Harnessing full potential of rice production

The long-run economic potential of Bangladesh cannot be realised unless the people feel confident about the first item on most people's budget -- food. With a population of about 150 million and a projected population of about 220 million by 2060, there is good reason to be concerned. However, most people also do not seem to realise the incredible strides that Bangladesh has already made in expanding its food supply and how much more can be achieved with systematic effort. This note seeks to lay out briefly the reasons for cautious optimism. It begins by dealing with the production potential of local growth. If this is seen to be adequate, and I will argue that it is, then the rest is up to us to achieve.
For the sake of easy readability I will refer to rice as the only 'food' in question -- a simplification that does not affect the essence of the question. The high price of rice that alarmed everyone in the spring of 2008, was a short-run problem, caused by reliance upon imports from India and a sudden change of Indian policy. This enables me to outline what might be done if a future shortage is feared -- provide full and credible information. Finally, a few words on food security vs rice security.
Policy advice has moved Bangladesh from the mantra of 'food self-sufficiency'-- a phrase that has dirigisme overtones -- into the market-friendly 'food security', which allows income to be the policy variable and assumes that maximising gross domestic product (GDP) will provide the requisite income to everyone. [Nick Cullather has pointed out that the google Ngrams of the two mantra phrases are very revealing]. It will be clear that I oppose this trend, not because I oppose the market, but because such donor-based mantras ignore local realities; in this case, these realities are the production potential of Bangladesh and its comparative advantage. I have deliberately chosen large and simple numbers and calculations because in questions of this kind one wants to convince one's readers by making them think things through.
So our numbers will be adequate if they indicate orders of magnitude and our reasoning will suffice if the reader can confirm all steps. While the article will talk directly only about food, it is taken for granted that other complementary measures that accompany economic growth, such as infrastructure and education are all taking place concurrently.
Bangladesh has gone from 9.0 million tons in 1971 to over 30 million tons by 2010 and is now practically self-sufficient. It could have tried for full sufficiency but the advising powers felt that it was better to rely on Indian rice for the balance of our needs (more later on this).
If the population increases to 220 million, what has to be the rice production to reassure ourselves of adequate staples? Growing populations have a pyramidical age structure since there are always many more children than youth and more youth than adults; we can think of the additional 70 million as consisting of 15 million adults, 20 million youth and 35 million children. If the youth consume two-thirds of an adult and the children consume one-third of an adult, we have to prepare for 40 million more adults by 2060. If we take this to be 25 per cent of the current output the goal is to produce 37 million tons in about two years. How is this to be done?
First, the yield gap between demonstration farms and farmers is 30 per cent. This is primarily due to input-supply irregularity and limited agro extension. It can be made up simply by exercising more care and extension. This is a chance to employ those educated youth who are unemployed. If two workers are allotted to each village for extension, we have productive jobs for some 140,000 individuals. Using these domestic resources alone, Bangladesh can ensure a move to 39 million tons
by 2015.
Remove Government of Bangladesh (GoB) management, especially of inputs, and go to a free market for inputs. Earlier experience has shown that agricultural input markets work better than GoB allocations. While price may exceed that set by the GoB, the supply is regular and reliable. It is this reliability that is vital to ensure output, since the appropriate use of inputs contributes about 75 per cent of the yield of HYV varieties. This will ensure the gains of step one.
Expand the high yielding variation (HYV) varieties with local potential, by encouraging the second generation of HYV varieties developed by Bangladesh Rice Research Institute (BRRI) such as BR-28, BR-43. This has been done to a fair extent since 2008, but needs continued encouragement. As about 1/3rd of Bangladesh area is by the coast, new coastal varieties from BRRI need rapid expansion in areas such as Shoron Khola. Training, demonstration and local seed production are sufficient for this. When adequately utilised the output gains can be in the order of 20 per cent, or another 7.0 million tons.
Agriculture credit is not being adequately financed. The procedures are complex and discouraging. No private institutions exist for this purpose, which is strange in view of the prevalence of microfinance and support for small and medium enterprises (SMEs). By focusing upon the very poor, micro-finance institutions  (MFIs) have hitherto been missing the small farmer -- who can be especially productive, but who is excluded from the usual MFI loans by having some assets.
Hybrid technology needs package support; for reasons that are unclear, the government has been reluctant to introduce such comprehensive packages. They will provide 20 per cent more output than HYV, let us just say it is 5.0 million tons. The only new input needed is education and the building of domestic capacity, so no foreign exchange is involved. In the short run, import quality has to be assured, since the current imports of poor quality seed are biasing the market against innovation.
Aggregating the totals, we find output to be over 35 million tons in a couple of years, depending on the vigour with which the extension programme is pursued, and Bangladesh can become a rice exporter by 2015, after meeting all its domestic needs. Bangladesh has met its goal. If all the assumed output gains materialise the potential, rice available for export will be about 10 million tons. The foreign exchange it can earn is about 10m x current world price of cheap export rice. When the potential is realized, even if we assume it stops at less than the numbers given, because of declining fertility and water-logging etc., so that an exportable amount of 20 million tons is all that is achieved, then the export earning can be calculated with an export price of approximately Tk60. The potential loss to Bangladesh is about Tk1,200,000 million per annum.
What is lacking? Only the vision of what can be done and the will to execute it! What is most pleasing about this prospect is the realisation that the primary 'new' input is agricultural extension - it is advice and supervision of trained agronomists, which is a domestic resource that Bangladesh has plenty of, and can readily generate more.
Why is rice export so desirable? Food prices have been increasing recently and world trends suggest further increases because of population growth, coupled with rising energy price. Bangladesh is blessed with fertile land. What economists call comparative advantage, doing that which we are best suited to do, should alone have suggested this option to Bangladesh. Instead of draining foreign exchange, such a policy move will make rice a foreign exchange earner.
As the world price increases, Bangladesh farmers will face an unlimited world market to sell their rice to; this may occasion an initial price jolt, so the GoB has to be careful about such teething problems. But thereafter, the high prices will ensure maximum effort and productivity on rice farms. A collateral benefit is the changed income distribution -- farmers will earn more and their lands will consequently become more valuable. As farmlands rise in price, people will think twice before converting 'dhani land' to other uses; as rural incomes rise, the need to migrate to cities will diminish and the cities will become more liveable.
This is an adapted version of a presentation made by Professor Salim Rashid at the first conference of Bangladesh Economists' Forum, held in Dhaka on June 21 and 22, 2014. The writer mentions that this presentation is an expanded and revised version of a paper, originally published in The Financial Express, Dhaka, in 2009. He wrote the original article jointly with Prof. Zohrul Karim, ex-Secretary, Government
of Bangladesh and Directo
General, BARC.