SDGs financing strategy: Bangladesh perspective

Dhaka,  Wed,  26 July 2017
Published : 08 Jul 2017, 21:02:06 | Updated : 08 Jul 2017, 21:22:18

SDGs financing strategy: Bangladesh perspective

SDGs financing strategy: Bangladesh perspective
Shamsul Alam
The Sustainable Development Goals (SDGs) include 17 goals and 169 targets that set out quantitative and qualitative objectives and illustrate an inspiring vision for the world in the years until 2030. Unlike Millennium Development Goals (MDGs), that focused primarily on the least developed or poor countries, the SDGs are more global and applicable for all countries. 

It is evident that challenges that concern countries worldwide irrespective of how developed they are, such as climate-change, migration, conflict, cannot be dealt with isolated efforts from individual countries. This aspiring agenda is a reminder of the challenges the world faces to this date, as many countries were not able to make sufficient progress on many Millennium Development Goals (MDGs).  The newly incorporated goals in the SDGs are more comprehensive and expansive in nature and thus will explore development schemes of vital importance to humanity.

The "SDG Need Assessment and Financing Strategy: Bangladesh Perspective" (henceforth referred as GED Report on SDG financing strategy) prepared by the General Economics Division of the Bangladesh Planning Commission provides a well-defined work plan that highlights the actions necessary to attain significant progress in SDGs implementation in the  country. A full-blown needs assessment study helps us to identify the key development interventions and develop a well-defined roadmap for long-term planning. The GED Report on SDGs financing strategy provides an estimate of the annual resource gap and an opportunity to revise the government interventions and financing strategies accordingly. 

Several thematic working areas have been identified for this study which cover all 17 goals of SDGs. Key Informants (KI) from various stakeholders have been contacted for consultation under these thematic working areas to assess and approach the challenges for Bangladesh to overcome by 2030. The methodologies used for the additional cost estimation and to determine the resource gap, as well as the financing strategy, have been adopted based on the suggestions offered by different stakeholders including government personnel and experts of the relevant sectors. Three broad annexes under each goal provide the details of coverage of SDG targets for the additional cost estimation exercise, data sources, methodology, and breakdown of total additional cost. Around 80 per cent of the 169 targets of SDGs have been covered in the costing exercise.  Diversified method has been applied in the cost estimation. In some cases, multiple methodologies are used for different targets under the same goal. For most of the goals, Multiplicative Factor Analysis (MFA) procedure has been applied to calculate the total cost per annum. This costing procedure takes into account the cost required to achieve certain targets, while considering several factors including quantity, quality, efficiency, sustainability and capacity building. The other methods applied for this study include poverty gap analysis, Incremental Capital-Output Ratio (ICOR) analysis, investment requirement for certain sectors and block allocation for some targets. For a few goals and targets, current programmes under the national budget have been used as the base for cost estimation and these programmes are considered to scale up for better coverage. The analysis under each goal shows the breakdown of annual additional cost in both current and constant (2015-16) prices. Additional cost is the cost that will be required over the Business As Usual (BAU) cost. The BAU cost is defined as the cost that will be incurred up to FY2030 if the current provision of cost related to SDGs by all economic agents continues.  

Most of the goals under the SDGs are interconnected. Therefore, if cost of implementation for each goal is estimated separately, total cost will overestimate the actual cost of implementation. The overlapping issues have been addressed using a process of synchronisation among overlapping goals and targets. Synchronisations are done for SDG1, SDG3, SDG5, SDG6, SDG7, SDG8, SDG9 and SDG17. The major synchronisation has been done among the SDG7, SDG8 and SDG9, with SDG8 as the centre of the exercise. Achieving most of the goals will depend on SDG8 which aims to achieve decent job and sustainable and inclusive growth of the economy. The total cost after synchronisation is the final cost to address the goals of the SDGs.

Two possible scenarios have been considered to come up with the SDG Need Assessment. Firstly, the BAU scenario. The average annual growth rate of real gross domestic product (GDP) has been considered to be 7.0 per cent from FY2017 to FY2030. Secondly, the 7th Five Year Plan (7FYP). The Plan has extended the growth scenario for achieving SDGs and the GDP growth rate has been projected to reach 9.0 per cent by FY2030. The GED Report on SDGs financing strategy thus suggests a SDG-plus scenario which envisages a growth rate of real GDP higher than what is required under SDG8.

According to the 7FYP extended growth scenario, the aggregate GDP at constant 2015-16 prices for the period FY2017-FY2030 would be BDT 498,900.3 billion (USD 5,004.99 billion). On an average, the annual GDP at constant prices during this period would be BDT 35,635.73 billion (USD 357.50 billion). In contrast, the total GDP at constant prices based on the BAU growth scenario during FY2017-FY2030 would be BDT 460,814.95 billion (USD 4,646.33 billion), and the annual average GDP would be BDT 32,915.35 billion (USD 331.88 billion).  

The total additional unsynchronised cost for the SDGs has been estimated to be BDT 118,274.59 billion (USD 1162.76 billion) at constant 2015-16 prices during the period FY2017-FY2030. After removing overlaps through the process of synchronisation for each year, the total additional synchronised cost for the implementation of SDGs has been estimated to be BDT 94,711.65 billion (USD 928.48billion) at constant prices, which is 19.75 per cent of the accumulated GDP under 7FYP extended scenario during the period FY2017-FY2030. The additional synchronised cost is smaller for the initial period of implementation and the cost increases gradually for the later periods (Table A). 

The additional synchronised cost of implementing SDGs would be BDT 11,100.27 billion (USD 129.79 billion) during the period FY2017-FY2020, which would increase to BDT 54,466.91 billion (USD 498.04 billion) for the period FY2026-FY2030. Similarly, the annual average additional synchronised cost of SDGs will be BDT  6,765.12 billion (USD 66.32 billion) for the period FY2017-FY2030. However, for the FY2017-FY2020 period, the annual average figure would be BDT 2,775.07 billion (USD 32.45 billion), which would increase to BDT  10,893.38 billion (USD 99.61 billion) in the period FY2026-FY2030. 

The year-wise additional synchronised cost is shown in Figure A, which suggests that the additional cost would increase from BDT 2,128.75billion (USD 26.28billion) in FY2017 to BDT 13,630.40 billion (USD 119.65billion) in FY2030. 

Figure B shows that the additional synchronised cost for all 17 goals would be 10.16 per cent of the projected GDP (at 2015-16 constant prices) under 7FYP extended growth scenario in FY2017 which would increase to 24.06 per cent in FY2030. Under BAU growth scenario, the estimated total additional cost of SDGs would be 10.18 per cent of the projected GDP (at 2015-16 constant prices) in FY2017, which would increase to 28.14 per cent in FY2030.

The highest cost would be incurred for the implementation of SDG8 since economic growth is the core of development. Figure C shows that, since the major synchronisation is done among the SDG7, SDG8 and SDG9, an aggregated synchronised additional amount of BDT 55,135.27 billion (USD  535.64 billion) for SGD7, SDG8 and SDG9 would be required during the period FY2017-FY2030, which would be about 59.12 per cent of total additional cost of SDGs. In contrast, the least cost would be incurred for the implementation of SDG17, which would be BDT 16.96 billion (USD 0.18 billion).  

The goal-wise annual average figures of implementation cost, as shown in Figure D, suggest that the highest average cost would be for SDG7, SDG8 and SDG9 together, which would be BDT 3,938.23 billion (USD 38.26 billion). In contrast, the least annual average cost would be for SDG17, which would be BDT 1.21 billion (USD 0.01 billion).

Five potential sources of gap financing have been suggested in the GED Report on SDGs financing strategy. These which are: Public Financing; Private Sector Financing; Public-Private Partnership (PPP); External Sources which include Foreign Direct Investment (FDI) and Foreign Aid and Grants; and lastly, non-government organisations (NGOs). During the period of FY2017-FY2030, on average, public sector would account for 34 per cent of the financing requirement, whereas the share of the private sector would be 42 per cent. The average share of PPP would be 6.0 per cent. The external source would have an average share of around 15 per cent. Finally, the NGOs would contribute around 4.0 per cent.

The private sector has historically been playing an important role in economic development in Bangladesh. It is thus envisaged in the GED Report on SDGs financing strategy that, the largest portion of resource gap in SDGs implementation would come from the private sector. The private sector is envisaged to contribute about 37.03 per cent of total additional cost in FY2017 which would increase to 46.27 per cent in FY2030. The contribution of external sources is expected to decrease from 18.35 per cent of total additional cost in FY2017 to 13.25 per cent in FY2030 which indicates that external dependency of Bangladesh would decrease over time. PPP is envisaged to contribute about 4.53 per cent in FY2017 and 6.59 per cent in FY2030 of total additional cost. NGOs would finance about 7.0 per cent in FY2017 and 3.0 per cent in FY2030. Contribution of the public sector is estimated to be about one-third of the total gap. The public sector would finance about 34.03 per cent of additional cost in FY2017 which is estimated to reduce to about 31.31 per cent in FY2030 with some fluctuations.

Table B suggests that during the period FY2017-FY2030, it has been estimated that a total of BDT 81,307.61 billion (USD 796.09 billion) would be required to be financed from domestic sources. In contrast, BDT 13,404.04 billion (USD 132.39 billion) would be needed from external sources. On an average, BDT 5,807.69 billion (USD 56.86 billion) would be annually needed from the domestic sources during this period, while BDT 957.43 billion (USD 9.46 billion) would be needed annually from the external sources. Out of the total contribution of external sources, BDT 9,923.05 billion (USD 96.69 billion) is expected to come from foreign direct investment (FDI) and BDT 3,480.54 billion (USD 35.69 billion) from foreign aid and grants during the period FY2017-FY2030. The average additional amount required annually from FDI would be BDT 708.79 billion (USD 6.91 billion) and from foreign grants and aid, BDT 248.61 billion (USD 2.55 billion). In FY2016, Bangladesh received FDI of around USD 2.0 billion. Therefore, the projection of annual average receipt of FDI of additional USD 6.91 billion seems to be ambitious. However, given the government's initiative to set up 100 special economic zones (SEZ) by 2030 and the prospects of large FDI from China, Japan, India and other countries in those SEZs may fulfil much of this requirement.   

One of the major challenges for the cost estimation was that many of the proposed indicators have been newly introduced and data for these indicators are unavailable. For Bangladesh, unavailability of data is a major concern. Data are available only for one-third of the indicators. For a few indicators, targets to achieve within FY2030 are not clearly specified and a few other indicators are not quantifiable. Another major challenge was how to address the overlapping issues. This problem has been addressed using synchronisation process (reported in the GED Study in the Annexes 18.1 to 18.14.)

Finally, one of the main challenges in achieving SDGs is the need for improvement in implementation of projects and programmes.  Efficiency gain in public sector spending is a must.  Delays in project implementation have deleterious impact on cost as well as on the intended benefits. 

Improving tax-effort by 9.0 percentage points over the next 13 years will not be easy. The National Board of Revenue (NBR) must embark on new initiatives based on reforms, automation, capacity development and audit to improve revenue mobilisation. Access to climate fund critically depends on our capacity to negotiate with the development partners. In this context, Bangladesh has identified areas of strengthening. These should be ensured on a priority basis. The 7FYP states that the international experience with the implementation of infrastructure PPPs suggests that this policy has worked best when the legal framework is well-thought-out and when and the management of the initiative involves competent professional staff. The legal framework needs to lay down clear rules of engagement, and the incentive framework and dispute resolution mechanism should compares favourably with international good practices. 

Dr. Shamsul Alam is Member (Senior Secretary), General Economics Division (Government Focal Point for Poverty and SDGs), Bangladesh Planning Commission.

Editor : A.H.M Moazzem Hossain
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