Abdul Bayes
Trade and business enterprises account for one-fifth of the rural non-farm employment and nearly half of the income is generated from business firms. Also, a large proportion of workers reporting non-farm labour as primary occupation are employed as wage labourers in these enterprises. The most pertinent point is what these business enterprises are. Researchers asked trade and business-dependent households to report about the type of business activities, the amount of capital employed and the source of finance. The intention was to study the linkage of business enterprises with agriculture. The activities reported can be grouped into the following classes:
* Agricultural inputs related: Irrigation pumps, fertilisers, spare parts, power tillers, small agricultural implements, threshing machines, and pesticides.
* Crop output related: Paddy and jute stores, vegetable shops, fruit stalls, betel leaf and nut shops, rice and wheat stall, oilseeds and spices stores.
* Livestock related: Sweetmeat and curds, chicken and eggs, milk trading, butcher shop and cattle trading.
* Fisheries related: Fish trading and fish fingerling trading.
* Forestry related: Timber trading, fuel wood trading, bamboo and hogla leaves.
* Agro-processing: Gur (molasses) making, rice and flour mills, oil mills, cheera and muri making, saw mill, fish drying, handicrafts, salt making, goldsmith and furniture making.
* Construction materials related: Hardware shops, cement and rod, lathe machine, brick, stone and sands, brick field, lock and key, bamboo fixtures, contractor for road and bridge construction, tin and iron.
* Transport operation related: Vehicle renting, leasing ferry ghat, trawler, repairing rickshaw/van, transport business.
* Restaurants: Tea stall, peddling tea and restaurants.
* Others: Cloth shops, readymade garments, tailoring, phone and fax machines, electronics, utensils, glass and cookeries.
It appears that agricultural input and crop-output related enterprises account for nearly one-third of the total business enterprises but claim only 16 per cent of the total capital employed in these enterprises. The livestock, fisheries and forestry product-related enterprises accounted for another 16 per cent of the rural enterprises and 13 per cent of the total capital employed. Agro-processing enterprises accounted for only six per cent of the units and employed similar proportion of capital. Thus, nearly 56 per cent of the business enterprises are agriculture-related. Grocery stores that serve the basic consumption needs of daily life accounted for nearly 14 per cent of the units. The enterprises which are relatively larger in size with regard to capital employed are engaged in transport business, cloth and garments business and trading of construction materials.
The average size of capital employed in rural business enterprises was relatively small at US$ 349 in 2008. The largest size of capital employed was in cloth and garments business ($5,248)), transport business ($364) and fisheries ($465). The lowest size of capital employed was in restaurants ($97), trading of agricultural produce ($152) and crop products ($152).
In a broader sense, commercial capital invested in agricultural sector constitutes roughly 45-50 per cent of total rural investment. This perhaps proves that the overall economic growth is closely linked with agricultural growth and vice versa.
Interestingly, most of the capital invested in business was financed by own savings. Thus, mobilisation of surplus from the increase in agricultural productivity appears to be the initial foundation stone for the development of the rural non-farm enterprises. On the other hand, the contribution of formal financial institutions in setting up the enterprises was relatively small in 2000 but increased over time. For example, only about 11 per cent of the initial capital was obtained as loans from commercial banks in 2000 but by 2008, the share has risen three times. The credit from commercial banks went proportionately more to enterprises dealing with cloth and garments, construction materials, and fisheries and crop products. But the NGO (non-governmental organisation) credit went proportionately more for agro-processing and forestry products. However, it is clear that the lack of access to credit appears to be a major constraint to the expansion of rural non-farm enterprises.
Researchers on rural industries identified major constraints on the development of the sector as shortage of finance, deficient entrepreneurship, traditional technology, low quality of output, inadequate infrastructure and marketing facilities and unfair competition with large and medium-scale industries due to discriminating macro policies Most of these problems were recognised by the government in late 1950s when the First Five-Year Plan of the then Pakistan (1955-60) was formulated, which were repeated almost religiously in successive development plans. The government created a number of institutions such as the Bangladesh Small and Cottage Industries Corporation (BSCIC), Handloom Board and Sericulture Board to cater to the needs of small-scale and cottage industries, but they were inadequately backed by allocation of financial resources and appropriate management support to ensure sound institutional health.
In the post-independence periods, the successive governments of Bangladesh also recognised the importance of rural non farm activities, particularly for generating productive employment. As a strategy for development of rural non-farm activities, the Five-Year Plan documents proposed development of rural 'growth centres' in important market places as catalytic agents for rural development. Large varieties of rural industries were proposed to be established in and around the growth centres. The industries that were selected to be promoted are manufacturing of rural transport equipment, agricultural implements and machinery, post-harvest processing industries, and machinery and equipment for handlooms. To support development of rural industries, the Plans proposed to establish some basic facilities such as foundries and repair shops at the growth centres. The Plans also proposed that 200 workshops would be established under public sector sponsorship as pioneering ventures to overcome the inertia of the private sector at the initial stage. After successful completion and operation of the workshops, those would be disinvested to interested private entrepreneurs. Besides, the Plans also proposed to set up Employment and Resource Centres at the thana level for the promotion of rural non- farm employment.
However, researchers submit some policy prescriptions that came out of various researches on development of the rural non-farm activities (RNFA). First, the most important factor is education, closeness to market, access to electricity and credit etc. Second, more investments are needed in education, infrastructure development and provisions for finance since participation in RNFA is influenced by these elements. It should be noted that RNFA is no longer a mere 'residual' sector, as it was thought to be before. It has already absorbed more than half of rural labour force from both the poor and rich households. May be the poor segments mainly pursue low productive activities - and are subject to disparity - owing to the lack of credit, education and electricity.
The writer is a Professor of Economics at Jahangirnagar University.
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