Privatisation for Poverty Reduction : The case of Bangladesh

Abstract

The shift in the last two decades from a state-led to a market oriented development strategy in most of the developing countries under the directions of the World Bank and the IMF has had its repercussions on policy making for poverty reduction. The role of the state has been redefined both in terms of its stance in the market and the ways in which it intervened in the process of redistribution. In the meantime, the concern over the persistence and/or rise of poverty in many LDCs and transition economies in the 1980s and 1990s led various parties to reconsider the relationship between economic policies and social objectives. The two major actors of policy making in developing world, i.e. the World Bank and the IMF, revised the nature of their policy conditional lending. The primary focus on stabilization and structural adjustment (SSA) shifted in a seemingly significant way to a strategy of poverty reduction. SSA packages have been replaced by the Poverty Reduction Strategy Papers (PRSPs) after the late 1990s. Although the latter were designed by the governments in each country, they, in many ways, encompassed the standard SSA policies. Invariably, poverty reduction strategy papers of individual economies included privatisation of state owned enterprises (SOEs) as an essential component of the poverty reduction process. SOEs have been viewed to be draining the resources of the nations (because of overstaffing, excessive budgetary support, loss making and inefficiency) which can be more productively used for crucial social purposes e.g. poverty reduction. In this paper, we aim to revisit the process of privatisation with a view to explore its implications for poverty reduction in the context of a low-income country, namely Bangladesh. The first part presents an overview of the issues with respect to privatization in general terms. The subsequent sections evaluate the process of privatization in Bangladesh in view of its impact on employment, revenue generation and efficiency.