Agricultural Research Management Information System

Home
Research Summary
Search
About Us
- ARMIS
- Brochure
Contact Us
Report
User Request
Data Input
Help
- Operation Manual
  - PDF
  - Video
- Program Area & Commodity
We have reached 37600 number of research entries at this moment.

- Logout

Research Detail

Home
Research
Detail

Agricultural Trade Liberalisation and Economic Growth in Bangladesh: Analysis of Technological Transformation and Distributional Consequences

Dayal Talukder
Institute of Public Policy, Auckland University of Technology, New Zealand ICL Business School, Auckland, New Zealand

Abstract/ Executive Summary:

This paper analyses the impact of agricultural trade liberalization on economic growth through a technological transformation as well as on the welfare of rural households in Bangladesh. Using the secondary data, it considers the background and reasons for policy shift of Bangladesh from agricultural protection to trade liberalization. This study found that large and medium farmers gained from productivity improvement but lost from a decrease in producer price. The net buyers gained more than net sellers because both consumer and producer prices declined in the post-liberalization era. Therefore, the poor gained more than the rich indicating the growth was not pro-poor. The study suggests that agricultural trade policy reforms positively impacted productivity growth and benefited the majority of the population who are involved with agriculture and are predominantly rural poor and functionally landless.

Keywords: Agricultural trade liberalisation, Technological transformation, Rice production, Productivity growth, Household welfare, Bangladesh

Location: In Bangladesh

Start Date: 00-00-1995

End Date: 00-00-2005

Program Area: Knowledge Management

Commodity: Trade, Socioeconomic, Sustainable livelihood

Objectives:

To impact the agricultural trade liberalization on the economic growth through a technological transformation as well as on the welfare of rural households in Bangladesh.

Methodology:

Agricultural trade liberalization measures opened the irrigation and fertilizer markets to private investors. The most notable change in Bangladesh’s agricultural sector in recent years was the significant increase in the production of boro rice; that was made possible by the wider availability of small-scale imported irrigation equipment such as shallow tube wells and low lift pump as well as fertilizers and high yielding variety (HYV) seeds in the post-liberalization period (Klytchnikova and Diop, 2006). Wider applications of fertilizer, facilitation of irrigation and increased adoption of HYV seeds have improved the rice production technology, leading to substantial growth in rice productivity. Due to more intensive use of fertilizer in rice production, the demand for major chemical fertilizers such as urea, triple superphosphates (TSP) and gypsum increased significantly. During 1995-2005, the total demand for TSP increased dramatically by 240 percent, an average of nearly 20 percent per year. Similarly, the demand for urea and gypsum has increased by 44 and 75 percent respectively over the same period. Similarly, the structure of irrigation was changed as a result of agricultural trade liberalization. Imported irrigation equipment replaced the role of traditional irrigation methods. From 1995 to 2005, the use of shallow tube-well (STW) and low lift pump (LLP) increased by 75 and 21 percent respectively. However, the use of deep tube-well (DTW) increased marginally by 4 percent over the same period. On the contrary, the use of canal and other traditional methods (dam, shifting water manually etc.) declined by 18 and 16 percent respectively. In Bangladesh, farms are predominantly small and medium-sized. Amongst the five methods of irrigation, shallow tube-well became the most popular one due to its suitability and effectiveness of applying in small and medium-sized farms; and this fact was reflected. In 2005, shallow tube-well covered 58 percent irrigation of rice cultivation followed by low lift pump and deep tube-well with a share of irrigation by 17 and 15 percent respectively. In the same year, the traditional method jointly covered only 10 percent of irrigation. Agricultural trade liberalization policies and deregulation in agriculture have increased the use of irrigation equipment and fertilizers, leading to a technological transformation in rice production. The government deregulated and privatized public tube-well installation and removed restrictions on imports of minor irrigation engines and pumps. These policies encouraged the rapid spread of farmers owned and operated small-scale irrigation leading to a significant change in irrigation structure in Bangladesh. The farmers of Bangladesh produce three rice crops per year: Aus, Amon and Boro. Aus is planted in spring and harvested in summer. Amon is usually planted prior to the beginning of monsoon rains and harvested in winter. Boro is planted in winter and harvested in spring or early summer (Hossain and Deb, 2003; Klytchnikova and Diop, 2006). Although all three crops adopted high yielding variety (HYV) of rice and were applying fertilizer widely, only boro had the intensive combination of irrigation-fertiliser-HYV seeds technology. Other two crops, Aus and Amon, needed irrigation insignificantly because of the availability of rainwater during cultivation. Therefore, agricultural trade liberalization and technological transformation influenced boro rice production significantly. Consequently, Boro become the dominant rice crop in Bangladesh in terms of productivity and volume of production.

Source of Information: History Research, 1(1): 1-18, December 2011

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

The findings of this study support that despite the declining share of agriculture in GDP, it played a key role in explaining the rural livelihoods of Bangladesh’s economy. The majority of the working population were dependent on agriculture for their livelihoods. Agriculture was still considered an important sector for its significant contribution to GDP and overall growth of the economy. Rice was an important component of the agricultural sector, because it constituted the major part of the sector’s share in GDP and was the staple food of the economy. Therefore, any policy change that affects rice economy is bound to have important impacts on the welfare of households. The findings and analyses of this study suggest that the change in the welfare of rural households can be attributed to the change in productivity and prices as a result of agricultural trade liberalization. This study found that recent liberalization and reform measures removed various distortions from the agricultural input markets, leading to the increase in farmers’ efficiency and productivity at the farm level. Agricultural trade liberalization improved rice production technology significantly resulting in a noticeable increase in productivity, leading to a sharp decline in producer and consumer prices of rice. These changes affected the welfare of rural households – some appeared as gainers and some became losers due to such changes. Amongst the rural households, net consumers or net buyers of rice experienced an increase in income. On the contrary, net sellers of rice experienced a decline in income. However, the income of poor households increased, which indicates that income growth due to agricultural trade liberalization tends to be pro-poor during 1995-96 to 2000. Thus, amongst rural households, the poor were benefited from agricultural trade liberalization through a greater opportunity for employment and higher wages as well as through an increase in real income by a decline in consumer price. The recent price hike in rice market was largely due to global concerns and speculation rather than production shortage in Bangladesh.

Knowledge Management: Journal