Professional Documents
Culture Documents
Bangladesh
Report
On
1.
2.
3.
4.
5.
Name
Md. Shakil Ahmed (L)
Sabuj Sheik
Tanvir Rahaman
Kamrul Hasan
Tania Khatun
ID
131020101069
131020101105
131020101074
131020101064
131020101084
Batch: 32nd
Bachelor of Business Administration
Department of Business Administration
Prime University
Date of Submission: 09 December, 2015
Letter of Transmittal
Date: 09 December, 2015
To
Jannatul Ferdous
Senior Lecturer
Department of Business Administration
Prime University
Subject: Submission of Report on Foreign AID Scenery in Bangladesh.
Dear Sir,
This a great pleasure to submit our report on "Foreign AID Scenery in Bangladesh. It was a
golden opportunity for our knowledge and practical experiences regarding the procedures and
functions while working. So, we firmly believe that, these knowledge and experiences will
help us in our professional life. We have tried hard to fulfill your expectations by sharing
details of each and every topic and avoiding unnecessary amplification of the topics.
Therefore, we will be very much glad to hear from you for further clarification.
Sincerely yours,
Declaration
I, Md. Shakil Ahmed, hereby declare that the report titled " Foreign AID Scenery in
Bangladesh is prepared by our group after completion of two week works from internet and
various books.
I also would like to confirm that, the report is prepared exclusively for academic
purpose not for any other purposes.
Executive Summary
Foreign aid plays an important role in Bangladesh. The pattern of foreign aid has undergone a
striking transformation in Bangladesh during the last four decades. The average yearly aid
totaled US$ 1.3 billion over the 40-year period. Although aid only accounts for roughly 2
percent of GNI, it constitutes almost 50 percent of the countrys annual development budget.
In fiscal year (FY) 2009/10, the amount of foreign aid disbursed was US$ 2.2 billion. As the
country developed, its reliance on these forms of aid gradually decreased so much so that, in
2000-2010, food aid and commodity aid together accounted for only 6% of total aid. The
share of project aid, on the other hand, steadily grew over the years, from 26% during 19711980 to 94% during 2000-2010. In FY 2009/10, project aid constituted 96% of total foreign
aid. The effectiveness of foreign assistance as a means to contribute to sustainable
development in the country has, at times, been the subject of debate. Different surveys and
assessments have come to the conclusion that the development assistance provided by a wide
range of partners could produce much better results should they be better coordinated, as well
as more harmonized and aligned with national priorities and systems. Similarly, it has been
pointed out that strong government leadership, as well as effective and efficient government
institutions are crucial to ensure that foreign aid is effectively utilized. Hence, improving aid
effectiveness is a joint responsibility of the Government of Bangladesh and its development
partners. This report presents the findings and recommendations of a review of policies and
procedures relating to aid management in Bangladesh. The assessment is based on the
analysis of relevant studies and other documents as well as discussions with a number of
government officials, involved directly or indirectly, with aid management. The Government
of Bangladesh (GoB) has taken considerable steps towards local implementation of the global
aid effectiveness agenda (Paris Declaration principles and Accra Agenda for Action) in recent
years. On the Government side, related initiatives are primarily spearheaded by the Economic
Relations Division of the Ministry of Finance through its Aid Effectiveness Unit (AEU).
Despite laudable achievements at the policy level, progress towards integrating aid and
development effectiveness considerations into the national development planning,
programming and budgeting process has been limited. One has to be realistic, however,
concerning the AEUs ability to instigate and manage the related change process, in the light
of the units capacity and institutional arrangements.
Table of Contents
Sl. No. Topic name
1.1
1.2
1.3
1.4
1.5
2.1
2.2
2.3
2.4
2.5
2.6
3.1
3.2
3.3
Page No.
Letter of Transmittal
Student Declaration
Executive Summary
Chapter- One: Introduction
Introduction
Origin of the report
Objectives of the Report
Methodology of the Report
Limitation of the Report
Chapter- Two: Foreign AID Scenery in Bangladesh
Definition of foreign Aid
Historical Background of foreign aid
Foreign AID Scenery in Bangladesh
Overview of Aid Flows to Bangladesh
Economic Effects of Foreign Policy of Bangladesh
Advantages and Disadvantages of Foreign Aid
Chapter- Three: Findings, Recommendations & Conclusion
Findings
Recommendations
3
4
5
7
8
9
9
9
9
10
11
12
17
18
20
22
23
24
25
Concluding Remarks
Reference & Bibliography
26
27
CHAPTER - ONE
INTRODUCTION
1.1 Introduction
Foreign aid is one of the important sources to finance the development Program in
developing countries. Bangladesh is not exception to this. Foreign aid can be defined as the
economic assistance from one country to another country, intended either to provide
Humanitarian relief in emergencies, to promote economic development or to finance Military
expenditures (Black, 1997, pp.09). Aid may take the form of outright gifts of Money, which
may be tied to purchase from the donors, or untied and available for Expenditure anywhere.
Aid may also be given in form of food, commodity, project or Technical assistance. Aid fund
is divided into two parts, namely, grants and interest based loans. Bilateral aid is given
directly by a donor to a recipient country whereas multilateral aid is channeled through an
international organization, without direct contact between donors and particulars recipients.
Bangladesh is considered as one of the poorest and most densely populated countries in the
world. More than 154 million people lives in this country with 47 million poor people. The
current (2014) GDP of this country is $116.4 billion with per capita GDP $ 859. Bangladesh
is a low income country with yearly 6.03 percent GDP growth and most of its income is
generated from the industrial sector followed by agricultural sector (GOB 2013). The life
expectancy at birth its people is only 65 years, and the adult literacy is only 57.91 percent
(BBS, 2010). Different democratic governments have been ruling this country since 1991,
namely, BNP (Bangladesh Nationalist Party) government for two terms (1991-1995, 20022006), BAL (Bangladesh Awami League) government for two terms (1996-2001, 20092012). While a Military government ruled this country for eight years (1982-1990).
Bangladesh is a foreign aid recipient country since its independence in 1971. It receives
foreign assistance mainly to finance the budget or trade deficit and the annual development
program (ADP) over the period of time. Moreover, it also gets external assistance in form of
food and commodity aid for various purposes in different years from the donors. Mainly for,
reconstruction of the newly independent country, to overcome the various natural disasters
such as flood, famine, cyclones etc. Over the period of time, this is a topic of intense debate
that, whether the foreign aid has any positive effect on the economic development of the
recipient countries. The aim of this paper is to examine the effect of foreign aid on the
economic growth of Bangladesh.
1.4 Methodology:
There are two types of methodology .it are given below:
i) Primary
ii) Secondary
1.5 Limitation:
While preparing the term paper, we had to face some difficulties such as:
*Lack of experience to prepare a term paper about Foreign AID Scenery in Bangladesh.
*Lack of sufficient knowledge
*lack of information and documents to support our study.
CHAPTER - TWO
Foreign AID Scenery in Bangladesh
10
Foreign aid can be defined as the Economic assistance from one country to another country,
intended either to provide Humanitarian relief in emergencies, to Promote economic
development or to finance Military expenditures.
Aid may take the form of outright gifts of Money, which may be tied to purchase from the
donors, or untied and available for Expenditure anywhere. Aid may also be given in form of
food, commodity, project or technical assistance. Aid fund is divided into two parts, namely,
grants and interest based loans. Bilateral aid is given directly by a donor to a recipient
country whereas multilateral aid is channeled through an international organization, without
direct contact between donors and particulars recipients.
11
aid as colonies became independent and multilateral organizations like the UN, the World
Bank and the International Monetary Fund took over development work.
It was really through the 1960s that the aid programs started to formulate and take shape and
become a more definite commitment. That's where you see the start of the evolution of a 0.7
per cent target of countries giving 0.7 per cent of national income in development assistance,
says Mr White.
The northern European donors like Sweden, which historically hadn't had colonies, so it
didn't have the reason to be giving money to ex-colonies in the way that Britain and France
did, started to recognize the need for aid on humanitarian grounds and so also adopted these
targets and started to develop aid programs in particular focus countries. And it took off from
there.
At the end of the 1960s, ideas about the purpose of aid began to change under the influence
of Robert McNamara, who became head of the World Bank in 1968. He promoted the idea of
using donor-funded programs to meet people's basic needs in health, education, water and
sanitation.
That was a decade where people began to talk about poverty, and they began to talk about
why are people poor, and whether it was possible to have economic growth that was more
equitable, economic growth that focused on reducing poverty rather than just assuming that if
you had growth everybody would ultimately benefit. That discussion about what kind of
growth is one that is alive and very well today as well, it's a constant theme in discussions
about development, says Ms Eyben.
In the 1980s basic needs disappeared off the agenda as a result of the global recession that
was a result of the oil shock of the 1970s. Many developing countries were heavily indebted
as a result of the recession, and donor countries lent them money in order to manage their
debts, but on the basis of them having to restructure their economies, and to particularly stop
spending so much money on social services. This was called structural adjustment, and it's
very similar to what is happening in Europe at the moment with what we are calling austerity
programs.
The collapse of the Soviet Union in 1991 and the end of the Cold War led to a return to
democracy in many countries and the increasing participation in development projects by
both non-government organizations and wealthy philanthropists like Bill Gates and George
Soros during the 1990s. But many poor countries were still staggering under impossible-torepay debt.
Steve Radelet, an academic and former chief economist for the US Agency for International
Development, worked in the US Treasury on international debt relief deals from 1999
through 2002. He says that ironically the first countries that were able to get out from under
13
their debt burdens were the ones that had borrowed from commercial markets, not from aid
agencies.
Those that had borrowed from Citibank and other commercial banks were able to do deals in
the late '80s and early '90s under a program called the Brady bonds were essentially the
commercial banks would swap old debt for new debt at 70 per cent of the face value or 50 per
cent or 30 per cent, it varied by country, says Mr Radelet.
The commercial banks pretty quickly figured out that they weren't going to get fully repaid
and were willing to go in and do a deal where they would accept a write-down in order to get
some things repaid. But for loans that were made by donor governments, and by the World
Bank and the IMF, many more years went by until those donors were willing to recognize
that they were going to have to write their debts down.
Finally in 1998 the big movement forward happened when the World Bank and the IMF
finally decided that it did not make sense for them to demand repayment of these old loans
because countries were really stagnating under the weight of the burden of repaying it.
Most of the really poor countries that had built up a lot of debt have now had that debt
forgiven. There's really only a few countries remaining with large debt burdens, and they are
tough cases. Somalia is one, Sudan is another, Zimbabwe is another, and the progress on debt
relief there is frankly waiting for a transition to a government where the donor countries are
more willing to move forward with debt relief.
Over the past decade, more attention has been paid to working out the most effective way to
spend aid money. This has included the rise of impact evaluation, a set of methodologies that
allows agencies to determine how effective development programs are for the people they are
trying to reach.
The shift in global power relations that has occurred over the past 10 years has also been
playing out in aid relationships. Some former aid recipient countries have now become
important economic and political powers in their own right. These rising powers have a
different approach to aid, which they describe as development cooperation on the basis of
mutual self-interest. One of the most prominent examples of this is the relationship between
China and Africa, says Ms Eyben.
China provides a lot of economic infrastructure and support for social development, and in
return becomes the privileged buyer of African raw materials for China's growing economy,
she says.
On the philosophical side, which is important here because it influences how people think
about what they are doing, these new sovereign powers stress that the corporation is
horizontal, that it's not the old vertical relationship that the former colonial powers have with
their erstwhile colonies who are now aid recipients.
14
While this is an attractive philosophical position, a number of observers believe is not much
different from what the old donors were doing in the 1960s when they emphasized support
for economic development.
When development is primarily understood as economic growth, then most of the money
will go on supporting the growth of markets, supporting the infrastructure that helps markets
work better, says Ms Eyben.
When the emphasis shifts to development being understood as greater human wellbeing,
then donors have been spending more money on supporting the strengthening of civil society,
supporting the attainment of gender equality, putting more money into education and health
and so on and so forth.
Country
2012
Afghanistan
6,725.0
Vietnam
4,115.7
Ethiopia
3,261.3
Turkey
3,033.1
2,859.3
Tanzania
2,831.8
15
Country
2012
Kenya
2,654.0
Cte d'Ivoire
2,635.6
Bangladesh
2,152.0
Mozambique
2,096.9
Country
European Union
2012
$86.66
16
Country
2012
United States
$31.55
United Kingdom
$17.88
Germany
$14.06
Japan billion
$11.79
France
$11.38
Norway
$5.58
Netherlands
$5.44
Canada
$4.91
Australia
$4.85
current (2014) GDP of this country is $116.4 billion with per capita GDP $ 859.Bangladesh is
a low income country with yearly 6.03 percent
GDP growth and most of its income is generated from the industrial sector followed by
agricultural sector (GOB 2013). The life expectancy at birth its people is only 65 years, and
the adult literacy is only 57.91 percent (BBS, 2010).
Different democratic governments have been ruling this country since 1991, namely, BNP
(Bangladesh Nationalist Party) government for two terms (1991-1995, 2002-2006), BAL
(Bangladesh Awami League) government for two terms (1996-2001, 2009-2012). While a
Military government ruled this country for eight years (1982-1990). Bangladesh is a foreign
aid recipient country since its independence in 1971. It receives foreign assistance mainly to
finance the budget or trade deficit and the annual development program (ADP) over the
period of time .
The standard definition of foreign aid comes from the Development Assistance Committee
(DAC) of the Organization for Economic Cooperation and Development (OECD), which
defines foreign aid (or the equivalent term, foreign assistance) as financial flows, technical
assistance, and commodities that are (1) designed to promote economic development and
welfare as their main objective (thus excluding aid for military or other non-development
purposes); and (2) are provided as either grants or subsidized loans,
Foreign Aid is any capital inflow or other assistance given to a country which would not
generally have been provided by natural market forces. In Bangladesh, foreign aid serves to
bridge the gap between savings and investments and make up the deficits in the balance of
payments. Foreign aid is a major means of financing the country's economic development.
Economic literature generally classifies foreign aid into four main types. Firstly, the longterm loans usually repayable by the recipient country in foreign currency over ten or twenty
years. Secondly, the soft loans repayable in local currency or in foreign currency but over a
much longer period and with very low interest rates. The softest are the straight grants often
given to the less developed countries. Sale of surplus products to a country in return for
payment in the country's local currency, e.g., food aid from the USA under PL-480, is the
third type and finally, the technical assistance given to the developing countries comprises the
fourth type of foreign aid.
The Bangladesh Aid Group, an international consortium of donors, comprising of 14 affluent
nations and 12 international development agencies, meet every year to review development in
the economy of Bangladesh, and as such, aside from prescribing courses of action for the
economy, also takes decision on the amount of aid. Members of the Aid Group include
Australia, Belgium, Canada, Denmark, France, Finland, Germany, Italy, Japan, Netherlands,
Norway, Sweden, Switzerland, UK, USA, International Development Association (IDA),
Asian Development Bank (ADB), European Union EU, International Fund for Agricultural
Development (IFAD), UN agencies, the Ford Foundation and Asia Foundation
18
Bangladesh is the 22nd largest recipient of foreign aid globally (based on 2010 information
obtained from the website, Globalhumanitarianassistance.org). Bangladesh is one of the 10
most vulnerable countries to natural disasters, due to climate change impacts as well poor
preparedness and lack of infrastructure to mitigate or respond to these impacts. The country
hosts the worlds largest humanitarian aid community, with 12 UN agencies, over 70
international NGOs, over 2,000 locally registered NGOs, and over 60,000 community based
organizations. Overall official development assistance (ODA) commitments to Bangladesh
were $5.38 billion US Dollars and net ODA received was $2.67 billion US Dollars (OECD
2013). Net ODA received per capita was $14 US Dollars (World Bank 2012). According to
2013 OECD DAC data, the largest donors in Bangladesh in 2013 were Japan (32%), the
IDA/The World Bank (30%), the IMF (7%) and the Asian Development Bank (6%).20 Other
bilateral donors were Canada (3.6%), the U.S. (3.5%), and the Netherlands (1.9%). From a
10-year perspective the largest donors to Bangladesh were IDA, followed by Japan, the Asian
Development Bank Special Funds and the United Kingdom.
Donor
2008
2009
2010
2011
2012
IDA
836.8
328.5
352.4
364.7
703.9
Japan
886.9
128.6
142.5
201.6
449.5
286.0
288.3
356.8
253.1
250.7
229.9
368.6
310.8
United States
134.6
99.8
151.5
142.9
215.7
IMF
140.0
194.5
131.9
188.6
159.1
128.2
Australia
45.1
41.4
50.3
79.3
120.8
Germany
65.9
73.1
65.0
77.1
81.6
Netherlands
84.7
70.3
78.6
77.7
66.5
TOTAL
2,501.7
1,124.2
1,545.0
1,759.4
2574.0
AsDB Special 0
Funds
United
Kingdom
(Concessional
Trust Funds)
EU
Institutions
20
The enormity of aid dependence impacts negatively on the type of foreign policy a country
pursues. The results of analysis were the states with highest level of economic development
tended to be active-independent states, those with intermediate levels of development tended
to be transitional state; and those with low level of development tended to be inactivedependent states. Bangladesh fits into a category somewhere in between the latter two
types. But despite the paramount importance attached to economic diplomacy by Bangladesh,
this is perhaps the foreign policy sector that is characterized by largest number of disquieting
news items.
The economic imperatives compelled Bangabandhu to diversity foreign policy and make it
donor-oriented. Consequently, the western developed countries emerged as the dominant by
31% by the international organizations. The share of the socialist bloc and India stood at
21%. The OPEC share stood at a meager 5%.
During the Zia regime Bangladesh was successful in inducting China as a major donor; and
augment aid inflow from the Western and OPEC sources. The average annual commitment of
aid was $1218 million as compared to $828 million during the previous regimes. The
proportion of aid disbursement was 76% as against 66% during the previous regime.
On top of everything, the recently released least developed countries report indicate that
Bangladeshs growth rate was lower than regional standard. In 1995, the rate was 4.5 percent
which increased to 4.7 percent growth rate and Cambodia 6 percent.
Lower growth rate certainly suggest lower development rate. In appears therefore that
economic diplomacy over the years has been successful in making Bangladesh overwhelming
an aid dependent which however are the major concern of BFP.
The recent overtures made by the Hasina Government for sub regional cooperation in South
Asia and becoming a member of BISTEC are in reality geo-economical means to geopolitical ends.
22
Advantages:
Economic growth is a main advantage. Nations that receive money invest it into their
economy which helps to create more jobs for the people, better infrastructure, and stabilize
their economy. Nations such as China GDP growth rate increased 9.65% from the investment
of the foreign aid into their nations economy. Foreign aid has other advantages, such as
fighting hunger, saving lives and providing civilians with shelters, clean water and medicine.
Pharmaceutical drugs are dispensed free or subsidized to that in need and training is given to
doctors and nurses which will ensure they know the correct way to deal with a patients
health. Foreign aid is also a benefit the donor. Donor nations are able to control the funds that
they give to the nations by asking for or requiring certain gains in return such as use of
military bases and other resources the nation is in need of. The gains in return create a strong
economical, cultural and or political bond between recipient and donor nations.
Disadvantages:
A disadvantage of foreign aid however is an increase in dependency from recipient nations.
Governments that receive aid become dependent on steady flow so that while still being able
to support the people of its nation, they can begin putting the money into the sectors of the
country which need the assistance. Corruption is a big disadvantage of foreign aid. Aid
money that is being given to government officials is being put straight into their own pocket
rather than in the country to solve its problems. (In this case the only people who benefit from
the money are government officials rather than the nation and its people).
23
CHAPTER - THREE
24
3.1 Findings:
The findings of the study are as follows:
Bangladesh depends on external aid to finance the development budget. This research
concludes that, foreign aid has positive effect but diminishing return on the economic growth
of Bangladesh. Aid mobilizing and executing institutions of Bangladesh including public
administrations have capacity constraints, mainly for, poor structure and planning, corruption
and political instability.
The government must take initiative to overcome these shortcomings to gain the maximum
and efficient output from aid.
Foreign aid has positive effect on the economic growth of Bangladesh
25
3.2 Recommendations:
Foreign Aid is declining over the period of time. It has 7.38 percent, 4.05 percent, 1.8 percent
and 4.43 percent contribution to GDP of Bangladesh during 1980-1990, 1991-2001, 20022012 and 1980-2012 correspondingly. The square term depicts that, the return of aid is
diminishing for a country having the absorptive capacity constraints. Bangladesh is not
exception to this.
If more nations monitor and control their funds and help government officials with placing
the money in the useful sectors, it will decrease the chance of corruption in the country.
Furthermore it will eradicate dependency of aid by the recipient nations.
International Aid must have long-term benefit for poor countries. Otherwise, it is only the
question of time when developed countries would not be able to maintain growing number of
people in the third world.
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