Aid for Trade Series: Issue Paper 29
Contributors: Fahmida Khatun, Samina Hossain and Nepoleon Dewan
Publication Period: December 2013
With about USD 392 million per year received since 2006, Bangladesh is among the top 15 recipients of Aid for Trade (AfT) funds. Indeed, AfT commitments increased by 35 percent since the AfT initiative was initiated in 2005, but in in recent years disbursements declined by 29 percent. What can be learned from the experience of Bangladesh? This study assesses the effectiveness and impact of AfT in Bangladesh. By doing so, it also tries to identify the reasons of the decline in disbursements which is quite uncommon among other least developed countries. The study argues that the results of AfT are somewhat mixed for Bangladesh. On the one hand, AfT has addressed some significant supply side constraints and has contributed to enhance export competitiveness in a few key sectors for the country’s socio-economic development. For instance, donor-supported projects in the ready-made garment sector have enhanced some critical aspects for the industry, such as capacity building of workers and fulfilment of compliance requirements, which in turn helped improve the overall competitiveness of the sector.
Moreover, AfT is aligned with countries’ development policies, and the implementation of projects often benefited from effective coordination mechanisms among donors and between donors and the government. On the other hand, AfT programmes and projects are not effectively mainstreamed into national policies. More important, the study shows that the lack of efficient administrative mechanisms, limited human capacity, political instability, and stringent donor requirements are major reasons for low absorption capacity. Indeed, this limits the overall effectiveness and impact of AfT in Bangladesh and could be one of the reasons of the decline in disbursements.
This paper is part of a broader research project that ICTSD has recently undertaken to assess the effectiveness of aid for trade in eight developing countries – Bangladesh, Cambodia, Ghana, Guatemala, Malawi, Nepal, Peru, and the Philippines. Through this analysis, ICTSD aims to contribute to the ongoing discussion on the aid for trade initiative and to provide information and evidence to guide developing countries and their trade and development partners in designing and implementing more effective aid for trade programmes in the future.