WORKING PAPER SERIES. Center for Transportation Studies

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1 WORKING PAPER SERIES Center for Transportation Studies Working Paper # CTS2002C 1

2 Potential Impacts of the Jamuna Bridge: A Baseline Assessment Lata Chatterjee Center for Transportation Studies Boston University July,

3 Table of Contents TABLES AND FIGURES...4 I. INTRODUCTION...6 II. ECONOMIC EFFECTS OF MAJOR TRANSPORT IMPROVEMENTS: A THEORETICAL REVIEW...9 III. THE TRANSPORTATION CORRIDOR: THE STUDY AREA...14 IV. ANALYSIS OF THE HOUSEHOLD SURVEY - BOGRA AND TANGAIL...29 Demographic...29 Household Income and Incidence of Poverty...30 Bogra...33 Tangail...33 Household Expenditures...34 FBEV...37 EDN...37 BOGRA...37 Food and Beverage Expenditures...40 Education...41 Clothing...43 Housing Consumption and Expenditures...43 Transportation...45 V. ANALYSIS OF THE ESTABLISHMENTS...47 MONTHLY EXPENDITURE...53 BOGRA...53 TANGAIL...53 VI. CONCLUDING COMMENTS...67 A Baseline Regional Profile...67 Additional Information Requirement for JB Assessment

4 TABLES AND FIGURES Figure 1. The Northwest Transport Corridor in the Regional ContextError! Bookmark not defined. Figure 2. Map of the NW-Dhaka Transportation Corridor...Error! Bookmark not defined. Figure 3. Distribution of Per Capita GDP Growth Rate: Error! Bookmark not defined. Figure 5. Distribution of Per Capita Industry GDP: Error! Bookmark not defined. Figure 6. Distribution of Per Capita Utility GDP: Error! Bookmark not defined. Figure 7. Distribution of Per Capita Transportation GDP: Error! Bookmark not defined. Figure 8. Income Lorenz Curve...Error! Bookmark not defined. Figures 9 and 10 Expenditure Lorenz Curve for Bogra and TangailError! Bookmark not defined. Table 1. Jamuna Bridge Corridor Districts (or Zilas) Population 1991 (Adjusted)...15 Table 2. Per Capita Gross Domestic Product by (Former) District...18 Table 3. Agricultural GDP by Sector: Table 4. Industrial GDP by Sector: Table 5. Percent of Population Attending School in 1991 (Age 5-24)...28 Table 6. Medical Facilities, Table 7. Urbanization Along the Jamuna Bridge Corridor by Former Districts...29 Table 8. Household Monthly Income Distribution...31 Table 9. Gini Coefficients For Household Income And Selected Expenditures...33 Table 10 Household Monthly Income by Length Stay...33 Table 11. Household Monthly Income (Taka) by Occupations...34 Table 12. Means and Standard Deviations For Monthly Expenditures (Taka)...35 Table 13. Income Elasticity of Demand...37 Table 14. Monthly Expenditures by Income & Expenditure Categories...40 Table 15. Education Expenditure by Occupations...42 Table 16. Rent Expenditure (Taka) by Occupations

5 Table 17. Transportation Mode Choices by Household Income (Taka)...46 Table 18. Transportation Mode Choices by Occupations...47 Table 19. Transportation Expenditure by Occupations...52 Table 20. Remittance Expenditure (Taka) by Length of Stay (yrs)...53 Table 21. Types of Formal Registration...54 Table 22. Types of Ownership by Establishment Types...55 Table 23. Total Monthly Expenditure on Wages by Establishment Types...56 Table 24. Cost of Capital Equipment by Establishment Types...57 Table 25. Total Monthly Interests Paid by Establishment Types...58 Table 26. Cost of Land & Building by Equipment Types...59 Table 27. Rent of the Premises by Establishment Types...60 Table 28. Total Number of Employees by Establishment Types...61 Table 29. Total Monthly Expenditure on Wages by Number of Employees...62 Table 30. Cost of Capital Equipment by Number of Employees...63 Table 31. Total Monthly Interests Paid by Number of Employees...64 Table 32. Cost of Land & Building by Number of Employees...65 Table 33. Rent of the Premises by Number of Employees

6 I. INTRODUCTION The rivers of Bangladesh have been, arguably, the single most important factor influencing its physiography, economy and culture. The low-lying nature of the terrain, normal in an active delta-building ecosystem, combines with the monsoonal rainfall to create very large rivers. These large rivers tend to greatly fluctuate in size between the peak and low flow seasons due to the concentration of the heavy rainfall in a few months of the year. Bridging such wide rivers is both economically and technologically demanding. The Jamuna, the largest river in the Northwest region, carries the combined waters of the lower reaches of the Brahmaputra and the Tista. It is notorious for its devastating floods and frequent shifting of the channels, within the wide riverbed, due to its proximity to the Himalayan range, sudden increase in volume of the tributary waters during the monsoon season and high rate of sedimentation. Consequently, it has acted as a significant barrier to efficient communication between the eastern core of the country and the northwest, effectively making the latter a peripheral region of Bangladesh. The Northwest (NW) - administratively the Rajshahi Division - has lagged behind the other three Divisions of Bangladesh Dhaka, Khulna and Chittagong - in a variety of economic indicators documented in a later section. However, the NW shares a common border with India and has the potential for growth and development due to increasing trade between the two countries. The NW region has suffered from poor linkages with the economic cores of the country the Dhaka and the Chittagong regions largely due to physical and economic constraints. The transport bottlenecks caused by the need for ferry crossings of goods and passengers by trucks and buses across the Jamuna river were the primary physical constraint. The related economic constraint was the poverty and lower economic productivity of the region. The North West Area Development Study (NWADS) has noted that a strategic objective of the Government of Bangladesh (GOB) was to provide a modern, competitive, a cost efficient transportation corridor connecting the NW region with the rest of Bangladesh and the globalizing countries (GOB ADB, 1997a: 18). The GOB designated the Dhaka-NW highway as one of its 5 most important transportation corridors. The Jamuna Bridge (JB) was constructed across this river in 1999, as part of this highway, to eliminate ferry crossings and, thereby, facilitate the uninterrupted flow of goods and passengers between the NW, Dhaka and the international port of 6

7 Chittagong. This major infrastructure project can have a crucial economic impact by increasing efficiency of transport services. It has the potential to remove obstacles to growth, promote regional integration and further the national objectives of efficient and equitable development. Theoretically, several benefits can result from increasing regional integration through transportation related infrastructure investments. Two types of positive economic benefits can be generated. First, improved accessibility to raw materials and an enlarged market for outputs can increase productivity of existing enterprises through competitive pressures. Increased productivity, in turn, can lead to higher incomes of households and establishments. We can characterize these as growth effects. Second, there can be induced effects - captured through the creation of additional industries and service activities. For example greater accessibility can attract newer types of industrial and service establishments catering to national and international markets. Migrant households are likely to be induced to relocate from the adjacent rural hinterland, and other regions of Bangladesh, due to job creation and increased employment opportunities. These are trade and structural change related benefits. Both the scale/agglomeration and regional restructuring effects can increase the regional product and human welfare. Potential impacts of the JB, through the increased connectivity of the NW to the economic core of Bangladesh, have the potential for generating both these classes of benefits. A process of regional restructuring can be positive if this leads to greater convergence with the Dhaka and Chittagong regions with a decline in their regional and urban primacy. However, greater connectivity also has the potential for generating adverse consequences. Greater connectivity with the economic core region of Dhaka may cause resource outflows from the NW through the out-migration of existing human, financial and other resources. For instance, the ADB reports (1997a,b,c) showed that North West Area Development (NWAD) region had the highest rate of trade with India, relative to other regions, because of a common border, established rail links and the highest percapita mileage of roads in Bangladesh. Due to regional integration, greater competitiveness between enterprises in Dhaka and those of the NW, may cause the latter to fall into the shadow zone of the former. There can be a potential for the erosion of the current locational advantage of the NW region with respect to trade with the SAARC countries of India, Nepal and Bhutan. Thus lowering of transshipment costs between Dhaka and the NW, through improved infrastructure, need not necessarily increase development in NWAD through interregional trade and investment, particularly if the local firms and other 7

8 institutions are not positioned to take advantage of market enlargement and/or locational benefits. Instead of sub-regional convergence of economic and welfare indicators, as envisaged earlier, greater accessibility also has the potential to increase the welfare gap, thereby, increase divergence in the national economy. What types of internal transformations are likely to occur in the NW area in general, and the transportation corridor in particular, as a result of greater interconnectivity to the eastern core brought about by the construction of the JB? Since the directionality of the impact on the NW can be a priori indeterminate positive or negative it is important to monitor the system responses over time. As this is an empirical matter, it needs to be addressed through the evaluation of the positive and negative impacts of the increased flow of goods and people, between the two sides of the Jamuna River. We would expect the welfare gains and losses to be made at both the household and the establishment levels in both urban and rural areas. In order to assess if the potential benefits are being realized, we ought to measure the changes in establishments and households before and after the construction of the bridge through a range of indicators. For enterprises, we can monitor growth in the size of employment, levels of capital investment in existing and new enterprises, migration of activities and households and so on. For household welfare, we can follow trends in household income and consumption, types and amount of asset formation and so on. Furthermore, we can track the evolution of rural urban linkages consequent on JB construction, and how these emerging linkages affect rural - urban growth patterns. In addition, urban growth of population and enterprises has implications for urban management and governance. Analysis of data on changes in urban areas, households and enterprises can provide valuable information for policy decisions particularly if the causal or associative factors are identified. Evaluation of the economic, human welfare and urban impacts are useful as both the positive and negative impacts of the bridge can be influenced through policy interventions. The objective of the report is to provide base line information that will be useful for monitoring the transformations of the urban and regional system along the corridor as it evolves after the construction of the bridge. Descriptive statistics and economic analysis will allow a quantitative description of the current system. Two sources of data - secondary and primaryhave been used in this report. Secondary data from the Bangladesh Bureau of Statistics, Statistical Yearbooks, several NWADS reports and of Government of Bangladesh and Asian 8

9 Development Bank, identified in the text, provide information about the transportation corridor in the nineties, that is, prior to the construction of the bridge. Two household surveys and two surveys of establishments were conducted in two urban centers in the transportation corridor, in the spring of These surveys provide primary information about the household and establishment characteristics in Bogra, located on the west bank of the river in the transportation corridor and Tangail, on the east bank (Figure 1). NWADS published five reports on the Agriculture, Fisheries, Transport and Communications, Urban Development, and Industry and Finance sectors in 1997 (GOB-ADB 1997). The objective of these studies was to analyze the current status of these sectors and to assess the advantages and obstacles for their potential growth following the completion of the JB. Their major findings have been compared with the current results, when applicable, as this report is complimentary and provides additional micro-geographical detail. In section II we provide a very brief discussion of the theoretical issues under-girding this analysis. This is followed, in Section III, by a description of the study area. Some economic and social attributes of the transportation corridor from Dhaka to the Indian border are shown in a series of tables and charts. In Sections IV and V, the primary data from the Household and Establishment surveys of Bogra and Tangail are analyzed. The report concludes with comments about some likely impacts of the bridge on household welfare and establishment growth. It points to additional data requirements. II. ECONOMIC EFFECTS OF MAJOR TRANSPORT IMPROVEMENTS: A THEORETICAL REVIEW A major transport infrastructure improvement like the Jamuna Bridge is likely to have several direct and indirect effects on the transport sector and on transport-using sectors, the latter essentially embracing the entire economy. Over time such pervasive effects of transport infrastructure lead to improved regional incomes and welfare. There is an extensive literature on the types and magnitudes of the economic effects of transport infrastructure, as observed mostly in US, Europe, and Japan (e.g. Aschauer, 1989, 1990; Bell and Mcguire, 1997; Gramlich, 1994; Johansson, 1993; Lakshmanan and Anderson, 2002; Mera, 1973; Nadiri and Mameneus, 1996). Much less attention has been devoted to developing nations where transportation infrastructure investments play a more crucial role in fostering economic growth and development. 9

10 Figure 1. The Northwest Transport Corridor in the Regional Context 10

11 It is worth noting that in the North Atlantic Region and Japan, endowed with large and dense stocks of transport infrastructure, a major highway, bridge or airport is often a marginal addition to the stock of infrastructure. On the other hand in developing countries, an investment like the Jamuna Bridge is a non-marginal addition to Bangladesh s public capital stock. By linking a relatively isolated region, it may greatly alter the economic possibilities for old and new regional activities potentially leading to transformational or economic developmental changes. It is from this perspective that we outline below the likely manner in which the transport improvement represented by the Jamuna Bridge may initiate interactive effects through the Northwest region s economy. It tends to identify and link the many market, and technical and structural, processes which interact with one another and generate economy-wide effects in order to set the stage for identifying the broad types and magnitudes of economic and social changes that need monitoring in order to capture the full effects of Jamuna Bridge. The direct effects of the Jamuna Bridge arrive in the form of lower costs and increased accessibility to various market actors in the region. The markets for labor, for other factors of production, and for products in the region will expand as these economic agents - input suppliers, shippers, producers, workers, customers, and households - in the transport corridor experience the lower costs of travel, increased capacity, and greater mobility from the completion of the bridge. Market expansion and regional integration will enhance opportunities for exports and imports, in turn, open up several channels of economic effects, both in product and factor markets -- in a manner analogous to the results from tariff reduction and trade area expansion. The NW region will likely shift from possessing poor outside contacts to increased trade with other regions in the country and the international economy. This can foster economic specialization in several ways, paving the way for more rapid economic expansion. First, expansion of regional exports, made possible by the new bridge, will lead to higher levels of regional output allowing higher levels of sales to cover fixed costs of operation and yield efficiencies. Second, increasing imports from other regions into the NW will put competitive pressures on local prices. Such pressures lead to the lowering of goods prices and monopoly rents in the NW. The resultant drop in the cost of living would stimulate demand for goods and economic growth. Further, it would lead to improved efficiency of the regional economy in two additional ways: a) by the restructuring of the economy (as firms enter and exit) 11

12 and raise productivity, and b) production activities can adopt leaner production processes, and raise productivity with lower costs of production as the Jamuna bridge lowers passenger and freight travel times and enhances their reliability. Third, lower transport costs and increased accessibility enlarge the markets for labor and other factors of production. Establishments in Bogra and Tangail will likely draw labor from a broader area and with a greater range of capabilities improving the labor supply. The Jamuna bridge, by improving connectivity between different locations, can also open up new, lower cost land for economic activities. As these effects of the Jamuna Bridge, starting from lower costs, time savings, and reliability, course through regional labor and product markets, modifying their attributes, an important distinction between two types of economic effects is in order. First, the construction of the Jamuna Bridge, as noted so far, will make a variety of existing economic activities cheaper and more efficient. Regional farmers will gain from spending less time and money in accessing fertilizers and improved seeds, as well as, in shipping their crops to the market. Similar gains are likely for the existing wholesalers, retail and industrial establishments. Second, the bridge may induce new development or make possible new economic activities in locations in the region. For example, as accessibility increases and travel costs drop, new urban markets will come within the economic reach of rural areas, which may shift from cereal cropping to higher valueadded vegetables and dairy production. The first effect is a growth effect deriving from lower transport costs, and the second is an induced developmental effect. In other words, a distinction is made between scale and developmental or transformational changes consequent on the Jamuna Bridge project. In analyzing these complex and multi-level economic changes, recent work on the structure of markets in the transport and transport-using sectors in the field of the new economic geography is relevant. The core idea of the new economic geography is the notion of increasing returns, an idea that has earlier transformed both trade theory and growth theory (Fujita, Krugman, and Venables, 1999). Taking advantage of Dixit and Stiglitz's (1977) formalization of monopolistic competition, tractable models of competition in the presence of increasing returns have been developed in the fields of industrial organization, international trade, economic growth and location theory (Lakshmanan and Anderson, 2002). 12

13 A key belief in this line of argument pertains to assumptions about the market structure of transport-producing firms and transport-using firms. It may be useful to consider the competitive structure of transport in the partial equilibrium case. As contrasted with the typical assumption in the microeconomic models of perfectly competitive markets, the belief here is that both transport producing and transport using firms are inherently imperfectly competitive. Research on imperfect competition and the increasing returns to scale extends to locational analysis. This literature emphasizes the importance of the interactions between transport costs on the one hand and market size and economies of scale on the other. With declining transport costs and economies of scale, a firm in a location gains a larger market area and dominance, which in turn promotes the concentration of other firms in the same location. The central feature of this theory of agglomeration (as has been noted for a long time in economic geography and regional science) is the presence of external economies of scale in the Marshall (1920) sense. Different firms clustered in a location experience positive externalities in the form of diversity of labor supply, training, business services, etc. in that location. In short order regional specialization develops. Indeed, without increasing returns to scale in the context of transport improvements, it is impossible to account for the observed spatial concentration of firms, and regional specialization, in regional and national economies. In contemporary spatial agglomerations of economic activity where there are frequent transactions between suppliers and customers and where high end business services often accompany goods delivery -- the cost of transactions are likely to be lower inside, rather than outside such centers. Further, some interregional links gain advantages from the existence of increasing returns to transportation and transactions, which may help form transportation and transaction hubs as noted by Krugman (1999). Johansson (1998) uses the notion of density (of economic activities, social opportunities and transaction options) and economic milieu in such locations as leading to self-reinforcing and cumulative causation effects. Density is a positive factor to the degree it enhances accessibility to all economic actors. The purpose of this discussion is to show how transport infrastructure and transport improvements open up markets and create conditions, in the context of spatial agglomerations, technical change and diffusion, to influence the regional economic structure and performance. A broad variety of interactions take place within firms and between firms, within sectors and between sectors and more broadly within and between households and organizations. The 13

14 implication is that it would be ideal if the impacts of the Jamuna bridge are examined in a broad way in this study. In order to assess these trends we need data at a micro-geographical level for both households and establishments. III. THE TRANSPORTATION CORRIDOR: THE STUDY AREA Transport is likely to facilitate economic growth through improved access to national, sub-continental and international markets for goods produced in the region. Cost efficient transport can provide an impetus for high growth development in the corridor, particularly in the lagging industrial sector through the a) production of commodities in more competitive ways and b) marketing of the outputs to locations where the best prices can be received. Since the NW has the best road network in the country in terms of density and quality (GOB, 1997a), the removal of a major constraint such as ferry crossing of trucks can be expected to have a multiplier effect on the regional and national economies. Increased connectivity through the Jamuna Bridge is likely to generate impacts in several sectors of the Bangladesh economy. In the transportation corridor, some sectors will have opportunities for expansion while noncompetitive sectors have the potential to contract. For instance, high value added market gardening, such as the production of vegetables and dairy products using truck transportation, have been observed to expand, relative to rice cultivation, in neighboring West Bengal, India following more efficient and speedier transportation connectivity to metropolitan Calcutta. Agriculture is currently the primary economic base of the northwest and it will be important to monitor if this sector moves into higher value added agriculture as connectivity to metropolitan Dhaka improves. Such observed shifts to higher value added activities in the region will set in motion significant changes in the dynamic rural-urban linkages. Rural households will increase their demand for services in support of the need to rapidly move inputs, labor and outputs of the new high value activities. In the nonagricultural sector, urban households will in turn increase their income through expansion of trucking services, transportation maintenance workshops, or in gas/petrol filling stations in order to meet rural needs. This will have implications on the urban sector in wholesale, transportation and financial sector activities. A comprehensive analysis of the impacts of the Jamuna bridge, at the sectoral 14

15 level, must consider and estimate the rural-urban interactions. Such analysis should help in the identification of the winners and losers among the households and establishments. In this section we analyze the economic attributes of the transportation corridor at the time the JB was completed. The analysis of this corridor is based on secondary data as the primary household and establishment survey data refer to only two urban centers in this corridor. The transportation corridor is defined as the districts through which the Dacca-NW Highway is constructed of which the Jamuna bridge is an integral feature. A more refined analysis at a lower geographic scale, such as the old upazila, would have been useful for interpreting the microgeography of impacts as the existing rural and urban settlements vary in their accessibility to the highway depending on the location of secondary and feeder roads. However, economic data at the old upazila and settlement levels were unavailable at the time of writing this report so the district level data has been used. Table 1 lists these districts which are also depicted in Figure 2. The analysis is at the level of the old districts for two reasons. First, the new districts are actually subdivisions of the old districts and are fully contained within their borders. Second, the GOB data is available only at that level of disaggregation for the period prior to 1998 (GOB, 1999). Table 1. Jamuna Bridge Corridor Districts (or Zilas) Population 1991 (Adjusted) Old District New District Population(1991) Dhaka Dhaka Gazipur Tangail Tangail Pabna Sirajgonj Bogra Bogra Rangpur Rangpur Gaibandha Dinajpur Dinajpur Panchagarh Thakurgaon Source: Statistical Yearbook of Bangladesh, p

16 Figure 2. Map of the NW-Dhaka Transportation Corridor 16

17 While there is loss of information due to district level aggregation, nevertheless, it is useful to analyze the socio-economic data at this level since data is most readily available from the Bangladesh Bureau of Statistics (BBS) at this geographic scale. It can provide a base line for analysis of future changes in this corridor through expanded shift-share methods. Shift share analysis of sectoral data using as the base period will give some indication if the JB has set in motion a process of convergence. Estimation of the differentials in the overall and economic sectoral growth rates in the transportation corridor, relative to national growth rates, will indicate if the economic growth rate in the corridor is greater than the national growth rate potentially leading to regional convergence. If the sectoral growth rates in the western part of the transportation corridor are lower than those of the eastern part, this will indicate a greater divergence with increasing polarization. To assess this we need a baseline data against which future changes can be evaluated. To this end, the regional differences in Bangladesh, prior to the opening of the bridge, are discussed here. The objective is to provide benchmarks for future comparison of patterns between two or more time periods. Per Capita Gross Domestic Product for the six former districts and four divisions in the transportation corridor, prior to the opening of the JB, are shown in Table 2. The data shows that the NW is relatively less developed its divisional GDP at TK4790 for the year is the lowest in Bangladesh. This has been consistent for the each of the six years depicted here. The rate of growth, in the period, is also the lowest its 9.5% rate of growth for the 5 year period can be contrasted to the 14.1% and 18.2% rate of change of the nation and Chittagong division respectively (Figure 3). Not only did the NW lag behind the others in absolute terms, but the gap between the districts in the transportation corridor was also increasing - a more disturbing statistic. The districts on the eastern bank of the Jamuna River have grown more rapidly in the five year period compared to the districts on the western bank. In fact, every district in the Dhaka division located in the transportation corridor, has had higher GDP growth rates in the five years prior to the opening of the bridge. Declining population share, declining share of employment, higher unemployment ratios and increasing poverty are standard characteristics of lagging areas. Future changes can be measured against these benchmarks. Per capita GDP for the ten major sectors for is shown in Appendix Table A1. It provides additional information that prior to the bridge construction the NW, and the 17

18 transportation corridor on the west bank of the river, lagged behind the other regions of Bangladesh. The growth rates differ also along the transportation corridor between the east and west banks of the river. The former have the benefit of transport connectivity to Dhaka and Chittagong with their higher purchasing power. This data has been used for the bar graphs depicting the distribution of sectoral GDP. Table 2. Per Capita Gross Domestic Product by (Former) District % Change Corridor District (in taka) Dhaka % Tangail % Pabna % Bogra % Rangpur % Dinajpur % Division Average Dhaka % Chittagong % Rajshahi % Khulna % Country Average % Other District Mymensingh % Jamalpur % Faridpur % Chittagong % Ctg Hill Tracts % Noakhali % Comilla % Sylhet % Rajshahi % Khulna % Barisal % Patuakhali % Jessore % Kushtia % at Constant Market Price. Source: Statistical Yearbook of Bangladesh, Table 11.11, p

19 Figure 3. Distribution of Per Capita GDP Growth Rate: Agriculture is the mainstay of the regional economy. Figure 4 shows the GDP per capita for the agricultural sector for the districts in the corridor. The divisional average of Rajshahi is higher than the national average and of Khulna and Dhaka Divisions. Its divisional total is second only to the Chittagong Division where cash crops and forestry products explain the higher value added. Per capita agricultural GDP in four of the five districts in the Northwest Rajshahi, Dinajpur, Rangpur and Bogra - are individually higher than the national average. Bogra District, of which Bogra town is the growth center, has the highest per capita agricultural GDP among the districts along the corridor. Within the agricultural sector, crops and livestock are particularly important; the Rajshahi division has the largest share of the national total, and the highest GDP per capita, in livestock farming (Table 3). The agriculture sector is likely to benefit from the JB as a result of 4 factors. First, we can expect increased specialization in value added crops and livestock in which the region is currently well positioned. With more reliable transport and access to higher priced markets, farmers can switch from cereals to high value added agriculture such as fruits, vegetables and dairy products. Second, households will be likely to rely on traded agricultural goods, causing increases in trip generation between rural areas, market towns and regional growth centers such 19

20 as Bogra for household goods, farming implements and agricultural supplies (GOB, 1997a: 24-25). Third, much of the agricultural goods are perishable and sensitive to spoilage through time delays at ferry crossings. Thus such time sensitive goods like milk products were not traded interegionally. With time savings from JB, these products can be traded to markets with the best prices, fetching higher returns. Fourth, there is a potential for increase in the official and unofficial trade with India in agricultural products. For instance, there is unofficial trade with India in cattle, machinery, transport equipment, clothing and construction material (GOB 1997a: 29). Further disaggregation of the data will be needed to monitor if these changes occur in the agriculture sector due to the construction of the Jamuna Bridge. Figure 4. Distrubtion of Per Capita Agriculture 20

21 Table 3. Agricultural GDP by Sector: Sub Sectors (in million taka) Corridor Districts Crops Forestry Livestock Fisheries Total Dhaka Tangail Pabna Bogra Rangpur Dinajpur Division Total Dhaka % of National Total Chittagong % of National Total Rajshahi % of National Total Khulna % of National Total Other Districts Mymensingh Jamalpur Faridpur Chittagong Chittagong Hill Tracts Noakhali Comilla Sylhet Rajshahi Khulna Barisal Patuakhali Jessore Kushtia National Total Source: 1998 Statistical Yearbook of Bangladesh Table p.483. at Constant ( ) Market Price However, the NW lags behind the other regions in the industrial, utilities, transportation, storage, communication and trade sectors (Table 4). Particularly striking is the disproportionate 21

22 underdevelopment of the industrial sector (Figure 5). Every district in the western side of the transportation corridor had industrial GDP per capita significantly below the national average. Table 4. Industrial GDP by Sector: Sector (million taka) Corridor District Large Scale Small Scale Total Dhaka Tangail Pabna Bogra Rangpur Dinajpur Division Total Dhaka % of National Total Chittagong % of National Total Rajshahi % of National Total Khulna % National Total Other Districts Mymensingh Jamalpur Faridpur Chittagong Ctg Hill Tracts Noakhali Comilla Sylhet Rajshahi Khulna Barisal Patuakhali Jessore Kushtia National Total Source: 1998 Statistical Yearbook of Bangladesh at Constant ( ) Market Price Table p

23 Figure 5. Distribution of Per Capita Industry GDP: Even Tangail has a higher industrial per capita GDP in comparison to the Northwest. The average per capita GDP in industry in the NW is less than 25% of the national average (Table A1). The Industrial sector has been disaggregated into the large scale and small scale industries based on size of employment (Table 4). The Rajshahi division has only a 5.2% share of the national large-scale industries and only 7.3% share of the small scale industry. The only industrial base in the region is the production of light engineering goods and construction materials for the local region. Bogra produces agricultural equipment such as irrigation pumps and has workshops for transport maintenance equipment (GOB-ADB, 1997a). With improved access to the national market, these industries may be able to grow in size and productivity through the capture of scale economies. Also, there is a potential for increasing the official and unofficial trade with India in machinery, transport equipment and clothing as the JB will provide the NW with cost efficient access to inputs and industrial trading partners from the industrial core in the east. In Figure 6, the distribution of GDP per capita in the Power, Water and Gas sector is depicted. Rajshahi division s average of TK 56.5 per capita GDP is almost 50% below the national average (Table A1). Only Bogra district s GDP in this sector is slightly above the 23

24 national average. Rajshahi Division s GDP per capita in the transport and communication sector at TK345.4 is less than 40% of the Dhaka and Chittagong divisions (Figure 6). Both these sectors can be expected to benefit from greater accessibility. There have been significant increases in the road transport sector in the NW in the last decade. While road transport accounted for 54% of the passenger, and 35% of the freight movement, in , it accounted for 75% of passenger and 61% of freight movements by the nineties. We can expect road transport to continue to significantly increase with the construction of the Jamuna Bridge (GOB, 1997a). We can make some additional observations about the potential benefits of the JB on the transportation sector from the NWADS transport sector paper (GOB, 1997a). For example, Table 6.21 of the report shows that the truck transport charges for a 9MT truck from Bogra to Dhaka was 3.40TKM. This can be contrasted to 1.99TKm, 1.74 TKm and 1.88 TKm for the Bogra-Rangpur, Bogra-Ragshahi and Bogra-Panchagarh sections; none of the latter destinations involved crossing of the Jamuna. It is plausible that the longer times involved through ferry crossings in the Bogra - Dhaka section are factored into these higher per kilometer costs. For smaller trucks, with 5MT capacity, the corresponding figures from Bogra to Dhaka are 6.11Tkm as contrasted to 3.58 TKm, and 3.13 TKm for transport from Bogra to Rangpur and Rajshahi respectively. Thus the TKm costs almost double for transportation from Bogra to Dhaka. It is important to note that these TKm costs are underestimates since they do not include the costs to the wholesalers of spoilage of perishable commodities due to delays at ferry crossings. The transportation sector can be divided into the organized and unorganized sectors. The organized sector consists of trucks, buses and other forms of four wheelers (GOB-ADB, 1997a). The unorganized sector consists of two and three wheelers, as well as, rickshaws and hand pulled or animal pulled carts. The latter account for the bulk of passenger and freight movement in small towns and rural areas. This finding is also supported by data also from the primary surveys discussed in the next section. Only 7% of the transportation sector in the NW belongs to the organized sector even though it contributes to 25% of the total value added in transportation (Statistical Yearbook of Bangladesh quoted in GOB-ADB, 1997a). In the North-West, as a whole, the organized sector grew at approximately of 1.9% annually in the period (GOB-ADB, 1997a, Table 6.15). However, the unorganized sector grew at a much faster rate 5.9% annually for the same period. Since the unorganized sector accounts for more than 73% of 24

25 all transportation services, such a rate of high growth is not only impressive, but hints of continuing expansion of the road transport sector. While, the Jamuna bridge is likely to directly impact the growth of the organized sector we can expect multiplier and indirect impacts on the unorganized sector as well. Road transport with its 72% share accounted for the bulk of the modal share of the organized transport sector. We can confidently claim road transport will continue to dominate passenger and freight movements. However, the JB is likely to benefit directly the more capital intensive organized transport sector through scale economies (Figure 7). The unorganized sector, comprising of small transport enterprises and informal transport services will benefit indirectly, through spillover and multiplier effects. The road transport sector needs to be monitored for the assessment of impacts of the JB. For instance, are larger national trucking firms competing in the region? Are local truckers increasing their fleet size and composition? Are the local firms competitive in price and service quality? Figure 6. Distribution of Per Capita Utility GDP:

26 Figure 7. Distribution of Per Capita Transportation GDP: Such data will allow an assessment of the shifts occurring due to competitive pressures and increasing regional output. When the railway bridge is constructed the share of the organized sector is likely to increase as it will benefit line haul of low value added goods, as well as freeing up extra space in the JB for road transport. Currently, the NW has the highest per capita and per sq. km of railways in Bangladesh with.18km compared to.029 for Bangladesh as a whole and thus will be positioned to take advantage of better rail connectivity to the rest of the country. Figures A1-A6 in the Appendix show the distribution of GDP per capita for six additional sectors. There is minimal difference between the divisions and the districts in the corridor as they are all close to the national average. These figures have been provided for the future comparison of trends and not been interpreted as they are self explanatory. An interesting exception is Bogra s sector GDP per capita in Banking and Insurance which is well above the national average. It is fourth highest among all districts in Bangladesh (Figure A5) providing suggestive evidence the area may be positioned to take advantage of trade and transit activities. The NWADS (GOB-ADB, 1977a; appendix 6.1.2) observed that JB has the potential for increasing trade and transit with the SAARC countries. Trade with India was already an 26

27 important characteristic of the regional economy prior to the construction of the bridge. The trade agreement with India has specified mutual arrangements for the use of roadways, railways and waterways for commerce benefiting both countries. The NW also has trade and transit arrangements with the SAARC countries. In addition, Bhutan and Nepal have additional transit links with Bangladesh. The transit traffic from these countries to the international port in Chittagong will pass through this corridor. Appendix Tables A2-A4 provide some broad indicators of the distribution of social capital in the corridor. The disadvantaged position of the NW is again apparent. Thirty percent of children and adults attended school in 1991 in comparison to the national average of 36%. (Table 5). However, the Rajshahi division with its 33.4% growth rate in the number of primary schools in the period, had the highest rate of change indicating GOB s prioritization of educational investment in that region (A.2). In 1997, this region had the largest number of primary schools accounting for 27.2% of the national total. A similar trend can be seen in the growth of secondary schools with a regional growth rate of 51.4% in comparison to the national rate of 32.4% in the same period. The large number of educational institutions in the Rajshahi Division suggests there is an emphasis on human capital formation in the region. The social infrastructure investments, will be complementary to the physical infrastructure investment policy with respect to the impacts on regional growth. Bogra has a smaller number of colleges relative to the other districts in the NW (A4). However, since this data lacks information on size or quality of the institutions, we cannot draw firm conclusions. In general, we can expect an acceleration in economic growth with removal of transport bottlenecks due to the supply of educated labor and availability of this human capital in the local labor market. The importance of education in the region is corroborated by the household survey discussed in the next section as the highest income demand elasticities occured in education. 27

28 Table 5. Percent of Population Attending School in 1991 (Age 5-24) National Average 36.20% Dhaka Division 36.20% Khulna Division 38.10% Chittagong Division 36.40% Rajshahi Division 30.30% Source: 1998 Statistical Yearbook of Bangladesh. Table 12.6, p. 558 The geographical distribution of medical facilities in is shown in Table 6. Once again the NW is disadvantaged in the number of facilities; 66 district level hospitals in the Rajshahi divisions can be compared to the national average of 99 hospitals per division. Bogra district has the smallest number of hospitals. However, as this data has no information on size of hospitals or the number of hospital beds on a per capita basis, too much emphasis cannot be placed on mere numbers of hospitals or schools as indicators of the availability of medical or educational services. They are merely suggestive of institutional conditions. Table 6. Medical Facilities, Former District District Level Hospitals Former District District Level Hospitals Dhaka 151 Rajshahi 17 Mymensingh 13 Dinajpur 15 Jamalpur 4 Rangpur 18 Tangail 5 Bogra 8 Faridpur 12 Pabna 8 Dhaka Div. Total 185 Rajshahi Div. Total 66 % of National Total 46.84% % of National Total 16.71% Ctg Hill Tracts 6 Khulna 18 Chittagong 29 Barisal 9 Noakhali 7 Patuakhali 3 Comilla 10 Jessore 6 Sylhet 47 Kushtia 9 Ctg. Div. Total 99 Khulna Div. Total 45 % of National Total 25.06% % of National Total 11.39% Source: Statistical Yearbook:

29 Table 7 shows the level of urbanization in 1991 in the districts along the corridor, as well as, the rate of change in the urban population in the period. Bogra with 11% urban and Tangail at 9% were relatively poorly urbanized and in 1991 had levels of urbanization approximately 50% of the national average. However the percent change in urbanization is higher than the national average in Bogra, Pabna, Rajshahi and Dinajpur in the NWADs region with 42%, 50%, 94% and 49% change in the decade. Since the 1991 urbanization rates are dated information, the new Census will be able to confirm if these higher growth rates in the Northwest have continued and thus allowed the NW to converge to the national level of urbanization. Table 7. Urbanization Along the Jamuna Bridge Corridor by Former Districts 1981 / % Urban 1991 / % Urban % Change National Dhaka Tangail Pabna Bogra Rangpur Dinajpur Source: 1998 Statistical Yearbook of Bangladesh Table 2.33, p. 38 IV. ANALYSIS OF THE HOUSEHOLD SURVEY - BOGRA AND TANGAIL The results of the two Household Surveys - for Bogra and Tangail - are interpreted in this section. The findings from these surveys are compared wherever feasible with results from the Urban Poverty Task Force Report (GOB-ADB 1996) and the several NWADS (GOB-ADB 1997a, 1997b, 1997c) reports. Demographic Tangail and Bogra districts were among the top 20 of the most urbanized districts in Bangladesh in Nevertheless, the urbanization rates in these districts were low. Tangail District ranked 19 th with an urbanization level of 7.6% and Bogra district ranked 20 th with an urbanization rate of 7.3% in However, Bogra District has been growing rapidly and its urban growth rate of 9.1% in the decade can be compared to the national urban growth rate of 5.4% (GOB-ADB 1996). The decadal growth rate of Bogra Town was 155% - the 29

30 fourth highest in the nation. Only Dhaka SMA (286%), Rajshahi SMA (281%) and Rangpur (161%) had higher growth rates. The population of Bogra town is likely to accelerate with the economic maturation of the transportation corridor. Economic growth can be expected to attract in-migrants to both these towns as they are headquarters of their respective districts. The 2000 Population Census can shed light shortly on this observation. The survey results indicate a very low rate of urban - rural migration, as 5% and 10% of the households in Bogra and Tangail identified themselves as migrants. This is consistent with the findings of the GOB-ADB report which noted (1997c, page 22) that rural-urban migration rates in the NWADS have been lower than expected as the rural areas continued to retain the greatest proportion of their natural increase. Rural urban migration contributed between 40 70% of the growth of the major urban centers of Bangladesh (GOB-ADB1996). However, the low rate of rural-urban migration may change in the future with the increase in employment opportunities in urban growth centers such as Bogra. For example, an Export Promotion Zone was proposed for Bogra by NWADS as the lack of urban land with good transportation connections and utility provision was lacking in the area and development of industrial estates and manufacturing establishments proximate to the Dhaka-NW highway could be expected to benefit from lower transshipment costs, flows of FDI and proximity to India. If such urban industrial and commercial land development strategies are adopted by the Planning Agencies, investments will attract labor and fuel population growth through immigration. The rural urban migration rates may conceivably approximate the national pattern in the future. Household Income and Incidence of Poverty Table 8 shows the Mean monthly incomes for four income categories of households. Average monthly income for both towns are TK 16,813; Tangail has a slightly higher mean at TK 17,762. The poverty line determined by the Household Expenditure Survey of Bangladesh in 1991/92 was equal to TK 3000 per month for an average sized urban household. Nationally, some 47% of the urban population had incomes below this poverty line. The Urban Poverty Task Force Report (GOB - ADB, 1996) determined two income based poverty categories. They used TK3,500 for the absolute poor (moderate poor) and TK 2500 for the hardcore poor (in 1995 Taka). We have adjusted these figures upward to take inflation into account. Households with incomes less than TK 5000 (in current 2000 takas) were considered to be absolutely poor. 30