A Strategy for Poverty Reduction in TheLagging Regions of Bangladesh

7/30/2019 A Strategy for Poverty Reduction in TheLagging Regions of Bangladesh

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M E S S A G E

e Constitution of the Peoples Republic of Bangladesh in Article 19(2) mandates uniform level ofeconomic development throughout the Republic. is report A Strategy for Poverty Reduction in theLagging Regions of Bangladesh prepared by the General Economics Division of the PlanningCommission is the reflection of the present Governments commitment towards balanced development inthe country.

Bangladeshs progress towards reducing poverty in the last decade across the regions has not been even. ethree Divisions of the country out of six, namely, Rajshahi, Khulna, Barisal have higher rates of poverty.

e emergence of regional variation in poverty incidence in the country is a matter of considerable concern.

e Planning Commission was entrusted with the task of exploring the causes of the differential rates ofpoverty and preparing a strategy paper for correcting the imbalances. To this end a Committee was formed.e Committee has accomplished the task by formulating this strategy paper.

I would like to extend my appreciation to the members of the Committee and officers of the PlanningCommission for their efforts in preparing and publishing this strategy paper. I fervently hope that theplanning and development process in Bangladesh will henceforth be more strongly oriented towards anexpeditious reduction in the regional imbalance in development.

Dr. A.B. Mirza Md. Azizul IslamAdviser

Ministry of Finance and PlanningGovernment of the Peoples

Republic of Bangladesh

Dr. A.B. Mirza Md. Azizul Islam

Adviser

Ministry of Finance and Planning

Government of the Peoples

Republic of Bangladesh

Ministry of Finance, Planning,Commerce, Posts & Telecommunications


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C O N T E N T S

THE STUDY COMMITTEE 9LIST OF TABLES 10LIST OF APPENDICES 10LIST OF ANNEXURE 10EXECUTIVE SUMMARY 11

1. INTRODUCTION 151.1. BACKDROP 17

1.2. CONSTITUTIONAL COMMITMENT 181.3. SCOPE OF THE REPORT 19

2. EFFORTS IN REDUCING REGIONAL IMBALANCE ANDPOVERTY BOTH IN DEVELOPED AND DEVELOPING COUNTRIES 21

3. REGIONAL VARIATION OF POVERTY IN BANGLADESH 273.1. RECENT EVIDENCE FROM HIES DATA 293.2. INCIDENCE OF POVERTY 303.3. DISTRIBUTION OF POOR 31

3.4. INTENSITY AND SEVERITY OF POVERTY 323.5. NON-INCOME POVERTY 33 3.5.1. Literacy Rate 33 3.5.2. Enrolment Rate 33 3.5.3. Infant Mortality 34 3.5.4. Maternal Mortality 34

4. REGIONAL GAPS IN INCOME, SAVINGS, INVESTMENT AND EMPLOYMENT 354.1 GROSS DOMESTIC PRODUCT (GDP) 374.2 PER-CAPITA GDP 384.3 PER-CAPITA INCOME AND CONSUMPTION EXPENDITURE BY STRATUM 394.4 LABOUR FORCE AND UNEMPLOYMENT 404.5 EMPLOYMENT AND WAGE 404.6 SAVINGS AND CREDIT DISBURSEMENT 404.7 DISTRICT LEVEL ANALYSIS 40

4.7.1 Geographical Concentration of Rural Poverty 40 4.7.2 District wise Per-capita GDP Growth (1996-2000) 42 4.7.3 Spatial Distribution of Educational Attainment by Workers 43 4.7.4 Agricultural Growth and Rural Poverty 43


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5. APPROACHES TOWARDS ADDRESSING POOR REGIONS 455.1 PROMOTION OF RURAL NON-FARM ACTIVITIES 485.2 OVERSEAS EMPLOYMENT 495.3 LOCATIONAL DISPERSION OF INDUSTRIES AND CREATION OF

REGIONAL GROWTH CENTRES 49

5.4 TRAINING AND SKILL GENERATION 505.5 INVESTMENT FUND FOR LAGGING REGIONS 51

6. ATTEMPTS TOWARDS ADDRESSING BACKWARD REGIONS IN BANGLADESH 536.1 PAST RECORD 556.2 CURRENT PROGRAMMES OF THE GOVERNMENT 55

6.2.1 Public Investment 55 6.2.2 Distribution of Social Safety Net Programmes Benefit 56 6.2.3 Distribution of Households Receiving SSNP 56

7. A FRAMEWORK FOR REDUCTION OF POVERTY IN LAGGING REGIONS 597.1 GENERAL RECOMMENDATIONS 617.2 SHORT-TERM MEASURES 617.3 MEDIUM TO LONG-TERM MEASURES 63

8. MONITORING AND EVALUATION (M&E) FRAMEWORK 678.1. INSTITUTIONAL MECHANISM 698.2. DATA GENERATION 698.3. INDICATORS FOR M & E 70


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T H E S T U D Y C O M M I T T E E

on Poverty Reduction in the Lagging Regions of Bangladesh

A Strategy for Poverty Reduction in the Lagging Regions of Bangladesh 9

1. Mr. Jafar Ahmed Chowdhury, Member, GeneralEconomics Division, Planning Commission &Secretary, Planning Division, Ministry of Planning

Convenor

2. Mr. Ehsanul Fattah, Member, Industry and EnergyDivision, Planning Commission, Ministry of Planning

Member

3. Mr. Mohammad Shah Alam, Member, Agriculture,

Water Resource and Rural Institutions Division,Planning Commission, Ministry of Planning

Member

4. Mr. Muhammad Abdul Mazid, Member, PhysicalInfrastructure Division, Planning Commission,Ministry of Planning

Member

5. A.Y.M. Ekramul Hoque, Director General,Bangladesh Bureau of Statistics, Planning Division,Ministry of Planning

Member

6. Dr. Ashraf Uddin Chowdhury, Professor, Departmentof Economics, Dhaka University

ExpertMember

7. Dr. Momtaz Uddin Ahmed, Professor, Department ofEconomics, Dhaka University

ExpertMember

8. Dr. Quazi Mesbahuddin Ahmed, Former Member,Planning Commission, Ministry of Planning

ExpertMember

9. Dr. Rushidan Islam Rahman, Research Director,Bangladesh Institute of Development Studies (BIDS),Planning Division, Ministry of Planning

ExpertMember

10. Dr. Uttam Kumar Dev, Senior Research Fellow,

Centre for Policy Dialogue (CPD)

Expert

Member

11. A.K.M. Khorshed Alam, Joint Chief, Macro andPerspective Planning Wing, GED, PlanningCommission, Ministry of Planning

MemberSecretary


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L I S T O F T A B L E S

Table 1 : Incidence of Poverty by Region 31Table 2 : Number and Density of Poor People by Region: 2005 31Table 3 : Poverty Gap and Squared Poverty Gap by Region: 2005 32Table 4 : Literacy Rate (7 Years and Over) by Division 33Table 5 : Children Enrolled in Schools, 2005 33Table 6 : Infant Mortality Rate by Division 34Table 7 : Maternal Mortality Ratio by Division 34Table 8 : Share of GDP by Region and Sector 37Table 9 : Net Cultivated Area, Gross Cropped Area and Cropping Intensity by Region 38Table 10 : Region wise Per-capita GDP at Current Market Prices 39

Table 11 : Per-capita Income and Consumption Expenditure by Stratum: 2005 39Table 12 : Division-wise Distribution of Bank Deposit and Advances 40Table 13 : Ranking of Districts by Growth Rate of GDP 42Table 14 : Ranking of Districts by Per-capita GDP 43Table 15 : Agricultural Growth, Agricultural Diversity and Rural Poverty 44Table 16 : Share of RADP Allocation by Region 55Table 17 : Division wise Distribution of SSNP Benefit by Households: 2005 56Table 18 : Division wise Distribution of Households Receiving SSNP: 2005 56

L I S T O F A P P E N D I C E S

Appendix I : Roadmap for Poverty Reduction in the Lagging Regions 73Appendix II : Labour Force, Unemployment and Wages 74Appendix III : Extent of Poverty in Different Regions 75Appendix IV : Landlessness in Bangladesh 76Appendix V : Educational Attainment of Worker 77Appendix VI : Social Safety Net Programmes in Bangladesh 78Appendix VII : District-wise Overseas Employment from 1976 to August 2007 79

L I S T O F A N N E X U R E

Annexure 1 : Action Plan for Poverty Reduction in the Lagging Regions 80Annexure 2 : Committee for Monitoring Implementation of Action Plan 88



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E X E C U T I V E S U M M A R Y

i. Bangladesh has made strong progress towards reducing poverty in the last decade at the aggregate levelpoverty incidence reduced from 51.0% in1995-96 to 40.0% in 2005. Te poverty gap also declined from

17.2 in 1992 to 9.0 in 2005. Squared poverty gap too declined from 6.8 to 2.9 during the same period. Butat the regional level, the pace of poverty reduction is not equal and some regions are lagging behind whilethe others are performing well. Tis phenomenon is not uncommon in many developing and developedcountries. Recently, the Honourable Chief Adviser of the Care Taker Government of Bangladesh notedwith concern that the incidence of poverty is disproportionately higher in the Divisions of Barisal, Khulnaand Rajshahi on the basis of the preliminary report of the Household Income and Expenditure Survey(HIES), 2005. Te HIES, 2005, shows that poverty is still higher in the western region of the country whilelower in the eastern region. Te poverty incidences in the three north western Divisions namely Khulna,Barisal and Rajshahi were 45.7%, 52.0% and 51.2% respectively while the incidences of poverty in southeastern Divisions namely Dhaka, Chittagong and Sylhet were 32.0%, 34.0% and 33.8% respectively. Teselagging regions are more agriculture dependent and less industrialised than other regions. In the past, these

regions received relatively less allocation of the Social Safety Net Programme (SSNP) as well as the AnnualDevelopment Programme (ADP). Tese regions also lag behind others in respect of some criticalinfrastructural facilities such as transport and communication, and electricity and gas.

ii. Consequent upon the concern to address the issue a committee was formed with officials and localexperts to analyse the reasons of such high poverty and to prepare an action oriented and operationallyuseful strategy paper as suggested by the Honourable Chief Adviser. Te committee met five times toinvestigate the issue using time series of existing regional statistics and literature in the relevant field. Afterseveral rounds of discussion and analysis, the committee constructed a framework for poverty reduction inthe lagging regions. Te framework recommended some measures for short term and medium to long termsolutions to the problems. Recommendations entail policy and programme interventions with particular

focus on infrastructural development and targeted interventions in the poorer regions. Following are someof the major recommendations made by the committee for the short and medium to long-term timehorizon. Te recommendations for policy interventions made below are neither exhaustive nor based onin-depth research because of time constraint. Admitting the shortcomings, the committee emphasises theneed for full-blown research and studies for pragmatic policy making in future.

A. Short Term Policy and Measures

1. Strengthening the SSNPs in the poorest and remote areas of the Divisions where the most hard-corepoor are concentrated.

2. Te farmers in the poorest Upazilas should get priority in terms of distribution of agriculture subsidy.Explore the possibility of increasing the provision of agricultural loan at a lower interest rate in the poorestUpazilas.

3. Expand BR-33 rice and Cassava cultivation in the lagging regions especially in Monga areas.

4. Government should create job opportunities in Monga areas during the off seasons when there is noagricultural works. A support to internal migration for the people of Monga areas may be provided.

5. Undertake work-fare programmes employing target population and using very simple technology tomaintain rural roads connecting respective Upazilas and districts.



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6. Undertake Public Health Programmes to mitigate arsenic contamination and saline water for obtainingpure drinking water. e Sono filter invented by local scientists should be used for this purpose.

7. Encourage local NGOs to provide a need-based work plan containing short-term programmes for thechronic and hard-core poor (with adequate gender dimension) of the poorest regions of the country to beexamined for implementation by the Government.

8. Special attention should be given to accelerate ADP implementation maintaining its quality in thelagging areas.

9. Appropriate measures should be taken to give a fair share of the block allocations of the developmentand revenue budgets for development programmes in the lagging regions.

10. Rajshahi Krishi Unnayan Bank (RAKUB) should go into wider areas of the lagging regions with thepoverty alleviation project called Small Enterprise Credit Programme (SECP). Preference should be givento the small enterprises of Monga areas.

B. Medium to Long Term Policy and Measures

1. Construction of culverts, bridges and ferry ghats in lagging regions should get priority.

2. A 10% lower rate of interest on loans should be offered for investing in lagging regions.

3. Supervised credit system should be strengthened through NGOs, PKSF and specialised banks likeBangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank (RAKUB).

4. Block allocation for local government institutions in lagging regions particularly in lagging districtsshould be enhanced.

5. Against the backdrop of declaration by the Election Commission to hold elections in a staggeredmanner and as early as possible, elections to the local bodies in the poor regions of the country should getpriority consideration.

6. Storage and transport facility in lagging Divisions should be improved.

7. In order to impart need-based training, the private sector training operators should be provided withinterest-free loans from Banks and financial institutions.

8. Complete the Upazila connecting roads in Barisal, Rajshahi and Khulna Divisions. Upgrade theUpazila connecting roads into regional highways, wherever possible, followed by a detailed feasibility study.

9. New electricity generation plants should be undertaken for Barisal, Khulna and Rajshahi Divisions.

10. e gas transmission line projects (on-going and new) in Rajshahi and Khulna Divisions should becompleted.

11. By administrative arrangement and making provision for skill development, people of lagging regionsshould be encouraged to go abroad.

12. A new policy to ensure balanced migration from the country should be formulated. e policy wouldinclude strategies focusing on workers migration from the poverty-stricken districts and also on reducingthe migration cost itself.

13. e Technical Training Project for the unemployed youth should be undertaken specially for thelagging regions (e feedback from the technical training project phase II will be helpful in making theproject for the lagging regions effective).



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14. Special attention should be given to export manpower on a large scale from Monga areas. To this end aquota may be introduced for greater Rangpur district for overseas employment.

15. Newly established Rangpur Technical Training Centre should be started immediately. Courses onEnglish and Korean languages need to be introduced as soon as possible both in the Rangpur andLalmonirhat Technical Training Centres.

16. Decentralise urbanisation by making secondary cities and towns the hub of social and economicactivities of the surrounding areas. Note that concentration of urbanisation particularly in the primate cityis one of the highest in Bangladesh.

17. All sectoral projects in ADPs, particularly those with the evident focus on pro-poor growth and genderempowerment, should be examined from the perspective of their regional dispersion.

18. e construction of Padma Bridge should be started as early as possible.

19. A feasibility study for constructing a second bridge over the river Jamuna at the upstream should beundertaken.

20. Eco-tourism should be developed in the Sundarbans.

21. Kuakata in Patuakhali District should be transformed into a full-blown tourist centre.

22. Necessary measures for rejuvenating the Mongla Port in Khulna should be undertaken.

23. e long-term dredging programmes of inland waterways should be expedited.

24. Administration should be decentralised as decentralisation of administration, especially regardinghealth and education service will bring multiplier effect in the economy of the disadvantaged areas.

25. Steps should be taken to establish indigenous and export oriented industries in the lagging regions ofthe country.

26. A well-functioning institutional mechanism/a high level committee should be established within the

government to address all issues of spatial inequality in Bangladesh.

iii. e Committee constructed a monitoring and evaluation framework of programmes in the laggingregions along with an institutional mechanism and indicators for monitoring and evaluation. It alsochalked out a roadmap for poverty reduction in the lagging regions.

iv. According to the suggestions of the Committee and advice by the Adviser to Finance and Planning, anAction Plan for poverty reduction in the lagging regions has been prepared based on the recommendationsof the strategy paper (Chapter-7). A 13-member Committee for monitoring implementation of ActionPlan has also been constituted. Member, Programming Division, Planning Commission is the convener ofthe committee. Division Chief, General Economics Division, is the Member-Secretary.



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I N T R O D U C T I O N

1. BackdropRegional difference in economic development is a common phenomenon in the developed as well asdeveloping countries, because economic development never progresses at the same pace in all the regionsof a country over time. However, the severity is more pronounced in developing countries. In an economy,the pace of expansion can vary substantially from sector to sector and from region to region. At any pointof time, there will be some industries, firms or regions which act as growth poles and develop rapidly

while others may stagnate or even decline. Te duration of such process gives rise to increase in inequalityin regional incomes and calls for regional policies to deal with it and ensure balanced spatial development.Regional development policies are thus formed and pursued which are socially desirable and economicallysound.

Significant differences at the levels of income and employment existed even in the most highly developedeconomies and tend to be the results of relative underdevelopment or depression. Te typicalunderdeveloped regions (such as South of Italy and Southern and Western France at early stages ofdevelopment) with little or no industry had traditionally an extremely high proportion of people engagedin agriculture associated with low per-capita income, high unemployment and underemployment. Tus,excessive locational concentration of economic activities in the developed regions and economicbackwardness in the depressed regions includes demographic malaise, underdeveloped infrastructures, lowor scarce resource availabilities etc. have traditionally been the major factors underlying regional disparityin economic development in these countries.

Some of the recent researches in this field suggest that even today the problem of regional inequality inper-capita income among the European Community member countries continues to be a considerable

problem. Te countries such as Belgium, Germany, Greece, Spain, France, Ireland, Italy, Netherlands,Norway, Sweden and U.K. suffer from high levels of inequalities in the regional distribution of per-capitaGDP in them1. Differences in the stock of capital per worker, productive specialisation, degree of tradeopenness etc, are identified across various regions as the major causative factors explaining regional incomedisparities in these countries.

Geographically, Bangladesh is a small country with ethnically much more homogenous population thanmany other countries in South Asia. Nonetheless, historically it is marked with considerable regionaldifferences in dialect, custom, agrarian relations and social development. Although the presence andpersistence of differences in human development indicators in the country are often discussed, regionaldifferences in income and other economic indicators are less known and talked about.

Bangladesh now has one of the fastest rates of poverty reduction in South Asia. In 1991, 57 percent ofBangladeshs population was living below the poverty line. By 2000 this figure came down to 49 percent.Over the period 2000 to 2005, the poverty rate further declined to 40 percent with around six millionpeople lifted out of poverty. Yet a comparison with Vietnam is more sobering. Te poverty rate in Vietnamfell from 58% in 1992 to 20% in 2005. In other words, although the proportion of poor in Vietnam wassimilar to that in Bangladesh in the early nineties, it is now around half that in Bangladesh. Te main


1See Ezcurran, R. et al (2006).


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reason is that Vietnams annual rate of GDP growth was on average 2.5 percentage points higher than

Bangladeshs during this period. Key to Vietnams higher growth are the infrastructure investments thathave created three growth poles within the country in contrast to the Dhaka-based locus of Bangladeshsdevelopment. In this context, one can argue that had there been more growth poles in Bangladesh, incomegrowth and poverty reduction would be larger than what actually happened. In addition, the gap betweenincome and poverty among the regions could have been less due to the spread of growth poles.

While the overall progress in reducing poverty in Bangladesh is impressive, there are major differencesbetween the eastern and western parts of the country. Dhaka, Chittagong and Sylhet Divisions, all in theeastern part of the country, have had the most significant reductions in poverty; in contrast to Barisal,Khulna and Rajshahi Divisions, in the western part of the country. Regional differences were quite sharp in2005 the poverty headcount ranged from a low of 32 percent in Dhaka and 34 percent in Chittagong and

Sylhet to over 50 percent in Barisal and Rajshahi. In fact, Dhaka and Chittagong, with just over half thecountrys population, contributed as much as 79 percent of the aggregate reduction in poverty headcountbetween 2000 and 2005.

Tese regional patterns may be explained by a number of factors. Te eastern part of the country has seena higher concentration of manufacturing employment opportunities as businesses prefer to set up inproximity to the capital and the main port city. Another important factor is connectivity. Lower travel timeto the nearest town, as well as to Dhaka, explains some of the regional differences in poverty. Te patternof remittances also closely mirrors that of the reduction in poverty. One in four households in Chittagongreceives remittances, followed by 16% in Sylhet and 8% in Dhaka. Yet on the western part of the countryonly 1% of households receive foreign remittances in Rajshahi, 4% in Khulna and 5% in Barisal. Tere isalso some evidence that the distribution of safety net programmes was skewed towards certain EasternDivisions (e.g. Sylhet).

However, we clearly do not have the full answers to why Bangladesh has an emerging East-West divide. Asa result we only have a partial set of solutions and these also need to be translated into policy decisions thatcan be implemented. Te reasons behind Division and district level inequality require more research.

2. Constitutional Commitment

Article 16 of the constitution of the peoples republic of Bangladesh states: Te state shall adopt effectivemeasures to bring about a radical transformation in the rural areas through the promotion of an agriculturalrevolution, the provision of rural electrification, the development of cottage and other industries, and the

improvement of education, communications and public health, in those areas so as progressively to remove thedisparity in the standards of living between the urban and the rural areas. By inference we get a directive toaddress the disparity in the standards of living.

Again, Article 19 (2) states: Te state shall adopt effective measures to remove social and economic inequalitybetween man and man and to ensure the equitable distribution of wealth among citizens, and of opportunitiesin order to attain a uniform level of economic development throughout the republic.



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3. Scope of the Reporte terms of reference (ToR) of the committee on Poverty Reduction in the Lagging Regions ofBangladesh constitutes the scope of the report. ese are:

a. Collection and analysis of regional inequality data;

b. Analysis of available research in the relevant field;

c. Recommendation for policy formulation and expenditure allocation by the Planning Commission forrapid reduction of poverty in Barisal, Khulna and Rajshahi;

d. Emphasising Infrastructural development in Barisal, Khulna and Rajshahi (Construction of Padmabridge, increased use of Mangla Port, gas supply through pipeline in Khulna Division, etc.);

e. Recommendation for increased targeted intervention, if the number of poor in those regions is massive.



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E F F O R T S I N R E D U C I N G R E G I O N A L I M B A L A N C E A N D P O V E R T Y B O T H

I N D E V E L O P E D A N D D E V E L O P I N G

C O U N T R I E SExperience with Some Policies and Approaches

Development of lagging regions and efforts at removing inequality and furtherance of standard of life inlagging regions is a matter of policy concern for both developing and developed countries. However, theproblem is more acute for developing countries. Available literature on the subject illustrates the point. Alarge mix of policies framed under the regional plans in both France and Italy2 such as decentralisation ofeconomic activities, special incentives for development of local industries in the less developed regions,fiscal and financial subsidies and concessions, infrastructure development initiatives etc. have been used to

deal with the problems of inequality in regional development in these countries.It is thus imperative that the formation and implementation of special regional policy is pertinent in thecountries where regional imbalance in development persists, provided there is strong political will to reducespatial differences in the level of economic development. Models for reducing regional imbalance both indeveloping and developed countries are discussed below:

Backward Regions Grant Fund in India: Policy makers have tried a number of both planned and marketbased policies aimed at regional development and at reducing imbalances between leading and laggingstates. Tese interventions include fiscal incentives, industrial policies, central funds, and more recently,introduction of Backward Regions Grant Fund in India. Two hundred and fifty districts in India arecovered under the Backward Regions Grant Fund which has a budget of Rs.3750 crores in 2006/07. Each

district will get an additional Rs. 10 to 15 crore annually exclusively for developing infrastructure andfilling gaps in development programmes. Tis Fund is implemented totally through Panchayati Rajinstitutions and the basis for the funded programmes is the District Plan. Te District Plan is put togetherby District Planning Committees constituted in each district. Tose committees also integrate plans ofrural and urban local bodies. Under the Backward Regions Grant Fund, capacity building of PanchayatiRaj functionaries is being financed. Tere is a parallel investment for building local community capacitiesby promoting the training of barefoot engineers, community level agricultural extension workers andlocal level specialists.

Indonesian Experience: Some tactical policies related to regional development were implemented inIndonesia since the early 1970s. Tey were aimed to promote a more balanced regional development. From

the fiscal perspective, expanded fiscal revenue during the oil boom in 1970s enabled the transfer of massiveresources to islands that were heavily dependent on suffering non-oil export sectors. Massive resources weretransferred through a government-based channel, which contributed to developing regional infrastructure,such as roads, schools and health facilities. Tey were represented in government expenditure from budgetallocation of central government into provinces. Some remarkable social progresses were made in thisperiod. Moreover, some tactical programmes were intended also to achieve more equitable regionaldevelopment, such as Inpres (instruction of President) programme for under developed villages. It was part


2See Brown, A.J. et al (1977).


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of fiscal decentralisation policy that allows regional governments to have greater autonomy in reducingpoverty in their respective areas.

However, an increasing level of regional income inequality, following the rapid economic growth shows thefailure of some of the above policies. e significance of regional disparity is also indicated by the coefficientof variation (CV) for per-capita GDP among provinces compared to some developing countries. In 1997,

it was 0.83 while the other developing countries varied from 0.186 to 0.797. A Recent study reports thatoverall regional income inequality increased significantly over the 1993-97 period (from 0.262 to 0.287),during which time Indonesia achieved an annual average growth rate of more than 7 percent.3 e increasewas due mainly to a rise in the within-province inequality component, especially in the provinces of Riau,Jakarta, West Java and East Java. Te between-province inequality also increased but only veryinsignificantly.

e regional disparity in Indonesia represents an ever-present development challenge in most countrieswith large geographic areas. Globalisation heightens these challenges as it places a premium on skills. Withglobalisation, skills rather than the resource base of regions determine their competitiveness. Skilledworkers gain at the expense of unskilled ones. As typically rich regions also have better educated and betterskilled labour, the gap between rich and poor regions widens. Poor regions become poorer and the richricher. However, neoclassical models posit that regions with low capital-labour ratios should catch up to thelevel of the developed regions because of the marginal productivity of a unit of invested capital is higher.For many policy considerations, this regional convergence generally is assumed as a good thing, whichreduces the level of regional disparity.

European Structural Fund: e regional inequality is also a subject of many developed economiesincluding EU, Japan, U.K etc. e difference in the level of industrialisation, productive specialisation,degree of trade openness, availability of skilled manpower, lack of communication net work are the majorcauses of regional differences. Historically, both planned and market based ways have been tried to addressthe problem of regional disparity which includes fiscal incentives, industrial policies and special allocation.Under the common regional development policies adopted by the European Community, the European

Structural Fund is directed at promoting development in the regions of the member countries whereper-capita GDP is below 75 per cent of the community average (objective - 1 region) expressed aspercentage of national GDP. About 70 per cent of total Structural Fund expenditure in the 2000-2006programme was allocated to the objective-1 region.

Eden Project in the U.K: Regional policy in the United Kingdom has a long history, designed to redressthe balance between a wealthy southern belt and the de-industrialised belt in the north. RegionalDevelopment Agencies have been established to spearhead growth and raise funds for their areas. Forexample $160 million Eden Project converted a derelict industrial zone into a major internationalbotanical garden financed by the South West Regional Development Agency and the EU Structural Fund.

Reforming Regional Policy in the United Kingdom: e UK has tried many variants of regional policy

since the early 1960s. One of the main aims of the regional policy was to transfer of jobs. Over the 1960sregional policy shifted around 500 establishments to the assisted areas, and that it raised their employmentby about 100,000. Budgetary expenditures tied to regional equalisation objectives peaked in the 1970s andthe instruments have been fine-tuned since then. Recently a regional economic growth Public ServiceAgreement target has been agreed in England by the Department of Trade and Industry, the Office of theDeputy Prime Minister and Treasury. It aims to make sustainable improvements in the economic


3See Ferdaus, M. (2007).


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performance of all English regions and over the long term reduce the persistent gap in growth rates betweenregions. Performance is measured by gross value added per head, and detailed plans have been drawn-up.Te new target makes a commitment to reduce the regional gap. It is suggested, in order to reduce regionalgap, it should embody a substantial distributional component to policy. It is also suggested to reintroducea distributional component to Regional Selective Assistance (RSA) to encourage the relocation of

UK-owned plants. Te RSA job condition rules out job diversion, whether by plant relocation oremployment displacement.

Suggestions for including redistribution components are made on four grounds. First, the survey-basedevidence suggests that the grants have a significant effect on plant location and it is the main effect in largeprojects. Second, it is reasonable to make the grants available to UK-owned plants on the same basis thatthey are available to foreign-owned plants. Tird, foreign direct investment has fallen sharply in recentyears, and it is unlikely to continue underpinning regional policy. Finally, redistribution involves efficiencylosses, but it can relieve inflationary and congestion pressures in the prosperous regions, leading to anoverall gain.



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ASt t f P t R d ti i th L i R i fB l d h u 29


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(vii) To assess the results of the estimation mentioned in (vi) above, the World Bank, in one of its recentreports for Bangladesh used the eil index4 of inequality. ree conclusions are noteworthy. First, theeil measure of inequality, like the Gini index, shows a sharp increase in inter-personal inequality inexpenditure during the 1990s. Second, both within District and between-District components ofinterpersonal expenditure inequality rose during this period with slightly higher pace of increase recordedfor the latter. ird, and more importantly, the contribution of between District inequality to totalinterpersonal inequality was relatively modest 17 percent of total inequality in 1999/00. Briefly, the bulkof the total interpersonal inequality is explained by within District inequality. Researchers found similarevidences for other developing countries: the contribution of average variations across spatial units, to totalinterpersonal inequality, seems to be no greater than 25 percent .It does not mean that spatial inequality isnot a phenomenon of great policy interest. In fact, studies on this subject suggest otherwise.

(viii) As regards correlate of sub-national expenditure dynamics in Bangladesh, the districts with lowerper-capita expenditure in 1991/92 experienced faster subsequent growth in per-capita expenditure. Asmentioned, a pattern of mild unconditional convergence in expenditure level, albeit very slow, was seen.

(ix) Districts with higher gender inequality experienced slower growth.

(x) Initial inequality in landownership is negatively correlated with growth.(xi) Initial expenditure inequality is negatively associated with expenditure growth.

e HIES, 2005 shows that incidence of poverty (using upper poverty line) was the highest in BarisalDivision followed by Rajshahi Division. e picture is the same for rural urban divide in those twoDivisions. On the other hand, using the upper poverty line, the incidence of poverty between 2000 and2005 increased in Khulna. Using the lower poverty line, the incidence of poverty increased in BarisalDivision between 2000 and 2005. Poverty gap i.e. the extent of poverty in Barisal Division in 2005 (usingboth upper and lower poverty lines) has also been the highest. Paradoxically, literacy rate (7 years andabove) was the highest in Barisal in 2005; this holds true for both rural urban divide as well as for maleand female. School enrolment for 6-10 year age-group in Khulna was the highest in 2005 followed by

Rajshahi and Barisal Divisions. School enrolments by poor and non-poor households also showedparadoxically that such enrolments from both households were highest in Khulna followed by Barisal andRajshahi. Gross enrolment rates in 2005 were highest in Barisal Division where the incidence of povertywas also the highest in that year.

e highest percentage of households receiving benefits from various safety-nets programmes was fromSylhet Division where the incidence of poverty was near the least. Khulna Division, where poverty hasincreased between 2000 and 2005, received the least amount of such benefits.

e above description reveals that the picture of regional imbalance may be far more complex than theHIES data of income poverty alone might indicate. is is not to deny that the data on income-povertyincidence is an important yardstick to measure the ill-being of people in different regions of Bangladesh.

2. Incidence of Poverty

Despite the appreciable reduction in poverty by nearly 9 percentage points during 2000 to 2005, itsincidence is still extremely high (40%). e number of poor people is substantially large (about 5.6 crore).Besides, the returns due to fall in the poverty incidence at the national level have not been equitably shared


4Theil L or mean log deviation which belongs to the general entropy class of inequality measures.


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by all the Divisions of the country. In the three Divisions, namely, Rajshahi, Barisal and Khulna, theincidence has remained higher than those of the national and other Divisions levels (Table 1).

Table 1: Incidence of Poverty by Regio

e trend of poverty illustrates that its incidence is higher in the rural areas than the urban parts. epattern is equally true for both at the national and the Division levels, excepting for Sylhet in 2000. Also,like the declining trend of poverty at the national level, the rural areas of all the Divisions have experiencedthe same movement. However, alarmingly, the trend of incidence in the urban areas of Barisal, Khulna andRajshahi shows an opposite tendency. Not only are the incidences in these areas very high, they are on arising trend since 2000.

3. Distribution of Poor

Given the size of population, the poverty incidence of a Division at the end shows the number of poor in

that particular area. Counting the number of poor in this way, in turn, yields a scenario of distribution ofpoor of a country across the Divisions. Table 2 informs about this distribution. It shows that the largestnumber of poor lives in Rajshahi, followed by Dhaka, Chittagong, Khulna, Barisal and Sylhet. As againstthe information of Table 1, Table 2 generates a different picture for poverty. Table 2 also providesinformation about density of poor by Divisions. It shows that density of poor people is highest in Rajshahi,followed by Dhaka, Barisal, Khulna, Chittagong and Sylhet.

Table 2: Number and Density of Poor People by Region: 2005


1995/96 2000 2005Division Total Rural Urban Total Rural Urban Total Rural Urban

Barisal 49.9 50.2 44.4 53.1 55.1 32.0 52.0 54.1 40.4

Chittagong 52.4 54.0 40.8 45.7 46.3 44.2 34.0 36.0 27.8

Dhaka 40.2 48.5 18.4 46.7 55.9 28.2 32.0 39.0 20.2

Khulna 55.0 56.0 48.7 45.1 46.4 38.5 45.7 46.5 43.2

Rajshahi 61.8 65.0 36.8 56.7 58.5 44.5 51.2 52.3 45.2

Sylhet - - - 42.4 41.9 49.6 33.8 36.1 18.6

National 51.0 55.3 29.5 48.9 52.3 35.2 40.0 43.8 28.4

Source: BBS, Reports of HIES, 2000 and 2005.

(percentage of population below poverty line)

Source: BBS.

Area Population Poor

Population Density

(per square kilo

meter)Region

Squarekilo meter % Crore %

Poverty

Incidence

(%) Crore % Poor All

Barisal 13,297 9.01 0.89 6.42 52.0 0.46 8.3 346 669

Chittagong 33,771 22.88 2.67 19.25 34.0 0.91 16.4 270 790

Dhaka 31,120 21.09 4.47 32.23 32.0 1.43 25.8 460 1436

Khulna 22,273 15.09 1.62 11.68 45.7 0.74 13.3 332 727

Rajshahi 34,514 23.39 3.34 24.08 51.2 1.71 30.8 495 967

Sylhet 12,596 8.54 0.88 6.34 33.8 0.30 5.4 238 699

Bangladesh 147,571 100 13.87 100 40.0 5.55 100 376 940


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5. Non-Income Poverty

Inequity in social development can also reflect the ill-being of people across the regions. However, inBangladesh, it is observed from different survey findings that non-income dimension of well-being do notconform with poverty incidence. Following indicators of social development represent the variation insome non-income aspects of poverty.

5.1. Literacy RateLiteracy is growing over the years but there exists inequity in its rates among Divisions. In 2005, the highestliteracy rate was observed in Barisal (62.1%), followed by Khulna (53.9%), Dhaka (53.1%), Chittagong(51.3%), Rajshahi (49.7%) and Sylhet (42.1%). Table 4 depicts the scenario.

Table 4: Literacy Rate (7 Years and Over) by Division

5.2. Enrolment Rate

At the national level the school enrolment rate in the age group 6-10 years was 80.42% (Table 5). It was79.47% in the rural area and 83.98% in the urban area. e school enrolment rate in the age group 11-15years was lower than in the age group 6-10 years. It was 69.97% at the national level and 69.75% in the

rural area and 70.72% in the urban area.ere exists a regional variation in the school enrolment rate for both the age groups 6-10 years and 11-15years. At the aggregate level in the age group 6-10 years, the highest enrolment rate was observed in KhulnaDivision (87.15%) followed by Rajshahi (83.48%), Barisal (83.16%), Dhaka (81.70%), Sylhet (76.40%)and Chittagong (72.29%). In the age group 11-15 years, the highest enrolment rate was found in KhulnaDivision (76.75%) followed by Barisal (72.75%), Rajshahi (69.79%), Dhaka (69.96%), Chittagong(68.77%) and Sylhet (59.14%).

Table 5: Children Enrolled in Schools, 2005


Source: BBS.

2005 2000Division

Total Rural Urban Total Rural Urban

Barisal 62.1 59.6 76.2 58.6 57.6 69.0

Chittagong 51.3 46.7 65.0 43.1 41.7 49.8

Dhaka 53.1 42.9 69.9 43.8 33.9 63.2Khulna 53.9 50.8 65.6 47.1 43.7 65.6

Rajshahi 49.7 47.3 62.3 42.9 40.4 59.5

Sylhet 42.1 37.8 68.6 - - -

National 51.9 46.7 67.6 44.9 40.9 60.2

Source: BBS

(%)

Children aged 6-10 years Children aged 11-15 yearsDivisionTotal Rural Urban Total Rural Urban

Barisal 83.16 82.37 87.50 72.75 71.78 78.85

Chittagong 72.29 69.73 82.45 68.77 68.48 69.72

Dhaka 81.70 81.08 83.05 69.96 70.19 69.55

Khulna 87.15 87.23 86.65 76.75 77.47 73.54

Rajshahi 83.48 83.22 85.21 69.79 69.56 71.07

Sylhet 76.40 75.08 87.10 59.14 57.20 73.03

National 80.42 79.47 83.98 69.97 69.75 70.72


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R E G I O N A L G A P S I N I N C O M E ,S A V I N G S , I N V E S T M E N T A N D

E M P L O Y M E N T

Observing the higher poverty incidence rates in Rajshahi, Barisal and Khulna, it is felt necessary to assessthe status of development in these areas compared to remaining Divisions. Primarily, it calls for anassessment on regional base of income, savings, investment and employment.

1. Gross Domestic Product (GDP)

e sectoral share of GDP in the lagging regions is different than the developed regions. e contributionsof industry and service are dominant in Dhaka and Chittagong Divisions while agriculture is dominant in

Rajshahi Division. Table 8 below informs that the largest contributor to total GDP is Dhaka (above 37%).It is followed by Rajshahi (above 20%), Chittagong (above 19%), Khulna (about 12%), Barisal (about 6%)and Sylhet (above 5%). Table 8 also shows that Rajshahi, Khulna and Barisal are the predominantlyprimary goods producing areas and less industrialised. e table is interpreted further in paragraphs 41-43and 46-49.

Table 8: Share of GDP by Region and Sector

(at current market prices)

In the case of industrial GDP, the largest contributor is Dhaka (above 48%). It is followed by Chittagong(about 20%), Rajshahi (about 15%), Khulna (about 9%), Sylhet (about 5%) and Barisal (above 3%).

In the event of services GDP, the largest contributor is also Dhaka (about 39%). It is followed by Rajshahi(about 20%), Chittagong (above 19%), Khulna (above 11%), Barisal (about 6%) and Sylhet (about 5%).

In the field of agricultural GDP, the largest contributor, however, is Rajshahi (above 26%). It is followed byDhaka (about 25 %), Chittagong (about 19%), Khulna (about 15%), Barisal (about 9%) and Sylhet(about 7%).


Source: BBS

(In percentage)

Agriculture Industry Services All Sector

Division 95/96 99/2000 95/96 99/2000 95/96 99/2000 95/96 99/2000

Barisal 9.00 8.73 3.27 3.29 5.70 5.60 5.99 5.87

Chittagong 18.98 18.66 20.15 19.93 19.52 19.38 19.55 19.32

Dhaka 24.57 24.83 48.61 48.01 39.04 38.84 37.41 37.23

Khulna 14.84 14.90 8.82 9.01 11.15 11.20 11.60 11.70

Rajshahi 26.03 26.20 14.61 15.08 19.77 20.27 20.14 20.52

Sylhet 6.58 6.68 4.54 4.68 4.82 4.71 5.31 5.36


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e base of production and application of appropriate technology on it are fundamental factors forgenerating GDP. At the same time, the location of the base distributes the share of GDP among the regions.In case of the agricultural GDP, net cultivated land, total cropped area and cropping intensity are thedetermining factors for its value added. Table 9 provides data on the net cultivated area, the gross croppedarea and cropping intensity by region. It shows that the cropping intensity is lowest in Dhaka (1.44).However, cropping intensities in Sylhet (1.95) and Chittagong (1.83) are higher than those in the laggingDivisions.

Table 9: Net Cultivated Area, Gross Cropped Area and Cropping Intensity by Region

As Table 9 demonstrates, the biggest cropped area is located in Rajshahi, followed by Dhaka, Chittagong,Khulna, Barisal and Sylhet. is sequence in the size of production base has resulted in the same sequenceof value added in the agriculture sector by region at Table 8. Sylhet sets an example of underutilisation ofits cultivated area, where gross cropped area is less than net cultivated area.

Information of Table 8 implies that value added by Dhaka is the moving force of total current income ofthe economy. On the other hand, contributions by Sylhet and Barisal are negligible. Although Barisalsshare has some prominence in agriculture, Sylhet plays insignificant role across the sectors.

Rajshahi Division and Chittagong Division have almost equal importance in the total economy. However,there is competition between these Divisions in generating incomes in the agriculture and industry sectors.In case of agriculture, Rajshahi is the leading area and Chittagong is third. In case of industry, Chittagongis the second and Rajshahi is third.

In terms of contribution to the GDP, one can rank the Divisions as follows:

1st: Dhaka, 2nd: Rajshahi and Chittagong, 3rd: Khulna, 4th: Barisal and 5th: Sylhet. However, it is to beremembered that the weight of Dhakas GDP in the economy is so huge that its status of development

cannot be compared with other Divisions.

2. Per-capita GDP

Table 10 reflects the status of per-capita income among the six Divisions. According to the income status,six Divisions converge into three groups. Barisal, Rajshahi and Sylhet become the members of low incomebracket. e level of per-capita income of these Divisions is about Tk.15 thousand in FY00 and aboutTk.11 thousand in FY96. Chittagong and Khulna join the club of middle income group with same level of


Source: BBS

* Includes Aus, Aman, Boro and Wheat (both local and HYV) and Jute.

2005

Division Net cultivated area

(acres)

Gross cropped area*

(acres)

Cropping Intensity

( %)

Barisal 1,598,955 2,420,260 179

Chittagong 2,519,967 4,037,591 183

Dhaka 1,366,245 7,640,187 144

Khulna 2,427,234 3,676,328 170

Rajshahi 5,575,582 10,422,196 173

Sylhet 4,595,546 1,807,136 195

Bangladesh 18,083,529 3,003,699 180


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income about Tk. 18 thousand in FY00 and about Tk. 14 thousand in FY96. Dhaka holds the upper ortop rank - Tk. 22 thousand in FY00 and Tk. 17 thousand in FY96. A substantial gap prevails in the levelof income among three groups and has not changed much over the years.

Table 10: Region wise Per-capita GDP at Current Market Prices

However, the weights of the regional GDP have no perceptible impact on the standings of per-capitaincome of Khulna and Rajshahi. Per-capita income of Khulna stands at a higher level similar to that ofChittagong. In opposition, the weight of GDP of the former is nearly half to the latter. Here, the size of

population plays the role as denominator. Table 2 records that the size of population of Chittagong is morethan one and a half time than that of Khulna. Similarly, per-capita income position of Rajshahi has fallento the bottom like those of Barisal and Sylhet, in contrast to their importance in GDP. Again here,population makes the difference. e size of population of Rajshahi is almost four times to those of Barisaland Sylhet.

3. Per-capita Income and Consumption Expenditure by Stratum

Per-capita income and consumption were much lower, particularly in the rural areas of the laggingDivisions. In 2005, per-capita income was highest in the municipality area of Sylhet Division (Table 11).e lowest income was recorded in the rural areas of Barisal Division. e per-capita consumption

expenditure was highest in the SMA of Chittagong. It was lowest in the rural areas of Rajshahi.Table 11: Per-capita Income and Consumption Expenditure by Stratum: 2005


Source: BBS

(In Taka)

Division 1995/96 1999/2000

Barisal 11,520 15,383Chittagong 13,712 18,128

Dhaka 16,734 22,303

Khulna 13,276 17,875

Rajshahi 11,074 15,174

Sylhet 11,017 14,886

Bangladesh 13,621 18,269

Source: BBS SMA = Statistical Metropolitan Area

Per-capita (Tk.)Stratum

Income Consumption Expenditure

Barisal Division (Rural) 1,139 1,052

Barisal Division (Municipality) 1,709 1,421

Chittagong Division (Rural) 1,354 1,155

Chittagong Division (Municipality) 1,895 1,521

Chittagong~(SMA) 2,614 2,327

Dhaka Division (Rural) 1,192 1,189

Dhaka Division (Municipality) 1,806 1,619

Dhaka~(SMA) 2,729 2,047Khulna Division (Rural) 1,197 922

Khulna Division (Municipality) 1,773 1,398

Khulna~(SMA) 1,313 1,004

Rajshahi Division (Rural) 1,266 880

Rajshahi Division (Municipality) 1,361 1,091

Rajshahi~(SMA) 1,944 1,580

Sylhet Division (Rural) 1,289 1,199

Sylhet Division (Municipality) 2,807 2,066

Total 1,486 1,231


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4. Labour Force and Unemployment

Distribution of labour force, aged between 15 and 29 years, shows that in 2005, 29 percent of it wasconcentrated in Dhaka, followed by Rajshahi (24.4%), Chittagong (19.7%), Khulna (13.4%), Barisal(7.7%) and Sylhet (5.8%) (Appendix II.1). In FY03, the percentage of unemployed population was highestin Dhaka (33.7), followed by Rajshahi (26.9), Chittagong (16.5), Khulna (10.4), Sylhet (7.2) and Barisal(5.2).

5. Employment and Wage

Employment and wages are expected to have a major impact on growth of income, especially for the poorerhouseholds. Appendix II.2 and Appendix II.3 present data on wage and employment by Division. Riceequivalent of wage has been lower in Khulna and Rajshahi, compared to other Divisions both in 2000 and2005. Growths of rice wage were close among the Divisions.

Employment per worker has declined in all Divisions except Rajshahi.5 e declines are high in Barisal andKhulna.

6 Savings and Credit Disbursement

Table 12 depicts a picture of deposits and advances in 6 Divisions. Both deposits and advances are higherin Dhaka Division. In case of deposits, the amounts are nearly one-third in Chittagong. Compared toDhaka and Chittagong, the amounts are insignificant in the remaining Divisions.

Table 12: Division-wise Distribution of Bank Deposit and Advances

(all banks)

7. District Level Analysis

7.1. Geographical Concentration of Rural Poverty

Kam et al. (2004) reported geographical concentration of rural poverty in Bangladesh for 425 Upazilas in

2000-016

. e study measured and mapped incidence of poverty (using Head-count Index) and severity ofpoverty (using Squared Poverty Gap Index). e Head-count Index varied from 15 per cent to 79.9 percent of the rural households across the 425 Upazilas. According to the study, the areas with highestincidence of poverty (greater than 47 per cent) are the depressed basins in Sunamganj, Habiganj andNetrokona districts; the north-western districts of Kurigram, Nilphamari and Nawabganj; and Coxs Bazar


Source: Bangladesh Bank

(Million Taka at end June)

Deposit AdvanceDivision

2003 2004 2005 2003 2004 2005

Chittagong 218,360 243,087 279,041 149,770 171,457 199,085

Dhaka 624,348 722,025 850,325 553,733 626,999 740,100Khulna 61,946 62,711 71,857 52,927 55,374 64,461

Barisal 24,374 26,308 29,158 14,152 14,196 14,870

Rajshahi 78,431 85,986 96,889 61,514 66,171 79,252

Sylhet 65,848 75,644 88,607 15,245 17,106 19,554

Total 1,073,307 1,215,761 1,415,878 847,341 951,303 1,117,322

5Tahman, R.I. (2007): Pro-poor growth: Recent Evidence from HIES Data, Paper presented at a BIDS seminar on August 16, 2007.

6Most of the Upazilas of the Chittagong Hill Tracts and the metropolitan Thanas were not included in the study.


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e study by Kam et al (2004) added that income inequality and entitlement to land (land ownership andtenancy) are major determinants of poverty. Given the same level of income, the higher the inequality inthe distribution of income the higher the incidence of poverty. e 2001 Census estimated that nearly 42percent of the households do not own any cultivated land. e Upazilas with highest concentration oflandlessness are in the greater Sylhet, Chittagong and in the Khulna regions (Appendix IV). e studyfound that the higher the degree of landlessness the higher the incidence of poverty in the Upazilas. e

distribution of Upazilas by the incidence of tenancy varies from 7 to 57 percent of the cultivated land. etop quartile of the Upazilas with regard to the incidence of tenancy is concentrated in the coastal region ofBarisal, Noakhali and Chittagong, and also in the Nawabganj and Naogaon districts in the Rajshahi region.As regards tenancy, the study showed that getting access to land from the tenancy market helps reducepoverty.

7.2. District wise Per-capita GDP Growth (1996-2000)

e ranks of GDP and per-capita GDP of districts show, as contained in Table 13, that various districtswithin the same Division show widely diverging growth. us the ranking of poverty and growth at the

Division level may hide considerable differences within the Division. A decision, therefore, has to beadopted about the extent of regional segregation to be used in policy actions.

Table 13: Ranking of Districts by Growth Rate of GDP

From the pictures of per-capita income (PCI) and GDP growth, we find that Rajshahi and KhulnaDistricts are not among the lowest. ese districts include the Divisional headquarter and main towns.erefore, urban poverty in these Divisions is likely to be reflected in the PCI in these districts. While thisassociation does not prevail in the expected form, there is need for further in-depth research on the causesof rising urban poverty in these Divisions.

Source: BBS (Statistical Yearbook)

District Ranking by Growth Rate (1994-2000)

Chittagong 20

Chittagong H.Ts 11

Comilla 15

Noakhali 6

Sylhet 7

Dhaka 19

Faridpur 5

Jamalpur 17

Mymensingh 1

Tangail 2

Barisal 9

Jessore 18

Khulna 10

Kushtia 8

Patuakhali 3

Bogra 14

Dinajpur 13

Pabna 12

Rajshahi 4

Rangpur 16


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of long-term growth in agricultural and crop production had less incidence of poverty in rural areas. Forexample, Barisal had 51.0 percent rural poor in 1999 and it experienced slow long-term growth inagriculture (0.77 percent per annum) and in crop production (0.05 percent) while Jessore had 43.5 percentrural poverty which experienced high long-term growth in agriculture (4.51 percent per annum) and incrop production (4.50 percent). In case of Kushtia, long-term growth in agriculture and crop productionwas 3.62 percent and 3.42 percent, respectively and had 33.3 percent rural poverty. Relationship between

growth in agricultural (crop production) and rural poverty was statistically examined using correlationcoefficient between the two variables. Estimated value of correlation coefficient between growth in cropproduction (during 1980/81-1999/00) and rural poverty level (in 1999) was -0.37 indicating that higherthe level of long-term growth in crop production, lower the level of rural poverty. Similarly, estimated valueof correlation coefficient between growth in agricultural production (during 1980/81-1999/00) and ruralpoverty level (in 1999) was -0.36 supporting the fact that incidence of poverty is lower in those districtswhich experienced higher level of long-term growth in agricultural production.

Estimated correlation coefficient between diversity in crop production (in 1999) and rural poverty (in May1999) was 0.13 indicating very weak or no correlation between these two variables. Also, correlationcoefficient between diversity in agricultural production (in 1999) and rural poverty (in May 1999) was 0.31

indicating weak relationship between agricultural diversity and rural poverty. ese findings aresummarised in Table 15.

Table 15: Agricultural Growth, Agricultural Diversity and Rural Poverty

Source: Estimated growth rates and diversity in agricultural and crop production; Poverty MonitoringReport of the Bangladesh Bureau of Statistics for rural poverty data; as cited in Deb (2007).

Annual Compound Rate of

Growth (1980/81-1999/00)Diversity (1999)

Rural Poverty

(Head Count Ratio)District

Agriculture Crops Agriculture Crops (May 1999)

Barisal 0.77 0.05 0.65 0.74 0.510

Bogra 3.28 2.55 0.52 0.67 0.460

Chittagong 3.02 1.15 0.61 0.70 0.434

Chittagong H.T. 2.84 2.27 0.52 0.92 0.415

Comilla 2.91 1.81 0.61 0.80 0.449

Dhaka 2.07 0.74 0.60 0.83 0.434

Dinajpur 3.21 2.39 0.56 0.74 0.382

Faridpur 2.83 2.41 0.61 0.87 0.528

Jamalpur 2.51 1.89 0.49 0.78 0.498

Jessore 4.51 4.50 0.50 0.84 0.435

Khulna 3.49 1.42 0.63 0.54 0.392

Kushtia 3.62 3.42 0.42 0.87 0.333

Mymensingh 2.78 1.40 0.63 0.74 0.563

Noakhali 2.34 1.29 0.62 0.75 0.475

Pabna 2.21 1.18 0.57 0.82 0.469

Patuakhali 1.89 2.03 0.64 0.54 0.395

Rajshahi 3.45 2.84 0.55 0.77 0.412

Rangpur 2.52 1.62 0.51 0.75 0.519

Sylhet 2.44 1.51 0.58 0.69 0.406

Tangail 1.60 0.78 0.53 0.84 0.449


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A P P R O A C H E S T O W A R D S

A D D R E S S I N G P O O R R E G I O N S

How should government tackle the economic problems of persistently poor regions is an issue to beaddressed. In particular, should it encourage people to move out, or should it adopt specific programmesto lift these regions closer to the national average? One approach which might be termed the neo-classicalorthodoxy is to allow, or even encourage, local inhabitants to migrate out of poverty, to more hospitableenvironments where jobs and educational opportunities are better. Tis has long occurred in East Asia: notonly has there been international migration from poor to rich countries, but over time there has beenoutward movement from poor regions such as eastern Indonesia, Northeast Tailand, and the interior ofChina. Ultimately, in countries with very limited fiscal resources, out migration is probably the most

effective anti-poverty strategy. But there will always be pressure for governments to intervene, and to offerspecial assistance for poor regions, for at least following five reasons :

All governments face pressure to ensure some measures of egalitarian development, ensuring that somebasic minimum socio-economic standards are met throughout the country.

Some of the poor regions are large, spatially or in terms of population (e.g. Rajshahi Division, TailandsNortheast area, etc.).

Tere is an argument for more spatially dispersed population settlements to relieve pressure on majorurban centres and regions.

Not all the inhabitants of poor regions are able to move, whether for reasons of incapacity, ignorance or

apathy; thus, for a substantial proportion, the migration .option is not a solution, and alternative measuresneed to be found.

Tere may be scope for substantial and relatively inexpensive socio-economic improvement arising fromsome new policy approaches.

Discussion of inequality of poverty incidence (and its trend) across Division, cannot be undertaken withouta wider approach where the following aspects would receive attention:

(a) Regional inequality may be examined at various levels, e.g., division, district and Upazila levels. Whichlevel should have to be used for policies for generating more equal poverty reduction trend?

(b) Should these policy actions be targeted to

i) achieve fuller utilisation of potentials of growth and development orii) to greater regional equality (at some chosen level of region) of growth and/or poverty reduction;

iii) to accelerate poverty reduction in the pockets of acute poverty or

iv) to use the regional balances of resources to create productive potentials for the whole economy tomaximise growth and development of the country as a whole; and finally

(c) how to make interventions for short, medium and long term?

Answer to the first question is that one cannot always work at the same level of regional segregation. Formost poverty reducing actions, district or Upazila may be relevant. For growth augmenting infrastructure



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building, Divisional headquarters and port city will be most important physical spheres. For someenvironment related improvement projects, areas with same ecological feature will be the centre of action.

More important aspect of policy action is the usual growth vs. poverty reduction question. A balancedoutcome can be achieved through combining the following:

i) Short term programmes for poverty reductionii) Short term programmes for unleashing growth augmenting forces

iii) Medium term human development which can have a poverty reducing impact in longer-medium term

iv) Medium term growth augmenting actions and policies

v) Long term policies for regional development and through that for national growth and all roundedpoverty decline.

Income differences at the sub-national level matter in large part because of their impact on income growthat the national level. For one, the growth potential of a nation would not be fulfilled if any of its majorgeographical/administrative units fails to exploit its own potential. Lagging regions also create clear

demarcations between the haves and the have-nots, which, over the longer run, can sow the seeds forsocial conflict and jeopardize sustainability of good growth at the national level.

e main policy challenge, however, is to unleash the growth potential of each region, and not pursuit ofregional equality as a goal of intrinsic worth in itself. Single-minded pursuit of regional equality can, in fact,be counterproductive it is likely to retard the better performing areas without necessarily lifting up thelagging ones. Similar to nations, regions, too, grow toward their own economic potentials, which dependon a host of economic and social factors some in the control of policy makers and some not. Also, aseconomies grow and diversify there is a tendency to reap the benefits of agglomeration economies, spatialexternalities, and increasing returns to scale leading to the formation of large urban/industrial clusters andregional specialisation, with implications for increasing spatial divergences. e growth potential of thepoorer regions would very much depend on policy choices that encourage them to benefit from theexternality-generating activities, and facilitate flow of resources (especially manpower) to the parts of thecountry that are economically more dynamic.

1. Promotion of Rural Non-farm Activities

A very popular and effective medium to long-term approach may be promotion of rural non-farmeconomic activities (RNFAs) consisting of rural industries, livestock, trade, services, construction etc forcreating income earning and employment opportunities especially for the poor and the landless in the ruralareas. is has been very successfully done in the countries like China, Taiwan, Malaysia, ailand , Indiaand Vietnam and many other developing countries where the RNFAs account for 20 to 50 percent of rural

employment and 30 to 40 percent of rural household incomes. ere are many cases of such contributionsbeing in the range of even 60 to 70 percent depending on the individual country circumstances andpromotional policy dynamics and incentive mechanisms. Empirical evidence on both counts aboundamong which a recently completed leading study includes (Ahmed, 2006). RNFAs being operated on smallscale, using modest capital and simple technologies and more importantly being located predominantly inthe rural areas and small townships and serving local markets have proved to be handy weapons for fightingpoverty, inequality and deprivation. Besides, urban and export markets have also been successfullypenetrated by these activities in many countries under supportive policy environment. Examples of RNFAdynamism particularly in facilitating agriculture-industry linkages and promotion of broad-based rural

A Strategy for Poverty Reduction in the Lagging Regions of Bangladesh

48


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development and national economic growth based on studies done for India, Malaysia, Vietnam and Chinaincluding selected Latin American countries are also available.

2. Overseas Employment

Studies have shown that household assets and whether household receives remittances from abroad havestatistically significant positive influence on its expenditure level in both HIES, 2000 and HIES, 2005.However, the significance of remittances on households real per-capita expenditure has been found to bemuch larger in magnitude in 2005 compared with 2000. It is reassuring to note that the percentage ofoverseas employment is extremely low for 38 districts having shares from 0.01 percent to less than 1 percent(Appendix-VII).

Te above findings when posited against the evidence that the flow of wage earners remittances has beenfound to be skewed in their geographical distribution, the importance of policy options for spreading theopportunities of migration abroad to the lagging regions of Bangladesh become obvious.

In the above perspective, the Government is thinking about formulating a mechanism that would ensureequal number of workers from all districts of the country migrating abroad. Te Government would giveespecial focus on the poverty stricken north and north-western regions from where fewer labourers migrate.

3. Locational Dispersion of Industries and Creation of Regional Growth Centres

Locational dispersion of industries and creation of regional growth centres is also an approach towardsmitigating poverty in the lagging regions. Te un/under-employment situation in the labour market ofBangladesh makes it clear that the prevailing magnitude of surplus labour is such that the formal sector maynot be able to attract a large supply of labourers from the rural areas. Wages in many formal sectors areclose to wages of the informal sectors. In this situation, industrialisation should proceed through alocational dispersion of industrial units towards the poorer areas. An expansion of sub-contracting system

can utilise the entrepreneurial ability of small enterprises in these areas and can provide a useful substitutefor a wage labour-based industrialisation. Tis has happened extensively in pre-war Japan when it wasknown as the putting out system. Tis option can yield the desired outcome only if pursed at a reasonablyrapid pace. Otherwise, the rural labourers from poorer regions may resort to migration to the bigger cities.

Growth of hired labour based enterprises in regionally dispersed growth centres can provide an impetus toboth employment generation, poverty reduction and sustained growth of manufacturing. Entrepreneurscan thrive by drawing upon local labour force, especially the underemployed female labour force. Anenabling environment for development of local entrepreneurship can be created through provision of lowcost power, transport, communication systems and marketing services. NGOs and private sector financialinstitutions should be encouraged to extend a suitable package of financial services. Protected areas for

marketing and storage may be established as a component of district town/peri-urban growth centres.Growth centres in the port city of Mongla and in Rajshahi may be initiated as pilot schemes. Infrastructurefor linkage between semi urban growth centres and rural hinterland may help in direct and indirectemployment generation.

Employment growth must consist of a larger proportion of paid employment and especially regularemployment. Many studies on policy suggestions for employment creation focused mainly onself-employment in rural non-farm activities. But the emphasis should gradually shift to promotion ofenterprises using hired labour along with family labour. Purely family labour based activities have less scope



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for technology upgradation and expansion of scale. Appropriate incentive package for hired labour basednon-farm sector in the regional growth centres should be provided.

Since underemployment and unemployment rate is much higher among women, a choice open to thelabour intensive industrialisation process is to draw female workers. is option has already been utilisedby the export oriented readymade garment sector in Dhaka and Chittagong which are based on unskilled

and cheap female labour. Female workers constitute about 70 per cent of total employment in this sector.Other sectors are also increasing their dependence on female labour. During the last two decades femalelabour force participation rate increased. But still the rate is lower than many Asian countries and there isa prospect of increase of such participation rate if there are opportunities for better job. Growth centres inKhulna and Rajshahi may utilise this possibility.

4. Training and Skill Generation

e deficiencies of skill and inadequacies of educational attainment are major factors behindun/under-employment and low earnings. Given such deficiencies, the policies for raising the employabilityof the labour force through skill training can be an effective means for employment expansion especially in

poorer regions. Well-designed policies to improve the quality of labour force and commensurate policies tocreate matching employment opportunities can provide effective stimulus for a skill-based growth ofsecondary and tertiary sectors.

e short-term programmes will aim at short duration training to the young unemployed and will requireimmediate implementation. is precludes the possibilities of integration of school education with trainingfacilities. e short-term programme will also assume that it will be based on the existing institutionalfacilities. e key issues to be kept in mind about the short run trainings are:

It will take into account the existing supply side: the trainees will have educational endowments which areeffectively much less than what is expected of class 10 or 12 graduates. Tey cannot pay high fees. Apractical assessment is that they may pay about Taka 500 to Taka 1,000 per month for 3 to 6 months.

Subsequent groups of trainees may be ready to pay larger amount if the return to such training isdemonstrated by handsome returns. If immediate absorption of trained person into jobs with salary rangesfrom Taka 2,000 to Taka 3,000 per month is demonstrated, then future rounds of trainees may pay muchhigher fees for training purposes.

Te critical issue is, therefore, linking training with jobs. Here the past experiences of unsuccessfultraining activities of public institutions must be borne in mind. Traditional training with rigid and oldcurriculum was ineffective in making the trainees employable. Employability of trained personnel is a mustfor generating future demand for training. is can be ensured through prior assessment of demand. eassessment of training needs must first explore the sectors and locations where demand will be generated.Without an accelerated growth of small and medium industries, training to generate semi-skilled or skilled

labour force cannot have a good prospect. A large component of short term training should, therefore, target for self-employment. is will requirea combination of skill training and management training. Training organisations should be reoriented tocombine not only various types of training but also to adopt practices for getting the enterprise started.is will require provision of inputs including credit.

Multi-input facilities described above can be provided through flexible private training organisations ifthese are supported by government services. MFIs and training NGOs may enter into collaborativeprogrammes with private organisations. Apex bodies of NGOs and MFIs may experimentally adopt



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A T T E M P T S T O W A R D S A D D R E S S I N GB A C K W A R D R E G I O N S I N

B A N G L A D E S H

1. Past Record

From the First Five Year Plan (1973-78) to the Fourth Five Year Plan (1990-95) the issue of regionalinequality has not been addressed whereas it remains as a major objective in all the five year plans of India.Bangladesh being basically a mono-ethnic society such objective was not important in the past. e FifthFive Year Plan (1995-2000) recognised the importance of mitigating regional disparity in development as:"Development of hitherto neglected areas like the north-western region, Chittagong Hill Tracts and coastalareas .. It also addressed the balanced regional development and recognised significant differences in

regional development. It directed each ministry for taking projects related to development of variousregions from their sectoral allocation under the ADPs. e maintenance of the projects was then theresponsibility of the relevant local governments. After a paradigm shift from five-year plans to povertyreduction strategy paper, the I-PRSP and the PRSP of Bangladesh have not also addressed the issue ofregional gaps in poverty.

2. Current Programmes of the Government

By all counts, the Bangladesh Governments capacity for increasing expenditure is limited as its revenueearnings is one of lowest in the world. Even so, all the Governments have persistently undertakenprogrammes and projects for reducing poverty. ese interventions can broadly be divided into two types.

One is social safety nets and targeted programmes that directly transfer resources to the poor. eseprogrammes are mostly funded by the revenue budget. e Governments other intervention is of indirectnature and funded by the ADP. is intervention includes projects that build infrastructure and develophuman resources. In addition, the ADP includes block allocation for poverty alleviation and food assistedprogrammes. ese two are direct intervention in nature.

2.1. Public Investment

As regards government intervention for poverty reduction, particularly for the lagging regions, the scenariois not very impressive. Table 16 reports on the allocation of ADP resources by region. It describes that morethan 60 percent resources have the impact on the whole country. Of the remaining 30 to 40 percentresources, Dhaka shares largest followed by Rajshahi and Chittagong. e distribution shows that Khulna

and Barisal are at the lower end of receiving ADP resources.

Table 16: Share of RADP Allocation by Region


Year National Dhaka Chittagong Rajshahi Khulna Barisal Sylhet Total

2006/07 69.35 9.14 6.56 4.06 2.91 3.21 4.77 100

2005/06 66.61 11.69 6.07 7.55 2.93 1.45 3.70 100

2004/05 61.04 12.97 6.27 12.27 3.50 1.37 2.58 100

2003/04 65.17 16.17 5.24 8.06 2.62 1.54 1.20 100

Source: Programming Division, Planning CommissionNote: (1) National includes projects (or impact of the projects) which spill all over the country.

(2) RADP = Revised Annual Development Programme

(In percentage)


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As regards RADP resources in 2003/04, the highest allocation went to Dhaka Division (16.17%) followedby Rajshahi Division (8.06%) and Chittagong Division (5.24%) but this does not conform with theirpopulation size. e percentage of population in Dhaka Division stands at 32.23%, Rajshahi 24.08% andChittagong 19.25%. is uneven distribution of public investment led to aggravate poverty in the regionwhere the allocation is much less compared to their population size.

2.2. Distribution of Social Safety Net Programmes Benefite most effective government measure for poverty reduction is the Social Safety Net Programme (SSNP).e allocation under different SSNP should be devoted to the lagging Divisions with higher proportion ofpoor, but this is not addressed properly. In contrast, more allocation under SSNP went to richer Divisions.

Table 17 provides a statement on the households by regions receiving benefits from the Social Safety NetProgrammes.

Table 17: Division wise Distribution of SSNP Benefit by Households: 2005

In 2005, at the national level, 13.02 percent households received benefits from SSNPs. e highestproportions of these households were registered in Sylhet (22.42%). ose were followed by Dhaka(14.27%). e corresponding households were lowest in Khulna (9.58%). However, benefit-receivinghouseholds neither in Rajshahi nor in Barisal were in lower category. In fact, those households of Barisal

and Rajshahi were third (13.34%) and fourth (12.07%) respectively. Chittagong ranked fifth. Barisalsshare exceeded that of National. A list of existing social safety net programmes in Bangladesh is presentedat Appendix V.

2.3. Distribution of Households Receiving SSNP

Given the total number of households by Divisions (Table 18) and according to the ratios of householdsreceiving benefits from the SSNPs in Table 17, the distribution of households receiving those benefitsacross the Divisions can be derived. Table 18 shows Division wise distribution of households receivingSSNP.

Table 18: Division wise Distribution of Households Receiving SSNP: 2005


% of Household Received SSNP BenefitDivision

Total Rural Urban

Barisal 13.34 14.79 5.00

Chittagong 11.06 12.89 5.72Dhaka 14.27 19.98 4.94

Khulna 9.58 11.03 4.23

Rajshahi 12.07 13.02 6.71

Sylhet 22.42 24.31 11.25

National 13.02 15.64 5.45

Source: BBS, Preliminary Report on Household Income & Expenditure Survey, 2005

Source: BBS

Household (000) Household Received SSNP BenefitRegion

Total % Total %

Barisal 1789 6.2 239 6.4

Chittagong 4929 17.2 545 14.6

Dhaka 9521 33.2 1359 36.6

Khulna 3456 12.1 331 8.9

Rajshahi 7368 25.7 889 23.9

Sylhet 1578 5.5 354 9.5

Bangladesh 28641 100 3717 100


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According to Table 18, in 2005, proportion of households receiving SSNP benefits was higher comparedto their proportion of total households in Dhaka, Sylhet and Barisal. On the other hand, proportion ofhouseholds receiving SSNP benefits was lower compared to the proportion of total households inChittagong, Khulna and Rajshahi Division. e proportion of households receiving SSNP benefits was36.6 percent in Dhaka and the proportion of total households was 33.2 percent. e proportion ofhouseholds receiving SSNP benefits was 9.5 percent in Sylhet where the proportion of total households was5.5 percent. e proportion of households receiving SSNP benefits was 6.4 percent in Barisal where theproportion of total households was 6.2 percent. On the other hand, the proportion of households receivingSSNP benefits was 14.6 percent in Chittagong and the proportion of total households was 17.2 percent.e proportion of households receiving SSNP benefits was 8.9 percent in Khulna and the proportion oftotal households was 12.1 percent. e proportion of households receiving SSNP benefits was 23.9 percentin Rajshahi where the proportion of total households was 25.7 percent.



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A F R A M E W O R K F O R R E D U C T I O N

O F P O V E R T Y I N L A G G I N G

R E G I O N S

In order to maximise the growth potentials of each region and to reduce poverty in the lagging regions, atentative work plan is suggested below. (A Roadmap for Poverty Reduction in the Lagging Regions is alsopresented atAppendix-I).

1. General Recommendations

Available literature suggests some common measures that address poverty reduction in the lagging regions.ese are:

Increased resource allocation in lagging regions by the Planning Commission.

Special funds for lagging regions.

Priority in infrastructural development.

Targeted interventions for extreme poor.

Increasing remittances in the lagging regions.

Simplification of regulatory regimes for lagging regions.

A regional marketing strategy.

Strengthening regional data base of BBS.

Monitoring the flow of public and private resources to different regions.

ese ideas are reflected below in the short-term and medium to long-term measures for addressingreduction of poverty in the lagging regions.

2. Short-term Measures

Following short-term measures have been suggested:

Strengthening the SSNPs in the poorest and remote areas of the Divisions where the most hard-core poorare concentrated.

ii. Within each poorest Upazila, increase the coverage of Old-Age Pension Scheme. Money should bediverted from other nonfunctional SSNPs operated on national basis. For such Upazilas, the coverage ofother SSNPs (e.g. the employment generation programmes and SSNP funds for all types of womende

Documents

A Strategy for Poverty Reduction in TheLagging Regions of Bangladesh