Ensuring sustainability: bangladesh’s need for a green growth strategy

Overview and Development Context

Bangladesh’s development performance over the past 50 years since independence is truly outstanding.  Per capita income grew from less than $100 in 1972 to $2064 in 2020; GDP growth averaged 6.8% per year between 2009-2019 as compared with 4% during 1975-1985; life expectancy surged from 45 years in 1974 to 73 in 2019; adult literacy rate increased from 22% in 1974 to 75% in 2019; and poverty declined from around 80% in the early 1970s to 21% in 2019.  Building on these successes, Bangladesh now seeks to attain upper middle-income status (UMIC) by 2031 and High- Income Country (HIC) status by 2041 (Government of Bangladesh 2020) .  In addition to many policy, institutional and governance reforms, Bangladesh must address upfront the growing cost of environmental degradation and adverse effects of climate change to attain these targets. While past efforts to contain these costs have been helpful, they do not add up to a comprehensive response strategy.  Consequently, the costs have accumulated, and they pose a major challenge to the sustainability of long-term growth.

Data on the true costs of environmental degradation and adverse effects of climate change are scanty.  Yet, some indicative estimates are illustrative of the high cost.  A recent World Bank report states that in 2015 some 27.7% of all deaths in Bangladesh were related to environmental risks, mainly air and water pollution, which is higher than the South Asian average of 25.9% and the global average of 16% (World Bank 2018).  The report estimates that the economic cost of these deaths could be as large as 3.4% of GDP per year. The other costs emerge from land degradation, salinity, deforestation, flooding, riverbank erosion, and water logging (Ahmed 2017a).  The Bangladesh Delta Plan estimates that the loss of capital and productivity could lower GDP growth by 1-1.3% of GDP per year in a moderate climate change environment and by 2-2.5% of GDP per year in an extreme climate environment (Government of Bangladesh 2018) .  In terms of loss of human welfare, district and sub-district level analysis shows that there is a strong positive correlation between incidence of poverty and the intensity of natural hazards (Ahmed 2017b). On average, districts that are ranked as most exposed to natural disasters also show poverty rates that are higher than the national average. Strikingly, of the 15 most poverty-stricken districts, almost 90% of the districts belong to high natural hazard risk categories.  The district of Kurigram that clocked a poverty rate of as high as 70% even after 50 years of independence is a striking example of how climate change and natural disaster can frustrate development efforts unless the problems are addressed comprehensively and on a long-term basis at the source. 

The above suggest that unless the sources of these costs are addressed, the rate of return on investments will fall, GDP growth rate will suffer, and the achievement of the Bangladesh long-term development targets will be jeopardized.  Similar environmental costs were faced by other countries in the past, and many have responded by adopting a green growth strategy.  Notable examples from the Asian region include Korea, Vietnam, China, and Malaysia.  Korea is most advanced and green growth is now embedded as an essential component of development planning. The idea of a green growth strategy is to make the national growth strategy consistent with long-term environmental sustainability by ensuring that the growth strategy makes sustainable use of natural resources, avoids environmental degradation, and builds in offsetting policy measures to fight the adverse effects of climate change.  

The Bangladesh Approach to Green Growth Strategy

There is a populist perception in Bangladesh that since global warming and associated adverse effects of climate change are largely the result of bad development policies of industrial countries, these countries should pay for their past wrong doings.  It is argued that with low per capita carbon footprint, Bangladesh should not be burdened with the need to manage its own carbon emission.  Instead, the Bangladesh policy focus should be to fight for greater green financing from advanced countries to help tackle the adverse effects of environmental degradation and climate change.

Unfortunately,  this line of argument as unhelpful and is inappropriate advice to policy makers.  While industrial countries should take responsibility to ease some of the pain for low-income economies caused by the past neglect of carbon emission control in their development strategies and policies, countries like Bangladesh cannot simply wait for these resources to come by. The track record of global climate financing availability to meet the needs of developing countries is poor.  Importantly, the underlying sustainable development agenda for Bangladesh is not just a matter of mobilizing resources, it  requires a comprehensive approach to integrating the green agenda with the long-term development agenda of the country as a whole.  The ability to sustain the cherished development outcomes involving higher income, lower poverty and good quality of life require integrated and concerted policy actions at the national level.  The green growth agenda is an integral part of the Bangladesh overall development agenda, and its implementation is linked with concrete outcomes that have a determining effect on the peoples’ welfare. While Bangladesh should actively pursue all options to mobilize green financing from global sources, it must not wait for this financing to come by.  Instead, it should prepare and implement a long-term green growth strategy to reduce poverty, increase income, improve human welfare, and ensure the sustainability of development.

Status of Bangladesh Green Growth Strategy

Thankfully, the Government has been wiser and not fallen prey to the populist thinking.  Since 2009, Bangladesh has made commendable progress on a number of aspects of the Bangladesh Green Growth Strategy (BGGS) that is reflected in many strategy documents, laws and regulations, investment programs and active participation in associated global fora. Bangladesh is well recognized as an active player in the green global fora and has contributed to the formulation of global green agenda, green targets, and advocacy for mobilizing green funding for developing countries. Bangladesh is also one of the earliest developing country that has mobilized own resources to fight adverse effects of climate change and environmental degradation.  

On the strategic front, the efforts have mainly focused on strategies for sectors that are  environmentally sensitive. The national development plans and budgets have generally tended to treat environment and climate change as free-standing sectoral agendas.  More recently, the Eighth Five Year Plan (8FYP) (Government of Bangladesh 2021), the Perspective Plan 2041 (PP2041) and the Delta Plan BDP2100 have sought to integrate the environmental degradation and climate change agenda in national planning.

The Way Forward with BGGS

Notwithstanding  the progress made so far, it is fair to say that this is just the beginning of the long road ahead and there is much to be done. A review of past experience suggests that along with some success, many challenges remain in further developing and implementing the BGGS .   These can be classified into four broad categories: Strategy; Policy; Financing; and Institutions.

Strategy:  On the strategic front, much of the current effort has concentrated on developing free-standing strategies and policies that are narrowly focused on certain aspects of environmental degradation (e.g., forestry, agriculture, water, industry) but not well-linked or integrated with the national development strategies (Ahmed 2017a). A beginning was made with the Delta Plan and then further enhanced in the PP2041 and the 8FYP.  But there are many aspects and inter-linkages between environmental degradation and climate change and the national development strategy that are left vague and need further work.  Importantly, these integrative efforts have not been followed through with implementable action plans as was the case with the Korean Green Deal of 2009 that spelled out Green Deal Action Plans for implementation on an annual cycle.

Policies:  This is the area where the gap is particularly large. Prevention of environmental degradation and climate change management policies in Bangladesh are rather few and narrowly focused on a specific issue (e.g., relating to the brick kiln air pollution management; high tariff on imports of certain pollutants; the plastic ban; the ban on two stroke engines, etc).  It is well known that sustained progress with the green agenda will need a broad-based policy framework involving fiscal policy, trade policy, infrastructure policy, pricing policies for public utilities, public investment policies, water management policies, industrial policies, agricultural policies, etc) (Ahmed 2017a). These policies will need to ensure that private investment, production, export and import decisions are consistent with the green development strategy.  

Presently, for example, much of the environmental fiscal policies are missing (Ahmed 2018).  Energy pricing policies continue to subsidize fossil fuel and are therefore inconsistent with carbon management and incentives for renewable energy (Ahmed and Khondker 2018). Public investment in transport favors the most expensive and environmentally damaging road transport as against the least cost and most environmentally friendly inland water transport.  Agricultural policies subsidize use of carbon unfriendly diesel fuel and water polluting fertilizer and pesticide.  Water pricing policies prevent cost recovery leading to poor O&M, huge water loses, and inadequate incentives for private water supply.  Absence of implementation of polluter pays principle results in excessive pollution of air and water.  One can go on.  These conflicting policies with the green agenda are the direct outcome of the de-linking of the development agenda from the green agenda.    

Investments:  The growing fragility of the fiscal situation in Bangladesh has rendered almost impossible the ability to finance any meaningful programs to fight environmental degradation and climate change.  The tax to GDP ratio has now collapsed to below 8%.  With an estimated 5% of GDP committed to fixed expenses for running public administration, interest cost to service public debt and security spending for law and order and national safety, there is very little left for anything else.  Fiscal deficits of 5-6% of GDP account for the large chunk of spending in infrastructure, education, health, water management, agriculture,  and social security.  The resource constraint has gotten so deep that even after three years of adoption of the Delta Plan, public investment in water is a mere 0.7% of GDP.  The fiscal constraint is a much broader development challenge.  But unless this is addressed, it will be very difficult to make progress on the green agenda.  It is hardly surprising that a key policy implementation  of the Korean Annual Green Deal Action Plan comprises of substantial public investment programs in focused green growth areas. 

Institutions:  A final constraint that has to be addressed much more substantially is the weakness of institutions.  First, Bangladesh does not have a legally binding enabling framework for green growth.  In Korea, the Green Deal strategy adopted in 2009 was provided the force of law by enacting the Framework Act on Low Carbon Green Growth in January 2010.   Secondly, presently, in Bangladesh the Ministry of Environment, Forest and Climate Change serves as the coordinating ministry for environment and climate change. It has limited capacity, small budget, no inter-ministerial coordinating authority, it is disconnected from the Ministries of Finance, Commerce and Planning, and has limited policy implementation, enforcement, and monitoring capacities (Ahmed 2017a).  As a result, the green agenda is not well integrated with the development agenda, and even the established environmental standards and regulations are not well implemented.  In Korea, for example, the coordination of Green Deal priorities, investments and implementation are provided by the high-level Presidential Committee on Green Growth (PCGG).  Thirdly, another missing institution is the absence of a well- defined role for local government institutions (LGIs).  This is of course a reflection of the broader issue of the absence of decentralized LGIs in Bangladesh.  In Korea, for example, the PCGG comprises of representatives from the private sector, national government, and the local government. The full involvement of all stakeholders is a key factor for the success of the Korean Green Deal.

Conclusion

Clearly, Bangladesh  has a long way to go in developing and implementing a fully fleshed out green growth strategy. But it is never too late, and the efforts need to be re-doubled now. The 8FYP provides an important vehicle to energize the BGGS and develop an Action Plan for implementation on an annual cycle along with necessary institutional and financing support. As noted, a critical constraint to BGGS is the acute shortage of resources. Much of this will need to come from domestic sources.  The PP2041 has developed a thoughtful Medium-to-long-term Fiscal Framework (MLTFF) with strong focus on enhancing domestic tax and non-tax revenues. The 8FYP provides the first phase of the implementation of this MLTFF.  While Covid-19 has slowed down GDP growth, the associated tax and non-tax revenue reforms are critical for a recovery of medium-term growth and financing of sustainable development. Implementation of a solid Environmental Fiscal Reform (EFR) package will need to be an essential element of the BGGS (Ahmed 2018; Ahmed and Khondker 2018). 

References

Ahmed, Sadiq. 2017a.   Background Paper on the Determinants of a Green Growth Strategy for Bangladesh. Economic Dialogue on Green Growth (EDGG) Paper No. 5, Adam Smith Institute and UKAid, Dhaka.

Ahmed, Sadiq, 2017b. “Climate Change, Vulnerabilities and Poverty” Chapter 6 in Evidence Based Policy Making in Bangladesh, Policy Research Institute of Bangladesh, Dhaka. 

Ahmed, Sadiq. 2018. Environmental Fiscal Reforms in Bangladesh. EDGG Paper No. 7, Adam Smith Institute and UKAid, Dhaka.

Ahmed, Sadiq and Bazlul Khondker. Towards a Carbon Tax in Bangladesh.  EDGG Paper No. 9, Adam Smith Institute and UKAid, Dhaka.

Government of Bangladesh. 2018. Bangladesh Delta Plan (BDP) 2100, Volume 1 Strategy. General Economics Division, Planning Commission of Bangladesh, Dhaka. 

Government of Bangladesh. 2020. Making Vision 2041 A Reality: Perspective Plan of Bangladesh 2021-2041. General Economics Division, Planning Commission of Bangladesh, Dhaka

Government of Bangladesh. 2021. The 8Th Five Year Plan of Bangladesh FY2021-FY2025: Accelerating Growth, Promoting Prosperity and Fostering Inclusiveness. General Economics Division, Planning Commission of Bangladesh, Dhaka

World Bank. 2018.  Enhancing Opportunities for Clean and Resilient Growth in Urban Bangladesh. World Bank, Washington DC