| Why
does South Asia remain one of the world's most impoverished
regions? |
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For
the past decade, South Asia has been among the world's fastest
growing regions. Yet it remains among the most impoverished. With
half a billion of its people living on less than a dollar a day,
the region is home to 40 percent of the world's poor.
The incidence of poverty throughout
South Asia has changed little over the past decade both a cause
and consequence of the region's low level of human development,
and in particular the low status afforded to women. Despite
improvements in education and health services, South Asia still
has the world's highest adult illiteracy rate (35 percent of men
and 59 percent of women) and one third of the world's maternal
deaths. More than half of the region's children under 5 years are
malnourished. Environmental degradation, inadequate infrastructure,
and social exclusion are among the many other obstacles to future
growth and poverty reduction
Sustained economic growth is critical
for reducing poverty in South Asia. After years of inward looking
economic policies and tight regulation, sweeping reforms in the
1990s led to a period of accelerated growth. South Asia's GDP
growth rate reached 5.4 percent in 1999, making it the fastest
growing developing region for the second consecutive year. This
achievement, despite a climate of regional and national political
instability, is an indication of South Asia's potential dynamism.
However higher, and sustained growth, with more equitable
distribution of benefits, is essential to substantially reduce the
number of poor people in the region.
In the 1990's, South Asian nations
also began taking measures to reduce tariffs, remove trade
barriers, and dismantle restrictions on domestic and foreign
private investment. However increases in conflict and political
instability, which intensified in the past year, have limited the
region's ability to attract the foreign investment critical to
growth and poverty reduction. Tensions between Pakistan and India
over Kashmir continue to take a toll on lives, command large
defense expenditures, and keep G7 sanctions in place following
nuclear weapons tests in 1998, while a military coup in Pakistan
in October 1999 created further uncertainties. Elsewhere in the
region, a sharp escalation in the scale of the Sri Lankan civil
conflict caused an interruption in renewed mediation efforts;
political strikes continue in Bangladesh, costing the economy an
estimated US$60 million for each day lost; and political
instability continues in Nepal. As a result, South Asia still
receives only 1 percent of the total gross capital market flows to
developing countries.
South Asia's long-term economic
prospects will hinge upon much needed reforms in the key sectors
of banking, power, and infrastructure, and commitments to lower
remaining trade barriers, improve public spending, and reform
state enterprises. Improved governance, including stronger
regulatory reforms and increased transparency, is a critical
challenge for the region if it is to achieve its long-term
development goals. With greater political stability, accompanied
by a commitment to sustained reforms, South Asia could be a region
of considerable promise as it begins the new millennium.
SOUTH
ASIA AND THE WORLD BANK GROUP
The World Bank provides a combination
of financing, advice and technical assistance with emphasis on
three key dimensions: (i) the need for sound economic policies to
promote growth (ii) the importance of institutional development,
supporting good governance, and policies supporting poverty
reduction and human development, in order to achieve equitable
distribution of the benefits of growth, and (iii) a holistic
approach to address multidimensional poverty, reaching across
sectoral boundaries and engaging governments, other country
partners and donors in a coordinated effort to ensure maximum
impact on poverty reduction.
Following Africa, South Asia is the
largest regional recipient of concessional lending from the
International Development Association (IDA), the World Bank's
affiliate that provides interest free loans to the world's poorest
countries.
The region includes some of the Bank's
oldest and largest borrowers. India, Pakistan, Afghanistan, and
Sri Lanka have been members since the 1950s. Nepal became member
in 1961, followed by Bangladesh in 1972, the Maldives in 1978, and
Bhutan in 1981.
India is the largest single recipient
of World Bank assistance, with cumulative lending over $53 billion
at the end of fiscal year 2000 (FY00). Pakistan, with around $12
billion, and Bangladesh with around $9 billion, have received
substantial amounts and the Bank also has active programs in Sri
Lanka, Nepal, Bhutan, and the Maldives.
Lending
Commitments
In FY00, new World Bank lending
commitments to South Asian countries was $2.1 billion for 21
projects. This includes $1.2 billion in IDA credits and $934
million in market based loans from the International Bank for
Reconstruction and Development (IBRD).
India was the World Bank's largest
borrower in FY00 with new commitments totaling $1.8 billion ($866
million in IDA credits and $934 million in IBRD loans) for 11
projects. Bangladesh received $172 million (all IDA credits) for
four projects; Sri Lanka, $45 million in IDA credits for two
projects; Nepal, $55 million in IDA credits for one project;
Bhutan $22 million in IDA credits for two projects, and Maldives,
$18 million in IDA credits for one project. There was no new
lending to Pakistan in FY00, however the Bank continued to engage
in high level policy dialogue with the new government on a wide
range of macroeconomic and structural issues.
The South Asia lending portfolio of
ongoing projects, as of July 1, 2000, includes 148 operations
valued at nearly $17.8 billion. The largest portion of this
lending (in dollar terms) was for rural development programs,
accounting for 22 percent of the portfolio. This was followed
closely by the energy and infrastructure sectors, each accounting
for around 20 percent. Social sector lending for population,
health, and nutrition (17 percent) and education (12 percent)
represent an expanding part of the portfolio.
Fighting
poverty at the grassroots level
As part of a Bank wide trend, the
South Asia Region has placed increasing emphasis on listening,
learning and collaborating at the local level and helping to
design projects which both involve and benefit those most in need.
The region has placed growing emphasis on involving local
communities in the planning, financing, and operation of
development projects. With NGO support, projects in areas such as
agriculture, urban water supply and microcredit funds are
encouraging local level initiatives to ensure that poor and
marginalized groups can participate in the employment and income
opportunities generated by growth. The Bank is supporting several
new and ongoing initiatives aimed directly at poverty reduction at
the local level. For example,
· To help poor communities in India
direct their own development, in FY00 the Bank approved the
Rajasthan and Andhra Pradesh District Poverty Initiative projects,
which test a direct approach to improving the living standards of
the poor through small scale subprojects which are chosen,
designed and implemented by local communities. The projects also
aim to increase the voice of these communities to enable them to
receive better service from district and subdistrict governmental
and nongovernmental agencies.
· The ongoing Bangladesh Poverty
Alleviation Microcredit Project channels funds to a
quasigovernment poverty foundation, which provides training and
lends to promising small and medium NGOs that provide small loans
to the poor for income generating self-employment activities. The
project has helped more than 100 NGOs extend microcredit to an
estimated 1.2 million poor, mostly women borrowers.
· A similar microcredit project for
Pakistan was approved in 1999. The Pakistan Poverty Alleviation
Fund project provides microcredit to individuals, and grants for
small scale development projects for some of Pakistan's poorest
communities. The Fund is managed through a public and private
sector partnership and loans and grants are administered by NGOs
which place substantial focus on women in development.
Emphasizing
Human Development
The World Bank's support for the
social sectors (education, nutrition, and health) in South Asia
has increased in the last decade, and focuses on three central
elements: improving the coverage and quality of services;
promoting efficiency and cost effectiveness and expanding
community participation in project design. The Bank's social
sector projects place special emphasis on women and children.
In Pakistan, the Bank is supporting
the government's Social Action Program, its main vehicle for
improving basic services such as health, education and water
supply, along with a separate health project in the northern part
of the country.
In India, the Bank is supporting
health systems development and reforms in several states; national
efforts to fight diseases with significant public health impact,
family welfare, reproductive and child health, and nutrition
projects.
The Bank has also provided two IDA
credits to support India's National AIDS Control Program in
collaboration with the World Health Organization, other donors and
UNAIDS. Through its general health projects and dialogue with
other South Asian countries, the Bank is focusing on HIV/AIDS as a
major public health and development issue. In India, the Bank is
supporting the country's ongoing program to reduce the growth of
HIV infection and strengthen capacity to respond to the epidemic
through information awareness efforts, focused interventions
promoting behavior change, voluntary testing and counseling, and
reducing transmission by blood transfusions and occupational
exposure. Bangladesh is developing, with World Bank assistance, a
project that will help the country invest in cost-effective
prevention, which aims at maintaining low prevalance of HIV.
In Bangladesh, the Bank is supporting
government efforts to reduce malnutrition in women and children,
while the Bank assisted Health and Population Project is
supporting healthcare reforms, expanding access to essential
services for the poor, improving maternal and child health,
reducing the burden of infectious disease, and improving family
planning services.
Similarly, other health programs are
benefiting millions of families in Nepal and Sri Lanka.
In the education sector, the Bank's
strategy emphasizes outcomes and learning achievements that are
valued by markets and society. The focus on primary education
remains a high priority . Working with governments and other
stakeholders to build capacity for more effective programming,
better resource allocation, and reform of higher education are
other key areas.
The Bank is currently providing
assistance to Pakistan's Northern Education Project, which aims to
improve the quality of education and expand enrollment, especially
for girls, in the disadvantaged and remote mountainous regions.
The project is also fostering community involvement in school
management, and is expected to benefit more than one million
elementary school aged children.
In Bangladesh, the Bank is supporting
operations to improve the quality of primary education, increase
female enrollment at the secondary level, and provide informal
education to promote literacy. The Bank is also sponsoring
education projects in India, Bhutan, Nepal, and Sri Lanka.
Supporting
Private Investment
To help meet the region's massive
infrastructure requirements, the Bank encourages expanding private
sector participation in the funding and management of basic
infrastructure such as power, telecommunications, natural gas, and
transport. The Bank has recently stepped up its support for urban
development projects that focus on strengthening urban planning
and finance, and improving transport, infrastructure, and other
service delivery (particularly for the poor) through involvement
of the private sector.
In Pakistan, the Bank has provided
support for the commercialization and eventual privatization of
portions of the National Power Authority; creation of a Private
Sector Energy Development Fund; joint ventures; and the
restructuring and privatization of the telecommunication sector.
In FY00, the World Bank approved a US$ 500,000 Institutional
Development Fund grant to assist the Government of Pakistan with
its reform programs in the oil and gas sector. The grant will help
Pakistan establish a regulatory framework and an independent
regulatory body key prerequisites for eventual privatization of
Pakistan's oil and gas utilities.
In India, the new Uttar Pradesh Power
Sector Restructuring Project will help establish new legal,
regulatory, and institutional frameworks; create new power
corporations; and launch preparatory work for privatizing the
power distribution business.
Also in India, the new Bank supported
Telecommunications Sector Reform Project seeks to promote private
investment and competition in the sector by strengthening elements
of the policy and regulatory environment.
In Bangladesh, the Bank is helping to
build support for fundamental long-term energy sector reform and
foster a greater role for the private sector in power generation
and distribution and gas exploration and development. The Second
Rural Roads and Markets Project is improving rural transport and
trade infrastructure by taking advantage of the opportunities
presented by the newly commissioned Bangabandhu Jamuna Bridge (the
country's largest infrastructure project), which links the
northwest region with the rest of the country.
The Bank is also supporting a Private
Sector Infrastructure Development Project in Bangladesh, which is
providing both funding and technical assistance to promote greater
private sector participation in power, gas, water supply,
telecommunications, and transportation.
In Sri Lanka, the Private Sector
Infrastructure Development Project and the Telecommunications
Regulation and Public Enterprise Reform Technical Assistance
Project are setting up systems to facilitate private investment in
services that before had been provided by the state. The Sri Lanka
Energy Services Delivery Project is encouraging the use of
environmentally sound renewable energy technologies through the
private sector.
In Nepal, the Bank is helping the
government to formulate a Power Sector Development Strategy to
improve the efficiency and financial viability of the power sector,
increase power trade, and promote private sector investment. It is
also helping to reduce transportation costs associated with trade
by establishing an inland container depot for rail transfers,
upgrading depots, and streamlining trade and transit procedures.
The
International Finance Corporation (IFC)
The World Bank Group's private sector
lending affiliate also invests in private sector development in
the region. The IFC's strategy focuses on enhancing competition
and improving the quality of goods and services by supporting
firms with potential for world class performance. Special emphasis
is placed on exports.
The IFC is working to accelerate
private participation in infrastructure and is also intensifying
its efforts to support private financing of health and education.
It is also helping to expand and modernize South Asia's
agro-industrial base by supporting firms that focus on export
production or efficient import substitution.
In addition, the IFC provides support
to strengthen basic financial institutions and emerging capital
markets in the region, and to develop more sophisticated equity
and local debt markets in economies with established comprehensive
financial systems.
Protecting
the Environment and Natural Resources
The Bank is supporting efforts by
South Asian countries to promote development that is
environmentally sustainable and environmental lending as a
percentage of the total portfolio has been increasing in recent
years.
In India, for example, the Bank is
providing assistance to strengthen the monitoring of and
compliance with environmental laws and standards, especially
focusing on the mining sector, air pollution, and coastal and
marine area management. It is also supporting state pollution
control boards. In Sri Lanka, the Bank is supporting the
Environmental Action Project.
In Nepal, India and Bhutan, the Bank
has helped to address deforestation and preserve biodiversity
through programs promoting community management of forests.
Village communities work with forestry department staff to map out
a plan of local forest management that balances conservation with
harvesting the forest products they need for their livelihood. In
Bangladesh, the Bank and the Global Environment Facility (GEF)1
are supporting environment friendly and sustainable fisheries and
shrimp farming.
Moving
Closer to Clients
The Bank has continued efforts to
improve the quality of its products and services in South Asia, to
ensure greater participation of stakeholders in operations, and to
work more closely with partners. Five South Asia country directors
and 60 percent of World Bank staff working on the South Asia
region now do so from the Bank's five country field offices. This
has helped foster closer relationships with clients and helped to
ensure that the region's cultural, political, and social
dimensions are taken into account in the Bank's work. Management
of lending and non-lending services has been more evenly divided
between headquarters and field offices.
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