An analytical two-sector planning model for the Bangladesh economy has been developed in this paper. The model, essentially of the two-gap vintage, is specifically geared towards analyzing policy issues with respect to external assistance. Besides providing a numerical understanding of the effects of foreign aid on domestic resource mobilization, the model also points to the critical conditions that need to be fulfilled to realize desired objectives. The results indicate that the marginal productivity of external assistance is directly proportional to the marginal rate of savings in the economy. It is possible to obtain a high degree of self-reliance by 2000/2001 by a massive increase in foreign assistance between 1981/82 and 1986/87 accompanied by significant increases in saving and investment rates and by planned re-allocation of incremental resources. The model suggests that the use of labour intensive techniques can prevent worsening of the existing distribution of income in a significant way.

The paper explores the feasibility and potential of monetary cooperation among developing countries of the region. Unlike many proposals for cooperation that are expected to be underwritten by OPEC-funds, this one seeks to alleviate the problems of financing imports by mechanisms independent of such funds. It recommends the formation of a regional ‘Payments Union’ that integrates a clearing mechanism with a credit arrangement, both having certain distinctive features. The clearing facility incorporates extended settlement periods, routing of capital transactions, a new unit of account whose value is protected from gradual erosion and an investment guarantee arrangement. The latter three aspects of the facility could increase regional investment and thus overcome the usual problem of inconvertible balances. The credit mechanism derives its funds from a partial pooling of the countries’ foreign exchange reserves. The potential of the first is demonstrated in terms of its capacity to encourage regional trade and investment and thereby to finance increased imports while that of the second is shown by the generation of a eight-billion-dollar-fund capable of providing credits upto 30% of a country’s gross reserves or more. Optimism about the establishment of such an arrangement in the 1980s is predicated on three grounds. First, there will be greater incentives for even middle-income countries of the region, to seek alternative sources of financing. Second, developing countries have gained considerable experience of cooperation over the last decade. Third, this proposal seeks to extend and modify an existing facility as means of implementing this.

This paper emphasized the need for nutritional surveillance activities in order to fix priorities in resource allocation as well as in meeting emergency situations. Using the already identified socio-economic indicators such as wage, price and anthropometric indices of weight and height it proposes to monitor the nutrition situation of the country. A proposed institutional framework for such activities is also outlined and the need for regional cooperation emphasized.