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Urban-Rural Links and Transformation In Bangladesh: A Review of the Issues, James Garrett and Shyamal
Chowdhury International Food Policy Research Institute (IFPRI) Washington, D.C. USA
Whether the urban-rural devide continues or disappears depends largely on how markets in urban
and rural areas are integrated with each other, how efficiently goods and services move spatially, how
efficient the information dissemination process is, and how efficient formal and informal institutions
are.
Farm Sector
During the last three decades, there has been a significant structural change in agriculture in
Bangladesh both in terms of its contribution to national economy and employment. Agricultural value
added as a percentage of Gross Domestic Product (GDP) declined from around 60 percent in 1972 to
around 23 percent in 2001. This decline has not happened due to a decline in agricultural value but
growth in other sectors. In fact, overall, agriculture in Bangladesh has performed reasonably well over
the past decades.
Commensurately, the share of agricultural employment in total employment has declined from 77
percent in 1974 to about 50 percent in 2001. The absolute numbers of workers in the agricultural
sector continue to increase, however, and agriculture remains the major source of rural employment
in Bangladesh.
Employment in agriculture is also an important source of womens employment. In fact, during the last
decade, the share of women in the agricultural labor force increased relatively rapidly. The major
changes in womens roles in recent years seem to be primarily an across-the-board increase in
womens participation in the agricultural labor force, with men still dominating in fieldwork and women
becoming more involved in preparation and post-harvest activities. Women dominate homestead
vegetable production and livestock raising. Men largely control market activities.
Within the different sub-sectors of agriculture, there has also been a change in output composition.
Figure 5 shows the contribution of different sub-sectors within agriculture. Among the four sub-sectors
crop, livestock, fisheries and forestry it is the crop sub-sector that has experienced the greatest
decline. While the crop sub-sector contributed more than 71 percent of agricultural GDP in 1972/73,
its contribution declined to 57 percent in 2000/01.
The relative contribution of the crops sub-sector has declined from 75 percent in 1972-73 to 57
percent in 2000-01. The fisheries sub-sector has increased substantially, from 11 percent to 24
percent in the same period. The contributions of the livestock and the forestry sector have hovered
around 10 to 15 percent and 5 to 10 percent, respectively.
Non-farm Sector
There are difficulties in defining what is farm and non-farm, but in this paper we include only
agricultural production (whether crop, livestock, forestry, or fisheries) as farm and secondary and
tertiary activities as non-farm, even if they relate to agriculture.
Based on a nationally representative survey, income from the farm sector grew at a rate of 1.4
percent per year from 1987 to 2000, whereas income from the non-farm sector grew at a rate of 6.8
percent per year. Non-farm income now contributes, on average, more than 50 percent of total rural
household income.
With an increase in non-farm activities in rural areas, large and medium farmers are leaving farming,
and landless households are filling their vacuum as tenants. While farming gives a livelihood
opportunities to landless households that were not previously available to them, these households are
not participating in the
more rewarding nonfarming sector.
What barriers prevent
women
and
the
landless
from
entering the often
more lucrative nonfarm sector are not
well understood yet.
Schooling is one of
the
important
determinants
of
occupational mobility,
yet we do not know
much
about
its
relation to change nor
the
complementary
factors needed to
enter the non-farm
sector.
Rural Markets
The notion of the market is at the centre of economic literature and is so strong that since the time of
Adam Smith, the basic nature of the (economic) market has hardly changed. According to that notion,
the traditional market is seen as a flexible atomistic realm of impersonal exchange and dispersed
competition, characterized by Voluntary transactions on an equal basis between autonomous, usually
private, entities with material motivations (White, 1993a: 1). Thus in economics the market is the
supreme medium for the expression of individual choice (Hodgson, 1988). In most cases, the market
in economic literature is perfectly competitive, though models of monopoly, oligopoly and other forms
of distortion have also been discussed comprehensively in the literature. The notion of the market in
economics is an abstract one, where exchange of commodities is in fact a simple process, rather than
that which exists in reality. Real markets are very diverse and a complicated socio-economic
phenomena, which is why it is difficult to define them (Harriss-White, 1996). Real market is an
economically qualified, purposeful interchange of commodities on the basis of quid pro quo
obligations at a mutually agreed upon exchange rate in a cluster of exchange and rivalry relations.
In context of rural markets in Bangladesh these are characterized by the following features.
markets (and the nature of exchange in them) are wide and diverse; there are diversities in the
forms of various relationships among market players, types of produce, different systems of
production and marketing, seasonality and regional variations.
The market players are not only buyers and sellers, rather they have various social and political
(power) relations among them that influence the process and outcomes of market interactions.
markets are linked very closely with a number of other markets such as labour markets, input
markets and credit markets.
The socio-economic status of the market players is unequal and discriminatory.
It is evident from the above discussion that there are inequalities among those who participate in
market exchange in terms of the differences in their wealth, socio-economic status and political power
and influence.
Rural Haats are the oldest and significant platforms of economic, social and cultural exchange for
rural communities in Bangladesh. Bangladesh has approximately 20,000 haats networked all over the
country. Collectively they are the most basic and predominant form of rural market organization
around which buyers (consumers, middlemen traders), sellers (farmers, retailers), trade associations
(labor, transportation, etc.) and various service providers (SPs) congregate to exchange information
and enter into transacted trade or exchange relationships.
As vibrant economic exchange hubs, Haats play a vital role in the rural economy by allowing
producers and farmers to procure essential inputs and raw materials (e.g., seeds, fertilizer, feed,
pesticides), avail services (e.g., processing, agro-tool rental, financial), gather market information, and
liquidate produce through retail or wholesale trading.
Each haat by law is supposed to have a Haat Management Committee (HMC), comprised of
selected/elected haat user, which guides and oversees the development of the Haat. Haats are
generally owned by the Government (the line ministry being Ministry of Local Government, Rural
Development & Cooperatives) and they are leased annually. By law a percentage of this lease money
is allocated for Haat development. One of the key roles of HMC is to ensure that the development
fund is apportioned and used properly. In reality, the HMCs are either non-existent or dysfunctional
that affect investment and growth of these market places.
Concerning Issues
Agricultural marketing in Bangladesh is a multiple stage procedure. There is a large difference in the
price that the farmers get and the retail price of the product. There are innumerous small farmers who
are not able to achieve economies of scale from their production. Most of the farmers produce in a
small scale as they are not able to bear the high input cost and there is not sufficient credit available
to them. The profitability of farmers is low. Farmers do not get their share of increased price in the
market.
Research has revealed the following issues:
Farmers do not get any benefit from increase in the price level in the rice market, as seen from field
survey, which shows that the increased portion of price is appropriated by the intermediaries before
reaching the farmers. Thus the chain of intermediaries can be regarded as obstacle to farmers in
getting fair price for their products, and it affects the livelihood of the poor farmers thereby hindering
the growth of the agricultural sector.
The marketing system is characterized by underdeveloped market infrastructure and transport.
Most farmers in remote rural areas sell their products to the local merchants in the market places
and are dependent on the latter for selling their products.
There is a system of paying rent in the market while selling their produce and it appropriates a
significant part of the proceeds they get from selling their products.
Farmers in many rural areas are forced to sell their output just after the harvest either to repay their
loan or to meet their household expenses.
Lack of storage facility is another reason for which farmers have to sell their product shortly after
harvest at low price.
The various inefficiencies prevailing in the product market identified above affect the livelihood of the
poor farmers in the rural areas. Along with the various inefficiencies, the trade liberalization process
associated with the strategies adopted by the WTO, with their interfaces in the input, capital, labour
and product market have produced negative impact on the livelihood of the farmers. Farmers
livelihood assets consist of financial, social, political, physical and human assets. The interfaces have
led to the degradation of the various livelihood assets.
Fluctuation of Price Level and Distress Sale
One of the difficulties of marketing agricultural product is the fluctuation of the price level. Just after
the harvest the market price of crops fall and increase later. This is because just after the harvest
farmers sell their produce as soon as possible to repay their loan. Lack of storage facilities also plays
a compelling role in the affair. At this time of the year, produced output outruns the demand and thus
the price falls. As the price is low during the harvest, the farmers are deprived of their due income
from their product.
Distress sale shows the vulnerability of the small and marginal farmers of Bangladesh. Their
vulnerability forces them to sell their product at a very low price in the market. There is a negative
relationship between the size of farm and distress sale. It has been seen that within a month after the
harvest, small farmers have to take two-third of their product to the market for sale. For small, medium
and large farms it is 59%, 40% and 27% respectively. It proves that small farmers are forced to sell
their product in the market after the harvest to meet their necessary requirements rather than to get
profit from this. It has been seen that farmers get a price which is 6 percent less than the average
price of whole year when they sell their produce within a month after the harvest.
Big farmers who can store their product do not have to face loss as the small farmers due to the
difference in the market price of the whole year and selling price just after the harvest. They store the
crop and sell it when there is upward trend in the price level at the market.
Drafted by M. Farhanul Enam, Katalyst
marketing involves more intensive personal selling efforts compared to urban marketing. Companies
need to understand the psyche of the rural consumers and then act accordingly. To effectively tap the
rural market, a brand must associate itself with the same things the rural community does. This can
be achieved by utilizing the various media in rural areas to reach out to their readers in their own
language and in large numbers, so that the brand can be associated with the myriad rituals,
celebrations, festivals, melas and other activities where they assemble.
Local government capacity
Capacity of local government personnel is another serious constraint: the entire process of planning,
budgeting, auditing and accounting in local bodies is weak due to inadequate personnel (Siddiqui
2005). The National Institute of Local Government (NILG), the officially designated training
organisation, itself lacks capacity to provide the necessary quality of training or number of training
spaces on courses. Even if used to full capacity, NILG would not be able to train even 15 per cent of
all union parishad members over the next five years. The need for a comprehensive training and
orientation programme has been widely noted (GoB 2003; Ali 2002; Democracy Watch 2002; Siddiqui
2006b).
Conclusion
Poverty reduction is the central challenge for Bangladesh. To reduce poverty in the country, it is
crucial to develop the rural areas. For this, Bangladesh needs to accelerate the growth of agriculture
and non-farm sectors, improve the quality of social services, ensure proper functioning of the rural
institutions and expand the rural infrastructure.