Abstract

To increase per capita incomes at a faster pace and reduce the incidence of poverty, Bangladesh must significantly raise the average GDP growth from the 4 percent range of recent years to 7-9 percent per annum. The sectoral sources of growth are limited, the share of industry in GDP is small, and the sector lacks dynamism. Although services account for 45% of GDP, the likelihood of it providing much additional growth momentum are also quite limited. Thus, an improvement in Bangladesh's economic performance is likely to come from an increase in agricultural productivity and the spread of rural industry. The purpose of this paper is threefold: to provide the macroeconomic backdrop to development in Bangladesh and to show how it compares with other countries with respect to a number of key indicators; to explore the preconditions for the emergence of rural industry as a leading sector and the lessons from the experience of Asian and African economies with regard to rural industrialization; the state of agriculture and rural industry in Bangladesh and a discussion of factors explaining recent trends; and the delineating of a strategy for promoting rural based industries with backward linkages to agriculture and forward to the urban sector.

The findings of the study underscore the importance of location, with the hinterland of a few key cities having an edge over other parts of the country; the contribution of transport and communication infrastructure to rural industrialization; the advantages of adopting an export orientation and of seeking foreign direct investment; and the potential developmental role of local governments.