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ASIA AND THE PACIFIC

REGIONAL OVERVIEW

Economic developments

Developing Asia and the Pacific continued to outperform other regions in economic growth in 1996, although growth in some of the region’s economies moderated. Average real GDP growth in Asia and the Pacific was 8.2 percent in 1996, slightly lower than the 8.9 percent recorded in 1995 but still strong enough for substantial per caput income growth. The region’s cumulative growth between 1991 and 1996 added up to more than 50 percent. Growth in China continued to decline marginally in 1996, including in Taiwan Province of China, but at 9.7 percent, it still increased the size of the Chinese economy relative to the rest of the world. India, Asia’s other giant, grew at 6.8 percent. The newly industrializing economies (NIEs) of Hong Kong, the Republic of Korea and Singapore suffered a slowdown in their important export sectors, and their overall growth rate declined from 7.5 percent in 1995 to 6.3 percent in 1996. Southeast Asian economic growth declined from 8.1 to 7.1 percent, affected by the export slowdown as well as tighter monetary and fiscal policies. In South Asia, structural reforms continued, and the economies posted an aggregate 6.5 percent growth in 1996. Real economic growth in Asia and the Pacific is expected to be roughly stable at slightly more than 7 percent per year in 1997 and 1998.17

Trade and investment continued to play a key role in the region’s development. In 1996 it again reinforced its position as the leading destination among all developing regions for foreign direct investment (FDI), accounting for more than half of all inflows to developing countries. Where current account deficits in the region have widened, they have generally reflected increasing imports of capital goods to support the region’s high level of investment, rather than reflecting increased consumption. For developing Asia and the Pacific as a whole, export growth fell from 21.8 percent in 1995 to just 4.6 percent in 1996. This decline from unsustainably high export growth rates in 1995 was largely due to a slump in demand for some of the region’s major export items, notably electronics, in the more industrialized countries. Other factors included slower economic growth and import demand within the region (caused, in the notable case of China, by measures to prevent overheating, with knock-on effects for Hong Kong’s exports) and import restrictions to maintain the trade balance within prescribed limits.

Figure 8A

Figure 8B

A major issue for developing Asian economies is the extent to which the export slowdown also reflects a loss of competitiveness or, in other words, the extent to which it reflects structural rather than cyclical factors. High investment, education and economic growth rates in the region have made it natural for the comparative advantage of countries to shift. Over time, domestic supply bottlenecks, fiscal policy changes, a continued appreciation in the real effective exchange rate, relative factor price changes or changes in the composition of export demand can affect export performance negatively if structural adjustments do not occur. For some countries, such as Thailand, there is increasing competition from lower-cost producers within Asia (such as China and Viet Nam), and the maintenance of strong economic growth in these countries will depend on their continually adjusting their mix of products and production technologies – the same challenge faced by other industrializing or industrialized countries.

For almost two decades, China, with the world’s largest population, has pursued reforms and experienced extraordinary economic growth and improved living conditions. At 9.7 percent, the country’s real GDP growth in 1996 remains the envy of most other countries but has been gradually brought down from its 1992 peak of more than 14 percent in an effort to keep inflation under control. This has been accomplished through tight fiscal and monetary policies as well as new standards for bankruptcy of state-owned enterprises. China continues to be the most popular destination for FDI in the developing world, and continues to increase its export share of world markets in garments, textiles and light machinery.

India has continued to show enormous improvements resulting from the liberalization programme begun in 1991. Real GDP growth in 1996 remained strong at 6.8 percent, led by a 9 percent growth in the industrial sector and helped by the ninth favourable monsoon in a row. If the monsoons remain favourable, continued annual growth of about 7 percent is expected over the next two years. Mobilizing sufficient investment resources to finance the country’s massive infrastructure investment needs will remain a major challenge in the medium term.

Growth in the NIEs slowed slightly in 1996, mainly as a result of weak demand for electronics in the United States and Europe, which negatively affected exports from the Republic of Korea, Singapore and Taiwan Province of China. An appreciating US dollar, to which Hong Kong pegs its own currency, and a fall in China’s exports (and Hong Kong’s re-exports) reduced exports and overall growth in the territory. However, domestic demand picked up in the second half of 1996, and consumer and business confidence appeared to be high as Hong Kong entered its transition to the status of a Special Administrative Region of China. Growth in the Republic of Korea’s economy slowed, affected by a slowdown in investment and export growth, as well as by a more than doubling of the current account deficit. Economic liberalization related to the 1996 Korean accession to the Organisation for Economic Co-operation and Development (OECD) will promote further structural changes in the coming years. Growth in Singapore also slowed in 1996 as demand for electronics exports weakened and the financial and business services sector slumped.

Southeast Asia has generally been following the manufactured export-led growth path of the NIEs, but in most cases with substantially larger domestic markets and more robust agricultural sectors. Economic growth in Cambodia remained at a healthy 6 percent in 1996, led by power generation and construction and supported by a substantial increase in investment, particularly foreign investment. Real GDP growth in Indonesia declined slightly to 7.8 percent in 1996, as tighter monetary and fiscal measures were implemented to constrain inflation and reduce the current account deficit. However, prospects for the near future remain bright in view of strong domestic demand, increasing foreign investment flows and progress in deregulation. In Laos, real GDP growth rebounded to 7.2 percent as investment remained strong, trade and revenue collection increased and inflation remained moderate. Agriculture, particularly rainfed agriculture, remains the dominant economic sector, keeping overall economic performance subject to the vagaries of weather. Malaysia experienced a slowdown in GDP growth to a still high 8.2 percent, as monetary policy was tightened to limit the current account deficit, but plans for massive infrastructure projects should sustain growth. Myanmar achieved 6 percent growth in 1996, reflecting good weather and a resulting large harvest which yielded substantial rice exports. Reform measures introduced after 1990 have made this the fifth good year of economic growth. Under the influence of ongoing reforms in the Philippines, GDP growth has been improving, reaching 5.5 percent in 1996, and high rates of investment are being fed by both foreign and domestic capital flows. Viet Nam maintained economic growth at 9.5 percent in 1996, led by the industrial sector. Agricultural output met its target, despite bad weather in parts of the country, and inflation moderated to 6 percent.

In South Asia, the economic reform process began later than in most other parts of Asia, and the reforms, while positive, remained unfinished. Even so, real GDP continued to grow at 6.5 percent in 1996, up slightly from 6.4 percent in 1995. At 4.7 percent, growth was modest in Bangladesh, as reforms were delayed in implementation, investment and aid disbursements were below target and exports slowed. Recovery in the agricultural sector following improved weather spurred overall economic growth in Nepal in 1996, supported by growth in industry and tourism. Real GDP growth increased to 5.9 percent in Pakistan in 1996, but inflation remained in double digits as a persistent budget deficit again resulted from difficulties in revenue mobilization. Domestic savings declined, as did export growth, culminating in the introduction of a new stabilization effort. Sri Lanka continued to suffer from the strains of high defence expenditures, compounded by drought, while a declining agricultural output and weak performance in the industrial sector constrained export growth.

Reform measures undertaken throughout South Asia, together with the possible expansion of intraregional trade being advocated in the South Asian Association for Regional Cooperation (SAARC), have put the subcontinent on a sound footing for further growth. Expansion and further implementation of reforms will determine the sustainability of improved growth rates.

Agricultural performance

At 436 million tonnes, in 1996 China’s cereal harvest reached a record for the second year in a row, helping to hold down grain imports and increase stocks as well as narrowing the gap between state procurement and market prices. Cereal imports are estimated to decline sharply to about 12.9 million tonnes in 1996/97, down from 26.9 million tonnes in 1995/96. Agricultural production grew by 3.4 percent, significantly below the 1993-95 average of 8.9 percent, reflecting in particular poor performances of non-food crops. Food production rose by 4.2 percent, helped by good weather and higher procurement prices. The record cereal harvest and high government agricultural expenditures boosted rural incomes substantially, thereby helping to slow the widening rural-urban income disparity. A poor cotton harvest and rising cotton prices contributed to weaker textile exports in 1996.

Agricultural output in India increased by a marginal 0.5 percent in 1996, with cereal production remaining virtually unchanged from the previous year at 214 million tonnes. From 1990/91 to 1996/97 growth in annual cereal production only averaged 1.7 percent, less than the country’s 1.9 percent annual population growth. Record rice exports in 1995/96, together with the country’s first net wheat exports since 1947, pushed total agricultural exports up to $5.7 billion while agricultural imports, which are limited by tariffs, licensing, state trading arrangements and an array of other non-tariff barriers, fell to $1.9 billion, although vegetable oil imports more than tripled. Estimates for 1996/97 point to India’s return to being a net wheat importer and to a decline in the overall cereal surplus. The first budget under the United Front coalition government contained higher subsidies for irrigation, fertilizer and agricultural equipment, as well as provisions for supplying families classed below the poverty line with grain at 50 percent below the prevailing issue price. It also enhanced credit supplies for rural infrastructure and investment in horticulture, floriculture and food processing. Agriculture continues to employ nearly 70 percent of the economically active population and accounts for roughly 30 percent of GDP.

Despite wide variations in recent years, agricultural production in the Republic of Korea has generally exceeded population growth and it enabled an average 1.6 percent yearly increase in per caput food output during the period from 1991 to 1996. The country is a large and growing market for consumer foods. Consumer-oriented food imports exceeded $2 billion in 1995 before declining substantially but still exceeding $700 million in 1996. High tariffs and non-tariff barriers protect domestic producers, who are generally high-cost, small-scale family farmers, with a policy emphasis on rice production. However, under its Uruguay Round Minimum Market Access (MMA) commitments, the Republic of Korea will be required to import rice at least in accordance with its MMA schedule. To help the country’s rural sector adjust to the impacts of its Uruguay Round commitments, the government has passed a ten-year special tax, the proceeds of which will be targeted at hard-hit rural villages, and a Five-Year Agricultural Development Plan emphasizing improved international competitiveness, the promotion of rural industry and improved welfare for rural people.

In the Democratic People’s Republic of Korea the domestic food supply situation was extremely precarious after several years of poor agricultural performances (per caput food production fell by 3 percent yearly between 1991 and 1996). The outlook for 1997 also appeared grim in the wake of severe floods over two consecutive years. Although grain production in 1996 was estimated to be slightly greater than in 1995, a large part of the harvest was consumed prematurely owing to the severity of food shortages.

In accordance with the benefits perceived in Southeast Asia from unilateral liberalization measures and to control inflation, the Government of Indonesia has been deregulating and lowering the tariffs on many bulk-product agricultural imports as a step towards meeting its commitments to the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation Council (APEC) and the Common Effective Preferential Tariff, set by the Association of Southeast Asian Nations (ASEAN). The government has also set standards for maximum allowable pesticide residues as well as for the handling, labelling and sale of all foodstuffs. Wheat milling, animal feed, food processing and textile industries are all continuing to expand at a rapid pace. Although agriculture has increased at significantly faster rates than population over much of the past decade, the sector’s contribution to GDP has declined to about 17 percent, down from 24 percent in the early 1980s. Agriculture still accounts for almost 45 percent of employment, however.

Also following ASEAN’s direction towards a more liberalized economic environment, Malaysia’s Seventh Plan strives for greater private sector investment to expand capacity and increase mechanization. Under this plan, agricultural production programmes aim to increase export competitiveness by reducing costs, and to increase production of high-value commodities. Agricultural production has expanded at annual growth rates of about 2.8 percent in recent years, with the much faster growth of the industrial and services sectors. However, agriculture now only accounts for 14 percent of GDP, down from 22 percent in the early 1980s.

The Philippines’ agricultural sector recovered in 1996, with both higher output and higher prices on average. Rising incomes are reflected in increasing demand for meat and other imported foods and inputs (including feedgrains). The effects of the long shortage of public investment in rural infrastructure, human resources and research and development are becoming obvious as domestic production is increasingly unable to meet the food needs of the rapidly growing population. In 1996, the government replaced quantitative restrictions on imported agricultural goods with tariffs, taking a significant step towards eventually complying with WTO agreements and integrating its agricultural sector into the global economy.

Lower prices limited growth in the value of Thailand’s agricultural exports in 1996, thus adding to the country’s trade difficulties. Agricultural imports increased, notably livestock feedstuffs, despite the fact that the maize import window was shortened to April-June and the tariff-quota regime on maize and soybean products was maintained.

Pakistan’s agricultural sector grew by 6.7 percent in 1995/96, up from a relatively strong 5.9 percent growth in 1994/95 and spurred by growth in crop production and fisheries. The growth occurred despite a price rise and a shortage of fertilizer following a subsidy withdrawal as the sector benefited from better weather, fewer pests and an expansion of improved production technologies. Cotton area increased as sugar cane area declined and increased raw cotton exports boosted the share of primary commodities in total exports.

Issues and prospects for regional agriculture

For a vast majority of people in Asia and the Pacific, food security is largely linked to the performance of the cereals sector. Rice and wheat account for, respectively, about 37 and 19 percent of the region’s calorie consumption. As a result of relatively good performance in the region’s cereal production, its self-sufficiency ratio has remained high, decreasing slightly in East Asia (including China) between 1969-71 and 1988-90 from 97.9 to 96.2 percent, and increasing slightly in South Asia over the same period from 98 to 102 percent. As cereal self-sufficiency has remained high and total exports have grown, the share of the region’s export earnings spent on food imports declined from 16.1 percent in 1970-72 to just 5.1 percent in 1990-92.

Improvements in the region’s food availability helped reduce the share of the population suffering from nutritional deficiencies, yet about half a billion people in Asia and the Pacific are still chronically undernourished while many more suffer from other dietary deficiencies. For the food security of these people in particular, and the region’s population in general, supply disruptions arising from natural or market forces can be catastrophic.

An increasing population density, environmental degradation, migration to vulnerable areas and climatic variations have made Asia and the Pacific the most disaster-prone region in the world. An average of 35 natural disasters occur in the region each year, representing roughly 60 percent of the world’s total. A flood in Bangladesh in 1987 reduced rice production by 35 million tonnes to 82 percent of normal national output. In 1991, 5 percent of China’s annual harvest was destroyed by floods as 4 000 state grain warehouses were washed away and another 3 400 were swamped by water. In China it has been common to experience droughts in the north and floods in the south. Cyclones, earthquakes, volcanic eruptions, fire, pest infestations and other natural hazards have also taken their toll in the region. Physical losses from natural disasters in Asia and the Pacific were estimated by the Asian Development Bank (AsDB) to have reached about $10 billion in 1990-91.

These damaging natural phenomena disrupt production, storage and marketing or distribution systems and have both immediate and longer-term consequences. Their effects can be particularly devastating for poorer families, whose household strategies play an important role in coping with them. To mitigate the effects of drought, for example, households attempt to diversify income, borrow, share, sell assets and reduce or diversify consumption.

National flood and storm prevention and management strategies require both structural and non-structural measures, many of which need to be integrated into rural development plans. Structural measures may involve the construction of reservoirs, dykes, submersible embankments and river channel improvements. Non-structural preparedness measures involve maintaining a minimum adequate reserve stock, effective national food information and early warning systems, emergency relief capability and a food relief contingency plan. These elements are frequently poorly developed and are lacking, or not well integrated, in poorer countries. Longer-term efforts can include minimizing deforestation, undertaking reforestation and other conservation measures, restricting or reducing settlements in disaster-prone areas and investing in appropriate physical infrastructure, education, employment and income-generation activities in those areas.

Public distribution systems have played an important role in protecting vulnerable groups in Asia and the Pacific, accounting at times for 25 percent of consumption in China, 12 percent in India, 8 percent in Indonesia, 9 percent in the Philippines and up to 35 percent in Malaysia. As these systems are cut back to increase efficiency, the importance of better targeting is becoming more apparent.

Imports play an important role in supply stabilization for many cereal-deficit countries, including non-wheat producers and traditionally large cereal importers such as Bangladesh, China, Pakistan and the Republic of Korea. Projections from the study World agriculture: towards 201018 suggest that, by the year 2010, Asia will need to rely on substantial imports of wheat in its tropical countries, of rice where production costs are high and multilateral trade commitments limit or prohibit protectionism, and of maize where livestock production is growing rapidly.

Relying on imported supplies may be a cost-effective way of meeting demand but may involve the risk of price hikes or production shortfalls in supplying nations, war or other shipping hazards and politically motivated trade sanctions or diversions. There are also more normal trade difficulties relating to exchange rate fluctuations, foreign reserve shortages, port capacity and storage and handling constraints. Some of these risks may be mitigated by increasing incentives for privately held stocks, prepositioning government stocks in deficit areas, forming regional food security plans, improving early warning systems and negotiating long-term food import agreements. Steps in these directions have already been taken by ASEAN and SAARC, which have established food information exchanges, food loans and subregional emergency food reserves.

Reduced losses and improved inventory control measures may reduce what are considered necessary emergency stock levels. In addition, many developing countries in Asia and the Pacific could improve the efficiency of their food marketing systems. In part, this will occur with improvements in transport, marketing and energy infrastructure. The region’s trend towards reduced state intervention is also yielding clearer incentive structures and greater allocative efficiency.

To reduce the threats of supply shocks to regional food security the main steps that should be taken are to increase food production, generate employment and incomes, improve water control and mitigate the short- and medium-term negative effects that natural disasters have on the nutrition situation by implementing the measures mentioned above. The rapidly spreading regional cooperation efforts throughout Asia and the Pacific, together with the Asian Disaster Preparedness Centre, provide important venues for reducing trade barriers and sharing information, technology and emergency food resources as a means to achieve these goals.

BANGLADESH

Socio-economic characteristics

Despite significant economic and social progress over the past 20 years, Bangladesh remains among the poorest countries in the world. With a per caput gross national product (GNP) of $220, less than that of both Pakistan ($430) and India ($320), Bangladesh ranked as the 13th poorest among 133 countries covered by World Bank19 rankings in 1996. With a population of 120 million living within a limited land area of 147 570 km2, Bangladesh is one of the most densely populated countries in the world, supporting 800 people per km2. At current rates of population growth (2.17 percent), it is estimated that the total population could reach 175 million within 25 years from now.20 The urban population has been growing rapidly, by 5.3 percent per year from 1980 to 1993, but 83 percent of the people still live in rural areas.

Fifty percent of the Bangladeshi population lives below the absolute poverty line21 and approximately 40 percent of the effective labour force is underemployed. Poverty in Bangladesh is closely associated with landownership. Functionally landless (less than 0.2 ha) households comprise 65 percent of the poor, while the marginal landowners (with between 0.2 and 0.6 ha) account for another 21 percent. The number of absolute and hard-core poor increased between 1985 and 1992, especially in the rural areas, but later studies suggest a slight improvement in the levels of poverty in recent years. The proportion of the population living below the poverty line is reported to have fallen from 57.5 percent in 1987 to 51.7 percent in 1994.22 The prevalence of extreme poverty is far higher among female-headed households, whose total population may exceed four million. More than 95 percent of these female-headed households fall below the poverty line, of which one-third are among the hard-core poor.23 Their incomes, on average, are 40 percent less than those of male-headed households.

More than 62 percent of the population in Bangladesh is illiterate, and the country suffers from some of the highest undernutrition and malnutrition levels in the world. Although infant and child mortality rates have improved since the mid-1980s, 84 percent of children under the age of five are still considered malnourished. For centuries, predominant cultural perceptions in this region have disadvantaged women. Eating last and least is an all-too-common occurrence, with the result that, contrary to the global norm, life expectancy for women in Bangladesh is less than that for the men. Bangladeshi women are the most vulnerable to dietary deficiencies and, as a result, have one of the highest maternal mortality rates in the world – 490 per 100 000 live births in rural areas – largely as a result of the poor nutrition of expectant mothers. The nutritional status of the population points to significant gaps in food consumption.

Notwithstanding these stubbornly difficult socio-economic indicators, there have been some positive developments in recent years. The economy has grown by more than 4 percent annually since 1992, compared with an average annual growth rate of 2.1 percent over the previous 12 years. Although still relatively low, the percentage of literacy increased from 32 percent in 1991 to 38 percent in 1995; primary school enrolment has increased by more than 50 percent since 1990, of which almost half is accounted for by girls; the infant mortality rate (per 1 000 live births) has come down from 94 in 1990 to 77 in 1994; the fertility rate has declined considerably from 4.3 children per woman in 1990 to 3.4 in 1995; and family planning coverage has been quite phenomenal: 45 percent of currently married women under 50 years of age are now using contraceptives versus 25.3 percent in 1985.24

Macroeconomic policy and performance

Economic policy in the 1970s and 1980s was contained in a series of five-year plans. Economic policy aims of the various governments in those years were rarely achieved, partly because of unrealistic objectives and partly owing to a combination of problems arising from the rise in world oil prices, natural catastrophes and political disorder.

Since the late 1980s, Bangladesh has been undergoing structural adjustment reforms. Policies have been aimed at liberalizing the economy and making it market-based in order to raise growth, mainly by reducing the role of the government and giving encouragement to the private sector.

Bangladesh has initiated a number of structural reforms which encompass fiscal, financial, trade, institutional and industrial policy reforms, public resource management and privatization. Efforts are being made to restructure and/or privatize state-owned enterprises, most of which are incurring operating losses. Fiscal policy seeks to raise additional revenue (through the improvement of tax laws, structures and management), contain and switch public expenditure and enhance incentives for private investment. The external trade sector has been liberalized through steady reductions in import tariffs, and the government has been pursuing a flexible exchange rate policy in an effort to improve international competitiveness. Its monetary policy also aims at flexible and indirect management of money and credit growths. With the exception of three lending categories (agriculture, small industry and exports), interest rates have been decontrolled.

The reforms have contributed to significant economic progress over the past decade. Up until 1993/94, the economy was responding favourably. The inflation rate fell from 9.8 percent in 1985/86 to 5.3 percent in 1990/91 and down to 1.8 percent25 in 1993/94. There was a sharp decline in the current account deficit as a result of a rapid rise in exports of non-traditional items, such as garments and fisheries, combined with a slow growth rate in imports. Thus, the current account deficit dropped from 6.7 percent of GDP in 1984/85 to 4.5 percent in 1989/90 and again to 1.6 percent of GDP, an all-time low, in 1993/94. The country’s foreign exchange reserves stood at $3.2 billion, enough for covering more than seven months of imports, in 1993/94. Government revenues increased to about 12.2 percent of GDP (1993/94) as opposed to 9 percent during the 1980s, and the budget deficit, as a percentage of GDP, declined from 8.4 percent in 1986/87 to 6 percent in 1993/94.26

A sudden turnaround in these positive performances, however, took place in 1994/95 and 1995/96, the years in which Bangladesh experienced devastating foodgrain shortfalls. The rate of inflation climbed back to 5.2 percent, export growth slowed, the current account deficit increased considerably (owing to increased foodgrain purchases from abroad) and the foreign exchange reserve declined to $2.03 billion by the end of 1995/96.

Since 1989, annual GDP growth has consistently remained between 4 and 4.5 percent, but below the target rate of 6 percent considered essential for any significant impact on poverty alleviation. The main sources of this modest growth have been in large-scale industry, construction, transport and allied services and trade services. Despite impressive industrial growth in the 1990s (led by the export-oriented garments industry), the industrial sector still accounted for only 11.5 percent of GDP in 1995/96, with 34 percent of the sector’s contribution coming from small-scale, usually traditional, industry.

For the short to medium term, the primary objective of the new government’s economic policy is to increase the growth rate to 6 or 7 percent, while keeping inflation down, through manufacturing, services and agro-based industries. The government has identified three broad areas covered by the reform programme to attain these goals: i) private sector development; ii) improvement of public sector management; and iii) poverty alleviation, human resource development and enhancement of environmental resources.

Agriculture in the Bangladeshi economy

Agriculture is the single most important sector of Bangladesh’s economy. It is the principal source of income and livelihood of the vast majority (80 percent) of the population, employing approximately 66 percent of the labour force. Fifty-seven percent of the labour force is engaged in the crop sector which represents about 78 percent of the value added in the agricultural sector. The share of agriculture in GDP has fallen from around 57 percent in the 1970s to 35 percent in recent years but is still the largest economic sector.27 It is also the source of many of the small industrial sector’s raw materials, such as jute, and accounts for 32 percent of the value of exports. In short, agriculture is the driving force behind economic growth in Bangladesh and, as a result, increasing food and agricultural production have always been major concerns of Bangladeshi policy-makers.

Within the crop sector (rice, wheat, pulses and jute), rice dominates, with an average 71 percent share of the gross output value of all crops. As a result, growth in the agricultural sector essentially mirrors the performance of rice production, although the share of livestock and fisheries has increased steadily in recent years to 22 percent of the value added in agriculture.

The possibility of natural disasters is a constant threat for Bangladesh. The country has been, and will continue to be, particularly vulnerable to sudden floods, cyclones and even droughts. Vulnerability to natural disasters and a heavy reliance on annual rains for the main crop performance are the cause of severe fluctuations in foodgrain production and prices and also very erratic GDP growth. Losses of both food and cash crops are a common occurrence, seriously disrupting the entire economy by precipitating unanticipated food import requirements. This in turn reduces the foreign exchange availability necessary for imports of essential inputs for manufacturing and industry and, as a result, causes shortfalls in exports.

Bangladesh is the world’s leading exporter of raw jute and jute products, including carpet backing, twine and sacking. It accounts for as much as 25 percent of world jute production, 85 percent of world jute fibre exports and 44 to 55 percent of exports of jute manufactures. The fibre’s prominence in agriculture, as well as in the economy of Bangladesh, slipped during the 1970s and 1980s as world demand fell as a result of competition from synthetic substitutes. Consequently, the jute industry, which contributed 54 percent of total export earnings in 1984/85, accounted for only 11 percent a decade later. Overtaking jute in 1987/88 as an export earner, the garments industry has emerged as the country’s most important export sector. Garment exports comprised 57 percent of export earnings in 1994/95, up from 11 percent a decade earlier. Since garments exports require corresponding imports of other items, such as fabrics, yarn and buttons, the net benefit of the garments industry to export earnings in 1994/95 was, however, only 29 percent of the sector’s gross export earnings.28 There are clear indications that the industry is beginning to lose momentum and speculations that pressures on the industry are likely to intensify as countries such as China and Viet Nam develop their garments industries.

Export earnings from fish and fish products, in particular shrimp, are also sizeable (See Box 8, The fisheries sector in Bangladesh, p. 148), followed by export earnings from the leather industry. Natural gas production is of increasing importance. Its major product, urea fertilizer, has more than doubled in output in the last decade and the country now exports fertilizer, mainly to neighbouring Asian countries. Within the agricultural sector, tea follows jute as an important cash crop and export product; however, it represented only 1 percent of the country’s total export earnings in 1994/95.29

Bangladesh has a narrow resource base, except of course its human resource potential. Industry in the country is at present not large enough to support the country through export earnings, or by employment generation. The opportunities for diversifying the economic base in Bangladesh are limited and the country continues to run up a heavy trade deficit, reflecting its dependence on imports for most essential goods, such as machinery, equipment and petroleum products, and the decline in the real prices of its traditional staple exports of jute, jute manufactures and tea. Although levels of domestic saving and investment have been growing in the 1990s, they are still low and act as a constraint to the country’s economic growth and development.

Towards self-sufficiency

Bangladesh became a perennially food-deficit country in the late 1950s. Until then, farmers were able to produce enough grain to meet the food needs of the population, with the help of imports in times of natural disasters, crop failures, war, etc. Afterwards, however, population pressures began to take their toll. Threats of mass starvation have been felt several times since independence owing to droughts and severe floods, but a famine of significant proportion only struck the country in 1974 when world food production fell to an all-time low and world food prices rose sharply. At that time, there was insufficient food aid and the country did not have enough foreign exchange resources to buy all the grain it needed in the world market. Because of the subsequent combination of increased food aid allotments from donors and the government’s import programme and increased capacity to finance food imports, the days of severe famine were put to an end. However, persisting, widespread and endemic malnutrition as well as semi-starvation among the majority of the rural population are still far from over. In fact, a downward trend in the daily per caput intake of cereals, pulses, vegetables, fruits and meat can be seen over the last few decades in rural areas as well as at a national level. For example, rice intake in rural Bangladesh in 1995/96 was 427 g per caput. In 1981/82, 1975/76 and 1962-64, the levels of intake were 451, 493 and 505 g, respectively. There was only a slight increase in cereal intake in urban locations in 1995-96 compared with 1962-64.30

Bangladesh’s dependence on food imports and, in particular, food aid throughout the years has been cause for concern. Food imports in Bangladesh currently represent approximately 18 percent of total imports (down from 26 to 30 percent during the 1980s) and absorb 34 percent of total export earnings (down from 50 to 70 percent during the 1980s). In 1990/91, food aid represented 98 percent of total food imports but this has been reduced considerably to representing 30 percent of total food imports in 1995/96.31 The significant difference has essentially been made up by private sector imports which began in 1992/93.

The overriding objective of all agricultural policy and development since independence in Bangladesh has been to achieve self-sufficiency in foodgrains and, in particular, rice production. In reality, what has actually been sought is a substantial acceleration in the growth rate of domestic food production and a decreased dependence on or elimination of food aid in the long term. The emphasis on accelerating food production in Bangladesh stems from the country’s excessive dependence on food imports, its precarious external account situation and its perceived comparative advantage in food production. Bangladesh has excellent soils, rechargeable aquifers that are easily tapped for irrigation, an abundance of low-cost labour in its rural areas and a climate that allows crops to be grown the year round.

With the availability of high-yielding varieties (HYVs), rice has contributed significantly to the progress towards self-sufficiency. Despite the significant inroads wheat has made in the Bangladeshi diet, rice has been and continues to be the favoured foodgrain in the country. A large percentage of the wheat consumed in the country has been distributed in kind through welfare programmes, and this practice has restricted market demand. Moreover, wheat yields, which are very sensitive to the weather, require long and cool winters which are not found in Bangladesh.

Rice is the principal staple food of the Bangladeshi people and constitutes 95 percent of the cereals consumed. Rice cultivation is the major source of livelihood for the large majority of farmers of Bangladesh and it accounts for more than 74 percent of cultivated area, 83 percent of all irrigated area and 88 percent of the total fertilizer consumption in the country.32 In the Bangladeshi diet, rice accounts for approximately 68 percent of caloric intake and 54 percent of protein intake. The weight of rice in the consumer price index (CPI) is about 62 percent. In a social, political and economic context, rice is a significant crop in Bangladesh; it dominates all other economic activities and consumes a considerable amount of foreign exchange.

Although Bangladesh continues to be a net importer of food, importing on average 1.5 million tonnes of rice annually,33 it has achieved substantial gains in foodgrain production during the last two decades. From 1969/70 to 1992/93, the cropping intensity increased significantly, with foodgrain production almost doubling.34 Rice, the dominant crop, increased from 11.2 million tonnes in 1970 to an average of 18.2 million tonnes in the early 1990s.35 In the crop years from 1989/90 to 1992/93, Bangladesh produced bumper harvests of foodgrains, averaging 19.1 million tonnes per year, with a record production in 1992/93 of 19.5 million tonnes (much higher than the average of 16.4 million tonnes during 1985-89). For the first time in history it appeared that Bangladesh was close to attaining self-sufficiency in foodgrains.

In 1993/94 and 1994/95, foodgrain production declined as a result of droughts and floods as well as the farmers’ response to the fall in the price of rice from the bumper harvest of the preceding year. This was evidenced by more than a 2 percent reduction in the area sown, a decline in irrigation demand and more than a 4 percent decline in fertilizer consumption.36

The country faced one of its largest foodgrain shortfalls ever in 1994/95, owing in part to a severe fertilizer crisis and leading to a resurgence of large food imports and high cereal prices. In both 1994/95 and 1995/96 crop years, Bangladesh imported (through food aid, private sector imports and commercial imports by the government) approximately 2.5 million tonnes of foodgrains. The shortfalls sent foodgrain prices soaring, a situation which continued until April 1996 when good boro (dry season) harvest prospects started to dampen the market.

The recent trend in foodgrain production has not been positive. The agricultural sector is now confronted with low and stagnating yields of most crops, including rice, and the food gap between domestic production and demand has actually widened (Figure 9). In spite of the fact that rice production has increased at a higher rate than the rate of population growth during the last decade, and despite the fact that there are both public and private imports each year, the daily per caput food availability of foodgrains in Bangladesh has not reached the standard foodgrain requirement or target consumption level of 454 g since 1991/92 (Figure 10). Given that food availability is not equitably distributed, it is clear that the situation is worse for the poor than these figures would lead one to believe.

The pattern of agricultural growth over the past two decades suggests that virtually the entire growth achieved in crop agriculture has been due to the increase in foodgrains. The principal sources of growth came predominantly from boro rice, followed by aman (wet season) rice and, to a small extent, wheat (output of wheat grew from about 100 000 to 1.3 million tonnes between 1971/72 and 1995/96). The success in accelerating rice production in the 1980s can be attributed almost entirely to the conversion of local varieties to modern HYVs and, as a result of changes in the policy environment, the adoption of irrigation and fertilizer technologies, which has enabled intensive use of the boro months.

As a result of the heavy emphasis on rice production, yields of other non-cereal crops such as pulses, potatoes, oilseeds and vegetables have stagnated. Land used previously for pulses has been converted for rice production. There have been modest increases in the yields of local rice but the average local yields have been 50 percent of those of the HYV rice. However, of late, it is the yield of modern varieties that is showing signs of stagnation.

Agricultural policy reforms

The focus of government agricultural policy has so far been on foodgrain production. In the early 1960s, the government launched a "grow more food" campaign, with a package of policies that included direct state involvement in the procurement and distribution of modern agricultural inputs at highly subsidized prices, support to agricultural research and extension and public investment on water resource development. Recent reforms in the agricultural sector have been an essential and integral component of the ongoing market liberalization policy reforms.

These current reform measures support the main objectives of the government’s food policy, which includes:

During the last two decades, government control of fertilizers, pesticides and irrigation equipment has gradually been withdrawn. The import and distribution of these inputs are now the responsibility of the private sector. Import duties on other agricultural inputs, machinery and parts have also been gradually reduced. With the exception of certain nationalized tea estates, the production of agricultural produce is now completely in the hands of the private sector. A fair amount of agricultural processing, for example rice processing, is also carried out by the private sector. However, some facilities, such as jute mills and sugar factories, are still state-controlled.

The overriding impact of deregulation and liberalization has been increased access to improved technology (including minor irrigation equipment, fertilizers, power tillers, pesticides and seeds, owing to a substantial decline in their prices) as well as large-scale private investment in agricultural machinery. The key element in enabling the shift from traditional rice varieties to HYVs has been the spectacular spurt in minor irrigation development (particularly low-cost shallow tubewells). The share of power-irrigated cropped land increased from 17 percent in 1979-81 to 31 percent in 1989-91 and again jumped to 40 percent of total crop-growing area by 1993/94. In the three-year period from 1989 to 1991, the irrigated area expanded by almost 700 000 ha, which was more than the total irrigated area added during the previous eight years. Between 1988/89 and 1994/95, 197 784 shallow tubewells were installed. The expansion of modern irrigation facilities has also contributed to employment opportunities in the rural areas.

While fertilizer liberalization has induced good progress in rice production, the present urea pricing policy is not consistent with the general orientation of trade and exchange rate liberalization. The manufacturing of urea has yet to be privatized. Urea is produced from subsidized gas and sold at below production cost by the public sector (Bangladesh Chemical Industries Corporation) directly to the dealers. Its cheap market price therefore remains lower than triple superphosphate (TSP) and muriate of potash (MP). It is reported that, as a result, farmers are not using TSP and MP in the required quantities, while they are overusing urea to the detriment of soil fertility. The artificially low price of urea has also given rise to its scarcity and to rent seeking by those with access to rationed supplies. This, in fact, was the cause of the urea crisis in 1995 and the early part of 1996. Despite the lowering of the issue price of urea, interference and hoarding of rationed supplies by entrepreneurs caused the retail price to increase to such an extent that fertilizer application decreased significantly. This ultimately caused substantial losses in rice production during that year, which led to severe food shortages, escalated food prices and rising inflation. This resulted in backtracking with respect to fertilizer policies; the government has reintervened in fertilizer distribution by controlling the appointment of dealers, allocating their fertilizer quotas and delineating their command area.

In line with the government seed policy approved in late 1992, responsibility for the multiplication, processing and marketing of improved seeds was transferred from the Bangladesh Agriculture Development Corporation (BADC) to the private sector. Although the BADC is still involved in seed distribution, the private sector is now permitted to import any improved germplasm for research and development and to develop its own facilities for producing foundation seeds. It is also allowed to import seeds, except for the five "notified" crops (rice, wheat, jute, sugar cane and potatoes). The private sector has now been importing hybrid seeds of maize, vegetables, sunflower, sorghum and rapeseed for the last few years. It is also now producing potato seeds in limited quantities from the foundation seeds provided by the BADC. It is not, however, interested in the production of foundation seeds of any crops because of the high investment requirement.

With the privatization of seed distribution, Bangladesh still faces a current problem with seed quality and varietal replacement. The genetic and physical quality of seeds has been deteriorating. The physical quality of seeds can be maintained through effective processing, quality control, chemical dressing, handling and storage.37 However, it is very difficult to maintain the physical quality of seed at the farm level, since farmers retain 95 percent of seeds from earlier harvests rather than renew their seed stock by buying certified seeds. The production and distribution of quality seeds are insufficient to meet the demand. The BADC currently has a 3 percent seed replacement ratio but, according to national experts, a 10 percent ratio is needed as a basic minimum if Bangladesh is to continue on its agricultural growth path towards self-sufficiency.

The government has moved away from its previous intervention in the foodgrain market. In August 1992, it removed import restrictions on foodgrains for the first time. Private traders responded immediately by importing more than 300 000 tonnes of wheat by the end of that year. The private sector imported more than one-third of total foodgrain imports in 1995 to 1996. The government has also substantially downsized its food distribution system by eliminating the highly subsidized rural rationing channels and drastically reducing the total volume of distributed food. The rural rationing programme had cost the government $60 million in subsidies each year, and it is estimated that 70 percent of the foodgrains did not reach the intended beneficiaries of the programme. Because of the partial privatization of grain trading and the partial dismantling of the Public Food Grain Distribution System, the government has reduced public spending for food subsidies and has significantly reduced domestic procurement of foodgrains. It has been giving higher priority to the non-monetized targeted programmes such as food for work, vulnerable group development, rural maintenance and food for education, the first two of which are largely supported by international food aid.

All in all, the macroeconomic and sectoral policy reforms have reduced several price distortions and made allocative decisions in the agricultural sector more sensitive to price signals in external markets. The role of the private sector in agricultural inputs and the provision of services has been substantially enlarged. While, on the whole, most privatization policies have been successful, there are still short-term hurdles that need to be overcome, as evidenced by both the fertilizer crisis and the seed replacement issue. Even if market forces eventually stabilize the situation, it is the poorer farmers who are likely to be the hardest hit by the short- to medium-term impacts.

Challenges faced by Bangladeshi agriculture

Being an agriculture-dependent economy with a growing population and one of the world’s lowest land areas per caput, the most important issue in Bangladeshi agriculture is to enhance and sustain growth in crop production. The most pressing problem is therefore the current state of stagnating yields and declining productivity in a range of food and non-food crops. Projections of foodgrain supply and demand are consistent in their conclusions that there is a widening foodgrain supply gap.

With negligible scope for area expansion, as most of the arable lands of Bangladesh are already under cultivation, future growth will have to continue to rely on raising productivity per unit of land. For this reason, continuous efforts are being made towards developing new improved seed varieties. It is also felt that the agricultural sector has by no means exploited its full potential for crop production and that there are various opportunities for substantially increasing cropping intensities. Currently only 40 percent of the potential irrigated area is actually irrigated, while only 55 percent of cultivated area is covered by modern varieties and, most important, there are wide gaps between the potential and the realized yields for all crops in the country.

Narrowing gaps between actual and potential yields, however, is easier said than done, for there are various underlying issues and constraints in terms of productivity that are beyond the bounds of technology and another green revolution. To think that the growth of crop production and the goal of self-sufficiency depend almost entirely on technological progress is not only deceiving but also detrimental to the long-term sustainable development of the country. Aside from the fact that Bangladesh is prone to frequent natural disasters, there are other significant factors, both institutional and socio-economic, that play a part in determining the productivity of the agricultural sector and food security situation of the country. These include:

Landownership. The core problem facing Bangladesh is the scarcity of land. With a high and increasing rural population, farm sizes are declining rapidly and landlessness is rising. According to inheritance laws, land is divided equally among siblings and such fragmentation of landholdings is beginning to have serious repercussions. In general, fragmented landownership acts as an obstruction to modernization by reducing efficiency and deliverability of services. Smaller farms have less access to credit, machinery and other productivity-enhancing inputs. They also have less marketing flexibility. The dwindling per caput land resource is, as a result, one of the causes of persisting poverty and food insecurity in the country.

While most farms are becoming smaller in Bangladesh, about 10 percent of farm households own and operate 51 percent of agricultural land, while the bottom 40 percent own only 2 percent.38 The category of larger landowners has been increasing in size and power. The majority of farmers in Bangladesh are sharecroppers or work the land as labourers for large landowners. There are various tenancy arrangements, sharecropping being the most prevalent, under which the tenant agrees to bear all costs and pay 50 percent (and in some cases two-thirds) of the gross produce to the landowner. In some parts of the country, landowners and tenants share the fertilizer and irrigation costs for growing HYV rice; in some cases, the tenancy arrangement is changing from sharecropping to a fixed rent, which is more conducive to the introduction of HYVs. Owing to the insecurity of tenure for most farmers, however, there is little incentive for farmers to think in terms of long-term sustainability of the land. As a result, investments in the long-term productivity of the land are not made, and short-term inputs and practices lacking environmental concern prevail.

Environmental degradation. Bangladesh’s land resources are showing signs of fatigue which is resulting in the stagnation of yields of important crops. Although the adoption of modern varieties has increased, their yields have fallen in recent years. During the green revolution, for example, 1 kg of added nitrogen fertilizer produced 20 kg of grain, while now it only produces 8 to 10 kg. Declining productivity as a result of soil degradation is now a key constraint. The organic matter of more than 50 percent of cultivated soils in Bangladesh is said to be below the critical level of 1.5 percent and still declining at an alarming rate.39 A number of soil-related problems have emerged, owing particularly to current agricultural practices such as the insufficient and unbalanced application of fertilizers and the monocultural cropping practice used in rice production. Salinity, soil erosion, micronutrient deficiency, waterlogging and alkalinity are just a few of the soil-related problems. Unless the use of balanced fertilizers and organic matter in soils are seriously considered, increased and sustained productivity cannot be achieved.

Many are beginning to worry about the exploitation of groundwater and the long-term future of tubewell irrigation, which provides more than 60 percent of irrigated area and has been the main catalyst of growth in rice production. The intensive and increasing use of shallow tubewell irrigation has led to a lowering of the water table in many areas of the country’s north and northwestern parts. In periods of drought, many tubewells have begun to dry up totally. The quality of groundwater is also deteriorating because of the excessive use of chemical pesticides. Increased pest populations have been a direct result of crop intensification through HYVs, and this has had direct and disturbing implications on human health.

In some cases, for example in the coastal areas, land conflict exists between shrimp and rice cultivation. Saline water needed for shrimp cultivation pollutes adjacent paddy (rice) fields and degrades the soils, making them unfit for crop production. One particularly significant and difficult issue is how to deal with the problem of entrepreneurs who are known to come in, rent the land, produce shrimp for export and then move on, leaving behind the problem of salinization.

The need for ecosystem management, i.e. plant nutrient and water management, has been generally recognized in Bangladesh and is currently being pushed wholeheartedly by NGOs such as Proshika. The difficulty lies in trying to convert people’s agricultural practices, which were dramatically changed by the green revolution, to ecological agricultural practices. Since time is required to convert properly from old to new practices and actually to see increases in yields (because of the time the soil needs to rejuvenate), it is difficult to convince farmers to change their habits. For the large majority who do not actually farm their own land, there is not much incentive for them to adopt new practices. Until farmers convert to ecological practices, if indeed they do at all, they will continue to spend an increasing amount of resources on agricultural inputs, as more and more of these are required, and they will continue to receive less in net returns.

Crop diversification. With rice occupying almost 75 percent of the cropped area, followed by wheat which occupies approximately 4 percent and jute which occupies approximately 3 percent, less than 20 percent of the cropped area is devoted to a range of other crops. It appears that the benefits of crop diversification in the country are well known and have been recognized for a long time. However, all efforts seem to have been consumed by the domination of rice production and, as a result, the area under non-cereal crops has continued to diminish. The government has now recognized the urgent need for agricultural diversification, and a shift towards this end is beginning to take place, although – some would argue – at an unprogressive pace.

There are several immediate reasons why the focus of agricultural growth should incorporate more than the emphasis on foodgrain production alone and include several non-rice crops such as maize, pulses, oilseeds, potatoes and other vegetables as well as poultry, livestock and even sericulture production: i) Bangladesh’s serious nutrition predicament needs immediate attention. While the diet of the average Bangladeshi meets carbohydrate requirements, it is grossly deficient in proteins, vitamins and minerals. ii) Enlarging the cropping possibilities for Bangladeshi farmers will enable them to allocate their productive resources optimally and maximize their income. There are many opportunities to diversify farm products and by-products in support of agro-industries. iii) As already mentioned, the current cropping system, with its overdependence on rice production throughout the year, is detrimental to soil fertility. It also makes the crops easily susceptible to pest attacks. Crop diversification can help maintain a better soil structure for long-term sustainability. iv) A good proportion of the crops that are currently imported could be substituted through domestic production. Wheat is such an example; while the issue of taste was a constraint to increased wheat production and consumption in the mid-1970s, wheat has gradually become part of the rural diet. Not only does it require four times less irrigation than rice, making it ultimately less costly to produce, but it is also far less damaging to the environment. On the other hand, climatological constraints limit prospects for increasing wheat yields significantly. v) With the significant decline in jute production, together with the limited opportunities and intense overseas competition for rice exports, diversification is essential for agriculture to break into export markets and continue to make a significant contribution to GDP.

There are some obvious obstacles to agricultural diversification which need to be addressed. The development of modern technology for rice and wheat has impeded the development of seeds for other crops and reduced the competitiveness of pulses and oilseeds, which are important sources of protein for the poor. Additional research is needed to develop suitable HYVs and to make them competitive with modern varieties of rice and wheat. There is also an inherent difficulty associated with intercrop conflicts arising from competition for limited land area. Potatoes, vegetables, bananas, onions and spices are all easily produced in Bangladesh. However, up to now, storage and transport infrastructures have not been substantive enough to inspire the adoption of these crops on a large scale. Farmers have been discouraged by the high price risks associated with the marketing of these crops. Moreover, there has been inadequate extension of on-farm water management technology for non-rice crops. For a crop diversification programme to be successful, it will be necessary to create effective demand for the output through price support policies, education and consumer motivation and by ensuring a viable market with appropriate import and export policies.

Social and physical infrastructure and support services. The rural areas of Bangladesh suffer from severe constraints in terms of inadequate social and physical infrastructure and public support services. Government extension services, for example, are very weak and bureaucratic. They are also technology-driven (pushing rice production) as opposed to people-driven (responding to the interests of the farmers). The fact that the yield difference between demonstration plots and farmers’ plots is significantly high in favour of demonstration plots is in part indicative of weaknesses in extension activities concerning management practices.

It is very difficult to disseminate information in the rural areas, especially with respect to technological options, as the vast majority of farmers are illiterate and have limited means of communication available to them. Cooperatives are slowly beginning to emerge but, on the whole, there is currently very little sharing of knowledge or best practices.

Access to financial services is limited in the rural areas, especially for the vast majority of smallholders. Small and marginal farmers generally have no access to bank credit, as they lack the required collateral. NGOs such as the Grameen Bank and Bangladesh Rural Advancement Committee (BRAC) try to make up for this by providing targeted credit to poor rural households, but the actual beneficiaries are still a small minority.

Lack of access to organized markets is another common constraint as well as the lack of physical infrastructure such as feeder roads, a riverine transport network, bridges, stores and refrigeration units, to name a few. In good production years, farmers have been victims of distress sales, since they have been forced to sell at extremely low prices in order to get rid of their produce because of a lack of storage facilities.

New phase of agricultural development

Although Bangladesh has approached foodgrain self-sufficiency at a national level, food security40 has yet to be concretized, especially at the household level. Access to food remains a significant problem, with a sizeable proportion of the rural population still suffering from chronic and transitory food insecurity. Food insecurity in Bangladesh is closely linked to poverty; nearly half the population is simply too poor to obtain a reasonable share of the food that is available in the marketplace. The alleviation of widespread poverty is therefore a major challenge to the Government of Bangladesh.

The agricultural sector in Bangladesh clearly has major potential for contributing to overall GDP growth and poverty alleviation, especially considering that 62 percent of household income is spent on food. However, increasing rice production is not enough. Bangladesh is now entering a new and challenging phase of agricultural development; as has been seen, the opportunities and constraints facing the agricultural sector over the coming years are different from those of the past two decades. Many of the factors currently constraining growth in farm yields, incomes, diversification and exports could be ameliorated through changes in the policy environment, investments in rural infrastructure and technological change.

The food self-sufficiency objective must be viewed in terms of compatibility with other needs of the people and the economy, including foreign trade. It is time for a departure from rice-led growth to a more diversified production base that includes several non-rice crops, such as vegetable and horticulture crops. The diversification of agriculture, based on a better exploitation of international markets, is essential for broad-based growth in agriculture. Agricultural research and the identification of comparative advantages of agricultural products have to be re-examined in light of the need for diversification.


BOX 8

THE FISHERIES SECTOR IN BANGLADESH

Bangladesh is one of the richest countries in the world as far as inland fishery resources are concerned. The fisheries sector contributes to the national economy in a number of significant ways, playing a major role as a source of nutrition, income, employment and foreign exchange earnings.

The fisheries sector contributes around 8 percent of agricultural GDP, roughly 5 percent of total GDP and 12 percent of export earnings. Marine and inland fisheries provide full-time jobs to approximately 1.5 million rural people and part-time work for more than 11 million. Despite a decline in fish consumption since the 1970s, 71 percent of the daily per caput animal protein intake still comes from fish. The fisheries sector has been growing at approximately 2.3 percent per annum over the past decade.

Much of Bangladesh is a vast delta dissected by three major rivers and more than 700 other rivers and streams. The floodplain is rich in fish, and about one-third of the country is under water for six months each year. Fish ponds, which account for about 85 percent of the total aquaculture-based fish production, and tanks are also extensively spread over the countryside. Such freshwater resources explain why inland fisheries (capture and culture fisheries) account for just over three-fourths (77 percent) of the country’s total fish production. The remainder comes from marine fisheries.

Despite the recognized importance of this resource base, the fisheries sector is under severe stress as a result of overfishing, environmental and habitat degradation and the uncoordinated, multiple use of water bodies. Capture fisheries production has been disrupted and seriously threatened by a proliferation of flood control interventions, drainage, road embankments, irrigation systems, pesticides and fertilizers. For example, major carps such as, katla, mrigal and rui, which used to account for up to 20 percent of the open water fish catches, now constitute less than 1 percent. The failure to maintain the wetlands in the face of radical engineering interventions is undermining natural fish production and canals and estuaries are silted up. It is estimated that, within the next ten years, the annual loss in fish production could be equivalent to 12 to 18 percent of today’s catches if this process continues at the present rate.

Ironically, the same agricultural policies and projects that allowed rice farmers to increase their productivity and helped some landless to find more work often did so at the expense of open access capture fisheries. Water control projects, intended to create favourable conditions for rice production, frequently decrease flood duration and area. Embankments and regulators, for example, prevent fish from successfully carrying out breeding migrations, while structures to stop bank overtopping and lateral flooding lead to sedimentation further downstream, thereby adversely affecting fish production in river channels.

The resulting decline in inland capture fisheries is especially threatening for those Bangladeshis who depend on this open access resource as their only source of animal protein. The intensification of lease holding has also had profound effects on access by the rural poor to inland fisheries. Fisheries development projects that impose leasing systems are depriving the poor of their traditional fishing rights and heritage. The government’s new fisheries management policy, however, has recognized the problem of the poor’s access to common property resources and aims to bypass entrepreneurs and give licences directly to the genuine fishermen.

While the fisheries sector is facing infrastructural, environmental and socio-economic hurdles, there have been some recent positive developments: although inland capture and marine industrial fisheries have declined, there has been steady growth in aquaculture technology in shrimp farms and ponds; considerable efforts have been made to introduce rice-fish culture technology (the NGO CARE is currently doing extensive work in this area); private sector activities such as hatchery development, processing, preservation and export have expanded substantially in recent times, and the government is gradually implementing measures to mitigate environmental damage to fisheries. While there is still much to be done, these and many other planned improvements may expand Bangladesh’s opportunities for both domestic and export production and contribute further to the country’s social and economic development.


An agricultural development strategy based on the abolition of subsidies, the privatization of the delivery system of inputs, and an emphasis on the need for further development in high-quality seed and irrigation technologies is not enough to yield the desired results. Accelerating improvements in rural infrastructure is essential not only for the intensification of foodgrain production but also for facilitating diversification and expanding off-farm activities. Transport infrastructure will not only help in terms of employment generation but also by linking rural areas to major markets. "The key to agricultural development in Bangladesh lies in transforming the traditional peasantry of Bangladesh into agricultural entrepreneurs. The cultivators do not lack motivation, they lack expertise and resources."41 As such, human resource development and the spread of education are essential. Efforts should also be made to ensure the availability of credit at reasonable rates of interest and with greater access for small farmers and the marginalized, including women. The strengthening of extension services for both food and non-food crops is a key concern. The marketing system, currently one of the weakest links in the development of Bangladeshi agriculture, needs to be developed. Linkages with NGOs, which currently have the closest contact with rural farmers, especially the marginalized ones, would facilitate the development of all these areas. Of equal importance is the need for support services to facilitate private sector investments in rural areas.

The development of rural infrastructure can contribute enormously to raising agricultural production but thought must also be given to the development of a more sustainable rural economy. Considering the very small size of the average landholding and the large number of landless poor, opportunities in other sources of sustenance should be expanded. Adequate farm and off-farm employment and income-earning opportunities (supported by technical, infrastructural and financial services) are essential for supplementing small farmers’ income and enabling landless labourers to earn their livelihoods. Furthermore, the production potential from integrated homestead development should not be underestimated.

Investment should therefore be geared towards activities with the greatest potential for creating a dynamic and efficient economy in line with the country’s comparative advantage and for alleviating poverty. In this respect, export-based and labour-intensive growth is crucial for achieving sustained increases in growth and employment opportunities and consequent poverty alleviation. In addition to enhancing the contribution of agriculture to economic growth, fostering significant growth in potentially very dynamic manufacturing industries, such as the garments industry, should be viewed as a mutually supportive objective.

17 The country data and projections in this section are based on AsDB. 1997. Asian Development Outlook 1997 and 1998. Manila.

18 FAO. 1995. World agriculture: towards 2010. Edited by N. Alexandratos. Rome, FAO and Chichester, UK, Wiley.

19 World Bank. 1996. World Development Report, 1996. New York, Oxford University Press.

20 Government of Bangladesh. Bangladesh Food and Agriculture. Document prepared for the World Food Summit, November 1996, FAO, Rome.

21 The poverty line in Bangladesh is defined by the 1991-1992 Household Expenditure Survey and is calculated on the basis of a per caput minimum daily intake of 2 122 kcal (as recommended by WHO), with a 30 percent allowance for non-food basic needs. Those defined as the "hard-core" poor have a daily intake of <1 805 kcal (M.O. Hossain, 1991. Poverty alleviation. In R. Sobhan, ed. Report of the task forces on Bangladesh development strategies for the 1990s, Volume 1. Dhaka).

22 Economist Intelligence Unit. 1996. Bangladesh country profile, 1996-97. London.

23 UNDP. 1996. Report on Human Development in Bangladesh: A Pro-Poor Agenda. Dhaka.

24 Government of Bangladesh, op. cit., footnote 20, p. 128.

25 Inflation mainly reflected the price of rice which accounts for 62 percent of the consumption basket for CPI measurement. (Cited in Government of Bangladesh/FAO. 1996. Strategies and programme framework for agricultural development in Bangladesh – Draft.)

26 Government of Bangladesh/FAO, op. cit., footnote 25.

27 Government of Bangladesh, op. cit., footnote 20, p. 128.

28 Economist Intelligence Unit, op. cit., footnote 22, p. 128.

29 Ibid.

30 K. Jahan. 1996. Nutrition survey of Bangladesh, 1995-96 – a preliminary report. Institute of Nutrition and Food Science, Dhaka University, Dhaka.

31 WFP. 1997. Bangladesh Foodgrain Digest – February 1997. Dhaka.

32 M.M. Rashid. Achievements, constraints and future activities in rice research and production in Bangladesh. Bangladesh Rice Research Institute. Paper presented at the 18th Session of the International Rice Commission, September 1994, FAO, Rome.

33 Z. Karim. Accelerating agricultural growth in Bangladesh. Paper presented at the Seminar on Agricultural Research and Development in Bangladesh, February 1997, Bangladesh Agricultural Research Council, Dhaka.

34 Government of Bangladesh/FAO, op. cit., footnote 25, p. 130.

35 WFP. 1995. Bangladesh country strategy outline. CFA 40/SCP, 15/8/OMA/Add.1. Rome.

36 Government of Bangladesh/FAO, op. cit., footnote 25, p. 130.

37 Z. Karim, op. cit., footnote 33, p. 135.

38 M. Hossain. 1996. Rural income and poverty trends. In H.Z. Rahman, M. Hossain and B. Sen, eds.1987-1994: Dynamics of rural poverty in Bangladesh. Dhaka, Bangladesh Institute of Development Studies.

39 Z. Karim, op. cit., footnote 33, p. 135.

40 Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. (FAO. 1996. World Food Summit Plan of Action. Rome.)

41 M. Hossain. Food aid, food security and development. Paper 7 of the Seminar on Food Strategies in Bangladesh, organized by the Government of Bangladesh and the European Economic Community. October 1988. Dhaka.

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