Eradication of extreme poverty - best way to celebrate Golden Jubilee of independence

Bangladesh has made impressive gains in reducing poverty over the last two and half decades. During this period, headcount poverty ratio declined from 56.7 per cent to 24.8 per cent. An estimate shows Bangladesh achieved Millennium Development Goal (MDG) target of halving poverty by 2013 ahead of the targeted year 2015. This is a commendable achievement for Bangladesh which many developing countries have failed to achieve. Bangladesh has also been successful in reducing extreme poverty to a significant extent. Extreme poverty declined from 28 per cent in 1991-92 to 12.9 per cent in 2015. Such a significant decline in the incidence of extreme poverty is also very encouraging. But the situation still appears grim when more than 20 million population of the country, which is about the size of the entire population of Sri Lanka, or 4.6 million households are in extreme poverty. Eradication of poverty of such a large population should be a matter of urgent policy concern in any democratic country where welfare of people matters.
The government has justifiably attached due importance to eradication of extreme poverty in the Seventh Five Year Plan (FY2016-FY2020). The Plan notes, "As Bangladesh attains middle-income status it must free itself from the incidence of extreme poverty." However, it does not envisage complete elimination of extreme poverty during the plan period rather it sets the target at 8.9 per cent by the end of the plan period. It is a noble objective to make Bangladesh free from the incidence of extreme poverty by the 50th anniversary of independence and an achievable one if there is a political will.
A person or a household can expect to escape poverty if he or she is connected to the economy's production process in one way or other. He can be self-employed - growing crops, raising poultry, mending shoes, selling fruits, pulling rickshaws, hawking merchandise, running a shop, etc. He can also work as an employee of an agricultural, industrial or service enterprise or government. More importantly, the work - self-employed or hired labour, must be remunerative enough to enable him/her to live above the poverty line in a sustained way.
Unfortunately, many people in Bangladesh do not have work, or unable to work, or have low return/low pay work and that also infrequently. To make matters worse, these people are vulnerable to different types of shocks such as income, health and natural shocks which push them to deeper poverty. This group of people, characterised by low asset base, low human capital, low return occupations, and vulnerability, mostly constitutes the extreme poor. Generally, they belong to marginalised communities or groups in terms of religion, ethnicity, physical conditions, remoteness, ecological vulnerabilities, and occupations. As traditional growth process tends to by-pass these groups in various degrees, extreme poverty was once considered to be persistent or chronic in nature with little potential of upward mobility of the poorest.
But we already know that Bangladesh has been able not only to reduce poverty but also to reduce extreme poverty. This has been possible owing to a number of factors. We can highlight the more important ones. Sustained annual growth of around 6 per cent has been a major force behind poverty reduction. More importantly, the growth process in Bangladesh has not by-passed the poor rather it has been pro-poor and pro-poorest due to the nature of the growth drivers and growth-induced structural changes in the economy. Robust growth of RMG exports created jobs for unskilled young girls from poor and extreme poor households in rural areas enabling many of these households to graduate from poverty and extreme poverty. This has also exerted a positive impact on the wages of women engaged in informal sector.
Foreign remittance has limited direct effect on extreme poverty reduction because of little or no migration from these households due to restrictive migration costs. However, remittance inflows lead to expansion of many economic activities in rural areas and create demand for labour in various activities with positive impact on rural wages. Domestic migration of workers in search of jobs and higher wages has benefited the extreme poor households significantly in terms of raising consumption. Some of these workers enter the land tenancy market and become cash rent growers.
Three growth-induced changes in the economy have benefitted the poor and the extreme poor. Firstly,  dramatic change in land tenancy market from sharecropping to cash-rents facilitated rising participation of landless tenants. Secondly, access to micro credit by poor women resulted in direct expansion of rural non-farm sector and indirect expansion of farm sector through deflection of credit from non-farm to farm sector. Thirdly, expanding job opportunities in both farm and non-farm sectors resulted in tight rural labour market which has given rise to contractual labour market with higher wages and increasing productivity.
Other important initiatives include targeted livelihood programmes which have been quite effective in reducing extreme poverty. These programmes involve transfer of resources (assets or financial) to the extreme poor and help develop asset management, saving habit, organisational, financial and marketing skills among the target population. ICT penetration in rural areas has been successful in transforming rural Bangladesh. Further, measures have been in place to mitigate and reduce various types of shocks.
Past experience with extreme poverty reduction provides important lessons for future policies and actions. The observed success in bringing down extreme poverty is a result of government policies complemented by development partners, NGOs and private sector as well as favourable external sector development. The confluence of efforts to eradicate poverty needs to continue in the future. However, a more concerted and more focused effort will be needed to eradicate poverty of the marginalised. Successful targeted livelihood programmes need to be continued, replicated in other areas and expanded. Education, health and nutrition programmes of the government need to have a strong extreme poor focus to create skilled and healthier workforce. The National Social Protection Strategy, though comprehensive, might need to have special focus on people who still need additional help.
There has to be strong political will to spend required resources on the programmes with zero leakage. The necessary resources for the programme can be raised from domestic sources by increasing tax-to-GDP (gross domestic product) ratio at least to the level of Nepal. There are many laudable achievements of which Bangladesh can be proud of; eradicating extreme poverty by the Golden Jubilee of independence of the country, in 2021, can be another one.
The writer is Professor, Department of Economics, North South University.
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