ACE logo v3 2
The Anti-Corruption Evidence (ACE) Research Programme – led by SOAS, University of London - takes an innovative approach to anti-corruption policy and practice. With £6 million in funding over five years from UK aid, ACE is responding to the serious challenges facing people and economies affected by corruption by generating evidence that makes anti-corruption real and using those findings to help policymakers, business and civil society adopt new, feasible, high-impact strategies to tackle corruption.

Bangladesh has achieved sustained growth acceleration since the 1980s and significantly reduced poverty, thanks to multi-party competition and private investor confidence. However, Bangladesh also suffers from chronic problems of poor governance that result in political crises. Power generation and infrastructure construction have increased in recent years but at high costs, signalling the involvement of politically connected companies and high margins. The development of sectors like electronics, light machinery, pharmaceuticals, and shipbuilding has been constrained by weak regulatory capacities. Banks have lent to politically connected companies and banking scams have resulted in growing non-performing loans.

Skills training programmes, agricultural programmes, education, and health are all affected by corruption and weak governance. Unless cost efficiency can be achieved in these areas, growth may not be sustainable.

ACE’s approach explains why these ‘vertical’ enforcement efforts do not yield good results in countries like Bangladesh on their own. ACE looks for sectoral anti-corruption strategies using ‘horizontal’ support for enforcement in critical sectors like health, power generation, land markets, skills delivery, industrial regulation, and infrastructure investments.

BIGD is affiliated with two projects of ACE which are narrated below.

i)                  Power in Bangladesh

Enhancing productive investment in Bangladesh’s power sector by reducing incentives for rent capture.

Summary:

Productive investments in the power generation sector have been minimal, while less efficient and more costly investments have multiplied. There has been significant corruption through rent capture because incentives for long-term productive investments have declined over time. By changing some of these incentives and combining them with feasible improvements in contracting and procurements policies, we will see more productive outcomes in the sector.

The corruption issue

The incentive structures in Bangladesh’s power sector combined with the overall governance and political context of the country drive out technically-efficient bids, instead attracting politically-connected bids where rent-sharing is the primary business model.
If this problem is not addressed, the budgetary commitment of $1 billion to the power sector (which currently supports costly and poor technology generation) is likely to grow and become unsustainable. It is thus imperative to change rent capture incentives so that serious bidders can enter the power sector and generate energy more efficiently.


Our Theory of Change:

  • IF the profitability of productive investments in power generation can be raised by combinations of policies affecting the cost of long-term financing and making fuel policy more predictable with changes in procurement and contracting rules
  • THEN the supply of serious productive bidders for power projects with more efficient technical bids will increase
  • BECAUSE the credibility of contracts for bidders with the relevant technical and financial capabilities to participate in competitive bidding will increase and they will support the enforcement of more transparent procurements and contracting rules in their own interest.
Research Methods

We will use a number of econometric methods to gather the data. We expect hard data will be hard to obtain at the outset, given the political sensitivities and the threat of exposure that firms may perceive. We are thus working with our in-country partners to develop the right relationships alongside viable proxy variables, and alternative approaches and methods for data collection.

Partners: Mushtaq Khan (SOAS) and Sultan Hafeezur Rahman, Wahid Abdallah (BIGD)

ii)               Skills in Bangladesh

Reducing resource leakages in skills programmes to achieve better employability and wage growth outcomes

Summary:

Overall, the performance of skills training programmes in Bangladesh has been poor. But some targeted programmes have done well because they have addressed relevant market failures with targeted funding and appropriate governance structures.

The design of skills training programmes, together with connections with relevant employers and the tasks and capabilities of monitoring agencies, affect the incentives of stakeholders in training programmes. This results in either low or high levels of resource leakage, impacting upon training outcomes.
If the design of financing for skills training does not explicitly consider the heterogeneity of trainers as well as the differences in the capabilities and requirements of potential employers and monitoring agencies, then adverse incentives are often created. Trainers, trainees and potential employers often capture training resources in a variety of ways that can be described as corruption.


The Corruption Issue

If training providers receive public funding to support some or all of their training but they also know that even if they provide high quality training, many trainees will still be unemployed or fail to receive higher wages, the incentives to on both supply and demand side are significantly reduced. Rent capture and collusion thus become attractive options involving providers, monitors, and even some employers.
This corruption cannot be stopped or blocked simply through better monitoring and enforcement of penalties, but by simultaneously changing the incentives of some stakeholders to start behaving differently by helping them see why providing high quality skills is a good business model on both the demand and supply side.


Theory of Change:

  • IF training is matched to the capabilities of employers, with additional programmes introduced to raise the ‘organizational capacities’ of potential employers so they can use improved workforce skills to raise productivity and profitability
  • AND IF funding for training programmes and monitoring are designed to reduce leakage while considering the heterogeneity of trainers and employers
  • THEN resource leakage from training programmes will be reduced
  • BECAUSE the rewards of more effective training outcomes will be sufficiently internalized by one or more stakeholders who will improve governance of funds for training programmes
Research Methods:

  1. The research will use econometric and other methods to test the relationships between:
  2. the type of training organization
  3. its financing model
  4. the monitoring agencies processing payments based on results assessment
  5. the capabilities of employers measured by observable characteristics like their exports and export-growth, size of employment or other characteristics and
  6. the probability of employment of trainees and wage increase they achieve through training.
Partners: Mushtaq Khan (SOAS); Sultan Hafeez ur Rahman, Wahid Abdallah, Arafat Uz Zaman Markony (BIGD-BRAC); Palladium Bangladesh (Sudokkho project)

Project Website: 
www.ace.soas.ac.uk