Comments on draft Urban Policy
I recently provided the following comment on the draft National Urban Sector Policy 2011.
As I understand it, this is the first attempt at setting a national urban policy. As such, this is a very commendable step. Of the recommendations, particularly noteworthy are 5.6 Urban Housing and 5.10 Urban Transportation.
It’s also commendable that the draft policy attempts to be comprehensive in its coverage. While the vision and objectives of the policy are hard to argue with, the policy as drafted, with the extensive coverage, does appear to be a set of ‘motherhood statements’ at times. This leads to the meta-comment — instead of covering every aspect of a city, perhaps the policy could be more focussed with concrete action items or milestones to be implemented or achieved in specific time period.
Moving to specific issues, one can argue that the rapid urbanisation Bangladesh is witnessing is an essential part of the economic development process. Over the past generation, per capita income in Bangladesh has doubled, and there has been commensurate increase in other measures of the living standard. Typically, such improvements in living standards are accompanied by rapid urbanisation.
But as Chart 1 shows, urbanisation does not follow a uniform pattern as the economy develops. For example, despite having a much higher per capita income, Thailand is a lot less urban than Indonesia.
Chart 1: Urbanisation vs per capita income
Source: World Bank World Development Indicator.
This raises the fundamental question about whether there is a desirable pace of urbanisation that the Policy should seek to achieve. The government aims to achieve economic growth of 8% for most of the next decade, which would double per capita income to around $3,500 (in purchasing power parity terms). At that level of income, we could have an urbanisation rate of Thailand (around 30%) or Indonesia (around 45%). If one is preferred over the other, then that would obviously affect the National Urban Policy.
Further, the government aims to raise the industry’s share of GDP to about 40% over the next decade. How does this industrialisation relate to urbanisation? The stated Policy objective is to reduce the load on Dhaka and achieve balanced urbanisation. This implies that the government envisages industrialisation to occur outside Dhaka. And Policy Recommendation 5.3 includes a set of ideas supporting this view.
And yet, it’s not clear that the recommendations will actually achieve the desired outcomes. For example, let’s consider the location of garments factories. Readymade garments are manufactured primarily for exports. And the bulk of them are exported through Chittagong port. Then why isn’t the major garments belt near Chittagong port? Are the garments owners irrational?
Of course not. There are good reasons for an individual garments owner to be near other garments factories — the availability of skilled workers, for example. And there are good reasons why most garments owners would want to set up factories near Dhaka — it’s where the banks and government offices are at. And finally, there is a good reason to locate the factories in the northern outskirts of the city — it’s closer to the airport and the suburbs frequented by the expatriates (who include the marketing agents for the importers of these goods).
In and of itself, none of the recommendations in the Policy will change the relationships that have led to the Tongi-Ashulia garments belt. And by extension, it means that the Policy as such risks failure because the employment generation will happen in Dhaka (or nearby areas), and urbanisation will continue to be imbalanced.
That is, the idea that ‘local economic development’ can be assisted by ‘maximum support to small business’ or ‘special zones’ or ‘grants/subsidies’ is not sufficient. If the Policy is serious about urbanisation outside Dhaka, then it will need to tackle economic decentralisation in a much more concerted manner. Particularly, steps will need to be taken to set up communications and financial hubs outside Dhaka.
And economic decentralisation cannot happen without political devolution. In this regards, it’s not clear that recommendation 5.20 Urban Governance is sufficiently unequivocal. The tension between the local MP and upazilla chairman has been well documented over the past couple of years. The point also holds for the local MP and the local mayor. And the Policy skirts the whole issue by simply noting ‘local authorities should be properly empowered’. That is not satisfactory.
For the Policy to be a serious document, a clear articulation needs to be made in terms of the desired pace of urbanisation given the government’s medium term targets around the size and structure of the economy. Given that pace of urbanisation, Recommendations 5.3 and 5.20 will need to be revamped if the stated objective of balanced urbanisation is to be achieved.
(Thanks SS for pushing me on this).