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Article by: Nurul Islam Nazem, Ph.D , Amirul Islam Chowdhury, Ph.D & Md. Anwar Hossain 18 November, 2014

A Case of Competitiveness of the Greater Dhaka Region

This study on Greater Dhaka Region (GDR) explores the nature of the competitiveness of Dhaka in the context of its rapidly changing characteristics in recent years and its dominant role in the economy of Bangladesh. The study is a part of a collaborative research project undertaken jointly by the Asian Development Bank (ADB) and Corporacion Andina de Fomento (CAF), the Development Bank of Latin America in order to develop an understanding of the factors that drive the competitiveness of cities in their respective regions. Such understanding may facilitate identifying critical areas of intervention through lending programs and targeted development activities for sustained growth.   Most of the Asian and Latin American cities are growing faster than ever in the past, playing the role of an epicenter of rapid economic growth and the development of the City and its region. The contemporary characteristics of urbanization in the country and rapid urban growth, especially the metropolitan regions, appears to be a new challenge in terms of managing cities for their increasing contribution to the national economy.

The Study aims specifically to understand the dynamics of growth and consolidation of the competitive character of the Study city, with particular focus on productivity and policies that shapes its development. The key component of the Study is to identify the factors of competitiveness of Dhaka and exploring the ways of fostering its development in a more competitive and sustainable manner, especially to look into the development of industry clusters in the City in order to enhance its competitiveness. Dhaka City has been selected to study the competitiveness because it is the largest city in the country, it is the national capital, it has the largest concentration of industries in the country and because it has the best availability of data and information on it.

Based on the CCED approach (an approach which was experimented on in another ADB study on Dhaka City in 2009), the present Study followed a qualitative method of generating and explaining data on issues such as how urbanization and urban growth in the country inducing economic development and the factors that drive urbanization and economic growth of the City. The study findings are based on the analysis of both primary and secondary data. Primary data were collected through a series of in-depth consultation meetings with informed stakeholders, relevant policy-makers, researchers and academics. The secondary data were gathered from recently completed national census (2011). The Study discusses the following four broad areas: a) background study based on secondary data, which is an attempt to set the Study context to understand competitiveness and related issues, b) a discussion on the nature of drivers of the competiveness of Dhaka City, c) analysis of the industrial geography of the Greater Dhaka Region (GDR) and the analysis of competitiveness of two industry clusters (the RMG cluster and the knowledge industry cluster). And d) tWord did not find any entries for your table of contents.he synthesis of the whole Study and strategic initiatives that are to be taken to enhance city competitiveness.

The Greater Dhaka Region was selected as a study area.  It includes six administrative districts (Dhaka, Narayangonj, Gazipur, Narsingdi, Manikgonj and   Munshiganj) of Bangladesh. There are four City corporations and two municipalities, four Cantonment Boards, semi-urban and urban-fringe areas and a few rural pockets in the Study region. The total area is about 7,440 sq. km, with a population of about 23.5 million (2011). The Study area is located at the geographical center of the country.

Urbanization in Bangladesh sets the context for the present Study. In 2011, less than one-third (42m) of the national population (150 m) lived in urban areas of the country. Of them, 15.8 million lived in the Study region (which is about 35% of the national urban population). The rate of urban population growth in the country is still over 3%, while that in the Study region (GDR) is 4.1%. Within GDR, the level of urbanization is 67%, the highest in Bangladesh, if we consider any region in the country.  The urban sector in Bangladesh has been gaining importance over time and its contribution to GDP, its role in employment generation and absorbing surplus rural populace seem to be dominant factors in the economy of the country.  Having only 28% of the population in its urban areas, the sector contributes about 60% to the country’s GDP.  Dhaka megacity alone shares more than half of the urban sector’s contribution.  This is important for examining the competitiveness of Dhaka, which is so important in its national economy and development.

The importance of public investment in helping the private sector to flourish in GDR can hardly be over-emphasized.  During recent years, investment by the government has slowed down.  As a result, private investment is also discouraging.  Both factors negatively influence the growth of GDP and its competitiveness.  This was in almost all competitiveness indicators in the region in a negative way.  Such slow growth of investment, rising inefficiency in the utilization of capital, unutilized productive capacity and unhealthy (adversarial) business environment may emerge as major challenges that could undermine the prospects for macroeconomic performance.

The dominance of Dhaka in the country’s economy is a historical fact.  Its favorable location at the center of the country, easy communications and preferential investment in Dhaka since the 1980s helped receive rural migrants and contributed a phenomenal rise to its population growth.  The Dhaka urban area, on average, received taka 2000 million as public-sector investment annually, which is about 20% of the national (public sector) investment.  The private-sector investments, especially in the textiles and RMG sector, played a positive role by employing 2.1 million workers in GDR.  Only the RMG sector of the manufacturing industry in the City earns USD over $19 bn per year, which is about 78% of the country’s total export earnings. The sector creates more than 100,000 jobs, particularly for the poor and women. Most of the RMG industries were located in Dhaka, Narayangonj and Gazipur along the major communication routes.

Dhaka City has been suffering from a high infrastructure deficit. The failure to plan for adequate infrastructure, especially for road network, transportation, drainage, water and sanitation and electricity are adding substantially to development costs. It is not only the present level of infrastructure, but also that Dhaka fails protect its future infrastructure corridors and provisions due to poor planning and management. A recent study (ADB, 2012) shows that where infrastructure corridors have been planned and provided, they have been encroached upon and compensation is required (even if buildings are illegal), adding up to 40% to road construction costs. This results in less funding being available for new infrastructure and planned network improvements, often become very difficult to improvement. Besides, physical infrastructure, social and economic infrastructure is also inadequate in Dhaka. Health, education and recreational facilities and services are highly inadequate. The following is a brief description of a key strategic infrastructure profile of Dhaka that supports its economy.

One of the major objectives of this Study was to investigate the factors and nature of Dhaka City’s competitiveness.  Competitiveness was assessed through a framework used to measure industrial productivity and sustained economic growth of GDR.  Productivity and sustainability were measured by the ability to create a favorable environment for the growth of business and economy, which again depends largely on many factors, such as infrastructure, utility services, environmental quality, financial facilities and good governance.

Dhaka’s competitiveness was assessed through a number of panel discussions and the results compared with the Study competitiveness in 2009 (ADB, 2010).  The major drivers of competitiveness used were the cost of doing business, dynamics of local economy, infrastructure, human resources and training, quality of life and the government’s response to business needs. It reveals that GDR’s competitiveness has declined for most indicators since 2009.  The reasons, perhaps, are the political crisis and frequent hartals(political disruptions),on the one hand, and the shifting of factories from the central City to the periphery, where infrastructure is still poor compared with the central City.  However, there is evidence that chaotic communication, congestion on the City streets, poor service facilities and environment and weak governance scaled down Dhaka’s competitiveness.  These factors are adding greatly to the externality costs of doing business in DMR and leading to the migration of an increasing number of factories from inner areas to the outskirts of the metropolitan region.

The textile and RMG sector in GDR constitutes the largest manufacturing industry cluster in the country. The cluster absorbs 2.5 million workers, most of whom are women.  The sector has been growing in terms of employment, industry units and volume of exports. In 2009, the industry exported USD 1.9 billion.  However, the industry is facing serious challenges for its competitiveness and ability to command global market.  Poor physical infrastructure, inadequate utility services, lack of trained human resources – particularly in top and mid-level, poor quality of living environment and weak governance are responsible for the low competitiveness of the sector.  On the other hand, the condition compliance from the buyer’s side is also a challenge for both the government and entrepreneurs. The working environment of laborers, wages and other benefits (such as right to form union, the right to enjoy leave, etc.) are to be improved and complied with. The sector needs proper long-term planning, with a vision of technology changes and information that changes the global market.  Thus, education is an important area where investment is necessary to achieve trained human resources.

Lack of quality education in the country is the main barrier in making a knowledge-based society.  The present Study made an attempt to explore the structure of education in the country and the characteristics of the cluster, particularly in GDR. The aim of explaining the knowledge cluster of Bangladesh (considered one of the service industries) was twofold: First, exploring the nature and characteristics of the cluster (the education sector) and second, identifying the factors influencing the cluster, in particular, to draw key factors identified as weaknesses that need to be addressed as priorities and actions for the development of the cluster. The Greater Dhaka Region (GDR) is the largest hub of the knowledge cluster (education, training and research) in the country.

The pattern and performance of the knowledge industry cluster in the country in general and in GDR in particular can be seen through a number of parameters. First, net primary level enrolment reached about 92% in 2010, which is regionally comparable with India and Pakistan, though Sri Lanka and Maldives are ahead of Bangladesh. The sector performance is low as it receives only 2.3% of the GDP and about 14% of the government expenditure (2011). This is one of the lowest in the region.GDR contained 4821 educational institutions in 2009, which altogether generated 140,000 employments in 2009.

It was found that the knowledge-industry cluster in Bangladesh is characterized by low capital and low labor costs, which undermine skilled labor in industries and in the decision-making process. Bangladesh’s transition to a knowledge economy depends upon the readiness to use appropriate knowledge for its development. Without a developed knowledge industry in the country, acknowledge-based economy is not possible.  The present condition of the state human resources, in terms of market, quality of management skills and efficiency of labor force is at a very low level. To enhance the level of quality human resources it is necessary to develop an education system through improvements in policy and planning, improvement of training facilities for skills development and by providing sufficient incentives to the workers so that they devote themselves to their responsibilities. In particular, improving the quality of education in the country should be a top priority.

The human resources educational infrastructure in the country is also weak. Some of the infrastructure related to the education system directly, such as school building, playing field, the library system, utility services and power and telecommunication services and are related to the development of the City or region. With the onset of the knowledge revolution, higher levels of education are imperative to keep up with, and make effective use of, rapidly changing knowledge. Also it is necessary to create high levels of scientific and technical manpower to create new knowledge. Thus, restructuring the existing education strategy should be a priority agenda. The most crucial role in shaping the knowledge industry is the responsiveness of the government to the needs of the cluster development.

To enhance the level of competitiveness of the industry it is necessary to enhance the competitiveness of the City.  City competitiveness indicators appear to be mostly negative in Dhaka. Infrastructure, such as transport and utility supply, is a serious problem, which is the single-largest issue disrupting the RMG sector in Bangladesh. The political instability has become another serious issue that risks Bangladesh’s RMG sectors’ competitiveness. The prospects for Bangladesh’s RMG sectors’ competitiveness and growth to lead globally cannot be realized without successfully facing these challenges. Some of these challenges are to be realized at City level by the local authorities, while others are to be realized by the entrepreneurs and other local and national authorities.

One of the key factors to realizing the goal of sustainable urban development is good governance.  The Governance of Dhaka remains in a very critical situation. Multiplicity of institutions, overlapping mandates and responsibilities, lack of transparency and accountability, poor understanding of the problems, weak leadership, inadequate stakeholder participation and corruption have resulted in Dhaka becoming an almost unlivable city. It is necessary to emphasize seriously the issues of governance before any attempts are made to develop Dhaka.

RAJUK as a planning and development controlling institution isto be strengthened; although it looks after 20% of GDR area and about 80% of the population. At present RAJUK is one of the weakest organizations, in terms of manpower, understanding of the City problems, ignoring economic issues, power and authority and lack of accountability.  Unless these issues are addressed immediately, there is little possibility to see Dhaka as a modern, livable and economically a vibrant city.

The City Corporations and Municipalities should enhance their own capacity and economic strength in order to become an efficient provider of services to the people.  At present they enjoy too much control of the national government, and none of these local authorities can exercise their independent power to manage the City. Unlike RAJUK, these are democratic local governments, but they are financially and economically weak institutions.  As urban local governments, the capacity ofCity corporations and municipalities is to be substantially enhanced to make a competitive city.

The region has been suffering from lack of planning, lack of infrastructure and from high externalities. The development of modern economies is highly dependent on cities having competitive economies with efficiently managed services. At present GDR has no unifying authority with responsibility for guiding its economic development. The existing Master Plans and other considerations of city authorities have no, or very little, consideration for economic development. A demand-driving economic plan and creation of an authority to oversee its implementation for the development of the region would create a broad-based economic zone centering on the Dhaka metropolitan region. The region is already a specialized hub of economic activity in the country. A planned approach to its development would create an enabling environment for new economic activity, innovation and investment, which are urgently required for enhancing the competitiveness of the City as well as the region.

 

The CUS Team for the Study

Professor Nurul Islam Nazem, Team Leader

Professor Amirul Islam Chowdhure, Advisor

Md. Anwar Hossai, Team Member

 

Published in CUS Bulletin on Urbanization and Development, Number 65, 2013

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About Author: Nurul Islam Nazem, Ph.D

Professor, Department of Geography and Environment, University of Dhaka

+880 1819234025 nazem.info@yahoo.com
+880 2 9130965 [ Download CV ]

About Author: Amirul Islam Chowdhury, Ph.D

Professor, United International University of Bangladesh and Former Vice Chancellor, Jahangirnagar University. He is an Urban Economist with 40 years of experience in teaching, research and consultancy (for World bank, USAID and others).Member, Advisory Committee on Strategic Transport Plan of Dhaka Transport Coordination Board ( project supported by the World Bank).

[ Download CV ]

About Author: Md. Anwar Hossain

Md. Anwar Hossain, Lecturer, Department of Geography and Environement, University of Dhaka. and Life Member and Research Associate, Centre for Urban Studies (CUS), Dhaka

+880 1911463312 anwar.geo.du@gmail.com
+880 2 8120047 [ Download CV ]

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