We need a better urban social protection system

Urban areas are the new frontier of poverty. Picture: star

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Urban areas are the new frontier of poverty. Picture: star

Covid-19 has forced Bangladesh to take a hard look at its urban poverty situation and its fragmented social protection system. Urban areas were already emerging as the new frontier of poverty even before the pandemic. And the ripple effects on unemployment, income and food insecurity have already been widely documented. While Bangladesh focused on combating the effects of the pandemic, particularly in low-income urban communities, the measures were often temporary and difficult to administer. Today, the challenges are becoming apparent even as the economy recovers and the country navigates towards the post-Covid recovery phase.

Among the main issues, headline inflation (point to point) notably increased to 6.17% in February 2022 from 5.32% a year ago. Non-food inflation has led the overall trend in recent months with price increases for transport, clothing, furniture and furnishings. These increases are partly linked to more expensive imports of energy and essential goods driven by the Covid-induced spikes in world prices and freight costs. Domestic fuel, gas and transport price adjustments, as well as weak market surveillance of key commodity prices, have also compounded the problems. Global uncertainty due to the ongoing crisis between Ukraine and Russia, the resurgence of Covid in China and other developments are also impacting global trade and supply chains. This could further affect inflationary trends in Bangladesh. Overall, inflation is likely to continue to rise, according to the Bangladesh Bank.

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Households with low fixed incomes, especially the poorest urban households already affected by Covid-19, are likely to face tighter budget constraints. Lower middle income households may also face food insecurity. Given these elements, Bangladesh cannot afford to lose sight of social protection (including urban social protection), especially in the next national budget. Open Market Vending (OMS) programs in urban areas should be continued and expanded as part of ongoing government efforts.

Beyond these immediate concerns, Bangladesh needs to invest in a shock-responsive urban social protection system that can respond to the country’s climate crisis. Bangladesh has already experienced rapid urbanization accompanied by economic growth. At the same time, more frequent and intense weather-related disasters are displacing rural populations to urban areas such as Dhaka. Studies show that one in seven people will likely be displaced by climate change by 2050. But big cities such as Dhaka and Chattogram may also become less hospitable. According to a 2018 World Bank study on internal climate migration in South Asia, these are highly vulnerable to sea level rise, storm surge impacts and heavy flooding. Covid-19 has already exposed the flaws in Bangladesh’s urban welfare system. This underscores why investments need to be made now that include cities beyond Dhaka and Chattogram.

Bangladesh already has the project for the transition to such a system: the national long-term social security strategy and action plan. This includes expanding social assistance coverage and introducing social insurance programs in urban areas. Some forms of social assistance programs for children, the elderly and people with disabilities are already being considered as part of ongoing reforms. However, simply extending or duplicating rural welfare programs will not respond well to the distinct vulnerabilities of people living in urban areas. They face higher living costs, multiple aspects of deprivation and more precarious jobs.

Social protection reforms focusing on employment policies and social insurance are also key priorities alongside social safety nets, as highlighted in Bangladesh’s 8th Five-Year Plan. As noted earlier, the pandemic has disproportionately affected vulnerable urban households. Adults working in these households are likely to be self-employed, informally employed, or in unprotected, low-income formal sectors. They need help to protect their incomes and jobs, especially in times of crisis. Here, the gender needs of women require serious attention.

Bangladesh plans to introduce social insurance schemes (e.g. unemployment insurance schemes) for formal and informal workers under a pilot national social insurance scheme under the national strategy of social security. However, the benefits are more likely to flow to formally employed workers who can afford to help invest in their own security compared to those working in the informal economy. Given the new realities and drawing on international experience, Bangladesh can explore ways to introduce and expand affordable social insurance schemes to all working adults, which will reduce their insecurity.

Here, partnerships will be key to designing and implementing these urban-specific, shock-responsive programs, especially during emergencies. Bangladesh can benefit from the partnerships established between the Local Government Division and development actors working on urban poverty. For example, UNDP’s Urban Poor Communities Livelihood Improvement Project (LIUPCP) is one of the country’s largest urban poverty reduction initiatives. Similarly, the role of nongovernmental organizations (NGOs) can be critical in piloting small-scale programs to better understand what works for vulnerable urban households. Partnerships with insurance industry players in Bangladesh could also be crucial moving forward.

Sarah Amena Khan is a development practitioner.

Joel C. Hicks