CHAPTER I

AN OVERVIEW OF PAST PLANNED DEVELOPMENT

1.1 Macro Economic and Social Development

1.1.1 Bangladesh has had two and a half decades of development efforts at lifting the economy out of its abject poverty. The country has followed the course of planned development since 1973. In a medium term framework, the First Five Year Plan was launched in July 1973. This was followed by a Two Year Plan (1978-80) in the background of world-wide inflation and uncertainties. In 1980, the five year plan framework was reinstated and since then three five year plans were implemented in succession. There was no development plan during 1995-97 after the expiry of the Fourth Plan (1990-95). Every plan targeted at an average annual GDP growth rate of above 5 per cent but achieved about 4 per cent. In spite of large inflow of foreign assistance to augment meagre domestic resources, the planned effort for development has not been able to free the economy from the low growth trap. Almost half of the population of Bangladesh still continues to eke out an existence below poverty line with very little access to the basic amenities of life.

1.1.2 Planned development has been frustrated by a number of factors. First, political instability loomed large over most of these years since independence though a semblance of elected government was maintained. It was in the nature of thing that the absence of a truly representative government led to political turmoil adversely affecting development process. Worse still was the private agenda that the lack of public accountability bred indiscriminately. This not only added fat to projects but as said, gift horses also failed to earn their hay. Secondly, foreign aid flow and its modality affected the development effort. Although Bangladesh received generous aid, its level was not adequate to mount the investment programmes which the successive Plans envisaged. Even in that year (1989/90) when aid flow (disbursement) reached its peak ($ 1.8 billion) investment/GDP ratio was 12.80 per cent only, still one of the lowest in the south-east Asian region. Nor was aid flow steady; it appears to have reached its plateau at around $ 1.4 billion at constant market prices of 1984/85. At such prices average annual inflow of foreign aid during the Second Plan was lower than that in 1979/80 and steadily declined in real terms (at 1984/85 import prices) after the flood year of 1987/88 when aid flow was $ 1.59 billion. The modality of aid has also drastically changed with the gradual withering of commodity aid which used to generate counterpart fund for local currency financing of projects, and commitment of counterpart fund of food aid to selective projects. Thirdly, the development process has been disrupted by frequent occurrences of natural disasters like flood, cyclone and drought. They not only pre-empted scarce resources for relief work and rehabilitation but also sapped saving and investment habit, particularly in the agriculture sector due to high risk. All these compounded to frustrate planned development with shortfalls in investment and output. The planned outlay and GDP growth targets with their actuals of the successive Plans are shown in Table 1.1.

Table 1.1 Plan Size Actual Expenditure and GDP Growth Rate of Past Plans (at respective base year prices)

(in million Taka)

Plan

Plan Size

Estimated Actual Expenditure

Growth Target

Realised Growth

  Total Public Private Total Public Private (%) (%)

1

2

3

4

5

6

7

8

9

First Five Year Plan

44,550

39,520

5,030

20,740

16,350

4,390

5.50

4.00

Two Year Plan

38,610

32,610

6,000

33,590

24,020

9,570

5.60

3.50

Second Five Year Plan

172,000

111,000

61,000

152,970

103,280

49,690

5.40

3.80

Third Five Year Plan

386,000

250,000

136,000

270,110

171,290

98,820

5.40

3.80

Fourth Five Year Plan

620,000

347,000

273,000

598,480

274,083

324,397

5.00

4.15

1.2 Review of Fourth Five Year Plan (1990-95)

1.2.1 The Fourth Five Year Plan (1990-95) was launched in July, 1990, but the draft Plan had to undergo several revisions before it was formally approved by the government in June, 1995. The Plan outlay was reduced from Tk.689.30 billion to Tk.620 billion. The Plan placed emphasis on poverty alleviation and meeting the basic needs of the people with particular focus on human resources development, women in development and environmental sustainability. The main objectives of the Plan were: (a) accelerating economic growth to achieve an overall annual GDP growth rate of 5 per cent, (b) poverty alleviation and employment generation through human resources development and (c) increased self-reliance.

1.2.2 The allocation for the public sector was Tk.347 billion (56%) while that for the private sector was Tk.273 billion (44%). The share of the private sector was kept higher than that in the Third Plan (35%) and the Second Plan (16%) in view of expanding market economy and public resource constraint. To meet the resource requirements, the Plan aimed at raising domestic saving rate to an average of 8.60 per cent to achieve an investment rate of 14.80 per cent and tax/GDP ratio of 9.30 per cent in the terminal year of the Plan.

1.2.3 Growth performance: The average annual growth rate during the Fourth Plan period was 4.15 per cent against the Plan target of 5 per cent. The low growth was due to almost stagnant agricultural production. The growth of the sector was only 0.98 per cent compared with the Plan target of 3.42 per cent. Agricultural growth suffered due to problem with fertiliser distribution and lack of adequate public procurement of foodgrain at support prices. The manufacturing sector showed a modest growth rate of 7.05 per cent against the target of 9.02 per cent. The energy sector, however, accounted for an accelerated growth rate of 15.31 per cent while its target was 9.28 per cent. The public services sector showed some shortfall in attaining the growth target. The housing and other services, however, had marginally higher growth rates. The sectoral growth targets and achievements of the Fourth Plan along with GDP are given in Table 1.2.

1.2.4 Changes in economic structure: There was a marked change in the structure of the economy in the Fourth Plan period. The shares of the manufacturing and services sectors went up further and the share of agriculture declined in line with its historical trend (Table 1.3). The share of the agricultural sector went down to 32.77 per cent in 1994/95 from 41.77 per cent in 1984/85. In spite of these shifts, the economy continued to be dominated by agriculture; so it remained susceptible to natural hazards.