Bangladesh : PL-480 Title III paper

480 Title III programs in Bangladesh. Evaluation covers the period FY78-FY86 and emphasizes the programs' policy aspects. The mix of commodities - foodgrains, vegetable oil, and cotton - seemed to promote policy reform and clearly helped fill the gap between production and consumption. On the negative side, inclusion of rice seems to have been ill-advised because of possible disincentive effects on domestic rice production and the high cost of rice relative to wheat. It is recommended that rice be phased out during the next Title III program. Recent experience indicates that if Title III aid were not available, the Government of Bangladesh (GOB) most likely would have purchased food commodities on the world market, using its scarce foreign exchange and limited credit. Thus, the programs have operated as a transfer mechanism for providing the GOB with foreign exchange. The programs were generally successful in promoting marketing arrangements that favored the private sector. Rice and wheat were marketed mostly by grain dealers, through the Open Market Sales channel of the GOB's Public Food Distribution System; grain dealers also benefited from relaxed government control over business practices. Cotton was processed into yarn by public sector mills and sold to private handloom operators, who benefited from secure access to yarn and less restricted private mill capacities. Soybean oil was processed by public sector plants and sold to private sector distributors. The GOB's record in providing adequate agricultural production incentives has been mixed. While the GOB took positive steps such as increasing investment in irrigation, drainage, and flood control, it did not always uphold the foodgrain procurement prices announced prior to the crop season. This failure may have lowered incentives to rice and wheat production, especially at a time when fertilizer subsidies were being reduced. Similarly, incentives for oilseeds production may have been weakened by imports and subsidized sales (through the ration system) of non-Title III edible oil. All in all, the Title III programs achieved some notable policy successes. In addition to encouraging private sector marketing, the program has helped to stabilize consumer grain prices and to reform the ration system. The GOB has also taken steps toward a more efficient foreign exchange market, and it has made positive changes such areas as input pricing and the collection of outstanding agricultural loans. Although the World Bank was pursuing some of the same reforms, at least some of the GOB's favorable actions would not have been possible without Title III.