The Role of Donor Agency in Flourishing the Economy of Developing Countries Like Bangladesh

There is no denying the fact that embryonic countries constantly demonstrate a predisposition to bring in the policy pronouncement of highly developed countries in their delicate resources despite the shifting of overall socio-economic procedure virtually. In bona fide world state of affairs aspects that next to influence the strategy decisions of budding countries are found fictional in progressive countries. It is evident that reserve constraints and technical non-progressive phenomena are two focal setting that formulate the budding countries reliant upon the advanced countries. The highly developed countries make available financial assistance for the economic development of the developing countries through unusual multilateral and bilateral donor agencies, which are officially termed as ‘Development Partner’

The ‘Development Partner’ all the way through their lending tricks play a vital role in the policy-making method of developing countries. The intact process is now more evident in an interestingly univocal world order that materialize after the collapse of communism as a governing and economic system in the 1980s. The international financial agencies more than ever the World Bank and International Monetary Fund as policy shift pursued a free-market-based world order where the developing countries were urged, cajoled and hard-pressed to initiate market economy through structural modification reforms.

As a result, over the last one-decade developing countries have made changes in their state oriented development strategy mostly in line with the policy advice of the Development Partners.

The World Bank in its policy research report, “Assessing Aid, What works, What doesn’t, and Why” has laid emphasis on the internal policies of the recipient countries as important factors to make aid effective. In different international forums including the Aid Consortium Meeting that held under the auspices of the World Bank, the Development partners review the policy issues of the recipient countries with top priority; and before making any aid commitment want to make it sure that appropriate policy environment is prevailing in the recipient countries.

Among the Development partners the World Bank (WORLD BANK) is the most important whose confessional financial assistance has allowed it enormous access in the policy making process of developing countries which we can see with particular reference to Bangladesh.

The WORLD BANK has been working in Bangladesh since 1972, soon after the Independence. Robert D. McNamara was the First WORLD BANK president visited Bangladesh in the year 1972 to assess the aid requirement of the war devastated country. The then highly nationalistic government that led to the liberation of the country from occupying Pakistani forces was very much critical about the Bank’s close allies with the Pakistani regime. The dispute that emerged between the Bank and GOB was the issue of the Bangladesh’s share of debt liability. GOB declined to take the responsibility of debts taken by the erstwhile Pakistan government from different bilateral and multilateral donor agencies/countries. In the First Aid Consortium meeting of donor countries, which was held in Dhaka in March 1973, the Bank exerted pressure upon the government to come to a solution on the debt issue. After long parley the then government had accepted an inherited debt liability of $483 million against the projects, completed before independence and physically located in the territory of the erstwhile East Pakistan. The process through which Bangladesh resolved it’s past debt liability was viewed as highly instructive and mentioned as a glaring example of the Bank’s pressure on Bangladesh. But dependence upon the external aid left very little option for the government of the newly independent country to reject the Bank’s conditional lending offer. Domestic resources that were available to the economy found inadequate to implement the development projects. As a result, despite the Bank’s controversial role in the liberation struggle, the GOB had to accept conditional external assistance to implement the first five-year plan, which was launched in 1973. In the subsequent years, dependence of the country on the mobilisation and influx of foreign funds into Bangladesh for financing not only the development projects but also the import of food items and essential commodities, has become more institutionalised.

The WORLD BANK as an important single source of aid to Bangladesh co-ordinate the Aid Consortium for Bangladesh. The creation of the Bangladesh Aid Consortium has institutionalised the leadership of the World Bank. The resident mission of the WORLD BANK, which is the largest in Bangladesh, conducts detailed research on different aspects of Bangladesh’s economy. Since 1972 the Bank’s concessional lending arm, the International Development Association (IDA), has financed more than 167 operations with loans of about $8.2 billion. Till September 1998, Bank loans of more than $2.05 billion fund 21 projects in Bangladesh (The World Bank, 1998). Initially the Bank’s approach was more humanitarian; and, the Bank worked closely with others to revive the war-torn country’s economy. Early projects financed by the Bank were cyclone shelters built in the coastal areas of the country. In the early years, the Bank supported efforts to expand agricultural production, which have helped Bangladesh achieve a self-sufficient food supply, and to develop population and family planning programs that have dramatically lowered the high fertility rates. From the mid-1980s, the Bank expanded support for more energy projects and helped to reduce the country’s dependence on imported energy. Since early 1990s the Bank and other Development partners by keeping pace with the global change pushed the government for allowing more private sector participation in the public sector management and diverted the aid flow for the social sectors like health and education, which have direct impact on poverty alleviation.