welfare role

1. State Role in Welfare in
Developing Countries:
A Case Study of Bangladesh
Mozammel Huq
Department of Economics
University of Strathclyde, Glasgow
30 May, 2014.

2. Structure of the paper
• Introduction
• Main objective of the study
• State role in Welfare: Theoretical Perspectives
• Poverty in Bangladesh
• SSN Programmes
• Moving beyond the Basic SSN Programmes
• The Way Forward
• Concluding Remarks

3. Introduction
• State Role in Welfare: a fascinating proposition?
• A genuine question: Why the state should play a
role at all and, if so, to what extent
• A genuine outcome of democratic development

4. Main Objective
• To view the state role in welfare as it has been emerging
in developing countries, using Bangladesh as a case
study.
• And, in the process, analyse the aspiration of moving
from the initial goal of poverty removal to some
comprehensive welfare measures.
• Thus, we are trying to widen the focus in terms of a
comprehensive welfare approach as a long-term vision.

5. Theoretical Perspectives
(onlysomekeypoints)
• As with the efficient allocation of resources, the economists
have remained concerned with the distribution of income.
• Society's view of just distribution may conflict with the
existing distribution. In particular, there is concern with the
injustice in the original distribution of endowments.
• Also factor market imperfections, especially monopoly pricing
of the factors of production, can be an important cause of
income inequality.

6. Theoretical Perspectives (cont’d)
• Private redistributions made voluntarily, say through charities, are
riddled with problems, a major concern is that the task may be too
big for the private redistribution to execute.
• Musgrave (1959), among others, would like to justify state intervention to
maximise social welfare.
• Moreover, various charities may compete with each other as a
coordinating role will be missing. Indeed, the state can perform a
redistribution policy in a coordinated and comprehensive way.
(See, e.g. Brown & Jackson 1990.)
• However, Hayek (1960)and other libertarians are rather concerned
that state intervention in income distribution will cause curtailment
of personal freedom and, in the process, hamper growth.
• Hence the emphasis on voluntary contributions made by individuals personally
and/or help channelled through NGOs.

7. Poverty in Bangladesh
• The early years: Very high levels of poverty
• A major challenge to the economy: Is it
going to remain a “bottomless basket”?
• Indeed, “a test case of development”.

8. Fig1:Bangladesh-DramaticFallinPoverty
Proverty trends in Bangladesh
0
10
20
30
40
50
60
70
80
*
1
9
8
1
-
8
2
*
1
9
8
3
-
8
4
*
1
9
8
5
-
8
6
1
9
8
8
-
8
9
1
9
9
1
-
9
2
1
9
9
5
-
9
6
2
0
0
0
2
0
0
5
2
0
1
0
Years
Poverty
Head
Count
Ratio
by
the
DCI
Method
1981-
82
to
2000
(%
of
population)
National
Rural
Urban
Source: Bangladesh Bureau of Statistics, Household Income and Expenditure Survey
(various years).

9. SSN Programmes in Bangladesh
• In Bangladesh, the SSN programmes got a serious start in the early
1990s with the democratic government taking over in 1991.
• There now exists an extensive range of SSN programmes, as many as
90 or so (World Bank 2006; Khuda 2012; GOB 2011 Part 2).
• “The bulk of the programmes are implemented through government
channels. However, non-government channels play an important
supportive role particularly in those programmes focused on
sustainable graduation. 97% of annual allocations are spent through
30 major programmes.” (Rahman and Chowdhury, 2012, p. 3).
• The programmes are mainly rural based, those with “an urban focus
as yet remain minuscule , as only 0.7% of the total allocation”
(ibid, p. 3).

10. Table 1: MajorTypesof SSN Programmes
TYPE PROGRAM EXAMPLES
• Cash Transfers
• Old Age Allowance
• Widowed and Distressed Women Allowance
• Disabled Allowance
• Conditional Cash Transfers
• Primary Education Stipend Program (PESP)
• Stipends for Female Secondary Education
• Public Works or Training-based or in-kind Transfer
• Rural Maintenance Program, Food for Work
• Vulnerable Group Development (VGD)
• Employment Generation Program (EGP)
• Emergency or Seasonal Relief
• Vulnerable Group Feeding
• Gratuitous Relief (GR); Test Relief (TR)
• Open Market Sale (OMS)
Source: GOB (2011), 6th Five Year Plan, Part 1, o.166.

11. MajorSSN Programmes: GovtExpenditure
Allocations
• Govt expenditures (as % of GDP) on SSNs from 1999-00 to
2011-12 are shown in the next slide (Fig 2).
• Except the Food for Work programme (in which financial
allocation by the Government of Bangladesh decreased
from Taka 8,060 million in 1999-00 to Taka 6,224 million in
2011-12), all the other major SSN programmes have
witnessed an increase in allocations .
• Such increases are particularly marked in Honorarium for
Freedom Fighters, Primary Education Stipend Project, Old
Age Allowance, and the Allowance for Destitute Widows.

12. Fig 2: GovernmentExpenditureson SSNs:
1996-7to 2010-11(as % of GDP)
0
0.5
1
1.5
2
2.5
3
GDP

13. Review and Assessments
• The emergence and the growth of the SSN programmes in
Bangladesh have attracted attention from a large number
of researchers.
• Various international organisations including the World
Bank, UNDP and FAO have also shown a keen interest in it.
• Findings from selected studies (brief summary, next slides).

14. Authors Method of
the Study
Coverage of
the Study
Main Findings
Mannan &
Paul-
Majumder
(2003)
Field
Surveys,
2001
Country-wide,
seven major SSN
Programmes
Investigated
The targeted programs have positive impact on income, food consumption and access to safe
housing, however there is urgency to extend the coverage with additional funding allocation.
Also the distribution mechanism needs to be improved to get rid of political patronage.
World Bank
(2006)
Analyses key
primary
data.
HIES 1991 &
2000, and 2000
Labour Survey, &
a 2003 survey of
selected SSNs
Strongly suggests for raising level of expenditures on SSN programmes in Bangladesh, currently at
less than 1% of GDP. Also, critical of the current practice of administering these through
numerous agencies – “Government, non-government and international bi-lateral and multi-
lateral partners”, with “frequent overlapping between programmes and inadequate co-ordination
across ministries.”
Iqbal et al
(2007)
Broad
overview
Countrywide,
mainly using the
above WB study
Strongly argues for raising the allocation on SSNs, besides recommending, among others, to
attend to the “regional disparity”, in particular by creating employment on a permanent basis in
the “monga” affected areas of northern Bangladesh.
Ahmed (2007) General
overview
Analyses Budget
allocations
Examines the Budget allocations overtime against the various SSNs. Also, argues for improving
the functioning of these programmes in Bangladesh.
Khaleque et al
(2008)
General
overview
Assessment of
SSNs in the
monga-affected
Greater Rangpur
“VGD/VGF has strong positive effect in reducing poverty while old age pension has no such
contribution.” Highly vulnerable groups such as day labourers and beggars are found to be “left
out from the benefit of SSN programs due to their limited coverage and size. Also, inter-
ministerial coordination is found to be lacking, resulting high administrative expenses.”
Begum &
Paul-
Majumder
(2008)
Field
Surveys,
Dec 2000-
Jan 2001
Country-wide,
Destitute
Women’s
Allowance
86% of the recipients spend their allowance to satisfy their food and basic needs, however
there is urgency to extend the coverage as only around one-fifth of the deserving destitute
women are getting the allowance. Also need to increase the amount.

15. Authors Method of
the Study
Coverage of the
Study
Main Findings
Paul-
Majumder
& Begum
(2008)
Field Surveys,
2000
Country-wide,
Pension for the
Elderly Poor
Programme largely successful, 96% of the poor elderly recipients are able to meet part of their basic
needs, however the coverage of the programme has remained yet very limited or far below the
appropriate level.
Morshed
(2009)
General
overview
Country-wide Both Govt and non-Govt agencies are actively implementing SSN programmes, however most
implementing ministries lack sufficient capacity to monitor programmes.
Maniruzz-
aman
(2009)
Field surveys,
2007-08
Food insecurity in
Char (flood-prone)
areas
High level of food insecurity (90% in Kurigram), while 34% in Narsingdi. 34% of the 321 male-headed
households and 61% of the female-headed households received some SSN benefits, so greatly
helping them with food security.
Huq and
Salimullah
(2010)
Field Surveys,
2010
Assessment of the
SSNs coverage, in
rural and urban
areas.
One-fifth of the rural households received Govt-provided SSN benefits, while in urban areas it was
almost negligible. NGOs were providing SSN-type benefits in both rural and urban areas, helping
about 13% households in the former and just over 4% of the urban poor households.
Khuda
(2011)
General
assess-ment
Review of the SSNs
in operation.
High success of the SSNs, the lessons learned should even be of great help for other lo-income
countries, however need to improve co-ordination significantly.
Khandker et
al (2011)
Household
surveys,
2006-07
Review of SSNs in
the ‘monga-
affected Greater
Rangpur
Social safety nets are found to have a positive effect on mitigating both seasonal and non-seasonal
food deprivation, however also recommends investment in physical infrastructure and human capital,
and argues for diversification of income and increase in productivity.
Rahman &
Choudhury
(2012)
Field
Surveys,2010-
11?
Country-wide,
comprehensive
review.
Improvement in income and food intake, also halving of hunger in the chronic deficit areas, however
serious concerns because of disaggregated nature of the coverage gaps, multiple types of leakages,
presence of some low value-for-money programme components,

16. Impact of SSNs on PovertyDecline,
FindingsbyInchausteetal(2012)
• Negligible role of public transfers in poverty reduction in
Bangladesh; “leakages and small size of individual transfers
made their impact on poverty negligible, despite an expansion
of transfer programs during the last decade”. (Inchauste et al,
2012, p19).
• In contrast, labour-market related factors contributed to 61%
of poverty decline in Bangladesh, “pointing to an increase in
real wages and higher productivity as the main contributors
to poverty reduction.” (p. 4)
• International remittances, and also decline in population
growth and fall in the dependency ratios also contributed
significantly to poverty reduction in Bangladesh.

17. Key Issues & Concerns
• Although the SSN-support has been of particular help to some
needy groups and areas, e.g. poor elderly, destitute women
and the poverty-stricken parts, the programme is still low in
coverage and size. Also, day labourers and beggars, among
others, are also found to be left out.
• As strongly argued by the World Bank (2006), Bangladesh
seems to spend somewhat below the norm (less than 2% of
GDP) – as compared to 2% for Africa and close to 5% for
South Asia. (The serious resource constraint faced by the Govt
in Bangladesh is, understandably, a major hindrance.)
• There are also a number of other concerns (see below).

18. Key Issues & Concerns (cont’d)
• A major concern relates to the deficiency in administration of
the SSN programmes. Some 30 or so Government Ministries
are reported to be involved, and without any inter-Ministerial
collaboration.
• Also, at times various Government and non-Government
agencies are found to be working without any coordination.
• “Leakages” are frequently reported, and in some programmes
as high as 26% (GOB, 6th Five Year Plan, Part 1, p.168).
• Hence the need for improving the administrative capacity and,
in particular, involving central co-ordination, thus institution
building demanding a serious attention (World Bank, 2010).

19. Moving Beyond the Basic SSNs:
Case of a Long-term Vision
• Many developing countries are still struggling to
remove extreme poverty.
• Also, there are strong oppositions to create
welfare provisions.
• Ideological pressures following globalization.
• However, with the march of democracy, the
West European model is likely to remain a
cherishing dream.

20. The Way Forward
• Realistically, any hope of comprehensive
welfare measures is likely to remain a long
term vision.
• Two key components:
a) Need to grow steadily government
expenditures on welfare provisions as a
percentage of GDP and
b) Need to keep improving the administration of
such welfare measures.

21. Concluding Remarks
• Need to maintain a strong competitive market economy, thus
helping to keep improving the resource allocation, while also
the state remaining active in income distribution with carefully
selected (and also well administered) welfare measures.
• The short-term goal is likely to remain the eradication of
poverty.
• Any success in providing comprehensive welfare measures will
be dependent on how the capacity pf the state has improved,
involving two main areas: (a) social welfare allocations as a
percentage of GDP and (b) an organisational set up to
administer the programme efficiently.

22. Thanks!