Bangladesh: Priorities for Agriculture and Rural Development

[Md. Fouad Hossain Sarker]

BACKGROUND
Almost 80 percent of Bangladesh’s population lives in the rural areas, with 54 percent of them employed in agriculture and the remainder in the rural non-farm (RNF) sector. The rural economy constitutes a significant component of the national GDP, with agriculture (including crops, livestock, fisheries and forestry) accounting for 21 percent and the non-farm sector, which is also driven primarily by agriculture, for another 33 percent.

[Md. Fouad Hossain Sarker]

ISSUES AND CHALLENGES

High levels of rural poverty:
Poverty in Bangladesh is primarily a ’rural phenomenon’, with 53 percent of its rural population classified as poor, comprising about 85 percent of the country’s poor. Achieving the Millennium Development Goal (MDG) of halving poverty to 26.5 percent by 2015 will require a growth rate of at least 4.0 percent in agriculture and 7.0 percent in the non-farm sector. However, economic and institutional realities, the country’s geographical and demographic characteristics, and its vulnerability to natural disasters, make this a very challenging task.

Low agricultural productivity:
Another challenge is rapidly shrinking land base. While the country’s population is growing at the rate of 1.6 percent per year, demographic pressures and increased urbanization have caused cultivated area to decline at a rate of 1 percent per year. As cropping intensity has approached its limit (about 175 percent now), growth will need to come from intensification of cereal production, diversification into high-value crop and non-crop activities, and value addition in the agro-processing sector, including storage, processing and marketing. This will require reforming the agricultural research and extension systems, and financial and other regulations. Land administration and security issues also need to be addressed.

Improper functioning input and output markets:
The lack of easily accessible markets and collusion by the traders pose significant constraints in both agricultural input and output markets. Marketing margins are high relative to services provided. Lack of market information and infrastructure, the poor law and order situation, the existence of syndicates, and collection of illegal tolls further aggravate the situation.

Lack of enabling rural investment climate:
For nearly 45 percent of the rural population, who are already landless or functionally landless (owning less than 0.05 acre of land), and a majority of the new labor force every year, a declining land base and a small urban employment means that employment in the rural non-farm sector presents the best chance to escape poverty. The growth of the rural non-farm sector, however, is constrained by lack of or poor quality of rural infrastructure and services, highly centralized government framework, weak rural financial systems, and a poor law and order situation.

Weak rural institutions:
While the NGO sector in Bangladesh is well developed and the quality of informal institutions is improving, formal rural institutions remain very weak. Government agencies at all levels face overlapping functions, lack of coordination, low skill levels and incentives, and lack of responsiveness, exacerbated by an urban bias. Elite capture is also quite common in rural areas.

Vulnerability to natural disasters:
Bangladesh is the terminal floodplain delta of three large rivers - Ganges, Brahmaputra and Meghna. Every year about 20 to 30 percent, and every few years about 40 percent, of the country is flooded, causing serious damage to infrastructure, crops and the overall economy. Projected climatic changes and rise in the sea level are likely to worsen the situation. Since independence in 1971, the Government has made large investments to protect against floods and cyclones. However, issues such as public and private roles and community participation in disaster management, environmental protection, and institutional reforms of Bangladesh Water Development Board (BWDB), need to be addressed.

[Md. Fouad Hossain Sarker]

PRIORITY AREAS FOR THE WORLD BANK'S SUPPORT

1. Increasing agricultural productivity, diversification, and value addition
• Agricultural research and extension:
Both public and private investments in a dynamic and responsive agricultural research and extension system is essential to accelerate the transition from subsistence to commercial farming through diversification, export promotion, and bridging yield gaps.

•Enabling rural business environment:
To stimulate RNF growth, the country needs to provide an enabling rural business environment by investing in rural infrastructure, reforming its rural finance mechanism, regulatory framework, land policy and administration, and public expenditures, creating an incentive for rural SMEs and agro-business, improving the law and order situation, and ensuring decentralized and accountable rural service delivery.

[Md. Fouad Hossain Sarker]

2. Improving Factor Markets, Access to Assets and Natural Resource Management

• Agricultural land:
Land is becoming a scarce commodity in Bangladesh and land grab (particularly of public land) by the powerful is quite common. There is thus a need to review land administration, ownership distribution, rights and titles, and land use policy, followed by enforcement of laws and policies.

• Agricultural inputs:
Use of quality agricultural inputs such as seeds, fertilizers, pesticides, farm equipment, and irrigation is critical to promote diversification, and increase productivity. However, despite major improvements, agricultural inputs continue to experience problems such as lack of timely availability, poor quality, and high price, which are even more marked in remote rural areas. There is therefore a need to examine the impact of input price policy and subsidies on profitability and competitiveness, and explore options for their reform.

• Rural finance:
There is a need to understand the constraints to access to rural finance, particularly by the "missing middle" farmers as well as SMEs. There is also a need to reform ’agricultural banks’, to improve their recovery rate, reduce defaults, and increase the number of commercial bank branches in the rural areas.

• Water resources management:
There is a need to institutionalize participatory water management through water management organizations, improve operations and maintenance of flood control infrastructures, and strengthen water sector institutions, particularly BWDB and the Water Resources Planning Organization (WARPO). There is also a need to promote information sharing to reduce downstream flood damage.

• Natural resource management:
In view of the growing threat to the longer term sustainability of natural resources, there is a need to design and enforce a policy and institutional framework for natural resources management and conservation, including user participation. This will be critical to sustaining high agricultural growth in a country like Bangladesh with poor natural resource and high population density

[Md. Fouad Hossain Sarker]

3. Strengthening Rural Institutions and Livelihood Support

• Rural Service Delivery:
Improving physical and social infrastructure - roads, electricity, communication, water and sanitation, health and education – in rural areas is fundamental both for promoting employment opportunities and welfare. While Bangladesh has done well on developing rural roads, it has a long way to go to meet other infrastructure needs, such as electricity, which is only available to 15 percent of villages. Because of the inefficiency of the government in public service delivery, the non-governmental sector has de facto become one of the main actors in development efforts. While decentralization efforts remain incipient, the efficiency and sustainability of public service delivery remains in question.

• Livelihood Support:
Creating and strengthening local organizations such as water management organizations, farmer associations, women’s groups and village development committees is also essential to improving service delivery and accountability. Empowering rural communities, especially women, to create livelihood opportunities, such as through micro-credit programs is particularly important in this regard. Increasing the capacity for collective action has effectively enhanced the communities’ bargaining power, their access to assets and confidence in micro-enterprise development