Aid 'strings': When quality matters

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Shamsul Huq Zahid
The World Bank (WB), the global multilateral lender, has reportedly attached some conditions to obtaining a sizeable amount of its financial assistance by Bangladesh.
The government has sought the concessional WB fund that is normally processed and disbursed by its soft-loan affiliate, for the implementation of a number of power plants.
The WB wants the government to carry out reforms in the financial as well as non-financial state owned enterprises (SoEs) and ensure transparency in public procurement for receiving the loan.
What the WB wants the government to accomplish should, however, not be described as conditions. For successive governments
have publicly committed to carry out reforms in SoEs and ensure transparency in public procurement.
The SoEs have been causing serious haemorrhages to the economy since long. Many SoEs are now on the verge of collapse because of rampant corruption and high level of inefficiency and mismanagement. A good number of public sector enterprises do still exist because the government owns them.
A few statistics are enough to show the poor state of affairs with the SoEs. The net loss of 45 public sector enterprises in fiscal year (FY) 2007-08 was estimated at Tk. 56.37 billion and the total debt-service liability stood at Tk. 48.69 billion up to June 30, 2008. The government has to provide subsidies worth Tk 10 billion a year to the SoEs.
The outstanding bank loan of 30 SoEs stood at 170 billion, including a classified amount of Tk 15.22 billion as of June 2008. The state-owned banks have been the unwilling victims of inefficient SoEs. For, they are very often forced by the government to provide loans to SoEs with poor financial track records.
The government has, from time to time, acknowledged openly the need for reforming the SoEs. But hardly anything meaningful has been done to that effect. No matter whichever party remains at the helm of statecraft, it develops a soft corner for the inefficient SoEs. And the bureaucracy that manages lots of benefits from the SoEs torpedoes any reform effort.
High officials of different ministries, being on the board of directors of the public sector enterprises, financial or otherwise, do enjoy perks and privileges. They scuttle reform initiatives, fearing the loss of such benefits.
Similarly, the public procurement has been a drag on the economy because of massive corruption and wastage in government contracts and purchases that involve an average annual spending of about $5.0 billion. All concerned were largely aware of the widespread irregularities in public procurement of goods and services. Yet taking corrective measures was, apparently, nobody's business.
It was the WB, which took up the issue with the immediate past political government. After much foot-dragging, the government in 2003 formulated the public procurement guidelines. But most ministries and government agencies, deliberately, bypassed the guidelines, which, actually, had no legal backing. Again at the WB's insistence, the government adopted the Public Procurement Act in 2006 and the military-backed caretaker government framed the public procurement rules in 2008 to ensure the maximum possible transparency in awarding government contracts and giving procurement orders.
But the incumbent government, much to the annoyance of the donors who saw through the adoption of the PPA and PPR, has proposed a few amendments to the same. The donors have, officially, expressed their reservations about the amendments that primarily aim at giving opportunity to the contracts and suppliers having no previous experience. Critics have smelt a rat behind the government's amendment move. They allege that through the amendments, the ruling party is out to distribute favours among some of its "cronies" at the grassroots level.
The government, it seems, is bent upon amending the PPA and PPR as it has already introduced a bill in the parliament to this effect. The introduction of online procurement and formation a public-private committee to oversee the procurement of both goods and services are steps in the right direction. But relaxation of rules for procurement and contracts up to Tk 20 million does not anyway give the right signal, on real or perceived grounds.
There is no denying that, at times, the strings attached to assistance programmes, financial or otherwise, extended by multilateral and bilateral donors, have some ingredients to evoke repulsive emotions among the recipients of the same. But in some other cases, the strings are well- intended and very much in line with the expectations of the common people.
Yet there are few sceptics who always find wrong with the multilateral donors, including the WB and the International Monetary Fund (IMF), without looking into the merits of the suggestions made by the latter. But the fact remains that the government, in many cases, take money from bilateral donors, with the worst strings attached. The suppliers' credit is a case in point.
Coming back to the conditions that the WB, reportedly, wants to accept in exchange for the loan for 10 power projects, do hardly leave any room for rejection. Since the government desperately needs additional power to keep the wheels of the economy moving, it should discuss the issue with an open mind during the forthcoming visit of the WB energy mission.
Zahidmar10@gmail.com