Overcoming regional differences in development******
Friday, 22 April 2011
Rushidan Islam Rahman
Regional income inequality can be a matter of concern if some regions continuously experience slower income growth compared to other regions. Similarly, regional inequality in poverty incidence or change of poverty incidence, if occurs over long duration, can have a disquietening impact on social and political processes of development of a country. Regional inequality of poverty trends in Bangladesh received attention during the last decade or so. The two rounds of HIES, carried out 2000 and 2005, show that there has been no or little poverty reduction in two Divisions, namely Khulna and Rajshahi. Remedial measures should, of course be initiated to reverse this trend. However, the fact that poverty decline was faster in the areas (Divisions) in the east can hardly be an adequate basis to propose the theses of East-West divide. If this is based only on the experience of poverty reduction during 2000 to 2005 it may provide misleading conclusion regarding the Divisionwise difference in development and may create inadvertent repercussions. This article will highlight the changes in poverty incidence in different 'Divisions' not only during 2000-2005 but will look at the changes during the longer time span of 1996 to 2010. In addition, Divisionwise data on a few other social indicators will be presented to examine whether all indicators can be used together to come to a definite conclusion about backwardness of some regions (or East vs West). To facilitate the adoption of remedial measures for reduction of regional difference in various spheres of development, the nature of the problem requires in-depth analysis. HIES 2000 and 2005 data show that poverty incidence is higher in Barisal, Khulna and Rajshahi compared to Dhaka and Chittagong. Data from the four rounds of HIES (1996 to 2010) show that although Barisal, Khulna and Rajshahi performed worse than Dhaka, Chittagong and Sylhet in terms of percentage point of poverty reduction during 2000 to 2005, a reverse pattern was observed during 1996 to 2000. Again in 2005 to 2010 Khulna, Rajshahi and Barisal Divisions performed better. Thus, (if we have confidence on data from all rounds of HIES), the conclusion emerges that the Divisions' performance in terms of magnitude of poverty reduction were not similar in different periods. One may be taken by surprise to note that rural Khulna's poverty rate was much lower than rural Dhaka in 2010. It is extremely difficult to explain these upswings and downswings in Divisional ranking of poverty incidence. The other point that deserves attention is that in the two Divisions (Khulna and Rajshahi) about which there is a specific concern, have shown very diverse pattern of poverty trend in the urban and in rural areas. Relevant data shows that urban poverty increased during 2000 to 2005 while rural poverty incidence declined in Rajshahi. However, household income or poverty incidence is only a partial indicator of development. Therefore data on two other indicators of social development have been presented below. These are school enrolment rates of children and infant mortality rate (IMR). Sylhet and Chittagong have lowest school enrolment rates of 6-10 years old children. Dhaka and Sylhet have second and third highest IMR (44 and 39 per 1000 live births) while the figures for Barisal and Khulna are 35 per 1000 (data for 2008). Thus the position in terms of income poverty reduction and in terms of social development does not match and various Divisions' success in the two areas are somewhat contrasting. Therefore policy responses must be alert to such differences. Although there are fluctuations in the rate of poverty reduction and relative position of Divisions in this respect, there can be no doubt that some Divisions have substantially lower household income associated with lower level of economic development. There is need for policies for more balanced growth in various Divisions and a few specific policies are being suggested below. Policy Responses Regional inequality may be examined at various levels, e.g., division, district, upazila etc. Which level may be used for policies for generating more equal poverty reduction trend? Should policy actions be targeted to achieve fuller utilization of potentials of growth and development for the country as a whole or to greater regional equality (at some chosen level of region) of growth andor poverty reduction? Another alternative will be to accelerate poverty reduction in the pockets of acute poverty. It may be emphasized that Dhaka Division's rural area as a whole show higher poverty incidence compared to Khulna's rural areas (HIES 2010). Some districts in Dhaka Division are among the top ranking ones in terms of poverty rate. Therefore poverty reduction policies should not adopt the simplified notion of 'East vs West' but should pay attention to the poorest spots in various Districts and Divisions. One cannot always work at the same level of regional disaggregation. In the case of poverty reduction programmes, district or upazila may be relevant. For growth augmenting infrastructure building, divisional headquarters and port city will be most important physical spheres. For some environment related development projects, districts in the disaster prone coastal area will be the centre of action. Policies related to social development, especially education and health services should target the Divisions with lower achievement. Focus on Regional Growth Centres Regionally dispersed growth centres can provide an impetus to both employment generation, poverty reduction and sustained growth of manufacturing. Entrepreneurs can thrive by drawing upon local labour force, especially the underemployed female labour force. The ununderemployment situation in the labour market of Bangladesh makes it clear that the prevailing magnitude of surplus labour is not very large and the formal sector may not be able to attract a large supply of labourers from the rural areas. Wages in many formal sectors are close to wages of the informal sectors. In this situation, industrialization should proceed through a locational dispersion of industrial units towards the poorer areas. An expansion of sub-contracting system can Continued from page 20 utilize the entrepreneurial ability of small enterprises in these interior areas and can provide a useful substitute for a wage labour-based industrialization. This option can yield the desired outcome only if pursed at a reasonably rapid pace. Otherwise, the rural labourers from poorer regions will continue to migrate to the metropolitan areas. An enabling environment for development of local entrepreneurship can be created through provision of low cost power, transport, communication systems and marketing services. NGOs and private sector financial institutions should be encouraged to extend a suitable package of financial services. Protected areas for marketing and storage may be established as a component of peri-urban growth centers. Growth centers in the port city of Mongla and in Rajshahi may be initiated as pilot schemes. Infrastructure building for linkage between semi urban growth centers and rural hinterland may lead to direct and indirect employment generation and can help both poverty reduction and economic growth. Underemployment rate in Bangladesh is much higher among women and a choice open to the labour intensive industrialization process is to draw female labour force. During the last two decades female labour force participation rate increased. But still the rate is lower than many Asian countries and there is a prospect of increase of such participation rate if better job opportunities are created in close proximity to their rural homes. This can reduce regional inequality in economic growth and help empowerment of women. ................................... Dr. Rushidan Islam Rahman is a Research Director at Bangladesh Institute of Development Studies (BIDS) E-mail: rushidan@bids.org.bd
Regional income inequality can be a matter of concern if some regions continuously experience slower income growth compared to other regions. Similarly, regional inequality in poverty incidence or change of poverty incidence, if occurs over long duration, can have a disquietening impact on social and political processes of development of a country. Regional inequality of poverty trends in Bangladesh received attention during the last decade or so. The two rounds of HIES, carried out 2000 and 2005, show that there has been no or little poverty reduction in two Divisions, namely Khulna and Rajshahi. Remedial measures should, of course be initiated to reverse this trend. However, the fact that poverty decline was faster in the areas (Divisions) in the east can hardly be an adequate basis to propose the theses of East-West divide. If this is based only on the experience of poverty reduction during 2000 to 2005 it may provide misleading conclusion regarding the Divisionwise difference in development and may create inadvertent repercussions. This article will highlight the changes in poverty incidence in different 'Divisions' not only during 2000-2005 but will look at the changes during the longer time span of 1996 to 2010. In addition, Divisionwise data on a few other social indicators will be presented to examine whether all indicators can be used together to come to a definite conclusion about backwardness of some regions (or East vs West). To facilitate the adoption of remedial measures for reduction of regional difference in various spheres of development, the nature of the problem requires in-depth analysis. HIES 2000 and 2005 data show that poverty incidence is higher in Barisal, Khulna and Rajshahi compared to Dhaka and Chittagong. Data from the four rounds of HIES (1996 to 2010) show that although Barisal, Khulna and Rajshahi performed worse than Dhaka, Chittagong and Sylhet in terms of percentage point of poverty reduction during 2000 to 2005, a reverse pattern was observed during 1996 to 2000. Again in 2005 to 2010 Khulna, Rajshahi and Barisal Divisions performed better. Thus, (if we have confidence on data from all rounds of HIES), the conclusion emerges that the Divisions' performance in terms of magnitude of poverty reduction were not similar in different periods. One may be taken by surprise to note that rural Khulna's poverty rate was much lower than rural Dhaka in 2010. It is extremely difficult to explain these upswings and downswings in Divisional ranking of poverty incidence. The other point that deserves attention is that in the two Divisions (Khulna and Rajshahi) about which there is a specific concern, have shown very diverse pattern of poverty trend in the urban and in rural areas. Relevant data shows that urban poverty increased during 2000 to 2005 while rural poverty incidence declined in Rajshahi. However, household income or poverty incidence is only a partial indicator of development. Therefore data on two other indicators of social development have been presented below. These are school enrolment rates of children and infant mortality rate (IMR). Sylhet and Chittagong have lowest school enrolment rates of 6-10 years old children. Dhaka and Sylhet have second and third highest IMR (44 and 39 per 1000 live births) while the figures for Barisal and Khulna are 35 per 1000 (data for 2008). Thus the position in terms of income poverty reduction and in terms of social development does not match and various Divisions' success in the two areas are somewhat contrasting. Therefore policy responses must be alert to such differences. Although there are fluctuations in the rate of poverty reduction and relative position of Divisions in this respect, there can be no doubt that some Divisions have substantially lower household income associated with lower level of economic development. There is need for policies for more balanced growth in various Divisions and a few specific policies are being suggested below. Policy Responses Regional inequality may be examined at various levels, e.g., division, district, upazila etc. Which level may be used for policies for generating more equal poverty reduction trend? Should policy actions be targeted to achieve fuller utilization of potentials of growth and development for the country as a whole or to greater regional equality (at some chosen level of region) of growth andor poverty reduction? Another alternative will be to accelerate poverty reduction in the pockets of acute poverty. It may be emphasized that Dhaka Division's rural area as a whole show higher poverty incidence compared to Khulna's rural areas (HIES 2010). Some districts in Dhaka Division are among the top ranking ones in terms of poverty rate. Therefore poverty reduction policies should not adopt the simplified notion of 'East vs West' but should pay attention to the poorest spots in various Districts and Divisions. One cannot always work at the same level of regional disaggregation. In the case of poverty reduction programmes, district or upazila may be relevant. For growth augmenting infrastructure building, divisional headquarters and port city will be most important physical spheres. For some environment related development projects, districts in the disaster prone coastal area will be the centre of action. Policies related to social development, especially education and health services should target the Divisions with lower achievement. Focus on Regional Growth Centres Regionally dispersed growth centres can provide an impetus to both employment generation, poverty reduction and sustained growth of manufacturing. Entrepreneurs can thrive by drawing upon local labour force, especially the underemployed female labour force. The ununderemployment situation in the labour market of Bangladesh makes it clear that the prevailing magnitude of surplus labour is not very large and the formal sector may not be able to attract a large supply of labourers from the rural areas. Wages in many formal sectors are close to wages of the informal sectors. In this situation, industrialization should proceed through a locational dispersion of industrial units towards the poorer areas. An expansion of sub-contracting system can Continued from page 20 utilize the entrepreneurial ability of small enterprises in these interior areas and can provide a useful substitute for a wage labour-based industrialization. This option can yield the desired outcome only if pursed at a reasonably rapid pace. Otherwise, the rural labourers from poorer regions will continue to migrate to the metropolitan areas. An enabling environment for development of local entrepreneurship can be created through provision of low cost power, transport, communication systems and marketing services. NGOs and private sector financial institutions should be encouraged to extend a suitable package of financial services. Protected areas for marketing and storage may be established as a component of peri-urban growth centers. Growth centers in the port city of Mongla and in Rajshahi may be initiated as pilot schemes. Infrastructure building for linkage between semi urban growth centers and rural hinterland may lead to direct and indirect employment generation and can help both poverty reduction and economic growth. Underemployment rate in Bangladesh is much higher among women and a choice open to the labour intensive industrialization process is to draw female labour force. During the last two decades female labour force participation rate increased. But still the rate is lower than many Asian countries and there is a prospect of increase of such participation rate if better job opportunities are created in close proximity to their rural homes. This can reduce regional inequality in economic growth and help empowerment of women. ................................... Dr. Rushidan Islam Rahman is a Research Director at Bangladesh Institute of Development Studies (BIDS) E-mail: rushidan@bids.org.bd