World Bank Approves $200M for Bangladesh

The Associated Press reported that the World Bank has approved $200M in development loans to aid Bangladesh. The funds would be used to reform the tax and banking sector.

This is an important step on the road to stability in governance and economic bounty for Bangladesh. Scholars have been saying for the past fifteen years that economic prosperity of a developing (and developed nation, for that matter) is dependent on the health of that country’s public sector.

Basically, it works like this:

A country has problems. The roads don't get paved, few of its citizens are educated and the government officials look to outside donors and companies for sources of revenue. They know that they can't get any money from their own people to fix these problems (and line their own pockets), so they tax, tariff and coerce monies from outsiders. Outsiders say, "hey these guys are ripping us off-they nationalize our property, they require bribes to get anything done, and at the end of the day we may not be able to get our money out!" So they take their business elsewhere. Jobs leave, and things go down hill.

Investors, donors and domestic business want the public sector to be transparent and accountable. They need faith that they can do business and unpredictable stuff (wars, nationalizations, capital controls, ect.) won't get in the way. To be able to give them that faith the public sector needs to provide rule of law and stability. Rule of law requires a bureaucracy and legal system (these people need a paycheck) and stability requires a whole list of stuff from regime sanity to food in the bellies of the very poorest.

This takes cash, ya'll.

Plus, the act of paying taxes (unpleasant though it maybe) develops a social habit of interacting with the public sector.

So good for Bangladesh.



See the article at: http://www.forbes.com/entrepreneurs/feeds/ap/2005/12/02/ap2365164.html