Rural Industrialization for Sustainable Poverty Eradication

1. Rural Industrialization for Sustainable Poverty Eradication Mahbubul Islam Khan

2. The Settings • Economy has been growing at a rate of around 6% per annum • Economy underwent remarkable structural transformation • Agriculture’s share in GDP declined to around 20% despite agriculture grew at 3% per annum during the past decade. • Significant reduction in incidence of poverty (head count ratio) • Poverty (head count ratio) fell from 56.7% in 1991-92 to 31.5% (HIES 2010)

3. The settings (continued) • Bangladesh still remains a low income country with a per capita income of USD 1,044 in FY 2012-13 (almost double in India, substantially high in Pakistan) • Most (around 78%) labor force is engaged in informal low productivity and low income jobs. • Bangladesh is most vulnerable to climate change, nearly a quarter of Bangladesh is less than seven feet above the sea level. • Agriculture is susceptible to large scale natural disasters such as floods and cyclones

4. The settings (continued) • Agriculture employs almost 50% of labor force, low labor productivity in agriculture. • Extreme scarcity of land and declining land man ratio. • Still more than 40 million people live below poverty line. • Sustainable poverty reduction calls for creation of productive employment and income generation for the poor.

5. Defining Rural Industry • Physical location • Linkages (raw material and labor) • Examples are Brick making, charcoal making, small bakeries, Blacksmith and metal workers • Carpentry workshops, Handicraft products (sewing, basket weaving, cloth making etc.) • Batik, tie and dye, processing (milling, jams, pickles, honey).

6. Why Rural Industrialization? • Growth in agricultural production can’t absorb growing labor force • Non-farm income is important (agricultural income is insufficient, seasonality of agricultural wage employment) • Rural non-farm sector provides employment supplementation • Prevents/moderate out migration and helps control urban congestion and pollution

7. Why Rural Industrialization? (Continued) • Can potentially benefit disadvantaged populations, marginalized physically or socially (women, indigenous people) • Can potentially address regional differences in development • Reduce less capital and generate more employment per unit of capital

8. Support Needed for Rural Industrialization • Financial Services • Credit • Insurance • Non-Financial Services • Training on book keeping, business plan preparation • Production–oriented technical skills training

9. Support Needed (Continued) • Technological support to improve product design and quality • Facilitating access to markets (local, national and export markets) • Rural infrastructure development

10. Supportive Institutional Environment – Policy Support • Economy-wide macro-economic policy (e.g. allocation of budgetary resources, domestic terms of trade between agriculture and non-agriculture) • Sectoral policies, projects and programs (e.g. reform of banking regulations, reform of collateral regulations that impair the ability of small firms to access institutional loans), business cluster development • Making the playing field equal for small rural and large urban enterprises

11. Innovative Public–Private Partnerships • All institutional actors (public and private) need to work in harmony rather than in isolation • Subcontracting between urban and rural enterprises (manufacturing or trading companies outsource to rural enterprises)

12. Manufacturing Cricket Bat Norendropur, Jessore

13. Shoe making Bhairob, Kisharganj

14. Manufacturing Paposh (Mat) Santahar, Naogan

15. Manufacturing Imitation Ornaments Moheshpur, Jibannagar, Zinaidhaho

16. Thank You