Monday, October 30, 2017

http://dailyasianage.com/news/92740/competitiveness-of-dhaka-city

Competitiveness of Dhaka City Part 2

M S Siddiqui

Although Dhaka has a dynamic and vibrant economy, it is one of the poorest megacities in the world.
GDP per capita is low by international standards, but GDP per hectare is high because of the
intensity of urban development and business activities. but still lacking in international
competitiveness, a more in-depth study of its economy was made to find out how it can improve.
Poor planning and management of land use and utilities has led to high congestion and under-
performance of assets and service delivery, reducing the returns to businesses and government
from their capital investment. More and more business activities have migrated away from the
central area to the periphery as a result. Identifying improvements that can be made in the functional
and spatial productivity of industrial areas in Dhaka is important in attaining a more sustainable and
prosperous economy for the megacity.

The economy of the greater Dhaka is dynamic, but it is controlled by activities in and around the
central business district. There is significant variation in economic output and activities in the DCR
and the surrounding municipalities, and therefore also in the spatial distribution of poverty and the
quality of infrastructure, utilities, and government services. These patterns and variations in the
spatial geography of the economy are explained below.

The half of industrial units is in the Dhaka metropolitan area. The next-largest concentrations of
manufacturing units in the DCR are in Narayanganj, Narsingdi, and Gazipur. Manikgonj has the
lowest concentration. Within Dhaka District (see footnote 2), there is a major concentration of
industries in the central city area. Most of these are textile manufacturing units, located primarily in
Mirpur and Savar, and along the Airport Road. one of the largest concentrations of micro industries
is in Keranigonj Thana,4 south of the Buriganga River. Most industry units function as feeder firms in
the supply chain for a fewlarge-scale industries.

Two export processing zones in Savar, northwest of Dhaka city, contain many textile manufacturing
units. outside Dhaka District, the major concentrations of industries are in Narayanganj. Narayanganj
wastraditionally an industrial town engaged in jute processing and hosiery production. It is still an
industrial town, although jute processing is no longer a major economic activity. Apparel, especially
knitwear, industries are gradually moving to Narayanganj.

The greatest concentration of labor is found in Dhaka District, Savar, and fringe areas; the next
largest, in Narayanganj and then Gazipur. Gazipur is expanding because of its flat and generally
flood-free land. Land is also available in Narsingdi for the expansion of industries, and many
manufacturing industries are moving into this area.

There is a small concentration of industries, mainly food processing and other agricultural business
activities, in Munshiganj and Manikganj. The textile and RMG industry has been the country's export
leader for the last 30 years. The industry generates an estimated 1.2 billion jobs in the DCR and, in
2009, exported more than $3.6 billion worth of textiles and garments.

This sector has gained comparative advantage because of (i) its large pool of low-cost labor; (ii) its
low transportation costs, resulting from the co-location of industrial establishments; and (iii) policy
support from the government, including the establishment of economic enterprise zones and other
taxation, foreign ownership, and infrastructure inducements for exporters and investors. The sector
was named one of the "thrust sectors" of the government in its industrial and export development
policies.

The successive governments in Bangladesh have encouraged and supported the development of
the textile and RMG industry since the late-1980s. Industry entrepreneurs set up factories anywhere
they could secure land or buildings, including houses when these were available. The factories are
geographically concentrated in these districts because of the ready access to skilled labor, and the
lower transportation and other business transaction costs. Government did not seek to impose any
restrictions on the location of factories.
Supply industries grew rapidly to meet the demand for raw materials and fabricated products. There
were instances of setting up RMG factory at costly Motijheel commercial Area. The factory set up
without much investment for fixed capital like land and building etc.

In their advantage, many of the supporting industries are close to the main production houses, but
the intensity of the development in these areas has added to the traffic congestion and overtaxed the
utility services. Despite these disadvantages, many well-established family businesses with
expanded operations elsewhere in the DCR maintain premises in the inner city, partly because of
the numbers of skilled people who live in this area and also because of the economies of scale
resulting from the agglomeration.

In course of time these entrepreneurs became solvent enough to set up on factory and expand the
production facilities by move out of city but within the 30 km of Dhaka centre to avail all facilities of
city. On the other hand the buyers also imposed compliance issues like safety and labor rights as
precondition of buying garments.

A study of few years back revealed that more than 8,000 factories and SMEs of varying sizes are
involved in the production of textiles and ready-made garments in the DCR. More than 60% of these
are in the Dhaka metropolitan area, with around 8% in Narayanganj and 17% in Gazipur.

Most of the textile and RMG industry units are in central Dhaka, where factory buildings are
multistory and not well designed for efficient production. For this reason, some factories that have
expanded have relocated to areas where there is more land and vertical (same-level) production
systems.

In general, integrating backward and forward supply chains will add value. The backward supply
chain consists of eight stages: (i) cotton ginning or raw-fiber making, (ii) spinning, (iii) yarning, (iv)
knitting or weaving, (v) dyeing, (vi) cloth making, (vii) the turning of cloth into ready-made garments,
and finally (viii) the sale of the garments in the domestic or export markets. Each stage involves
some form of value addition. opportunities exist to add further value to products, especially if
supporting industries-such as (i) lining and the production of buttons, zippers, and other accessories;
and (ii) integration of design and marketing services-were to join the value chain. Mapping the
supply chain helps the industry to understand the production systems within the cluster, the value-
adding elements, and the linkages to supporting industries and services.

The supply chain for the textile and RMG industry shows that the industry cluster has a strong
multiplier effect on employment and production.The structure of the textile and RMG industry cluster
in the DCR. The five core industries in the cluster are cotton textiles, knitwear, woolen textiles, jute
textiles, and hand looms. The backward and forward linkages supporting the industry cluster are
government (in policy and strategy matters), utility services, industry associations and interest
groups, educational establishments, labor unions, national and international markets, and R&D and
design support services.

Many components of the cluster are poorly developed, inefficient, or missing Dhaka is competitive
than it competitive cities in Asia. It is interesting that cities in other part of Bangladesh, are much less
competitive than those in the east. The availability of energy and the comparatively better
infrastructure in Dhaka has significant contributors to the disparities with other part of the country.

Other cities of Asia like Ho Chi Min and Yangun will challenge Dhaka due to absence of viable
spatial policies like physical or spatial planning, since the policy makers in those cities are investing
and reforming their rules and regulations. Bangladesh should develop other cities like Chittagong,
Rajshahi, Khulna, Barishal, Rangpuretc to face the new challenge of other cities of Asia.
(Concluded).
The writer is a Legal Economist. mssiddiqui2035@gmail.com