Bangladesh is one of the most densely populated and least urbanised countries in Asia: only 27 per cent of its people live in cities and towns. Yet, in less than two decades, the cities have become the country's engines of economic growth and development.
Only 600 cities generate about 60 per cent of global GDP (gross domestic product). Cities contribute more than 90 per cent of GDP in Malaysia and Thailand, and close to 100 per cent in Singapore, Hong Kong and China, with their strong, highly competitive, and resilient economies (World Bank 2009). Even in countries with low urbanisation rates, like Sri Lanka and Bangladesh, more than 65 per cent of GDP comes from the urban areas. Dhaka constitutes almost one-fifth of the total economic establishments in urban Bangladesh. Although 50 per cent of the workforce is employed in agriculture, the GDP growth rate and the sectoral share of industries have been increasing, at the expense of agriculture, which has had a declining share of GDP.
The primacy of Dhaka is due to economic and political reasons. Similarly, Bangkok in Thailand, Manila in the Philippines, Colombo in Sri Lanka, Jakarta in Indonesia, Mexico City in Mexico, Nairobi in Kenya, and the capital cities in the developed world are some of the examples pointing to the dominance of the major cities in almost all countries.
Dhaka in several other global surveys has been ranked among the most polluted, least liveable and cheapest but costly for business cities. In January 2010, JETRO (Japan External Trade Organisation) conducted a comparative survey of investment-related costs in 29 major cities in Asia and observed that Dhaka's skilled labour cost base was still less than Singapore, Shanghai and Bangkok. The industrial estate rent is cost-effective compared to Shanghai, Jakarta and Bangkok. But some other important parameters like logistics and bureaucratic hassles have made the city less competitive than others. No city can hold an absolute advantage on every count, which could matter to a prospective investor. A manufacturer seeking cheap land, good shipping links and a low-cost workforce will inevitably be attracted to a different city unlike a technology firm seeking highly skilled graduates to develop their next-generation products.
In 2012, the Economist Intelligence Unit (EIU) ranked the competitiveness of global cities according to their demonstrated ability to attract capital, businesses, talent and visitors. Dhaka scored 27.7, while New York topped the list with score of 71.4; Tehran scored 27.2 and Logos 27.6. Dhaka was ranked 3rd among 120 cities from the bottom. The EIU was commissioned by Citigroup to develop a Global City Competitiveness Index to rank cities according to their demonstrated ability to attract capital, businesses, talent and visitors.
These cities are becoming more efficient and have high degrees of industry 'agglomeration' and specialisation. The mega-city Dhaka, on the other hand, struggles in the competitiveness rankings and performs poorly. Globalisation has led to specialisation and concentrated development in regions, where investors can enjoy business advantages. Urbanisation is fast occurring in the capital city of Dhaka. The country's other large urban centres are also growing rapidly. More than half of the country's urban population lives in the four large cities -- Chittagong, Dhaka, Khulna, and Rajshahi. Dhaka's population of more than 14 million is more than a third of the country's urban population. Severe environmental, housing, health, and social problems can be traced here to poorly managed urbanisation.
The greater Dhaka district is the most urbanised and has the highest per capita GDP, followed by Chittagong. An economic corridor runs between Dhaka and Chittagong, although Comilla, between the two, has a much lower per capita GDP, because of its poor infrastructure and poor governance. The third spatial concentration of economic development is the Jessore-Khulna-Mongla corridor.
Urbanisation in the recent years has been marked by intensified urban pull exerted by the growth of industries and services, particularly export-oriented industries in the large cities, construction, and foreign remittances. The local entrepreneurs have performed an impressive job within a short span of time since the early nineties. The garment industries took off in Dhaka (74 per cent of such units) and Chittagong (22 per cent). Accessibility to buyers, ability to communicate with overseas firms, financial and banking opportunities, and other location advantages drew industrial and other public sector investments to the country's urban areas, particularly the bigger cities. The sectoral approach to economic development has created a regional imbalance in the field of employment and investment, favouring more urbanised regions.
A study on competitiveness of the cities in Bangladesh shows that Dhaka, with a total score of 7.31 out of 10, is the most competitive city in Bangladesh. Chittagong, Sylhet and Comilla have the next-highest scores. Six of the 10 cities are not competitive nationally (their index scores are below 5). These cities cater to mostly local consumption needs. Chittagong, Sylhet and Comilla are considered 'competitive nationally'. But they have a long way to go before being able to set up more export-oriented, and internationally competitive, economies. None of the cities studied are internationally competitive (index scores of more than 7.5). Dhaka is competitive internationally in some sectors, mainly in textiles and garments.
The functioning of the cities with respect to transport, government services and natural resources also appears to be important in relation to competitiveness: centrally located cities with good connectivity are more competitive than those located close to the country's borders. Chittagong and Dhaka, because of their location advantages as major transport hubs, have higher concentrations and specialisations of employment and economic activities, and have benefited greatly from access to migrant labour, public services, and markets associated with agglomeration. However, the agglomeration of employment and business in these two cities has increased congestion and pollution costs.
Population size appears to be a major determinant of competitiveness. Large cities like Dhaka generate their own economies. The cities studied vary in ratings to a great extent both in terms of population size and in competitiveness scores. Dhaka tends to have an advantage over smaller cities in human resources and training, quality of life, and dynamics of the local economy.
Dhaka has been identified as the most competitive city in Bangladesh. It is also the administrative, commercial and cultural centre of the country. The greater Dhaka is relatively affluent compared to other areas of the country. The non-farm sectors, in particular, are faring better in the Dhaka centre region (DCR), possibly because of urbanisation and the agglomeration of economic activities. As a result, economic growth is faster in the greater Dhaka than in other regions.
Although Dhaka has a dynamic and vibrant economy, it is one of the poorest mega-cities in the world. Its GDP per capita is low by international standards, but GDP per hectare is high because of the intensity of urban development and business activities. But it still lacks international competitiveness.
In Dhaka, poor planning and management of land use and utilities has led to high congestion and underperformance of assets and service delivery, reducing the returns to businesses and government from their capital investment. More and more business activities have migrated from the central area to the periphery as a result.
Identifying improvements that can be made in the functional and spatial productivity of industrial areas in Dhaka is important in attaining a more sustainable and prosperous economy for the mega-city. The economy of the greater Dhaka is dynamic; it is controlled by activities in and around the central business district. There is a significant variation in economic output and activities in the DCR and the surrounding municipalities, and, therefore, also in the spatial distribution of poverty and the quality of infrastructure, utilities, and government services.
The half of industrial units is located in the Dhaka metropolitan area. The next-largest concentrations of manufacturing units in the DCR are in Narayanganj, Narsingdi, and Gazipur. Manikganj has the lowest concentration. Within Dhaka district, there is a major concentration of industries in the central city area. Most of these are textile manufacturing units, located primarily in Mirpur and Savar, and along the Airport Road. One of the largest concentrations of micro industries is in Keraniganj, south of the Buriganga river. Many industrial units function as feeder firms in the supply chain for a few large-scale industries.
A study carried out a few years back revealed that more than 8,000 factories and SMEs (small and medium enterprises) of varying sizes are involved in the production of textiles and ready-made garment products in the DCR (Dhaka centre region). More than 60 per cent of these are located in the Dhaka metropolitan area, with around 8.0 per cent in Narayanganj and 17 per cent in Gazipur.
The cities in other parts of Bangladesh are much less competitive than those in the east. The availability of energy and comparatively better infrastructure in Dhaka has significantly increased disparities between the capital and the other cities of the country.
The writer is a legal economist. shah@banglachemical.com