Introduction:

The world economy has just experienced the worst global financial crisis since the Great Depression. While major world economies have taken a massive hit resulting in negative growth rates in key countries or regions, including the US, EU and Japan, the infection also spread to emerging developing countries like China, Brazil, India and South Africa, as well as to the countries of South East Asia and Latin America (although the effect was not as much as US, EU & Japan). The magnitude of impact seems to depend on the extent of integration with the rest of the world (or to use World Bank jargon, the extent of liberalization that has taken place). The impact on LDCs like Bangladesh has been soft in the first, and even the second round. However, there is growing evidence that third round impacts are making themselves felt, manifested in declining exports, declining migration of labor (caused due to recent middle-east unrest), growing number of sick industries, industrial unrest, and reduced growth. There are also fears that poverty and unemployment may be exacerbated and MDG targets could become jeopardized. Countries like Bangladesh are interested in understanding the socio-economic impact of the global financial and economic crisis as well as policy options to cope with emerging challenges. This study addresses itself to the task of assessing the unfolding impact of the Global Financial Crisis on Bangladesh. There is a agreement that the chief transmission mechanisms relevant for Bangladesh are quite limited, operating through the impact on exports, remittances and labor exports, and imports. These could also lead to second order effects operating through lowering of growth, balance of payment and budgetary effects, as well as micro effects on employment and poverty. Flows of FDI and ODI (including food aid) have dwindled as well, leaving LDCs like Bangladesh to deal with the crisis on their own. And a recent Tsunami & earthquake hit at Japan may further decrease the aid inflow in Bangladesh. A saving grace has been the lack of a liberalized capital account in Bangladesh, which prevented dramatic capital outflows, and has not contributed to increased vulnerability.

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The possibility of an adverse impact on agriculture has not been raised in the current debate. However, low world and food prices arising from a volatile international market, has caused agricultural prices to be depressed, especially since Bangladesh imports significant quantities of agricultural produce, including cereals, from time to time. The current rice price situation suggests that the problem of farm incentives is a serious concern.

Governance
For the next 15 years the Asia-Pacific region will have to continue confronting the governance implications of the triple challenges of managing rapid urban growth, sustaining high levels of economic development, and eradicating urban poverty and inequality. With more than half of its population residing in cities and over 33 cities with population greater than 5 million in the coming decade, the region will have to reinvigorate the various initiatives being taken in promoting and enhancing effective decentralization and to consolidate the functioning of municipal authorities in meeting the demands of a rapidly rising population. At the same time, for sustaining the high levels of economic growth, which a number of countries are currently experiencing, the mechanisms that apply in enabling cities to serve as engines of growth and development will also have to be further consolidated. In this regard, effective governance to address globalization issues is thus increasingly dependent on peoples participation in decisionmaking and implementation of activities that affect their livelihoods. Systems and institutional mechanisms that nurture a partnership between public, private and civil sectors in service delivery, infrastructural development, as well as in producing means of livelihood within urban centers will need to be developed. Similarly, the regulatory and oversight frameworks which allow the private and community sectors to generate means of livelihood will have to be attended to and realigned. The capacity of city administrators will need to be enhanced to capitalize on the positive aspects of globalization and mitigate its negative effects. As much as a number of countries in the region have put in place programmes for achieving the Millennium Development Goals (MDGs), urban poverty and the inequities associated with it, will remain a challenge in the next 15 years. The governance repercussions for the resilience of urban poverty will compel Member States to give a high priority to the development of pro-poor
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policies in urban development; to the process of giving voice and empowering neighbourhoods and communities; and generally to promoting inclusiveness in accessing and harnessing urban resources and services and benefiting from urban development. Important levers for overcoming the above challenges in the governance of Asia-Pacific cities in the next 15 years includes the deployment of Information and Communication Technology and the use of planning and application of Management/geographical information systems, including addressing the urban environment-poverty links for ensuring sustainable and inclusive urban development. Indeed, the region is poised to become the worlds dominant economic powerhouse during the twenty-first century. With over 50 per cent of its population predicted to be urbanized by the year 2025 (the Pacific is already over 70 per cent urbanized) the future of the region, will be largely dependent on how well cities function as systems. The functioning of these systems is ever more important given that most value added economic activities will be located in urban areas (ESCAP 2005). Furthermore, it is increasingly recognized that, as globalization proceeds, more cities will find themselves managing problems and opportunities that used to be the exclusive domain of national governments. As more cities acquire populations and economies larger than those of many countries, cities will increasingly become the main players in the global economy. To squarely meet the challenges and maximize the opportunities afforded by urbanization, efforts to achieve sustainable urban development holistically must be strengthened. Similarly, urban governance has become a renewed opportunity frontier to address existing and emerging challenges for countries of Western and Central Asia as well as the Pacific Islands as they grapple with the challenges of growth, poverty reduction, liberalization, reconstruction and even transnational migration. There are, therefore, in all these cases, large dividends to be gained from an effective engagement in the governance frontier (Rahman & Robinson)

Economic Growth in Bangladesh

In the 1960s, the then East Pakistans economy grew by an annual average rate of around 4 per cent. About a fifth of that economy was destroyed during the Liberation War of 1971, and severe dislocations caused at that time left Bangladesh on a slower economic growth trajectory for the following two decades. Then the economy accelerated sharply from 1990.

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The solid grey line shows actual path of GDP. Dotted lines are hypothetical trend paths based on: 1960s trend (green); 1970s/1980s trend (red). Source: Bangladesh Bureau of Statistics, World Bank.

Had it continued to grow at the 1960s pace in the decades since, Bangladeshs GDP would have been 10 per cent higher by 2009? On the other hand, if not for the post-1990 acceleration, the Bangladesh economy would have been 29 per cent lower in 2009 than the actual. The implications of an even a small but sustained increase in economic growth is self-evident. Therefore, it is natural to ask whether another sustained economic acceleration is possible.

After suffering major setbacks in levels during the Liberation War and a slowdown in growth in its aftermath, Bangladeshs economy has accelerated since the end of the 1980s. Economic growth has also become less volatile over time. Finally, GDP per capita has increased steadily in recent decades. In 2009, GDP per capita was about 21,000 taka (in 1995 prices). Had the 1980s growth rate persisted, the average Bangladeshi would have been about 7,100 taka worse off (or a

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third poorer) in 2009.

The columns represent annual growth; the black dotted lines represent annual average growth over the 1960s, 1972-90, and since 1990; the red line represents annualized growth over the previous five years. Source: BBS, World Bank.

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The IMF data are for calendar years. The consolidated measure is derived by dividing the GDP series presented in Charts above by the United Nations population estimates. Source: BBS, World Bank, United Nations, IMF.

The GDP growth rate has been consistently over 6 percent over the last few years despite a number of weather related shocks emanating from cyclones and floods. There is considerable speculation about what impact the GFC will have on GDP growth with widely different figures emanating from different institutions. The World Bank suggested that growth could decline to 4.5 percent while most other observers had put the figure at 5.5 to 5.8 percent. Preliminary estimates now available from the Bangladesh Bureau of Statistics (BBS) put the figure at 5.88 percent for FY 2008-09. This is the lowest GDP figure posted in the last five years, and is significantly less than the target (6.5 percent). Most observers however feel that this is a commendable performance in the backdrop of the GFC following on sharp fluctuations in world food and fuel prices, high inflation levels, and low investor confidence. To put it in context, the deceleration in GDP in Bangladesh was much slower, compared to e.g. India and Vietnam (CPD-IBRD 2008-09).

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The sectoral composition of the economy has changed significantly over the past five decades. Agricultures share of the economy has nearly halved from about two-fifths in the early 1960s. The share of industry, on the other hand, has doubled since the early 1970s to about 30 per cent. Services have steadily accounted for about half of the economy since the 1970s. The economic acceleration of the past couple of decades has occurred nearly evenly in the industry and services sectors. Services have contributed particularly strongly to growth in the current decade.

Source: BBS, World Bank

Tangible sectors of the economy (largely agriculture and manufacturing) posted a moderate growth of 5.38 percent while the intangible sectors (e.g. services) recorded a 6.2 percent growth. The contribution of industrial sector to GDP was around 29 percent, with agriculture accounting for around 16 percent. Services, on the other hand contributed close to 51 percent to the GDP. Overall, the performance of agriculture was striking at 4.7 percent growth, even higher than the official target, with the crop sector posting a growth of almost 6 percent helping immensely to shore up a worsening food security problem. While services overall performed well, three out of the nine sub-sectors experienced relatively poor performance, in particular for wholesale and retail trade, transport and communication, and financial intermediation.

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Investment
After being set back sharply during the Liberation War, investments share of GDP rose in the late 1970s, before stagnating during the 1980s. Since the end of the 1980s, investment has risen steadily relative to GDP, albeit the pace of the rise has eased in the current decade. Higher investment-to-GDP ratio means more capital in the economy. According to the neoclassical growth model, capital accumulation should lead to a higher level of income in the steady state, whereas in some endogenous models of economic growth, capital accumulation can lead to a faster steady state growth rate. In either case, steadily rising investment-to-GDP ratio since the end of the 1980s, all else being equal, would have been expected to raise Bangladeshs economic growth in the medium term.

Growth in gross capital formation increased by 5.72 percent, significantly above the rate achieved in the preceding year (1.8 percent) however, this remains lower than the longer run trend of 8-9 percent. Investment as a percentage of GDP is just over 24.2 percent, marginally lower than the target set under the MTMF of the PRSP at 24.4 percent. It has tended to decline in recent years, mainly because of a decline in public investment. To put it in context, Bangladeshs investment rate is low compared to regional standards (e.g. India invests 40 percent of GDP) and well below the savings rate of 32.3 percent, implying substantial potential to scale up investment if the right conditions are in place. The current climate however has dampened investor confidence, arising out of a number of bottlenecks relating to infrastructure, an uncertain world market, and most crucially, an acute energy crisis.

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Source: BBS, World Bank.

Public Finance/Budget
Total revenue collection in 2008-09 is estimated to fall short of target by around 2 percent (CPDIRBD), mainly due to the shortfall experienced in tax revenue collection by the National Board of Revenue (NBR). In fact, non-NBR tax revenue is estimated to have exceeded the target set very comfortably, although non-tax revenues also dipped into the red. The revenue collection effort of the NBR has certainly been constrained by international forces, first stemming from the sharp rise in food and fuel prices (causing Bangladesh to reduce duties on many food items), and secondly, in the wake of the GFC, which led to a collapse in world commodity markets and reduction in import-based duties and taxes (which account for more than 40 percent of tax collection). Collection of import duty is estimated at 2.3 percent in 2008-09 against a target of 13.1 percent. Similarly, achievement by way of supplementary duties was very poor. However, these losses were compensated to an extent by growth in income tax collection (over 20 percent compared to a target of only 11 percent). On the basis of projected revenue earnings and expenditures for 2008-09 and 2009-10, the size of the budget deficit is estimated to be 3.19 percent of GDP in 2008-09 (down significantly from 4.18 percent in the preceding year) rising to 4.5 percent in 2009-10. This suggests that the
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government would need to be ready to deal with a significantly larger deficit in 2009-10, because of a large budget designed to meet the challenges of the global economic crisis. It would be important to carefully balance financing the budget from bank and non-bank sources and through foreign financing. While the government has generally opted to go for more non-banks financing, its ability to use foreign financing has tended to be poor. Budget expenditures for 2008-09 have also been well below target. The major expenditure accounts are interest (19.8%), education (17.7%), public services ((14.6%), agriculture (11.5%), defense (8.8%) and public order and safety (8.6%). In the light of the GFC it will be important to scale up expenditures and improve utilization of the ADP during the next fiscal. A concerted effort is urgently needed to improve utilization rates.

Money and Inflation

The spiraling inflation that was observed over 2006-08, led mainly by volatile world markets especially for food and energy products, was tamed by bumper rice harvests in the country combined with a slump in world markets in the wake of the global recession. The current worry is not so much with high inflation rates (which has come down from 11 percent in July 2008 to 5-6 percent in July 2009) and containing the money supply but in fact with low prices for farm produce that is acting as a disincentive for future production. The response of the government has been to expand subsidies (for fertilizer, fuel, credit). However, the government also needs to be ready to deal with re-emerging inflationary pressures once the recession eases off and world commodity markets rebound, towards the end of fiscal 2009-10. Years 2002-03 2003-04

Item

2000-01

2001-02

200405

200506

Rate of Inflation In Bangladesh (Meseared By CPI) Base: 1995-96

1.66

3.58

5.03

5.64

7.35

7.54

Source: Economic Trends, Statistics Department, Bangladesh Bank.

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Credit
The demand for credit has remained sluggish in the economy, especially from the private sector. Credit to the government sector grew at a modest rate but private sector credit declined, leading to excess liquidity in the banking system. Indeed, the level of liquidity increased by over 60 percent in 2008-09 compared to the preceding period, due to several factors: (a) the demand for import credit declined in the face of lower import prices, (b) uncertainty in the world market has led the private sector to postpone investments, and generally to adopt a more conservative approach, and (c) government expenditure during 2008-09 has also been low. However, the most important reason behind the reluctance of the private sector to invest is the energy crisis that has hit the country, which is a domestic issue and has little to do with the GFC. Indeed, one might argue that if energy did not act as a constraint, Bangladesh could have reaped significant gains from the GFC by reaching out to new markets and undertaking strategic investments in upgrading technology and equipment.

Interest Rate
In the light of slackening demand, the supposedly high interest rate charged by banks in Bangladesh has come in for a lot of harsh criticism. Recently, the Bangladesh Bank asked all commercial banks to limit the lending rate to 13 percent (from 15.5 percent previously). Some banks responded by lowering the interest rate on fixed deposits, leaving the average spread only slightly reduced, despite a significant drop in the inflation rate. The high lending rates are blamed on inefficiency, market segmentation and lack of competition although no systematic analysis has been conducted to actually examine this issue. Preliminary analysis by BIDS actually does not suggest that the spread is too high although others consider it to be one of the highest in the world (CPD-IBRD, 2009 p.14). The matter will require further investigation but what can be said perhaps with greater confidence is that the interest rate is not a key determinant of the decision to invest in Bangladesh, given the other much more serious constraints that investors must overcome (including energy, and generally costs of doing business).

Exchange Rate
Bangladesh adopted a free-floating exchange rate in 2003, and is believed to be conducting a policy of managed float, keeping the BDT stable against its main trading currency the BDT.
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The local currency has remained virtually unchanged against the USD since 2006, giving rise to concerns among a segment of exporters that Bangladesh is losing its competitiveness in the light of large losses experienced by the USD against all other currencies in the wake of the GFC. The Bangladesh Bank however feels that there are no grounds for depreciating the BDT since the effect on exports are unlikely to be large, and there may be adverse effects of higher import costs that could negate any gains made. Recent research by BIDS-PRP (Hossain and Ahmed, 2009) suggest that there may be some gains from small adjustments to the exchange rate a view however that is not supported by all. It is generally felt (although this exercise does not appear to have been conducted) that the exchange rate is at equilibrium and needs little adjustment or intervention.

Foreign Direct Investment

The global flow of FDI fell by over 28 percent in 2008 and is expected to fall further in 2009. FDI to Bangladesh over July-April 2009 was around $900 million a 91 percent increase over the preceding period. Net portfolio investment was negative. Bangladesh has not emerged as an important destination for FDI due to its poor image, inadequate infrastructure, and more recently, the energy crunch. There is considerable potential however, in terms of investments in infrastructure, energy and manufacturing, especially in the light of the very recently approved strategy of supporting public-private partnerships. Given Bangladeshs excellent growth performance, rising incomes (GDP per capita is now around $700) and a more affluent middle class, there is a significant domestic market that would be attractive for many investors.

Foreign Aid
Foreign aid flows to Bangladesh in 2008-09 appear to have remained roughly at the 2007-08 level. However, food aid has declined dramatically. Thus over the period July-April (2008-09), food aid fell to $37.6 million compared to $83.3 million during the same period in the preceding year. The total amount has declined from historical levels of around a million tons to around 80,000 tons this year. Food security has been given the highest priority by the current
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government but given the large volatility often experienced in domestic food production, there is always a threat of crop losses and high domestic price levels. Given the recent volatility seen in world food markets, the government remains worried about food security, and would have welcomed an assurance of some food aid of at least 200,000 tons. There is a fear that low farm gate prices this summer, following on good harvests and low world market prices, will impact negatively on the next winter harvest, and could destabilize the crucial rice market.

Balance of Payments
Foreign trade plays a vital role in achieving rapid economic development of a country. Since Bangladesh is a developing country, foreign trade can be considered of pivotal importance. But unfortunately, trade balance of this country is still very unfavorable. Each year Bangladesh has to spend a huge amount of money for importing consumer goods and materials which is not a positive sign for our country. Bangladesh also spends much more for importing industrial raw materials, but it is a positive signal for our economy as it shows enhanced production of the economy. The countrys requirement of petroleum products is entirely met by import.

During the last five years, current gap in trade balance of Bangladesh is the highest. It is observed from the last five year figures given in Table that the trade gap is widening gradually. With a view to reducing the gap between exports and imports, the Government is trying to boost up the volume of exports by aiding private exporters in many ways. Arrangement of trade fairs at home and abroad is an effective measure of promoting export. Over the last few years, some non-traditional items have been enlisted in the list of exportable commodities.

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BALANCE OF PAYMENTS. Item

2000-01 2001-02

(Taka In Crores) Years

2002-03 2003-04 2004-05

Goods Export Import Trade Balance Services Receipts Payments Net Income Receipts Payments Net
Current Transfer (Net)

34905 45495 -10590 4095 9018.4 -4923.4 525.1 1951.1 -1426 1170.9 11434.4 12605.3 -4334.1

34037.7 44206.2 -10168.5 4964.4 7830.5 -2866.1 287.4 2122 -1834.6 418.8 15848.5 16267.3 1398.1

37587.2 51172.7 -13585.5 5136.7 9149.4 -4012.7 367.7 1513.4 -1145.7 470.3 19416.8 19887.1 1143.2

45534.7 57816.5 -12281.8 5959.1 10340.9 -4381.8 406.5 2723.5 -2317 284.9 21705.7 21990.6 3010

53961.4 72945.8 -18984.4 7506.7 12487.1 -4980.4 729.4 5671.3 -4941.9 220.1 26330.6 26550.7 -2356

Official Private Total Current Account Balance Capital & Finance Account (Net) Capital Accounts Direct Investment Portfolio Investment Other Investment Reserve Assets Total Error and Omissions

1550 940.5 -2 -524.3 1592.7 3556.9 777.2

2353.5 371.5 -31.8 -429.3 -1552.5 711.4 -2109.5

2480.5 532.3 5.6 571.7 -5117.8 -1527.7 384.5

1374.3 2269 31.6 -3700.6 -1343.9 -1365.7 -1644.3

1001.1 4758 0.3 1488.6 -1900.8 5347.2 -2991.2

Source: Economic Trends, Statistics Department, Bangladesh Bank.

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It is evident from the table that the trade gap in 2008-09 had been reduced. In 2007-08, it was 510791 million which had been decreased to 505906 million in 2008-09.

EXPORTS
Bangladeshs export earnings have risen rapidly since the early 1990s. Exports have grown from around 7 percent of GDP in 1991 to around 18 percent in 2006. Two main sources of economic growth have been manufacturing and services, both crucially dependent on the RMG sector. Thus, any impact on the countrys export processing sector, and in particular on the large RMG sector, will adversely affect economic performance.

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The main driver of the export sector is the ready-made garments industry (RMG) which accounts for almost four fifth of our total export earnings. Almost two and a half million people, ninety percent of them women, are employed in the RMG sector. While a large but undetermined number of people are involved in various ancillary and support services e.g. banking, insurance, transport etc. to this sector, the workers are largely drawn from the poorer sections of society. Any adverse effects on the RMG sector will thus have far-reaching implications for the entire economy and society. Bangladeshs export performance held up until July-December 2008-09, but decelerated quite rapidly thereafter. It will be observed from figure below that the export growth rate plunged in Jan-April 2009, clearly marking the impact of the GFC. In other words the second and third round effects of the crisis were beginning to be felt. Half Yearly Growth (%) of Bangladeshs Export (Year-over-Year)

Growth of Exports
Growth of Exports 25.39 23.18 9.22 6.88 24.93 16.70 3.96 Jan-June July-Dec Jan-April* 2009

Jan-June

July-Dec

Jan-June

July-Dec

2006

2007

2008

* Four months average growth over Jan-April2008 Source: Calculated based on data accessed from IFS, 2008 and Bangladesh Bank Although there has been deceleration in export growth, Bangladesh is one of the few countries in the world to achieve a positive growth rate. For example, its performance in the US market, contrasts sharply with that of many other countries in the region. Export growth has turned negative for India, Philippines and Sri Lanka although China and Vietnam have managed to post positive growth rates.

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Bangladesh registered a 12.5 percent export growth in woven products and 25.9 percent export growth in knit products to the US market at a time when US imports of these items actually shrank by 3.6 and 1.6 percent. Overall exports to the US grew by 13.6 percent in the face of a mere 2 percent growth in total US imports over the July-December, 2008 period. This basically indicates that Bangladesh has been increasing its market share in the US apparel market at the expense of competing countries. Quarterly Growth of Exports of Major Items to USA Growth of Exports (Jan-Apr 2009 on Jan-Apr 2008) (Year-on-Year) BD Woven Knit Fish Headgears 12.89 7.35 -14.24 -19.31 -11.61 -12.33 -9.47 USA* China India Pakistan Philippines Sri Lanka Vietnam -28.80 -22.37 110.84 -3.69 -15.44 70.55 -10.76 -42.10 -2.62 8.21 107.78

-13.50 -3.64 -10.01 11.94

-15.52 -21.21 -2.65 -9.72

Home Textile 35.01 Jute Plastics -52.95

-23.25 -24.22 -6.65

-19.76 -39.48

-6.46

Source: Calculated based on data accessed from USITC, June-2009.

By the end of 2009 (1st quarter) we see that except for Bangladesh, all other countries experienced negative growth in the US market (figure 3). Against all this adversity, total Bangladesh exports climbed to 11.38 per cent - further evidence of rising market share for Bangladesh. It may be noted that though Bangladesh experienced double digit export growth in the US market, this was 6.7 percent lower than the preceding quarter indicating that the impact of the crisis was very real. Bangladeshs performance even in the depressed EU market improved in more recent months.

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Thus, in January-March 2009 Bangladeshs export performance to EU market was better than in the US market, and far better than its own performance in the previous quartyer. Except Bangladesh and Pakistan, all other countries exhibit negative export growth to EU market, with the leading role played by woven, knit, headgears, and leather products (1.3). Growth of Exports to EU (Jan-Mar 2009 over Jan-Mar 2008) Bangladesh China Woven Knit Fish Home Textile Headgears Plastics Jutes Rawhide 22.31 23.23 -10.96 6.06 34.91 -13.86 -41.29 -44.00 14.81 25.95 6.94 1.98 3.71 -3.25 India 13.82 -0.48 8.46 0.09 4.70 Pakistan Sri Lanka 19.33 -4.89 -100.00 7.43 15.60 10.18 15.99 13.73 -10.34 11.58 -22.34 -9.49 -46.33 71.90 2.89 -0.53

-31.16 19.31

-34.15 -23.98 298.56 -39.30 -42.72 3.63 -6.06 8.16 -8.63

Leather Products 69.49 Total 18.94

Source: Calculated based on data accessed from Euro stat, 2009 The main advantage of Bangladesh over its competitors is its price. Exporters from Bangladesh have been cutting back on prices further in trying to cope with the crisis. Indeed, unit prices, calculated by dividing value by quantity for the top ten RMG products exported by Bangladesh, reveal that with few exceptions, there is a downward price trend for most categories of products. Exports of jute goods, leather and leather goods and frozen food have been hit hard by the recession. Export of jute goods, for example, declined by 18 percent in the first 10 months of 2008-09 while price and demand declined by 20-25 percent. Despite fears of markets drying up, factories closing down and large-scale bankruptcies in the wake of the global recession, Bangladesh has coped well, especially in the US market. Market share in the EU however has taken a hit in the face of stiff competition from China on the back of withdrawal of quotas on the Chinese and a sharp depreciation of the Euro against the Taka.
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On the positive side, the reputation of Bangladesh as a low-cost, reliable source in the RMG market has been established and a foothold has been gained in the huge Chinese market. Local firms also seem poised to break into the $12 billion Japanese market. China and India have become increasingly expensive, especially for lower end products, prompting buyers to search out lower cost sources that are reliable and can meet their stringent quality standards. It is in this context that buyers have been looking closely at Bangladesh. During the initial phase of the recession, Bangladesh has coped very well. Local firms have also been engaged in chalking out a more competitive strategy: larger firms have tended to increasingly tie up directly with retailers, and have thereby reaped a huge advantage. Smaller operators find this difficult and continue to rely on buying houses, placing them at a much greater risk. The other strategy has been to diversify products where some gains have been made, as producers moved up to the higher end of the low-end spectrum. There is a long way to go in this direction as well as distinct opportunities that seem to be opening up. An example is the increasing demand for outer-wear garments like jackets and sweaters that low-cost sources like Bangladesh could target. Low import prices for capital goods, intermediate goods, and raw materials provide an excellent opportunity to rebuild inventories and stocks, expand the productive base and upgrade technology. However, as the recession deepened further, export growth slumped, affecting the RMG sector as well, leading to closures and even industrial unrest. The situation was made worse by an ongoing energy crisis and worsening investor confidence. Thus, the opportunities afforded by low import prices could not be fully utilized with imports now declining quickly, especially for raw materials and capital goods. This has led to a surplus in the current account of the balance of payments, which in this case cannot be considered a positive development. The primary textile industry or backward-linked industries that have grown on the back of the RMG success, adds distinct strength and competitiveness to the RMG sector, serving to reduce lead time. It also acts as a check against Indian textile prices, which in its absence, would certainly use its quasi-monopoly status to raise import prices to a much higher level. If really

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needed, this sector should be given assistance to remain afloat in the wake of the deepening recession. Specific sectors have already been hit by the recession, including leather, frozen fish and jute. In the case of frozen fish, dwindling demand has been compounded by questionable phyto-sanitary standards that have hurt our reputation. Given the current market situation, it is imperative that Bangladesh competes in terms of price and quality, including bio-security considerations, if markets are to be retained.

Imports
Bangladeshs imports as a share of GDP have been rising steadily over the past three decades. A valuable portion about 27 percent of GDP was spent on import payments in 2007-08. Around 76 percent of export earnings originate in the RMG sector, of which 54 percent goes into imports of inputs needed for the RMG industry. Given the importance of imports for Bangladeshs economic growth and development, the implications for the balance of trade and payments, it is important to assess the likely impact of the world recession on the volume, structure and of imports, and the terms of trade. Import based revenues also comprise of a significant part of the national budget and could be cause for concern. The sharp fall in energy and food prices in the world market has benefited Bangladesh immensely. The country is dependent on POL imports from the world market and is also a significant importer of food. The domestic economy is therefore quite sensitive to movements in the world price of these key commodities. Before the onset of the recession, Bangladesh was reeling under the price pressures in the world market, leading to a high (double-digit) domestic inflation rate and fears of an impending food crisis. The advent of the recession brought prices down drastically, and as an importer, Bangladesh benefited greatly with domestic price pressures falling quickly, and the government making large savings from reduced subsidies, especially on diesel. Bangladesh has also benefited from the terms of trade effect as the import prices faced fell more sharply than export prices.

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The total import payments in 2008 (January-November) amounted to US$ 22260.7 million, which is 31 percent higher than import payments in the previous year. Total merchandise imports showed a robust 35 percent growth (on adjusted fob basis) during July-October 2008 despite a sharp decline in imports of food grains over the corresponding period of the previous fiscal year. In case of L/C settlements, except for food grains all other categories of import show positive growth in the face of falling prices in international markets. In order to understand the nature of impact of increased imports in the economy, it is important to take a more disaggregated view. From the composition of imports it is clear that capital machinery, crude petroleum products, cotton, yarn and fertilizer, textiles and articles, were the key commodities whose imports increased significantly. In other words, the nature of imports suggests that these were meant either to increase production or raise productivity in manufacturing industry and agriculture. In July-November, 2008 food grain imports declined by around 25 percent compared to the same period of the previous year. In November 08 the wheat price per metric ton was US $227 compared to $321 in the same month in 2007. Rice price also declined significantly from $1015 to $563 per metric ton from March08 to November08. In terms of volume, food grain imports stood at 11.7 lakh metric tons during July-December, 2008 compared to 20.7 lakh metric tons in the same period in 2007. The slide in food imports was due to good domestic production and a respectable public stock level. Public food stocks stood at 13.2 lakh metric tons at the end of December, 2008 compared to 7.1 lakh metric tons at the end of December, 2007. Total import payments in FY 2008-09 (July-April) were 8.86 per cent higher than import payments in the same period of the previous year. The month to month import payments show a downward trend in the last couple of months however, mainly through declining imports of food grains and capital machinery. The decline of food grains import is largely because of the significant increase in agricultural production. The decline in capital machinery is due to lower investor confidence, slowdown of export growth, and the raging energy crisis in the country. In case of L/C settlements, except for food grains all other categories of import show positive growth in the face of falling prices in international markets; LC opening data however clearly reveals the negative import trends for capital goods and industrial raw materials (tables below).

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Composition of imports (In million US dollar) Items 2007-08 2008-09P 2008-09P % Changes July-Apr 4 831.1 235.1 596 726.1 358.2 8936.7 247.4 466.1 943.2 217.6 1104.4 667.8 1794 5229.3 1184.8 19209.1 4 over 2 5 -36.93 -71.52 21.11 -11.67 40.25 14.8 -14.6 -12.94 85.27 24.91 7.22 21.33 14.25 17.81 -15.43 8.86

July-Apr July-Mar 2 A. Food Grains Rice Wheat Edible oil Sugar 1317.7 825.6 492.1 822 255.4 3 720.3 233.4 486.9 695.5 320.2 8191.1 212.4 433.4 923.7 198.4 1006.7 609.2 1603.7 4728.4 1100.4 17431.8

C. Consumer & Intermediate Goods 7784.8 Clinker Crude petroleum Fertilizer Dyeing and tanning materials Raw cotton Yarn Textile and articles thereof D. Capital Goods & Others Capital machinery Grand Total (A+B+C+D+E+F) *P for provisional 289.7 535.4 509.1 174.2 1030 550.4 1570.2 4438.9 1401 17645.6

Source: Statistics Department, Bangladesh Bank.

We have benefited enormously from cheap food, fuel and other crucial imports due to the recession. As recovery starts, this situation will also be slowly reversed so that we need to make the most of this situation. We should reduce import taxes and encourage a massive buildup of inventories, spares, capital so that we can take full advantage of the recovery when it occurs. Given the fact that we have been barely hit by the recession, we are in a perfect position to be able to do so. However, more recent trends suggest that we are unlikely to be able to utilize this opportunity due to confounding factors.

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Finally, we should aggressively pursue an expansionary monetary and fiscal policy, encourage consumption of domestically produced goods, inject purchasing power in the farm sector and reduce the cost of retailing credit. An expansionary policy will lead to some inflationary pressures which however, would not pose any serious threat. Statement of import L/C settlement and import LCs opened & settled July-May 2007-08 Sectors/commodities L/C Opening and Settlement Openin (million US$) Food grains (Rice & Value Wheat) % change Capital Machinery Value g 2016.1 3 198.57 1612.5 8 % change Petroleum Value 17.25 2264.7 4 % change Industrial Materials % change Others Value Raw Value 5.38 8211.3 4 38.75 8169.5 28.33 6747.77 -1.96 6997.68 -10.38 1886.2 179.27 1287.35 -60.67 1122.5 2 -30.39 1761.0 7 -22.24 7850.4 2 -4.40 8411.6 5 % change Total Value 39.71 22274. 29 % change 39.52 26.22 18277.6 4 24.80 2.96 19938. 55 -10.49 17.28 19912.2 4 8.94 13.26 7913.75 1.86 7925.72 0.22 1921.23 -36.61 1290.24 Settleme nt 1358.64 July-May 2008-09 Openin g 792.89 Settleme nt 861.3

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Agriculture
Low world prices combined with successive bumper harvests in 2008-09, especially of food grains, has led to a price slump. While consumers have found respite from the sky rocketing inflation of 2008, farmers are in distress. The newly elected government has given very high priority to agriculture, including scaling up of fertilizer and fuel subsidies. Out of a total The government also announced ambitious plans to support farm prices through a procurement drive but met with little success due to inadequate storage space in storage and procurement efforts aimed at rice (from millers) rather than directly in paddy from the farm gate. There are now concerns that these low prices could operate as a disincentive for the next crop in the winter, at a time when price pressures in the world market could once again exert themselves. In fact much of the stimulus package announced by the government in April, 2009 is aimed at the agricultural sector. Out of an additional allocation of BDT 34.2 billion almost BDT 30 billion is related to agriculture or food, and the remaining for subsidies to exports.

Remittances
There is little doubt that the recession has affected labor market prospects abroad adversely. However, a greater problem lies in the corruption and malpractices that have plagued the sector for years. The two are of course inter-related. No one wants to see the plight of laborers languishing in their airports or open spaces. There are also reports of increasing involvement in crime engaged in by migrant workers. The recession provides us with an opportunity to address urgent concerns of the sector to rid it off corruption and develop a strategy to deal with labor issues both in their home and destination countries. There is an urgent need for pre-departure orientation of workers along with detailed briefing about rights and obligations. As far as the immediate short run problems are concerned, remittances are unlikely to be seriously affected over 2009-10. There was an unprecedented wave of migration over 2007 and 2008 so that the full impact of that on remittances is yet to be felt. The current decline in the number of migrants is unlikely to cause a fundamental shift in the remittance flow pattern any time soon.

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For the longer term, a concerted effort is required to build up a skilled labor force for export including skilled manpower in security and related services, under a strict institutional framework, perhaps somewhat along the lines of the peace keeping forces sent out under the UN.

Towards Vision 2020 - Revitalizing Governance and Planning For Sustainable Urban Development
From the perspective of most Asian countries, the extent to which the state creates an institutional environment that maximizes the opportunities for growth and poverty reduction is the most critical dimension of governance (Rahman & Robinson 2006)

Improving Urban Governance and Management

The traditional discourse on decentralization with its statist focus on local governments no longer accords with ground realities where migration is a pronounced phenomenon, integration into the globalization process is well underway, and newer social forces are on the horizon with which local governments must find meaningful linkages. Changing ground realities in effect require a transition to a new paradigm, one of local governance with an emphasis on livelihoods. Local governance broadens the focus beyond local governments to include nongovernmental organizations (NGOs), community organizations, and the private sector, and highlights the importance of combined efforts towards concrete and specific goals. A two-track strategy is increasingly called for: a political agenda of administrative and financial devolution, and a functional agenda of service delivery, disaster management, affordable justice, and local economic regeneration for which local governments build viable coalitions with these social actors (Rahman & Robinson 2006). Decentralization is changing the patterns of governance and presents a major challenge throughout the region. To respond adequately to this challenge, Asia-Pacific countries need an improved national framework for support to local governments as well as programs of reform
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within local governments themselves. A critical first step is often for a national government to recognize that it plays a significant role in the success of local governments and that it can do much to support and empower them. National efforts to create an incentive structure for local officials to improve the efficiency of local service delivery carry big potential benefits. National governments should therefore develop a proactive framework for national support to local administrations. At the same time, local governments need to act independently to improve local management and increase the efficiency and responsiveness of local services. This would entail increasing accountability; improving the efficiency of service delivery; capacity building to improve the management and efficiency of services; improving asset management; performance benchmarking; building civic awareness and forming partnerships to reduce the burden; adapting the institutional structure; and engaging with networks

Enhancing the Local Investment Climate to Promote Economic Growth and Increase Employment
Improving the local investment climate can enhance the role cities play in contributing to national economic growth and employment creation. Local government decisions can have a significant effect on business productivity and thus on a citys ability to attract and retain industry and employment. With decentralization, local governments have a wide scope for shaping the investment climate in response to the needs of business. International best practice illustrates actions that national and local governments can take to bolster the local investment climate and improve productivity and competitiveness. Many of these recommendations require cooperation across levels of government, among different local jurisdictions, and between government and the public. They include the following: Creating national frameworks to guide local officials economic development efforts and providing these officials with training and technical assistance. Involving local businesses and the public in the process of crafting city-level economic development strategies, sometimes within a regional context.

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 Benchmarking government performance against that of comparable jurisdictions in services, regulation, licensing, land policy, environmental regulations, public safety, tax policy, local educational systems (including technical education), cultural and recreational opportunities, and trade logistics, ensuring that these soft investments are oriented to support the local development strategy. Providing appropriate infrastructure, including competitive telecommunication and information technology (IT) services, to support the local development strategy. Recognizing that a healthy, pleasant living environment that includes cultural, recreational and social activities is an important element in attracting high-level professional talent, whether foreign or domestic. Developing strategies to market the citys products nationally and sometimes globally (World Bank 2004:6).

Managing Metropolitan Areas

The phenomenal growth of urban population has led to the formation of many large metropolitan agglomerations that extend over the jurisdictions of numerous local governments. Because not all services can be managed effectively within the boundaries of individual jurisdictions, the need to consider metropolitan-level governance is becoming ever more urgent. Decentralization laws that inevitably give power directly to municipal and city governments exacerbate the difficulties because typically no attention is given to the needs of the metropolitan and urban regional-level governments. As a result, a crisis in governance of larger urban regional scale infrastructure networks is leading to inadequate transportation, land-use planning, water supplies, and drainage. New forms of institutional management are required. Other regions, including Europe and the United States, have tried different models without consensus on a single best approach. The different models range from (1) creating special districts to deal with specific services across jurisdictions, (2) annexing and consolidating to form a unitary government, (3) creating a federal two-tier structure of metropolitan government over multiple local districts, and (4) encouraging voluntary cooperation among local governments. Each approach has its advocates, and local politics and traditions play a large role. Central encouragement is inevitably

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necessary. What is important is that the national and local levels show leadership in developing a country-specific solution that will lead to joint benefits (World Bank 2004: 22).

Reinvigorated Urban Planning

Master plans, and even strategic plans, that do what they are supposed to do, which is to guide spatial development, can work quite well under conditions of slow and incremental change. But they belong to an era that was somehow calmer than the present, and additional tools are needed. As the on-going dynamics in the Asia-Pacific region obliges cities to re-imagine themselves, todays world is seemingly in turmoil. Most infrastructure projects are on a scale so monumental that they drive urban development more than they are a result of other developments. For better or worse, the very grain of the city is turning coarser, becoming less homey and less neighborly. Major interventions give the city a new face and traditional forms of planning need to be revised in order to incorporate newer and more flexible approaches (UNHABITAT 2005:181) Amidst the enormous variety of institutional and political settings one constant remains paramount to the future of urban planning in Asia-Pacific, as it is throughout the world: all existing planning systems (and cultures) are in movement in the sense that they are continually being revamped to adapt to perceived changes of both internal and external in origin. Overall, there is a trend away from planning conceived as a restraint on market forces (for example, through zoning legislation) to a kind of entrepreneurial planning that seeks to facilitate economic development through the market. Caution needs to be exercised in avoiding pitfalls observed in other parts of the world where suburban and inner-city mega-malls have created virtual cities-for-profit; suburban edge cities across the continent have sprung up without significant inputs from public planning (but with a great deal of ad hoc private planning); and the privately promoted and popular new urbanism (which has been taken on board by the federal government) has offered to tackle the problems of metropolitan regions primarily through neoclassical urban design. A new culture of planning needs to be adopted, one which that goes beyond narrow professionalism and public institutions is taken. Planning in this more inclusive sense can be seen as contributing to, though not necessarily guiding, the complex processes of city building. It involves multiple actors from both the private sector and civil society, each of whom brings
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relevant knowledge to the table. Viewed in this light, planning is not necessarily about getting a comprehensive perspective on the city, as in master planning or its equivalent; nor is it about the hierarchical coordination of diverse elements. It is not even, as theory has often claimed, a more rational way of making decisions or of laying out courses of action in advance, or even of charting the long-term future a normative vision of the city. It may be all of these, but it is also more. In contributing to city-building, planning can be described as a set of interdependent processes that, acting together, seek to create more livable, life-enhancing cities and regions. Such a practice is oriented to action more than to documents, though documents may underlie the action. Planning is increasingly conforming to certain principles a new habitus, a certain disposition to act that ensure positive results in todays world. Livability, a term popularized recently, 49 draws attention to the sustainability of human settlements. It refers not only to the proper stewardship of the enveloping natural processes that sustain human life, but equally to the social dimensions of cities, to social equity and justice and community, and to the aesthetic and spiritual qualities of the built environment (UNHABITAT 2005).

Working with the Private Sector

In the foreseeable future, private sources will likely provide financing for only a small part of the needed urban infrastructure investments. This is true even in China, where the volume of private finance is large but proportionally less than 10 percent of total infrastructure investment. However, the private sector has an important role to play in introducing innovation in design and management, especially in infrastructure operation and maintenance. The Asian private sector is a vibrant force in bus transport and solid waste operations, with the public sector providing only regulatory oversight. In other urban services, local officials need to continue with sector reforms, including restructuring and unbundling of services, developing transparent bidding procedures, and establishing regulatory frameworks to prepare for the time when private-sector involvement will increase. The new frameworks must improve on past practices, which involved poorly designed bidding arrangements, inappropriate risk sharing and hidden contingent liabilities. These practices, exacerbated by the Asian financial crisis, negatively affected the outcomes of many private infrastructure schemes.

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A positive development is the emerging ability of domestic private-sector companies to operate and manage infrastructure facilities. In Malaysia, the Philippines, Indonesia, and other countries, local companies are beginning to establish their credentials for operating water and wastewater systems and other services. Public policy that reduces the barriers to participation and competition for service contracts by domestic firms could support this trend (World Bank 2004).

Inclusiveness and Empowerment

Two notions help pinpoint the issues associated with the involvement of civil society in local governance: inclusiveness and empowerment of civil society. Inclusiveness traditionally

encompasses both political processes (and participatory democracy in particular) and policy objectives (improving the living conditions of all groups, focusing on marginalized and minority communities). In both cases, the main goal is to build structures which enable everyone, regardless of wealth, gender, age, race or religion, to participate productively and positively in the opportunities cities have to offer.

For inclusive governance to function effectively, it is not simply a matter of providing a space for involvement. Empowering civil society stakeholders is also in order, so that they can take advantage of any space provided. Authorities may have to take special action to enable civil society to participate effectively in the process of governance. Empowerment may require new institutions, new ways of working within existing organizations, and new rules for interorganizational relationships. The political dimension of inclusiveness includes the structures and processes that allow all stakeholders at the local level to participate in governance. The statutory framework defines the scope for civic participation and therefore has a strong influence on it. Innovative examples of civil society are abounding in the Asia-Pacific region. What is required in the next decade and a half is to devise modality for adaptation, replication and scaling-up and mainstreaming (UN-HABITAT 2004).

In paving the way forward to strengthen the urban governance in Asia and the Pacific, there are also external factors which deserve special attentions. These factors include the need to deploy
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information and communication technologies (ICTs). Indeed, the recent expansion of ICTs has revolutionized the way countries and cities do business, transfer information and improve the life of residents. Information pertaining to clean technologies or best practices is readily available on the Internet. Unfortunately the digital divide separates the ICTs haves from the have-nots and although it is slowly changing, as the technology gets cheaper and more available; developing countries are still at a disadvantage and lack a level playing field. The Internet gives people and governments the power to access information, and information is power. Not only can ICT be used to improve the living condition through networking, exchange and transfer of ideas, cities can also use the technology to access and disseminate information, which will enable other cities in a similar situation to benefit from the efforts and innovations (ESCAP 2005).

Recommendations to improve the situation

After facing traumatic experiences while working abroad, respondents have suggested some ways to improve the current situation. Government should ensure that migration cost is not higher than what is stipulated - currently it is Tk 84000 ($1200). Unscrupulous activities of the middlemen and agents should be strictly checked. The job contract should be signed in the presence of recruiting agency and government representatives. Besides, the bilateral relationship with foreign countries, particularly those who take workers from Bangladesh, should be improved, and Bangladesh embassies in those countries need to be made more effective. After Bangladeshi citizens have migrated as workers, both the government of Bangladesh and the foreign country officials should monitor migrant workers right to ensure their welfare. All the respondents had to come back to Bangladesh permanently at different periods of the current year because of inadequate and irregular payment. Although at some point of time, while travelling to their foreign destinations, they were legal migrants, their situation became vulnerable when their employers or brokers confiscated their legal documents to gain control over them. Thus, many migrants who were bona fide workers subsequently found themselves stranded in a foreign country and helpless against the forces of the authority. The rigidity of the governmental machinery in a foreign country became oppressive due to the suspicion and stigma usually attached to migrants from poor countries. Thus, devoid of government of Bangladeshs support and patronage, they were pushed back. In the face of such terrible conditions, they tried to complain and seek help from the corresponding Bangladesh Embassies in those countries but did
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not get any response. They blamed the unscrupulous manpower agents in Bangladesh for their terrible sufferings and unexpected return. Due to inhuman living experiences in the foreign countries, most of them are not at all interested to migrate for work anymore. Given a better opportunity, only a few are willing to migrate again, or to send their families or friends abroad for work. Migrant Workers Current Problems in Bangladesh Being deceived and pushed back home, the migrant workers find life worse and socially awkward. They are in severe financial distress. Their abrupt return to Bangladesh has made them mentally and socially distressed. Again, family conflict rising from unsuccessful migration makes their life miserable. Some have fled away from own village being afraid of people who lent them money for going abroad. Most of them have no work at present, and, are not getting any decent jobs. Optimism about the future The migrant workers are not optimistic about a positive change in living standard in the next six months to one year, given their current socio economic context. They are very afraid of the future as they do not see any signs of increased employment opportunity in Bangladesh in the near future. The three FGDs reported in this section bring out in stark terms the very difficult livelihood options and strategies pursued by workers and migrants, both men and women. What comes out quite clearly is that there is a some impact of the current global crisis at the grassroots level, alluded to both by RMG and leather workers, but this is mainly in terms of reduced earnings due to declining overtime, irregular payment, reduced working hours rather than outright employment. The spectre of large scale redundancy in the industrial labor sector remains a distant possibility only. The brunt of the impact really is in terms of lost or foregone opportunities because of the slowdown of exports, and consequently a general slowing down of investments, imports, and the usual knock-on effects on allied services sectors, and ultimately on employment.

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MITIGATION AND POLICY

The government considers the threat to food security the most serious threat to the economy and has given the food; agricultural and related sectors the most attention. There was widespread concern that the GFC would have deep and profound impact on the economy, especially through the export and the remittance channels. These however, have held up very well, although in the last 2-3 months, the rate of export deceleration has increased. The export sector and export dependent industries have been adversely affected by the global downturn but other domestic factors have had a much greater impact, especially the energy crisis in the country, and a deteriorating law and order situation. These additional factors have increased costs while the GFC has led to squeezing of margins to its very core. The situation has become very difficult for small and even medium sized plants while even the larger ones are now wary of expanding investment in capacity or new units. The mitigation strategy of the government to date consists of a number of measures that include a stimulus package that was launched in April, a much expanded budget with a focus on agriculture and social safety nets, extensive food and fertilizer subsidies, and scaled up agricultural credit. A relatively small part of the stimulus package has been allocated for direct support to the export sector.

Agricultural Credit
The central bank has announced a liberal, multi-targeted and inclusive farm credit policy worth BDT 11500 crore (115 billion) which is 23 percent higher than the last fiscal period a significant scaling up. Loan sizes are also set to be raised. A special focus on backward areas and small/marginal farmers has been stipulated, along with new mechanisms for delivery including linking up with NGOs, replacement of collateral by community-based guarantees, and disbursement in the presence of local elite and officials, and extension into new commodities including fruit and vegetable. There will nevertheless be implementation challenges that will ultimately determine the efficiency and effectiveness of the approach. A pilot exercise is advisable to fine tune delivery if the program is to avoid degeneration into a pure patronage distribution mechanism. Another problem surrounds the whole question of the missing middle the problem of effectively and efficiently reaching the medium farmer. The medium farmer is

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the most productive component of the agricultural sector and any attempt to stimulate agricultural growth, bypassing them, is likely to be successful.

Social Safety Nets

This defined as all kinds of cash and kind transfers to the poor, including welfare activities, unemployment benefits for retrenched workers, subsidized healthcare, shelter for the homeless, subsidized diesel, pension benefits etc. geared to reduce vulnerabilities of the poorest. During the last two decades, the government of Bangladesh has been pursuing a number of safety net programs. Currently, there are five types of programs in place: cash support programs, (b) food aid, (c) special programs for poverty reduction, (d) self-employment through microcredit, and (e) specific poverty reduction programs. The safety net programs received an allocation of 2.8 percent of the GDP in 2008-09. Over time, there has been a shift from the charity approach to the development approach. In the current budget, these types of programs have been further expanded and there are proposals for scaling up. Traditionally, some groups have always been left out, including ethnic minorities, backward regions like the char, and monga areas, and occupational minorities. There seems to be greater awareness of the need for better targeting along some of these categories, as borne out by the explicit references made in the agricultural credit policy recently announced. Problems that remain include low coverage, inappropriate targeting, leakages and weak implementation.

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Conclusion
While the Asian and Pacific economies and societies are undergoing rapid transformation, government structures and systems in many countries of the region have been slow to change and respond to the new challenges. To meet the challenges of the twenty-first century new partnerships between local governments, civil society, and the private sector, is required. Revaluation of the form and nature of local governance in Asia and the Pacific, in keeping with the principles of subsidiary and proximity, need to be the guiding light in reforming governance structures to meet the new challenges. Governance is not only a matter of structural attributes of states. It is also about values, processes and outcomes. For example, establishing an anti-corruption commission is easier than making it into an effective deterrent against corruption based on a broader social consensus. It is important to acknowledge that governance reform priorities may differ among distinct social groups. The predominance of elite perceptions of governance in policy and public discourse underlines the need to complement institutional and legal approaches with a focus on the rights and needs of the poor. The everyday reality of the poor and the marginalized in particular, and for citizens as a whole, is as important as the constitution and the legal framework for framing governance reform priorities. For these reasons it cannot be assumed that different social and political actors have similar priorities. The challenge lies in resolving the trade-offs between these competing perspectives. Greater agreement on core governance priorities in the region can generate the social consensus necessary to take the reform agenda forward (Rahman & Robinson 2006) Finally learning from Asian-led approaches to governance has implications for partnerships among Asia-Pacific countries and for the agendas of regional organizations. There is scope for more intensified exchange among the countries on experience of governance reforms that have successfully strengthened state capacities and enabled government agencies to broaden citizen participation and foster accountability. Successful models of public administration reform and innovative tools for capacity strengthening could be more actively shared through country-level training institutions. Study tours and bilateral exchanges of officials between countries in the region would foster greater awareness of positive experiences within the region. Positive
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experience of governance reform in the region could be documented more systematically and fed into the curricula of international public administration and training institutions. Finally, regional organizations, including the UN family, World Bank, South Asian Association for Regional Cooperation (SAARC) and the Association of Southeast Asian Nations (ASEAN) are taking a more active interest in promoting successful models of governance and public sector reform in member states that have had a positive bearing on growth and poverty reduction outcomes. Such efforts provide a firm foundation for future Asian leadership in developing strategies for strengthening state effectiveness and governance in the region (Rahman & Robinson 2006).

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