Creating Rural Non-Farm Jobs Experience Of Bangladesh

Transcription

1 Creating Rural Non-Farm Jobs Experience Of Bangladesh Madhur Gautam Lead Economist Agriculture Global Practice 1

2 Dynamics of Rural Growth in Bangladesh Context Unprecedented changes in Bangladesh s rural economy Agriculture main contributor to poverty reduction (2000) Yet the underlying story remains underexplored and underappreciated Broad conclusions Agriculture growth has strong catalytic effect, with strong farm-non-farm linkages Robust RNF economy is critical to sustain growth and poverty reduction, and will continue to grow in importance A balanced strategy with focus on agricultural and nonagricultural growth more effective that single sector focus Agriculture Global Practice, The World Bank 2

3 Significantly improved performance Trend growth rate (previous 10 years, percent); standard deviation of annuall growth rate Agricultural GDP in Bangladesh: Trend growth rate and growth volatility Agriculture GDP Ag. GDP Volatility FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Agriculture performed extremely well acceleration in growth rate till 2011 Agriculture is also markedly less volatile fewer natural disasters increased resilience: irrigation; technology; sub-sector performance. FY14(p) Agriculture Global Practice, The World Bank 3

4 Mutually reinforcing actions Trend growth rate (previous 10 years, percent); standard deviation of annuall growth rate Total and agricultural GDP in Bangladesh: Trend growth rate and growth volatility Agriculture GDP FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14(p) Marked shift in performance: structural break in mid-1990s policy reforms Complementary Investments in R&D/technology, roads, irrigation, efficient markets, and mechanization Agriculture Global Practice, The World Bank 4

5 Progress while swimming against the tide Terms of Trade for Agriculture Protection Rates: Agric. and Non-Agric FY80 FY82 FY84 FY86 FY88 FY90 FY92 FY94 FY96 FY98 FY00 FY02 FY04 FY06 FY08 Agriculture/Non-Agriculture Argriculture/Industry Agriclture/Services FY10 FY12 FY14(p) NRA - All Agriculture NRA - Non-agricultural Tradeables RRA - Relative Rate of Assistance Agriculture Global Practice, The World Bank 5

6 Structural transformation underway Share of Agriculture in GDP and Employment GDP Employment (LFS/WDI) y = e x Ratio of non-agriculture to agriculture labor productivity y = e x Agriculture Global Practice, The World Bank 6

7 Structural transformation: within rural space Urban and rural workforce (millions), Urban Rural Farm Rural Non-Farm 77 percent of workforce in rural areas RNFE 50% more than Urban employment Between 2003 and 2010 most non-farm jobs created in rural areas Agriculture Global Practice, The World Bank 7

8 Multiple income strategies: Diversification not discrete shifts Shares by source Income by origin Farm income Non-farm income Remittances Farm based Non-farm based Both farm and nonfarm based Majority have income from both farm and non-farm sources (65%) Increasing share of households with income from agriculture (80 to 87%) Keeping one leg in agriculture in strategy to climb out of poverty Agriculture Global Practice, The World Bank 8

9 Structural changes at household level Falling dependency ratio; rising worker-ratio Women s empowerment: Sharply rising female LFP Stabilization of land per capita (owned/cultivated) Growing endowment of human capital Rising confidence in agriculture Rising agricultural capital per worker Falling non-agricultural capital per worker Increased leasing-in land by landless Agriculture Global Practice, The World Bank 9

10 Rural non-farm sector Major source of productive employment, income and significant contributor to poverty reduction Land constraints will make RNF sector even more important Enterprises (SMEs) of particular interest as potential for growth and jobs Migration and remittances are very important sources of income Detailed analysis beyond scope of this study Agriculture Global Practice, The World Bank 10

11 Share of NF Income with rising income/capita Agriculture Global Practice, The World Bank 11

12 Occupation Choice and Income Dynamics All Extremely Poor Poor Vulnerable Non-poor Agriculture Global Practice, The World Bank 12

13 Source of Rural Incomes Temporal Shifts, Spatial Profile, 2010 Remitta nce income Other Income Crop Farming Non- Crop Farming Agr. Wage Income Remittan ce income Other Income Crop Farming Non- Crop Farming Agr. Wage Income Wage & Salary Income Enterpri se Income Wage & Salary Income Dhaka/Chittagong Poorly Connected Cities Enterpris e Income Well Connected Cities Rest of the Country Agriculture Global Practice, The World Bank 13

14 Nature of Rural Non-Farm Activities: Heterogeneous but stable structure Share of rural non-farm workers involved in different sectors, Business/manuf.: Other manufacturing Business/manuf.: Furniture makers Business/manuf.: Others Services: Highskilled (professional) Services: Semiskilled (officerelated jobs) Services: Lowskilled (domestic/person Services: Construction Business/manuf.: Food processing Services: Transport Business/manuf.: Handloom/tailoring Services: Hospitality Services: Trade/sales Source: HIES data, 2000, 2005, and 2010 Agriculture Global Practice, The World Bank 14

15 Rural Cottage Establishments by Industry, 2011 Manuf nonmetallic products 3% Manuf apparel 5% Manuf fabricated metal 9% All others 14% Manu food products 21% Manuf textiles 17% Other manuf 9% Manuf wood products 9% Manuf furniture 13% Source: BBS Cottage Industry Survey, 2011 Agriculture Global Practice, The World Bank 15

16 Driver 1: Dynamic and Productive Agriculture Significant progress on food security since 1970s Main driver of poverty reduction after 2000 In agriculture, significant capital deepening with irrigation and mechanization Potential to boost growth: heavy focus on rice Diversification major source of future growth Fisheries growing rapidly but livestock stagnant Role of agriculture in structural transformation from direct to leveraged contribution 10% Farm income growth contributes to an additional 6% non-farm income growth Agriculture Global Practice, The World Bank 16

17 TFP growth among the highest globally China India Indonesia Sri Lanka Malaysia Pakistan Philippines Vietnam BGD BGD Source: Authors, using Global Productivity Database (Fuglie 2012) Agriculture Global Practice, The World Bank 17

18 Impressive agricultural productivity growth (TFP) Technical Change (R&D Invest.) + Efficiency (Policy) TFP, efficiency, and technical change in Bangladesh's agriculture TFP Efficiency Technical change Very impressive TFP growth since 1995 Consistent contribution of technology impact of agricultural research Major impact of policy reforms visible via efficiency trend shift in 1995 Agriculture Global Practice, The World Bank 18

19 Driver 2. Connectivity: spatial evolution of RNFE Role of Secondary Cities Change in shares of employment by location, Non-Agr. Labor Business Transportation Low-skilled Service High-skilled Service DHK/CHT Well-connected Cities Poorly-connected Cities Rest of the Country -6 Source: MH Panel Survey Data Mega-cities a major source of informal jobs but other jobs in decline Secondary cities offer more promise for RNF dyanmism Connectivity is a critical factor for better jobs, especially for businesses. Agriculture Global Practice, The World Bank 19

20 Limited progress in sophistication and high exits Progression in RNFE sophistication (% households) Activities 1998/ /11 Basic Advanced Households with no RNFE Transition from basic to advanced activities RNFE (% HH) 2010/11 activities 1998/99 activities Basic Advanced Basic Advanced Source: WB-BIDS surveys 1998/99, WB-InM survey 2010/11. Agriculture Global Practice, The World Bank 20

21 Driver 3: RNFE Enabling Environment Case studies suggest challenging environment: creative destruction and obsolescence Need for better enabling environment: access to credit/finance, bus. develop. services, technology Regulatory environment: regulatory/tax anomalies; food safety and quality assurance Access to power and market infrastructure Investment in Human capital and skills development, esp. for women and youth Agriculture Global Practice, The World Bank 21

22 Diver 4: Markets Trading in High Value Products Demand for diverse and HV products growing Concerns: poor developed market channels Uncompetitive behavior of market intermediaries Distortions in transport and marketing (extortion, etc.) Study on Bangladesh, China & India: rice, potato Share of farmers in retail price highest in Bangladesh New value chain surveys: High-value Commodities Vegetable (brinjal); Poultry, Milk and Fish (Pangash) Agriculture Global Practice, The World Bank 22

23 Connecting Farmers to Markets Markets functioning very well overall. Marketing margins are small and reasonable Transport major source of traders variable costs. More educated, younger people entering trading Farmers have good market access distance and choice Price information flows smoothly and efficiently better prices for farmers; good market integration Traders face few serious barriers to entry Agriculture Global Practice, The World Bank 23

24 Key Findings: Low margins and low physical product loss Marketing margins Reasons for loss 2.7% 100% % 80% 70% % 30.3% 60% 50% 16.8% 40% 30% 20% 16.7% 26.2% 10% 0% Brinjal Pangash Chicken Milk Price Fixed costs Variable costs Net Margin Transport congestion Poor handling infra. Transport delays Left-over after sales Product kept too long Damage in storage Agriculture Global Practice, The World Bank 24

25 Still room for improvement Transport costs: improve traffic conditions and upgrading trucking fleets to reduce delays and costs Limited access to and cost of finance: access to finance reported as a major constraint by most traders Unreliable electricity supply: important for upgrading market infrastructure and value chains Investment in market facilities: significant improvement needed in physical markets, facilities and basic services Agriculture Global Practice, The World Bank 25

26 Sustaining progress: Priority areas for action A balanced development strategy for pro-poor growth, food security and nutrition Diversification in agriculture but with carefully balanced attention to rice Further improving the policy framework and rebalancing public expenditure priorities An enabling environment for robust rural non-farm growth and more efficient value chains Continued investment in connectivity for remaining secondary cities and rural areas Agriculture Global Practice, The World Bank 26

27 Thank you. Dynamics of Rural Growth in Bangladesh Agriculture Global Practice, The World Bank 27

28 THANK YOU Agriculture Global Practice, The World Bank 28