Sunday, October 29, 2017

http://dailyasianage.com/news/92591/competitiveness-of-dhaka-city

Competitiveness of Dhaka City part 1

M S Siddiqui

Bangladesh is one of the most densely populated and least urbanized countries in Asia: Only 27% of
its people lives in cities and towns. Yet, in less than 2 decades, the cities have become the country's
engines of economic growth and development.

Only 600 cities generate about 60% of global GDP. The industrialization is one of the key drivers of
urbanization in the country. Cities contribute more than 90% of GDP in Malaysia and Thailand, and
close to 100% in Singapore and Hong Kong, China, with their strong, highly competitive, and
resilient economies (world Bank 2009).

Even in countries with low urbanization rates like Sri Lanka and Bangladesh, more than 65% of GDP
is produced in the urban areas. Dkaka constitutes almost one fifth of the total economic
establishments and in urban Bangladesh. Although 50% of the workforce employed in agriculture.
The GDP growth rate and the sectoral share of industry have been increasing, at the expense of
agriculture, which has had a declining share of GDP.
The primacy of Dhaka is due to economic and political reasons. Similarly, Bangkok of Thailand,
Manila of Philippine, Colombo of Sri Lanka, Jakarta of Indonesia, Mexico city in Mexico, Nairobi of
Kenya, Stockholm of Sweden, Paris of France and London of England are some of the examples of
the dominance of primate cities in the rich countries.

Dhaka in several other global surveys ranked among the worst polluted, least liveable and cheapest
cities but costly for business. In January 2010, JETRO conducted a comparative survey of
investment-related cost in 29 major cities in Asia and observed that Dhaka's skilled labour cost base
is still less than Singapore, Shanghai, Bangkok. The industrial state rent is cost effective than
Shanghai, Jakarta, Bangkok.

But some other important parameter like logistic, Bureaucratic hassles and others made the city less
competitive than then other cities. No city can hold an absolute advantage in every dimension that
could matter to a prospective investor. A manufacturer seeking cheap land, good shipping links and
a low-cost workforce will inevitably be attracted to a different city than a technology firm seeking
highly skilled graduates to develop their next-generation product. In 2012, Economist Intelligence
Unit ranked the competitiveness of global cities according to their demonstrated ability to attract
capital, businesses, talent and visitors.

Dhaka score 27.7, while New York tops the list with score 71.4 and Tehran score 27.2 and Logos:
27.6. Dhaka ranked 3rd from bottom among 120 cities. The Economist Intelligence Unit (EIU) was
commissioned by Citigroup to develop a "Global City Competitiveness Index" to rank cities
according to their demonstrated ability to attract capital, businesses, talent and visitors.

These cities are becoming more efficient and have high degrees of industry agglomeration and
specialization. Megacity Dhaka, on the other hand, struggle in the competitiveness rankings and
perform poorly. Globalization has led to specialization and concentrated development in regions
where investors can derive a business advantage. Cities and city regions have replaced the nation
state as the principal drivers of economic development in many countries.

Urbanization is proceeding fastest in the capital city, Dhaka, but other large urban centers are also
growing rapidly. More than half of the country's urban population lives in the four largest cities-
Chittagong, Dhaka, Khulna, and Rajshahi. Dhaka's population of more than 14 million is more than a
third of the country's urban population. Severe environmental, housing, health, and social problems
can be traced to poorly managed urbanization. Surely, therefore, better managed urbanization will
be economically beneficial for Bangladesh.

Estimates indicate that urban areas account for 60% of national GDP although 50% of the workforce
employed in agriculture. The GDP growth rate and the sectoral share of industry have been
increasing, at the expense of agriculture, which has had a declining share of GDP.

The Greater Dhaka District is the most urbanized and has the highest per capita GDP, followed by
Chittagong. An economic corridor runs between Dhaka and Chittagong, although Comilla, between
the two, has a much lower per capita GDP, because of its poor infrastructure and poor governance.
The third spatial concentration of economic development is the Jessore-Khulna-Mongla corridor.

Urbanization in recent years has been marked by intensified urban pull exerted by the growth of
industries and services, particularly export-oriented industries in the large cities, construction, and
foreign remittances. The local entrepreneurs have done the wonderful job within short span of time
since early nineties. The garment industries congregated in Dhaka (74% of such industries) and
Chittagong (22%).
Accessibility to buyers, ability to communicate with overseas firms, financial and banking
opportunities, and other location advantages drew industrial and other public sector investment to
the urban areas, particularly the bigger cities. The country's sectoral approach to economic
development has created a regional imbalance in employment and investment favoring the more
urbanized regions.

The structure of the economy continues to change. Many traditional sectors are in decline, but new
industries are starting to make a noteworthy contribution to economic growth and development. The
three broad sectors of the economy-agriculture, industry, and services-are still growing, but at
markedly different rates.

The economy then moved gradually toward a free market economy with polices for deregulation and
liberalization being put in place. The policies promoted an open economy under private sector
leadership, along with a liberal trade regime.

There was a study on competitiveness of cities in Bangladesh. The results show that Dhaka, with a
total score of 7.31 out of 10, is the most competitive city in Bangladesh. Chittagong, Sylhet, and
Comilla have the next-highest scores. Six of the 10 cities are not competitive nationally (their index
scores are below 5). These cities produce mostly for local consumption.

They import a wide range of goods and services, but trade only a small range and quantity of basic
agricultural products with other regions. Chittagong, Sylhet, and Comilla are considered competitive
nationally, but they have a long way to go before they can have more export-oriented, and
internationally competitive, economies. None of the cities studied are internationally competitive
(index score of more than 7.5), although Dhaka is competitive internationally in some sectors, mainly
in textiles and garments.

The location of cities with respect to transport, government services, and natural resources also
appears to be important in relation to competitiveness: centrally located cities with good connectivity
are more competitive than those located close to the country's borders.

Chittagong and Dhaka, because of their location advantages as major transport hubs, have had
higher concentrations and specializations of employment and economic activities, and have
benefited greatly from access to migrant labor, public services, and markets associated with
agglomeration. At the same time, however, the agglomeration of employment and business in these
two cities has increased congestion and pollution costs.

Population size appears as a major determinant of competitiveness. Large cities like Dhaka
generate their own economies of scale. As the cities studied varied to a great extent both in
population size and in competitiveness scores. It tend to have an advantage over smaller cities in
human resources and training, quality of life, and dynamics of the local economy.

The most competitive sector is ICT, followed by clothing and textiles, from which Bangladesh derives
almost 75% of its export earnings. The competitiveness of the ICT sector is driven largely by
international factors and Garment sector due to local factors.

As Dhaka was identified as the most competitive city in Bangladesh. It is also the administrative,
commercial, and cultural center of the country. The greater Dhaka is relatively affluent compared
with other areas of the country. The nonfarm sectors in particular are faring better in the Dhaka
centre region (DCR) , possibly because of urbanization and the agglomeration of economic
activities. Thus, economic growth is faster in the greater Dhaka than in other regions. (To be
continued)
The writer is a Legal Economist.e-mail: mssiddiqui2035@gmail.com