Concluding observations

To substantially raise its per capita GDP, Bangladesh must take deliberate measures to increase its growth rate well above its current three to four percent per year. This quickening must come from rural development-agricultural modernization and the simultaneous expansion of a few rural industries-that could jointly lift the economy to a higher level of growth. Comparative experience from some of the successful East and Southeast Asian countries and empirical evidence from Bangladesh suggests that investment in transport infrastructure and the mechanization of farming would give the strongest push to agriculture and generate the most potent spread effects.

Agricultural growth and a change in the composition of output favoring cash crops would stimulate industry through demand and input-output linkages. But in order to turn rural manufacturing into a leading sector with the potential to employ a large number of people and good export prospects, impetus must come from other directions as well.

The starting point is the existing reservoir of skills in the rural sector, which help to define initial industrial possibilities. Textile weaving, working with natural fibers, assembly activities, jewelry making, and woodworking could evolve into modern industries serving export markets. But the current state of rural industry in Bangladesh and international experience with the evolution of rural-based export industries suggest that five conditions must first be.

First, the paucity of capital, the inadequate transport infrastructure, and the advantages of proximity to markets, argue for concentrating rural industry around a few urban centers. In Bangladesh Dhaka, Rajshahi, Bogra, Kushtia, and Chittagong are obvious candidates. Dhaka has the broadest industrial base and is the biggest market in the country. Chittagong is the country's main port and has also attracted garment industries and associated services. Rajshahi, located in a prosperous agricultural region close to the Indian border, is well-served by road and water transport, has a range of food processing industries, and is the center of Bangladesh's nascent silk industry.

Second, several urban services are essential if rural manufacturing is going to take root and become competitive. They include engineering services to help introduce modern production equipment, financial services, support in designing products that can penetrate overseas markets, applied research, industrial extension and marketing services. Again, proximity to well developed urban centers, is an advantage.

Third, it is vital for each area to concentrate on a few industrial subsectors rather than to spread scarce skills thinly across many industries. Successful development in Gujarat state in India shows just such focus.

Fourth, if rural industry is to gain momentum quickly, local demonstration effects and an international reputation are vital. Demonstration effects induce bandwaggoning and the entry of many entrepreneurs. An international reputation is needed to generate demand for Bangladesh's goods sufficient to draw buyers and foreign direct investment. Both require a few visible and sustained successes. Achieving these should be made priority, and popularizing them widely an essential element of strategy.

Fifth, Bangladesh must be a safe and convenient place to do business in. Hence the cities that are the centers of rural industry must be easy to reach by air and well served by hotel facilities, and travel to rural factories should be convenient.

Finally, rural industry needs a concentrated dose of entrepreneurial initiative some of which can be catalyzed by NGOs. In China local authorities have frequently taken the lead, putting up risk capital and providing leadership and managerial inputs. Once these initial measures proved successful, others were willing to enter. Elsewhere in Southeast Asia, foreign investors setting up production in Special Economic Zones (SEZs) helped to galvanize rural industry through production linkages, training, and technology transfer. Agricultural producer cooperatives also supplied capital to launch food processing industries. When these prospered because of exports, as in Taiwan (China), the stage was set for diversification into other light industries.