basic human needs such as health, nutrition, shelter, piped water and sanitation, etc • Despite impressive growth performance, the country faces important development challenges. Extreme Poor & Vulnerable 60 50 40 30 20 10 0 2005 2010 Source: BBS, HIES 2000, 2005, 2010

The Changing Global Aid Landscape • Historically, the giving of aid was driven by the donors and located in the context of the individual donor deciding on how best to help those in need. • Today, ‘aid giving’ takes place within a different framework – ‘development cooperation’ that increasingly reflects the needs and development priorities and strategies of recipient countries, often with a particular focus on poverty reduction and sustainable development. • The shift in emphasis in foreign assistance from just giving aid to development cooperation brings more pragmatism into the debate on aid, by recognising the need for adequate consultations by donors with domestic stakeholders and interest groups in developing countries. • The Millennium Development Goals (MDGs) adopted by the UN in 2000 and the Monterrey Consensus which emerged from the UN Conference on Financing for Development in 2002 provided impetus and direction for this new approach to aid, with emphasis on ‘national ownership’ of the process and recognition that changes taking place in international economic and political relations are also changing the role of and purpose of aid.

The Changing Global Aid Landscape (cont. ) • Shift of emphasis put the spotlight on aid effectiveness and, amplified calls for reform of the international aid architecture. • Concerns about the efficacy and effectiveness of development assistance have resulted in several international declarations endorsing ‘good practice’ principles aimed at improving aid effectiveness, including those emanating from a series of OECD DAC high level global meetings in Rome (2003), Paris (2005), Accra (2008) and Busan (2011), already mentioned. • The essence of these declarations has been to get donor, recipient countries and the multilaterals to agree on principles of good practice. For example, the Paris Declaration on Aid Effectiveness in 2005 agreed on 5 important principles: ownership, alignment, harmonization, mutual accountability and result based management; the Accra Agenda of Action that followed in 2008 was designed to accelerate progress towards ownership, inclusive partnership and results; and the Busan Partnership for Effective Development Cooperation of 2011 outlined priorities for future action to improve the development impact of aid and make aid an effective tool for development cooperation, implying a transition from ‘aid effectiveness’ to ‘development effectiveness’.

The Changing Global Aid Landscape (cont. ) • The global aid landscape has also changed in respect of the sources of finance: ODA from the OECD countries (traditional donors) is becoming a less important source of development financing, and a variety of other sources becoming more visible and relevant from a development cooperation perspective. China is the most obvious case of this brand of new donors from among the emerging economies. • Within the global aid landscape, the sectoral allocation of ODA has also taken a turn over time, with the shift from infrastructure and the ‘hard’ sectors favoured in the earlier decade to the ‘softer social sectors preferred in the new millennium.

The Changing Global Aid Landscape: Aid dynamics and trends in Bangladesh FY 13 FY 12 FY 11 FY 10 FY 09 FY 08 FY 07 FY 06 FY 05 FY 04 FY 03 FY 02 FY 01 FY 00 FY 99 FY 98 FY 97 FY 96 FY 95 FY 94 5. 50 5. 00 4. 50 4. 00 3. 50 3. 00 2. 50 2. 00 1. 50 1. 00 FY 93 Figure 1: Net Official Development Assistance to Bangladesh (% of GDP) Source: World Development Indicators (WDI), World Bank • During the first two decades after independence, net flow of aid was about 6% of GDP (Ahmad, Shafi and Quibria M. G (2008). • Since then, however, due to sustained growth in national income over the years and increase in other sources of foreign exchange, such as exports and workers’ remittances, ODA as a share of GDP has in general followed a downward trend. ODA inflows in FY 2013 amounted to about $ 2. 3 billion or just 1. 7 percent of GDP. • While per capita ODA has also followed a downward trend, ODA still accounts for more than one third of Bangladesh’s expenditure on the development budget.

Aid dynamics and trends in Bangladesh 16. 0 Figure 2: Net ODA For other South Asian Countries (as % of GDP) 14. 0 12. 0 10. 0 8. 0 6. 0 4. 0 2. 0 Pakistan 2011 2010 2009 2008 2007 2006 Sri Lanka 16000. 0 Figure 3: FDI, Remittances and Exports for Bangladesh 14000. 0 12000. 0 10000. 0 8000. 0 6000. 0 4000. 0 2000. 0 FDI Remittances Exports FY 13 FY 12 FY 11 FY 10 FY 09 FY 08 FY 07 FY 06 FY 05 FY 04 FY 03 FY 02 FY 01 FY 00 FY 99 FY 98 FY 97 FY 96 FY 95 FY 94 0. 0 FY 93 2005 2004 Bhutan Million USD India 2003 2002 2001 2000 0. 0

Aid dynamics and trends in Bangladesh 90. 00 80. 00 70. 00 60. 00 50. 00 40. 00 30. 00 20. 00 10. 00 Figure 4: Grants and Loans (as % of ODA) FY 93 FY 94 FY 95 FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 • While grants (as % of ODA) have followed a downward trend during the past decade, loans (as % of ODA) have actually risen. For the most part of the 1990 s, ODA was almost equally divided between grants and loans. • There was a sudden break from this pattern in the late 1990 s with ODA being increasingly dispensed as loans rather than grants. • This dichotomy was most pronounced in 2004 05 when the loan component of ODA was as high as 84 percent. In general, during the first decade of the millennium about two thirds of ODA has comprised loans and the remaining one third grants. Grant Loan Source: Bangladesh Economics Review, Ministry of Finance

Aid dynamics and trends in Bangladesh Figure 5 : Foreign Aid Commitment 120% 100% 80% 60% 40% 20% Total Southern/emerging donors FY 12 FY 11 FY 10 FY 09 FY 08 FY 07 FY 06 FY 05 FY 04 FY 03 FY 02 FY 01 FY 00 FY 99 FY 98 FY 97 0% FY 96 Total Northern/developed donors Total Southern/emerging donors Total Northern/developed donors FY 12 FY 11 FY 10 FY 09 FY 08 FY 07 FY 06 FY 05 FY 04 FY 03 FY 02 FY 01 FY 00 FY 98 FY 99 Figure 6 : Foreign Aid Disbursement 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FY 97 inflows have overwhelmingly come from traditional donors in the Global North, but more recently new donors from the emerging economies in the Global South (China, India, Kuwait, Pakistan, Saudi Arabia, South Korea and UAE) are appearing on the scene. In the short to medium term, the countries of the North are likely to continue to be the major source of foreign assistance to Bangladesh. FY 96 • ODA

Aid dynamics and trends in Bangladesh Figure 7 : Foreign Aid Commitemnt & Disbursement (Million USD) 2500 Million USD 2000 1500 1000 500 Commitment FY 12 FY 11 FY 10 FY 09 FY 08 FY 07 FY 06 FY 05 FY 04 FY 03 FY 02 FY 01 FY 00 FY 99 FY 98 FY 97 FY 96 0 Disbursement Source: Bangladesh Economic Review, Ministry of Finance • From the mid nineties till FY 2004, there were substantial gaps between the amount of aid commitments made by the development partners and the actual amount disbursed. • Due to improvements in policy and practice, the gap between the amount committed and what is actually disbursed has diminished significantly in the recent years.

Development Impact of Aid • There is not much empirical evidence showing whether external assistance to Bangladesh has had positive or negative effects on development overall. Ø First, there are information gaps with respect to data on performance and impact of individual projects and programmes. Ø Secondly, in cases where project data may be available, government has not been keen to draw conclusions about the wider impact of donors’ contributions or of a particular aid programme to the country’s aggregate growth and sustainable development performance. • This is perhaps not surprising, as until quite recently aid was not generally viewed by both donors and recipients as a tool for national development in the sense of a unified country programme against which it might be judged, but instead seen as a package of different projects and programmes loosely linked together, at best clustered around sectoral priorities such as health or education (Arndt et al 2011). • It is difficult to assess the wider impact of aid on development (e. g. growth and poverty reduction) in Bangladesh, since aid has not been provided within a wider strategic context with clear indicators against which to judge performance and impact.

The transition from Aid Effectiveness to Development Effectiveness • The increased prominence of, and the growing donor commitment in the new millennium to, the MDGs has given impetus to the need to link ‘aid effectiveness’ with ‘development effectiveness’ at country level. • There is ample evidence to suggest that at country level aid promotes development, especially when aid is provided under the right circumstances and with the right design. For example, large scale investments of external resources on HIV/AIDS response (e. g. through the Global Fund and the US funded PEPFAR country projects) over the past decade or more have impacted positively on the prevention, treatment and care of the epidemic. • Thus while the Paris Declaration and the Accra Agenda represented significant international efforts to achieve greater coherence among donors and recipients; they did not constitute operational frameworks for driving and enhancing the processes for achieving improved development outcomes or results. • The Busan partnership agreement constitutes an international framework for aid architecture that focuses on both the design of aid and the substance of implementation mechanisms required for transforming aid relationships into spurs of improved development outcomes, as well as provides a concrete basis for engaging a wider and more representative group of stakeholders that includes the emerging economies and private sector and civil society organisations in developing countries.

The transition from Aid Effectiveness to Development Effectiveness • The pledge made in Busan enables recipient country like a Bangladesh to have a greater say in how aid benefits development agendas and processes and how aid effectiveness is measured, which would imply assessment of the effectiveness of aid in terms of the impact on tangible development targets, goals and objectives. • Given that poverty and deficits in health and nutrition needs constitute the central challenge in the national development, and most of aid going to Bangladesh is targeted on those concerns, a strong case can be made for linking aid effectiveness with development effectiveness to assess improvements in the lives of the Bangladesh people – which is what development is supposed to be about after all. • The transition from aid to development effectiveness for assessing the impact of aid is particularly relevant in the context of the health sector, which in many developing countries are affected by misalignment between funding and need.

Aid and Health Sector Development in Bangladesh • In the health sector in Bangladesh, malnutrition and high fertility rates have been identified as key obstacles to social and economic development. In an effort to ensure these issues receive proper attention, the health sector in the country has been divided into three sub sectors: health, population control and nutrition (HPN) for the purpose of policy and programme interventions. • Initially, donors providing external assistance to the government in these areas did so through project aid, which was easy to plan, administer and monitor but contributed to the high fragmentation of aid in the health sector as a whole. • The need for greater coordination of aid within the sector gave rise to the shift towards more programmed based aid, characterized mainly by the sector wide approach (SWAp) which was first used in Bangladesh in the late 1990 s. • It was perceived that this approach would rationalize and simplify what was considered at the time an overly complex aid architecture, where many projects, vertical interventions and donor driven initiatives were affecting the development of the national health system and undermining the role of government.

Sector Wide Approaches (SWAps) • The first SWAp in Bangladesh was implemented during 1998 2003 to deal with health and • • population issues. In 2003, due to the extent of malnutrition in the country, nutrition was included in the second SWAp (Health, Nutrition and Population Sector Program) adopted by the Government in the Ministry of Health and Family Welfare (MOHFW). The SWAp required the MOHFW to take the lead role in contrast to the traditional donor driven project approach where each donor developed and supported the implementation of projects in the areas of their interest. One study (White 2007) found that the health SWAps in Bangladesh had succeeded in lowering transaction costs, and that the associated budget support had been a successful funding mechanism. However, the study also found that donors were still driving the policy process and that projects were too complex. Other studies of the Bangladesh SWAps have found donors’ unwillingness to fully participate due to lack of trust in the country systems (Buse, 1999); and that despite the clear contributions the SWAps have made to towards donor alignment and aid predictability, and strengthening of national health policy, they has failed to bring organisational and governance reforms (Martinez 2008). However, the failure of the SWAp mechanism to fully achieve its intended results should not be seen as a consequence of the inappropriateness of the SWAp model, but as a result of weaknesses in implementation such as the poor quality of the underlying health plans and monitoring systems.

Health Sector Development –A Comparative Perspective Table 1: Wealth and Health Indicators - Comparative Perspective Income person, $PPP Bangladesh 1990 540 2012 2030 Life Expectancy at Birth, 1990 59 years 2012 69 Infant deaths per 1000 live 1990 99 2012 33 birth Child (aged<5) deaths per 1990 143 1000 live births 2012 41 Maternal deaths per 1000 live 1990 800 births 2011 194 Infant Immunization rate, % 1990 65 2012 96 Underweight children, % of 1990 62 Total 2012 34 Source: World Bank, UNICEF, UNFPA India 874 3910 58 66 88 44 125 56 600 230 56 74 60 43 Pakistan 1200 2880 61 66 106 69 138 86 490 260 50 83 39 32 (2011)

Sector Wide Approaches (SWAps): HNPSP 2003 -2011 • Building on the lessons learned from the first SWAp, the HNPSP marked a shift from a multiple project approach to a single sector wide approach. • The total cost of HNPSP was $4. 3 billion (the “Programme”), of which $3. 1 billion was Government of Bangladesh funding and $1. 2 billion in development partners’ funding. Key Constraints and Challenges: • HNPSP started as a 3 year sector programme (2003 2006), was revised in 2005 after the signing of a credit agreement with the World Bank as HNPSP (2003 2010) and then it underwent a second revision in 2008 which extended HNPSP up to 30 June 2011. • Political Context • Inadequate Leadership • Decentralization • Performance Based Financing • HNPSP Coordination

HNPSP 2003 -2011: Major Achievements of the HNPSP • Under the HNPSP the maternal mortality ratio (MMR) declined by 40% from 322 in 2001 to 194 maternal deaths per 100, 000 live births in 2010 and under five child mortality rates (U 5 MR) declined by 26% from 88 per 1, 000 live births in 2004 to 65 in 2010. • Total fertility rate (TFR) declined from 3. 0 in 2004 to 2. 5 children per woman in 2010 and the contraceptive prevalence rate (CPR) for modern methods increased by 10% over 2004 and 2010 (from 47% to 54%).

The role and impact of aid funding in health sector development in Bangladesh • Examining the sectoral allocation of Figure 8: Assistance Disbursement in Health, Population & Family Welfare (% share) • It is recommended that ODA to the health sector should be more predictable and stable, as uncertainty and uneven spending could hold back progress towards the achievement of the MDGs and other national development goals. Source: Bangladesh Economic Review, Ministry of Finance FY 12 FY 11 FY 10 FY 09 FY 08 FY 07 FY 06 FY 05 FY 04 FY 03 FY 02 FY 01 FY 00 FY 99 FY 98 FY 97 18. 00 16. 00 14. 00 12. 00 10. 00 8. 00 6. 00 4. 00 2. 00 0. 00 FY 96 ODA, it is observed that external development assistance to the health sector has on average increased between FY 1996 and FY 2012, characterised by a sharp increase during FY 2006 and 2007, but followed afterwards by a steep decline in aid allocation to the sector, as shown in the Figure below. Since the beginning of the present decade, ODA allocations to health and population and family welfare have increased in line with MDGs requirements.

The role and impact of aid funding in health sector development in Bangladesh • Bangladesh has made significant • As a consequence of this rapid rate of decline, Bangladesh is on track to achieve the MDG 4 target for under 5 mortality by the year 2015. 150 100 50 160 140 120 100 80 60 40 2011 2008 2005 2002 1999 1996 1993 1990 1987 1984 1981 1978 0 1975 the last four years shows that infant and under 5 mortality declined substantially since independence. 200 1972 • Comparison of mortality rates over 250 Figure 10: Mortality rate, Infant (per 1, 000 live births) 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 progress in health indicators over the last 30 years and also achieved substantial progress in reducing death rates, especially mortality of under five children and infants. Figure 9: Mortality rate, under-5 (per 1, 000 live births)

The role and impact of aid funding in health sector development in Bangladesh • According to the Bangladesh Maternal Mortality Survey 2010 (NIPORT 2011), maternal mortality declined from 322 per 100, 000 in 2001 to 194 in 2010/2011, showing a 40 percent decline which gives an average rate of decline of about 3. 3 percent per year. Figure 11: Total Fertility Rate (births per woman) 8. 0 7. 0 6. 0 5. 0 4. 0 3. 0 2. 0 Source: BBS 2011 2008 2005 2002 1999 1996 1993 1990 1987 1984 1981 1978 0. 0 1975 dramatically increasing the country’s contraceptive prevalence rate (CPR), from 7. 7% in 1976 to 52. 8% in 2008, which contributed to a sharp decline in the total fertility rate (TFR), from about 7 children per woman to about 2. 1 in 2011 % of women ages 15 49. 1972 • FP programme played a critical role in 1. 0

Fiscal Commitment in the Health Sector Figure 12: Comparison in Health’s Development Budget (Planned, Actual, and Expenditure) SFYP Planned Development Budget 6, 823 Actual Development Budget Actual Development Expenditure 5, 404 4, 499 3, 473 3, 562 3, 825 3, 602 3, 473 2, 612 3, 623* 2, 551 FY 12 FY 13 FY 14 Source: Data taken from SFYP, p. 109; Mo. F, 2011; Mo. F, 2012; Mo. F, 2013. • This partly explains why the plan’s execution fell short of its objectives. Many of the strategies were not implemented, limiting the performance of the SFYP

Fiscal Commitment in the Health Sector Figure 13 : Evolution of Health Budget 7. 00% 5. 00% 3. 00% 5. 68% 5. 03% 5. 71% 152, 448 4. 00% 250, 000 222, 491 6. 18% 6. 00% Budget 189, 326 200, 000 4. 82% 128, 268 4. 26% 150, 000 101, 521 89, 316 100, 000 2. 00% 1. 00% 0. 83% 5, 101 0. 91% 6, 271 0. 93% 7, 287 0. 84% 7, 667 0. 88% 9, 130 0. 80% 9, 470 Health Budget 50, 000 0 Health budget as % of total budget FY 2014 P FY 2013 R FY 2012 FY 2011 FY 2010 FY 2009 Health budget as % of GDP • Indeed, when looking at these sectors’ budgets as a percentage of the national budget, it is clear that it has been sharply declining since FY 10. • To ensure the objectives of the SFYP are met, the budgets for both of these sectors must be at least equal to the values projected in the plan (Ahmed, 2013). Furthermore, a more pro poor budget would go a long way towards reducing disparities in society, mainly in the HD realm (UNICEF, 2012 b).

Conclusion • Aid has worked reasonably in the case of the health sector SWAps (programme aid) in Bangladesh, and contributed positively and tangibly to improvements in health and related social indicators and to increasing the resource base of the country for health services. • But effectiveness of this aid could be enhanced if more attention is paid to: ØBridging the gap between commitment and disbursement, and ensuring greater predictability of funding; ØBuilding local capacity through technical assistance, so as to reduce the direct 'hands on' involvement of donors in implementation; ØInstitutional development especially in relation to monitoring and evaluation such as through the availability of long term, time series data for assessing impact and change over time. ØAchieving longer term sustainability for aid funded projects and programmes and contributing to broader development goals and outcomes (e. g. poverty reduction) in a lasting way, rather than just short term objectives in the form of specific targets of individual interventions.

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