There is vast discussion of what to do for rehabilitation of the reported 1 million households that have been devastated by Sidr. In addition to the households there are many SMEs that have had assets destroyed. These discussions focus largely on giving grants or loans of food, water and materials to households and to SMEs to enable them to rebuild and replant.
This approach assumes that providers of grants have vast amounts of information on the needs, which they do not actually have. Hence, what is provided may not match what is needed. Every household faces particular, unique difficulties. But the managers of the grants will always work in fixed packages. One household needs to rebuild bunds in the paddy; another needs to prop up damaged trees. One needs to build a new house; another needs to replace a roof. One needs to buy fishing nets; another needs to drain and clean a fish pond. One needs to repair a tubewell; another needs to dig a new pond. One SME has lost its stock and has to procure; one SME has lost its machines and has to repair or purchase replacements.
The obvious solution was long age explained by Amartya Sen -- provide income through public works or, in a few cases, cash grants. The available purchasing power will cause the private sector to locate, transport and sell the things that the households and SMEs need.
Information is generated through the market, efficiently and cheaply. The bureaucratic approach will never collect the real information needed and will not know the actual needs of the households. While loans will help the SMEs, without purchasing power in the hands of the public they are not going to get much business.
How to get money into people's hands? People will send money to the distressed, but it will not be enough. Further, the affected households need to rebuild self-confidence and pride. Handouts have the opposite effect; people must be empowered to tackle their own problems, not be made into beggars. Here two government actions can a play key role.
First, to facilities private cash transfers into the region the mobile telephones must be working, and ways to transfer cash accomplished with the assistance of banks and mobile phone companies. Second, there must be a massive public-works program. The government must put aside the public procurement rules during this emergency.
One can identify up to 500 contractors that the government has dealt with before. Identify sites for 2,000 shelters in the devastated areas; use designs that are already available (2,000 shelters holding 500 persons each provides additional shelter for 1 million persons). The quantity surveyors can recalculate the costs with current construction materials prices. Then the contractors are invited to sign contracts to build one or more shelters at an agreed price.
Payment may include a bonus if completed early. Supervision teams comprising officers from LGED and the Bangladesh military may be formed to ensure quality.
The important thing is that workers are hired locally (a contract condition) and money flows into the local economy through their wage payments. The financially empowered local households will undertake to sort out their own problems.
There may be other construction projects -- repairing highways and bridges, rebuilding schools or clinics -- that can also be started quickly. Shortened procurement procedures may be followed. There may also be development projects in the area, ready to start or already underway, that can be given priority attention.
The point is not the projects themselves but getting money into the hands of the population. To achieve this objective it is worth taking some risks with procurement. Altogether, the government must create immediately a construction program in the affected areas, rapidly employing the local population in public works.
How to fund such an effort? There should be no hesitation here. A two-step process would do the job.
- Fund directly through the budget. Borrow more from the banking system if necessary. This takes no time whatsoever. The government can authorise the necessary expenditure program in one day!
- Approach donors, non-resident Bangladeshi groups, etc. to contribute to the construction fund. To do this will probably require partner participation in the oversight of the programs, but this is not bad -- it helps to prevent corruption. The Bangladesh government should invite support but not wait to receive it; it can seek suggestions but the program must reflect decisions and standards stipulated by Bangladesh. If the partners will not participate say, "thank you, but do not bother." In the past the rehabilitation programs have been slow; here the objective is to spend rapidly.
The key point is to empower financially the distressed households by generating immediate employment opportunities. This will revive the local society and economy. The government has already authorised increased lending. But lending without income generation is dangerous.
If this accelerated public works program gets underway, bank lending will become effective. Rescheduling micro credit becomes meaningful. Without employment generation we will end up with greater household debt and the poorest households will not receive much help.
Sen's insights into disaster management, particularly famines, have shown the way. Handouts and grants are needed in the immediate aftermath, but a public works program generating employment is the most effective solution to getting through the next year. Let the government commission the projects; the private sector organise and carry out the construction; the workers buy what they need for survival and rehabilitation; and the private traders respond to the demands and supply the materials.
The government should avoid getting involved in long term programs of supporting the population, but a public works program achieves this support and generates economic activity to restart the economy.
There may be some households so badly struck as to require grants. That should be arranged through the local authorities in appropriate cases. Eligible households may include a single mother with small children, or an elderly couple etc.
How much is involved in this program?
One million households need assistance. Household consumption expenditure in the area we estimate at Taka 50,000 (this is probably on the high side but reflects the Khulna-Barisal divisions average household consumption according to the HIES 2005).
Employment in public works projects must replace 50% of this expenditure during one year for 50% of the households. This implies Taka 1,250 crore should be paid as wages to the labour force. Total construction cost would be about Taka 3,750 crore.
A program with two thousand shelters at Taka one crore each would produce about half of the needed public works. Including multiplier effects such a program would generate Taka 3,000 crore in demand, 75% of what is needed. There will be additional amounts from other programs, cash grants from friends and relatives etc. But the proposed insertion of cash can be met.
Such a program would not be perfect: There will be corruption, neglected areas and households not covered. But most of the damaged area will be served and the population will be able to get their lives restarted through their own work.
Start an emergency public works program to construct 2,000 shelters at a price tag of Taka one crore each. This will generate the cash wages needed to restart the economy. It will also provide protection against future cyclones.
Forrest Cookson is a freelance contributor to The Daily Star.