Agriculture still a key driver of Bangladesh economy

Hasnat Abdul Hye

At the birth of Bangladesh as an independent country agriculture was the mainstay of the economy, contributing over 70 per cent of the gross domestic product (GDP). It employed about 75 per cent of the labour force and allowed 80 per cent of the total population to live in agrarian rural areas. Nascent non-firm sectors like fisheries, livestock and cottage industries were nurtured by agriculture directly or indirectly. Though a deficit yawned between demand and supply of food it was beginning to shrink following the introduction high-yielding varieties of rice, use of mechanised irrigation and chemical fertiliser on a large scale. The green revolution based on the new technology package got a fresh momentum after the emergence of Bangladesh as an independent country when attaining self-sufficiency in food was given a top priority.

At present agriculture contributes 12 per cent of GDP and employs 40 per cent of the labour force. Food production has accelerated, attaining near food self-sufficiency. In some years the country has a comfortable surplus which is exported. Crop diversification, begun in early seventies, now yields a variety of crops making optimum use of arable land and increasing income of farmers. Production in the fisheries and livestock sectors has also increased, riding on the back of agricultural growth. The country now exports meat, vegetables and even flowers. Value addition to agricultural produce through processing is going apace expanding the market for agriculture. It is no wonder that 70 per cent of the population still live in rural areas.

In spite of the contribution made by the agricultural sector and its continuing importance it has not received due support to expand its value and supply chain. At the pressure of donors, particularly lenders, subsidy has been withdrawn completely from irrigation equipment and pesticides. Subsidies provided for fertilizer and power for irrigation have been either irregular or misallocated. The bright spot in the agriculture sector has been the continuous care and guidance given by a very committed minister. In the absence of a national union of farmers the minister has been acting as their spokesperson.

The achievements and potential of the agricultural sector have recently been highlighted by the World Bank in its report captioned ‘Dynamics of rural growth in Bangladesh: sustaining poverty reduction’. It was conducted jointly by the Planning Commission of Bangladesh and the World Bank. The study found that the bulk of the farm growth came from increased yields, more precisely, through total factor productivity. Agricultural research and policy reforms have also been mentioned as contributor to the growth. This means while arable land is either being depleted due to non-firm use or has remained unchanged in acreage the productivity of the farm sector has risen through efficient use of inputs. User-friendly agricultural research can be assumed to have backstopped the efforts of the farmers to increase yield per acre while policy supports (not reforms) like subsidies, fixing minimum price and government procurement have underpinned the increase in productivity. Policy ‘reforms’ urged by the donors and multilateral lenders, keen on promoting free market economy, often run counter to the enabling policy support strategy adopted by the government.

It is ironical that while agriculture in America and Europe continue to enjoy subsidy and other support from the government and the EU in the case of Europe developing countries, like Bangladesh, are being advised and cajoled to withdraw all support from this sector. This is being done in spite of the well-known fact that however high the productivity growth in agriculture may be or because of it the sector will always be at a disadvantage in relation to the urban economy and the external market. The terms of trade between agriculture and the urban economy or the external market represented by importing countries is tilted against the farmers and will continue to do so in future. This is because cost of production in the agriculture sector decreases in tandem with productivity gains while the cost of production in urban sectors goes of increasing due to higher wages under pressure from organised labour. Similar is the case with cost of production for industrial and agricultural products in developed countries. Therefore, while referring to ‘policy’ for agricultural sector in Bangladesh, the context should be ‘support’ and not ‘reform’.

The study report has pointed out that Bangladesh has increased agricultural productivity in the last few decades and has observed that it is remarkable in view of so many people and so little arable land in the country. The role of the government and the farmers in achieving this remarkable success has not been mentioned in the report. Nor has a cause and effect relationship has been established between growth in factor productivity and reduction in poverty. According to theory, there is an inverse relationship between the two. It is important to mention the role of the government both for the growth in agricultural yield and poverty reduction because it makes out a strong case for continuation of the government role in the face of market failure.

The report has cautioned that there is no room for complacency as the agriculture sector has not been diversified enough to meet the shifting demands, to improve nutrition and to enable agriculture to adapt to climate change. A close analysis of growth of crops in recent years will show that crop diversification has been going on both to meet existing and creating new demands. This has been based on both farmers’ experience and perception about the market and publicity from the government. As regards improvement of nutrition level, it depends more on the disposable income in the hands of farm families than on diversification of crops. In this context, the case for price support by the government becomes compelling. No one will question that crop diversification to adapt climate change has become imperative but depends on research and financing from the global fund for climate change which is yet to materialise.

According to the World Bank report, diversification being an important priority for Bangladesh, a step in this direction would be to remove the remaining regulatory constraints to private sector participation in the seed business to inject new ‘technological vigour’. The observation shows unmistakably the Bank’s obsession with de-regulation. The seed sector has already been de-regulated, allowing private sector to import seed alongside the government agency. What is the justification for completely eliminating the public sector from the seed business when the room is large enough to accommodate both private and public sectors? To insinuate that the ‘remaining regulation’ is constraining the private sector in assisting crop diversification is stretching the argument beyond credibility.

The report has stated the obvious while mentioning that the country needs to invest more in research on non-rice crops, livestock and fisheries as well as infrastructure to support the shift towards high value agriculture. But the farmers are already shifting to high value products responding to market demands without waiting for research findings. They have also forged linkage with the firms involved in agro-processing expanding the value chain. It should be recognised that there is a limit to shifting to high value agricultural produce as long as low value agricultural produce cannot be imported from developed countries because of their protective agricultural policies.

If the problem of Bangladesh agriculture lies with the supply side it is not because of the lack of innovativeness or hard work of the farmers but the attempts to handicap them with biased ‘reform’ proposals. Bangladesh farmers have come a long way from the days when they were risk-avers, laggard in technology adoption and ignorant of market. Highest priority for their greater success should be improvement in infrastructure development and freeing the market of syndicates and layers of middlemen.