The approval originally slated to come from a WB Executive Board meeting on November 17 was deferred following the cabinet's foot-dragging in clearing a draft Public Procurement Law, a major condition for the loan.

The bank finally tabled the matter in its December 1 board meeting on the government's written commitment to enact the law and the High Court clearing the way for Rupali Bank's privatisation, another of the 13 conditions for the DSC.

The first DSC tranche of $300 million was approved in June 2003, followed by the $200 million DSC-2 in July 2004. The credit from the WB's concessionary arm International Development Association (IDA) has 40 years to mature with a 10-year grace period and carries a 0.75 percent service charge.

WHY THE DELAY
The draft Public Procurement Law was tabled at a cabinet meeting on November 2. But, in the face of strong opposition from some ministers, instead of okaying the draft, the cabinet formed a subcommittee to scrutinise the clauses of the law and recommend modifications.

The subcommittee held a round of meetings on the draft and then sent it to the law ministry for vetting.

But the WB took a staunch stance on the issue and told the government if any fundamental change is made in the law it will not approve the DSC instalment. It also deferred tabling the matter in its board meeting on November 17 as scheduled.

A source said the government then assured the bank of making no major change in the law and getting it passed by parliament soon, which made the WB resume the approval process.

WHAT IS DSC
The DSC funds a core and sectoral governance reform programme, a WB news release said yesterday. It is designed to assist the government in addressing key governance constraints by strengthening public expenditure and budgetary management, improving public procurement, modernising tax administration and enhancing delivery of public services, the release read. It also targets sectoral governance reforms in banking and energy sector and state-owned enterprises, and the government's trade liberalisation agenda.

The governance reforms supported by the DSC are "designed to improve social service delivery to the poor and improve the investment climate to enhance economic growth, exports, and jobs. Creating economic opportunity through sustainable growth and access to services is key to reducing poverty in Bangladesh, and the DSC supports both," said WB Country Director Christine Wallich.

According to the WB, Bangladesh has achieved significant economic and social progress in recent years. "GDP growth per capita has averaged around 3.3 percent since the 1990's, outperforming low income and IDA-only countries as a whole. GDP growth in 2005 remained above 5 percent, despite devastating floods in many parts of the country," the news release said.

In the social sphere, the release went on, Bangladesh outperforms most low income countries across a range of social indicators: Gender parity in school enrolment at secondary and primary level has been achieved, child mortality has been halved and life expectancy has increased significantly since the 1990's. Bangladesh is also on track to meeting many of the Millennium Development Goals, observed the bank.

However, the WB also pointed out that, despite sustained progress, the country faces some daunting development challenges. Among them it emphasised the high rates of child malnutrition and maternal mortality, widespread corruption and almost half the population still living below the poverty line.

In this regard, WB South Asia Region Vice President Praful C Patel said, "Improving governance is a critical challenge for Bangladesh and is very much at the heart of the DSC. We hope the reforms will reduce the scope for corruption, and, in turn, build more effective government institutions and improve public service delivery, giving long-term benefits for all Bangladeshis."