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Assessment of Comparative Advantage in Bangladesh Agriculture

Dr.Quazi Shahabuddin
Bangladesh Institute of Development Studies (BIDS)E-17, Agargaon, Sher-e-Bangla Nagar Dhaka-1207

Abstract/ Executive Summary:

The paper examines comparative advantage of different crops using two indicators-net economic profitability and domestic resource cost ratio. The profitability estimates and estimated domestic cost ratio suggest that except for a few import-competing crops. Bangladesh has comparative advantage in production of most crops. There are a number of crops, e.g. vegetables, potato, cotton and onion whose financial and economic returns compare favorably with that of HYV rice. The analysis has important implications for scope and incentive for crop diversification in the country. The longer term comparative advantage, assessed in terms of expected technological innovations and changes in future world market conditions suggests that although the profitability of HYV boro is likely to worsen in future, substantial improvements in both financial and economic profitability can be expected for most other crops. The analysis seems to suggest that the menu of crops that Bangladesh can produce efficiently either for import substitution or for export is quite large.

Keywords: Assessment,Comparative advantage,Bangladesh agriculture

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Program Area: Socio-economic and Policy

Non-commodity: Performance

Objectives:

To assess the comparative advantage of production of different crops in Bangladesh.

Methodology:

Assessment of Comparative Advantage: Methodology: Comparative advantage in the production of a given crop for a particular country is measured by comparing its border price with the social or economic opportunity costs of producing, processing, transporting, handling and marketing an incremental unit of commodity. If the opportunity costs are less than the border price, then the country has a comparative advantage in the production of that crop. In most developing countries, social or economic profitability deviates from private profitability because of distortions in the factor and output markets, externalities, and government policy interventions that tend to distort relative prices. Comparative advantage or efficiency in Bangladesh agriculture is analyzed here using two indicators: (a) Net Economic Profitability (NEP) (b) Domestic Resource Cost (DRC).

Source of Information: The Bangladesh Development Studies,Vol. 26, No. 1 (March 2000), pp. 37-76 Published by: Bangladesh Institute of Development Studies

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Achievement/Findings:

The analysis seems to suggest that the menu of crops that Bangladesh can produce efficiently either for import substitution or for export is quite large. A pertinent question is how for the comparative advantage that Bangladesh agriculture enjoys can be realized as a consequence of Uruguay Round Agreements. The paper argues that the existence of comparative advantage and the liberalization under UR Agreements are not likely to generate any significant benefit to Bangladesh agriculture on their own. What is essential is to enhance agricultural productivity, develop technology and skills, and create an effective policy regime to realize the potential benefits of the emerging trading opportunities.

Knowledge Management: Journal