flexibility of what and for whom? jasim uddin flexibility of what and for whom ... mr. mohammad...

BIISS JOURNAL, VOL. 31, NO. 2, APRIL 2010: 101-125

Mohammad Jasim Uddin

FLEXIBILITY OF WHAT AND FOR WHOM?====================================================

Abstract

Flexibility is a theoretical concept that can stand for a range of things.1 Debateon flexibility has been gaining increasing attention over the years for employersand employees. Different literature demonstrate that practice of flexibilityoffers employers a chance to vary workers and working hours according totheir needs, and provides employees with secure jobs, higher wages, fixedworking hour and better working condition. Other studies that describeflexibility as a function of benefits neither for employers nor employees areleast documented. Conversely, increasing evidence indicate that flexibilityoffers diverse opportunities for employers but for employees offers become less.This is also evidenced from various literature signifying that introduction offlexibility may not essentially have significant outcomes for workers’ benefits,particularly when innovations are experienced and executed by employers’unilateral decision without considering workers’ collective voices. Thetransition deteriorates job quality and security for workers and increasesinequalities between demands of employers and employees. Such debate is alsoexperienced in the firms inclined to achieve flexibility through transferringJapanese management practices (JMPs). Taking the ambiguity intoconsideration, this paper attempts to explore: What does flexibility mean toemployers and employees? What indicators may best capture flexibility foremployers and employees? What factors may act to promote a win-winsituation on flexibility for both employers and employees?

I. Introduction:

Since 1980s, many academias have defined flexibility in various respects.Allan Naes Gjerding 2 identifies flexibility as the ability of firms to take

Mr. Mohammad Jasim Uddin is Research Fellow at the Bangladesh Institute ofInternational and Strategic Studies (BIISS), Dhaka, Bangladesh. His e-mail address [email protected],

© Bangladesh Institute of International and Strategic Studies (BIISS), 2010

1 Anna Pollert, “The Orthodoxy of Flexibility”, in Anna Pollert (ed.), Farewell toflexibility?, Oxford: Basil Blackwell, 1991, pp. 3-312 Allan Naes Gjerding, “Work Organisation and the Innovation Design Dilemma”, inBengt-Ake Lundvall (ed.), National Systems of Innovation, London: Pinter Publishers,1992

102 BIISS JOURNAL, VOL. 31, NO. 2, APRIL 2010

advantages of changes in industrial relations systems. Mark Beatson 3 labelsflexibility as the capability of labour markets to counter to changing settings oflabour economics. Michelle Riboud, Caroline Sanchez-Paramo and Carlos Silva-Jauregui4 denote the term as the confiscation of regulations and institutions forsaving workers. Sumita Ketkar and P.K. Sett5 define the notion as the capacity offirms to react to varying competitive advantages over a period of time. Therefore,debate on flexibility has been gaining attention over the years not only foremployers but for employees also. Flexibility for employers is concerned withvarying volume of workers, readjusting working time according to needs, andincreasing employees’ involvement to workplace. By contrast, flexibility foremployees is concerned with securing labour demands.

Laurie Graham6 looks at an auto plant in the US. This study finds thatpracticing flexibility “reinforces unequal power relations between workers andmanagement”7. Therefore, workers find them susceptible to intensified jobs. BillTaylor, Tony Elger and Peter Fairbrother8 examine an electronic firm in Britain,and observe that “management relies on labour turnover as a form of numericalflexibility”9. Therefore, workers are insecure. Vagelis Dedoussis and Craig R.Litter10 look at eight manufacturing firms in Australia, and observe that “bigfirms disseminate information to employees to enable them to perform theirduties effectively rather than to allow them to have significant involvement in

3 Mark Beatson, “Labour Market Flexibility”, Research Series No. 48, EmploymentDepartment, Sheffield, 19954 Michelle Riboud, Caroline Sanchez-Paramo and Carlos Silva-Jauregui, “DoesEurosclerosis Matter? Institutional Reform and Labour Market Performance in Centraland Eastern European Countries in the 1990s”, Labour, Employment and Social Policiesin the EU Enlargement Process Working Paper, Washington: The World Bank, 20025 Sumita Ketkar and P.K. Sett, “HR Flexibility and Farm Performance: Analysis of AMulti-level Causal Model”, The International Journal of Human Resource Management,Vol. 20, No. 5, 2009, pp. 1009-10386 Laurie Graham, “How Does the Japanese Model Transfer to the United States? A Viewfrom the Line”, in Tony Elger and Chris Smith (eds.), Global Japanization: TheTransnational Transformation of the Labour Process, London: Routledge, 1994, pp. 123-1517 Ibid., p. 1248 Bill Taylor, Tony Elger and Peter Fairbrother, “Transplants and Emulators: The Fate ofthe Japanese Model in British Electronics”, in Tony Elger and Chris Smith (eds.), GlobalJapanization: The Transnational Transformation of the Labour Process, London:Routledge, 1994, pp. 196-2289 Ibid., p. 19710 Vagelis Dedoussis and Craig R. Litter, “Understanding the Transfer of JapaneseManagement Practices: The Australian Case”, in Tony Elger and Chris Smith (eds.),Global Japanization: The Transnational Transformation of the Labour Process, London:Routledge, 1994, pp. 175-195

decision making”11. Therefore, benefits emerged from flexibility tend towardsemployers. This is also viewed from a study of James Rinehart, David Robertson,Christopher Huxley and Jeff Wareham12 in a unionized auto assembly plant inCanada, where workers have a voice but not a vote. On the other hand, SimonGleave and Nick Oliver13 find some manufacturing firms in Britain and the USpracticing flexibility and experiencing higher levels of productivity andproviding employees with job security. The study of William Purcell, StephenNicholas, David Merrett and Greg Whitwell14 also finds some positive impact onflexibility for both employers and employees. This study finds somemanufacturing subsidiaries, which recruit varied workers, and ensureconsiderable use of flexible work practices among workers, high levels of jobsecurity and persistent multi-tasking.

Till to date, there is a point of debate amongst academia: whether flexibilityoffers positive-positive or positive-negative or negative-positive outcomes forboth employers and employees. Even, factors responsible to the varied outcomesare also debated. Tony Elger and Chris Smith15 accentuate on positive socialnetwork ties, removal of institutional complexities, and integration of firm.William Purcell, Stephen Nicholas, David Merrett and Greg Whitwell16 stress onbalancing power and ownership, participation and understanding betweenemployers and employees. Scott B. Martin 17 emphasizes on increasing

11 Ibid., p. 17712 James Rinehart, David Robertson, Christopher Huxley and Jeff Wareham, “ReunifyingConception and Execution of Work under Japanese Production Management? ACanadian Case Study”, in Tony Elger and Chris Smith (eds.), Global Japanization: TheTransnational Transformation of the Labour Process, London: Routledge, 1994, pp. 152-17413 Simon Gleave and Nick Oliver, “Human Resource Management in JapaneseManufacturing Companies in the UK: 5 Case Studies”, Journal of General Management,Vol. 16, No. 1, 199014 William Purcell, Stephen Nicholas, David Merrett and Greg Whitwell, “The Transferof Human Resource and Management Practice by Japanese Multinationals to Australia:Do Industry, Size and Experience Matter?”, The International Journal of HumanResource Management, Vol. 10, No. 1, 1999, pp. 72-8815 Tony Elger and Chris Smith, “Global Japanization? Convergence and Competition inthe Organization of the Labour Process”, in Tony Elger and Chris Smith (eds.), GlobalJapanization: The Transnational Transformation of the Labour Process, London:Routledge, 1994, pp. 31-5916 William, op. cit.17 Scott B. Martin, “Network Ties and Labour Flexibility in Brazil and Mexico: A Tale ofTwo Automobile Factories”, in Christopher Candland and Rudra Sil (eds.), The Politicsof Labour in A Global Age: Continuity and Change in Late-Industrializing and Post-Socialist Economies, Oxford: Oxford University Press, 2001, pp. 95-131


competence of firms and worker representations. Markus Pudelko 18 drawsattention to the extent of labour laws and regulations, accords with unions, andpartaking rights to the works councils. Therefore, debate on the factors that maymake flexibility a positive thing for both employers and employees has mainlybeen focused on varied sizes and characteristics of firms placed in diverse localand national locations.

In this backdrop, this paper attempts to explore the following questions:What does flexibility mean to employers and employees? Which indicators maybest capture flexibility for employers and employees? What factors or conditionsmay act to promote a win-win situation on flexibility for both employers andemployees? To address the questions, this paper relies on few-countrycomparisons (small-N case study method) and ‘analytical narratives’, a tool ofanalysing the few-country (such as Brazil, China, Malaysia and Turkey) casesfrom reviewing existing literature. Therefore, transferring Japanese managementpractices (JMPs) to various firms of the few developing countries selected hasbeen a way of looking for the best capturing indicators of, and observing impactson, flexibility for both employers and employees.

The few-country comparisons may enable industrial policy makers, trans- ormulti- national firms, development actors outside government such as employersand employees to explore: (a) how are JMPs exercised in transnational firms? (b)how do employers and employees respond to developments of flexibility? and (c)what factors may influence flexibility for employers and employees Suchinvestigation may facilitate (i) setting up of policies to fabricate macro and microlevel institutional restructuring, and (ii) both transnational companies (TNCs) andlocally-owned firm level practices on flexibility. However, a major handicap inthis paper is dearth of information. Therefore, consultation of existing literaturehas not been enough for analyzing the cases studies. Consequently, manyfindings of this paper may be tentative, and necessitate to be replicated rather in abroader context. It also requires a more comprehensive field based information infuture.

Barring introduction that constitutes Section I of the paper, the researchquestions aforesaid plus few relative ones would be studied in the followingsuccessive sections: Section II: Conceptual Framework that consists of two parts– Basics of JMPs, and Characteristics of Flexibility for Employers andEmployees, Section III: Research Methodology, Section IV: Empirical Evidencethat consists of two parts – Cases Studies on Various Firms and Studies from theFew Developing Countries Selected and A Comparative Look from the CasesStudies, Section V: Cross-country Observations to find out factors challenging to

18 Markus Pudelko, “Cross-national Learning from Best Practice and the Convergence-Divergence Debate in HRM”, The International Journal of Human ResourceManagement, Vol. 16, No. 11, 2005, pp. 2045-2074

flexibility and factors (both internal and external) that may act to promote a win-win situation on flexibility, and Section VI: Conclusion that summarises thepaper.

II. Conceptual FrameworkII.I Basics of JMPs

Since this paper is confined to the discussion of transferring JMPs by variousTNCs in the world under the producer driven value chain (PDVC) 19 , it isimportant to mention rationales of undertaking the JMPs. Attention to the JMPsappears to be more than a passing trend and goes beyond a straightforwardtransplanting of some techniques. 20 During the 1970s, the US and WesternEurope find their economy worsened, while Japanese economy rather maintainshigh growth rate.21 This extracts interest in Japan and also the JMPs because itcan act as the mechanisms for coordination and control of transnationaloperations.22 Behind the interest, many Western observers also keep an importantreason forefront i.e., mode of functioning Japanese firms. A large number ofJapanese firms “function as organic communities in which a strongorganizational culture seems to tie together interests of workers andmanagement”23. In addition to the rationale, others view from various angles.While some emphasize on “Japanese innovations in production and employmenthave themselves been the evolving and varied products of the interactionbetween earlier dominant models”24, others weigh on “universal applicability”25

of the JMPs. Taking the motivations into considerations, JMPs are undertaken

19 The PDVC consists of large Transnational Companies (TNCs), and of basically capitaland technology intensive industries such as automobiles, semiconductors, heavymachineries, etc. Whereas in case of autos, Toyota, for example, continues to command aPDVC, in case of semiconductors, INTEL, for instance, commands this type of chain.20 Ulrich Jurgens, “The Transfer of Japanese Management Concepts in the InternationalAutomobile Industry”, in Stephen Wood (ed.), The Transformation of Work?, London:Unwin Hyman, 1989, pp. 204-21821 E.H. Bax, “Globalization and the Flexibility of Labour: A New Challenge to HumanResource Management”, 1996, available at:http://som.eldoc.ub.rug.nl/FILES/reports/1995-1999/themeA/1996/96A41/96a41.pdf, lastconsulted on 08 March 200922 Adriana Prodan, Catalin Clipa and Anca Clipa, “The transfer of Romanian HumanResource Management practices in Multinational Companies”, MIBES Transactions, Vol.3, Issue 1, 200923 Ibid., p. 324 Tony, op. cit., p. 5525 Anne Caroline Posthuma, “Japanese Production Techniques in Brazilian AutomobileComponents Firms: A Best Practice Model or Basis for Adaptation”, in Tony Elger andChris Smith (eds.), Global Japanization: The Transnational Transformation of theLabour Process, London: Routledge, 1994, p. 348


because they are most often witnessed as role models since they offer “‘bestpractice’ ideas of management from which others can borrow and learn”26.

There are wide varieties of JMPs. One of the important JMPs is just-in-time(JIT), “a method of inventory control in which company keeps parts stocked online for only a few hours of work”27. The JIT is executed “through the techniquessuch as kanban, statistical process control (SPC), etc.”28. Kanban “is based on asystem of cards used by production workers to signal to previous machiningstage when new parts are required for production”29. Conversely, the SPC is “atechnical tool for detecting quality problems”30. In addition to JIT, kanban andSPC, concept of kaizening and total quality management (TQM) are widelyaccepted as JMPs. Kaizening means continuous improvement and addressesteam-based jobs with labours performing varied tasks. By contrast, the TQMbuilt on some aspects such as change, communication, empowerment andimprovement is seen as “generating significant productivity gains, achievingcompetitiveness and improving organisational performance”31.

Within a wide variety of JMPs, quality circles (QCs), Toyota productionsystem, quality control circles (QCCs), suggestion schemes, cellular productionand mini-factories are also well-known. While the QCs “allow andinstitutionalize worker’s participation”32, Toyota production system is focused onwaste-elimination and optimum utilization of human creativity. Whereas theQCCs are concerned with augmenting “worker’s involvement and participationand improving their satisfaction in work organisation”33, the idea of suggestionschemes is “to cultivate company loyalty and pride among employees and tapshop floor knowledge”34. On the other hand, the concept of cellular productionwithin departments is “introduced with workers tending to more than one

26 Chris Smith and Peter Meiksins, “System, Society and Dominance Effects in Cross-national Organisation Analysis”, Work, Employment and Society, 9, 1995, p. 24327 Laurie, op. cit., p. 14028 John Humphrey, “Japanese Methods and the Changing Position of Direct ProductionWorkers: Evidence from Brazil”, in Tony Elger and Chris Smith (eds.), GlobalJapanization: The Transnational Transformation of the Labour Process, London:Routledge, 1994, p. 34429 Anne, op. cit., p. 36830 Ibid., p. 35431 Engin Yildirim, “Modern Management Techniques in the Developing World: The Caseof TQM and Its Impact on Workers”, Work, Employment and Society, Vol. 13, No. 4,1999, p. 70432 Karel Williams, Itsutomo Mitsui and Colin Haslam, “How Far From Japan? A CaseStudy of Japanese Press Shop Practice and Management Calculation”, in Tony Elger andChris Smith (eds.), Global Japanization: The Transnational Transformation of theLabour Process, London: Routledge, 1994, p. 7933 Anne, op. cit., pp. 363-6434 James, op. cit., p. 172

machine”35, while the idea of ‘mini-factories’ focuses on “particular product lineswhere workers have the opportunity to work in cells or teams”36.

Whatever the purview of JMPs it is, vital point is: which aspects of JMPshave been attractive outside Japan37 to have impact on production and flexibilityconcept? One of the significant aspects is level of education combined withselection procedure. 38 A certain level of qualification with a tight selectionprocedure is required for workers to get tasks in production firms. Makingdecision on production problems, quality control, work-flow optimisation, andwork safety is the second aspect. 39 Decision is made through sharing ofknowledge and experience among management, supervisors and ‘shop-floor’workers. This ensures ‘quality circle’40 in manufacturing scheme.

Manufacturing scheme is based on the following rules: “flexibility inutilizing facilities, minimisation of quality problems and production-flow buffers(material- or manpower- or time- buffers)”41. In the scheme, production groupslabour on the law of JIT: ‘zero-buffer process of production management’ thatincorporates “staffing questions and aims at rationalising work process” 42 .Rationalising principle helps in easing of material buffers, manpower andworking-time buffers. Production groups, thereafter, employ themselves inensuring efficacy and developments of work organisation, accompanying withusual practices of supervisors, and increasing product quality. However, securingjobs and employers-employees relations in the overall manufacturing schemetakes prime concern.

With a secured job, employment relations are observed as a vital aspect ofgreater allegiance to firms by employees. 43 By contrast, worker’s success isencouraged by firms through extra pay, promotion and work placement. Thisextends relations between employers and employees. The relations are smoothedby the concept of company union: a sign of compliance, conformity and interestof employee. 44 Within the basics of JMPs, many of the Japanese leading

35 John, op. cit., p. 33236 Ibid.37 Masaki Saruta, “Toyota Production Systems: The 'Toyota Way' and Labour–Management Relations”, Asian Business and Management, Vol. 5, No. 4, 2006, pp. 487-50638 Ulrich, op. cit.39 Masaki, op. cit.40 Ibid.41 Ulrich, op. cit., p. 20842 Ibid.43Yonosuke Ogoshi, “Current Japanese Employment Practices and Industrial Relations:The Transformation of Permanent Employment and Seniority-Based Wage System”,Asian Business and Management, Vol. 5, No. 4, 2006, pp. 469–48544 Ulrich, op. cit.


manufacturing firms have been concentrated to how could employers be flexibleto using labours for higher productivity and how could employees with theirdemands be flexible in work organisation? 45 Now, question is: what doesflexibility mean for employers and employees? Which indicators may bestcapture flexibility for employers and employees? Following discussion attemptsto address the two questions.

II.II Characteristics of Flexibility for Employers and Employees

Flexibility for employers deals with fixing workforce.46 Fixing is attainedthrough deploying peripheral or core workers. 47 Variation in labour inputsincreases rate of labour turnover and poses worker’s job insecure. 48 Rate oflabour turnover is measured by “employers’ ability to adjust on extensive marginthrough engagement and dismissal of employees” 49 . Factually, the lower thecosts linked “with productivity, the higher is the expected turnover” 50 . Bycontrast, whether employers “provide non-compulsory redundancies or writtencommitment to a goal of long-term employment security amongst permanentstaff”51 may give an idea on job security. Therefore, observations on rate oflabour turnover and job security may be important indicators of flexibility foremployees. On the contrary, examining variation in labours employed might be akey indicator of flexibility for employers.

45 Kenichi Kuroda, “Japanese Personnel Management and Flexibility Today”, AsianBusiness and Management, Vol. 5, No. 4, 2006, pp. 453–46846 Heejung Chung “Flexibility for Whom: A New Approach in Examining Labour MarketFlexibility Focusing on European Companies”, paper for International Social SecurityAssociation, 5th International Research Conference on Social Security and the LabourMarket: A Mismatch?, Warsaw, 5-7 March, 2007, pp. 1-3647 “Peripheral workers are those who are semi-skilled or unskilled and numericallyflexible, as a result of short-term contracts, agency hiring and being employed by sub-contractors and those who are part-time and job sharing”. See, Sylvia Walby, “Flexibilityand the changing sexual division of labour”, in Stephen Wood (ed.), the transformation ofwork? London: Unwin Hyman, 1989, p. 130. By contrast “core workers are likely to beskilled and have secure contracts of employment and be employed by particular firms fora long time, unlike peripheral ones”. See, Ibid.48 Laurie Hunter, Alan McGregor, John Maclnnes and Alan Sproull, “The ‘FlexibleFirm’: Strategy and Segmentation”, British Journal of Industrial Relations, Vol. 31, No.3, 1993, pp. 383-40749 Jonathan Michie and Maura Sheehan-Quinn, “Labour Market Flexibility, HumanResource Management and Corporate Performance”, British Journal of Management,Vol. 12, 2001, p. 29450 Ibid.51 Ibid., p. 295

It is accredited that “commitment an employee feels to his organizationreflects to varying combinations of desires, costs and obligations” 52 .Commitment is expressed “as employee’s emotional attachment and involvementto and identification with work organization”53. Secured work environment andconditions (e.g., observations on employee participation, effective process fordispute resolution, and security in employment) may only make committedworkforce available. Therefore, observing involvement or commitment ofworkforce to workplace may be an indicator of flexibility for employers.

Flexibility is attained “by adjusting working hours of workers” 54 . Foremployers “non-standard working hours offer increased staffing flexibility”55.Therefore, “conflict is frequent for workers, whose work schedules arevariable” 56 . Consequently workers demand ‘flexitime’ 57 to have a balancebetween work and private life. While opportunity of choosing working hours isfree, “flexitime allows workers to decide on their starting and completion timefor a given day, provided that they work for a certain number of hours in a givenperiod”58. Therefore, observations on working hours have been an indicator offlexibility for both employers and employees.

Flexibility is by now concerned with capability of firms to fix wages forworkers. Flexibility on wages is measured by an arrangement of collectivebargaining and worker’s conformity. 59 A debate on wage flexibility due tocontinuing diminution of labour costs is that conventional approach of fixing

52 Ian R. Gellatly, Karen H. Hunter, Luanne G. Currie and P. Gregory Irving, “HRMPractices and Organizational Commitment Profiles” The International Journal of HumanResource Management, Vol. 20, No. 4, 2009, p. 87053 Ibid.54 Heejung, op. cit., p. 355 Lei Delson, “Working Time Flexibility: Two Cheers for Regulation, One Cheer for theMarket”, paper presented at the International Conference on Employment and SocialSecurity in the Perspective of Life organised by European Commission, SISWO and HansBockler Stiftung, Berlin, 2004, p. 556 Ibid.57 “Flexitime is a halfway house in terms of structure in that it permits variation inworking hours, but within restrictions. Flexitime can provide flexibility where core hoursare reduced”. See, Peter Reilly, “Types and Incidence of Flexibility”, Flexibility at Work:Balancing the Interests of Employer and Employee, England: Gower Publishing Limited,2001, p. 3558 Yoshio Yanadon and Takao Kato, “Work and Family Practices in Japanese Firms:Their Scope, Nature and Impact on Employee Turnover”, The International Journal ofHuman Resource Management, Vol. 20, No. 2, 2009, p. 44359 Stathis Tikos, “Wage Flexibility: The Case of Greece”, 2009, available at:http://www.eurofound.europa.eu/eiro/studies/tn0803019s/gr0803019q.htm, last consultedon 03 August 2009


wages through collective bargaining is observed as inflexible. Atkinson60 in hismodel articulates that “managers lower workers’ wages as business conditionswarrant and wages are likely to be close to downward and opposed to managers’efforts to lower them”61. Therefore, looking into the levels of wages (whether it ischanging, low, high, fixed or flexible) with regards to changing labour marketscenario is considered as a way of observing flexibility on wages for employees.

Currently, few firms are being interested to communicate information toemployees when daily workload or new arrangement is set up. By contrast,workers urge opportunity of communication to know about the new adjustment.As a result, communication is being associated with “information sharing,influence of consultation, meeting union or consultation about institutionalchange”62. It helps employees to negotiate with management and vice versa touphold a harmonious work environment. Therefore, mode of communication(whether it is vertical or horizontal, brief, highly structured or efficient, extensive,efficiency oriented, open or relaxed, one-way or both-way) is “seen as bedrockupon which flexibility for employees rest”63.

When flexibility for employees is discussed, it is important to note whether“employees are entitled to participate to value-added schemes or team-basedwork”64. Since, efficient labour participation, in turn, offers an opportunity todefine mode of labour representation (top-down or bottom-up, uneven or weak,authoritative or participative) in a firm. 65 The opportunities of labourparticipation and representation entail formation and endorsement of dynamiccapabilities for employees. By contrast, inadequate opportunities raises questionon supervision in a firm. 66 While strict or authoritarian or quasi-managerialsupervision detach relations between shop stewards and shop-floor, flexiblesupervision improves workers’ direct involvement and commitment to workplace.Therefore, observations on participation, representation and supervision may beimperative to examine flexibility for employees.

Whether work environment is wage based or task oriented or characterizedby regulations is crucial for employees.67 In the variation, workers “start feeling

60 John Atkinson, “Flexibility: Planning for an Uncertain Future”, Manpower Policy andPractice, Vol. 1, Summer, 1985, pp. 26-2961 Arne L. Kalleberg, “Organizing Flexibility: The Flexible Firm in a New Century”,British Journal of International Relations, Vol. 39, No. 4, 2001, p. 49862 Jonathan, op. cit., p. 29563 Markus, op. cit., p. 2050; Peter Reilly, op. cit., p. 10664 Jonathan, op. cit., p. 29565 Markus, op. cit.66 Ibid.67 Ibid.

physical and emotional pressure”68. Basically, pressures emerge from the level ofwork intensification generated from incorporating new work systems. Therefore,workers demand “development of work environment, especially ergonomicaspects of manual workplace to minimize stresses”69. Consequently, efforts areadvocated “to make work system more adaptable to meeting diverse humanneeds”70 of workers.

Where overt supervision, limited opportunity of labour participation andrepresentation, sudden labour turnover and wage related conflict are observed,workers attempt to be unionized, whereas employers seek ways to circumventunions. But it is accredited that unions’ involvement to planning and makingdecisions legitimizes labour interests 71 such as “promotion, task distribution,internal mobility, etc.” 72 . Whether there are opportunities of raising voicesthrough unions may also be an indicator of observing flexibility for employees.73

Debate on examining flexibility and characterising indicators or determinantsof flexibility for both employers and employees may be varied from firm to firmin a developed or developing country. However, based on existing literatureaforesaid, employers’ strategies concerning flexibility, and their impacts onemployees’ flexibility, indicators that may best capture flexibility not only foremployers but employees also could be framed under the following framework:

68 Peter Knorringa and Lee Pegler “Globalisation, Firm Upgrading and Impacts onLabour”, Journal of Economic and Social Geography, Vol. 97, No. 5, 2006, p. 47469 Gustavo Abel Carrillo Guzman, “New Production System in Transition: Implicationsfor the Brazilian industry”, Brazilian Journal of Political Economy, Vol. 20, No. 4(80),2000, p. 6170 Ibid.71 Ibid.72 Enrique de la Garza Toledo, “The Crisis of the Maquiladora Model in Mexico”, Workand Occupation, Vol. 34, 2007, p. 41273 Monir Tayeb, “Transfer of HRM Practices Across Cultures: An American Company inScotland”, The International Journal of Human Resource Management, Vol. 9, No. 2,1998, p. 354


Chart 1: Best Capturing Indicators of Flexibility for Employers and Employees

Source: Author’s self initiative

After providing a conceptual framework, immediate essence of this paper isto unveil a methodological discourse on strategy of cases selection, explanationof various firms, justification of undertaking few different developing countriesand matrix of research findings used. Clarifying the issues is the burden of thefollowing section.

By employers On employees

Job security

Rate of turnover

Level of wages

Working hour

Participation level

Variation in labouremployed

Variation in workinghours

Way ofcommunication

Representation level

Mode of supervision

Work environment

Working pressure

Mode of unionism

Mode of employeeinvolvement to workplace

Flexibility

III. Research Methodology

This paper is based on cases studies in consultation with secondary literature.It applies method of few-countries comparisons and uses ‘analytical narratives’, atool of case study method. Few-countries comparisons attain “control throughcareful selection of cases analyzed using a middle-level of conceptualabstraction” 74 . This paper, therefore, has been thorough since it attempts toaddress more of the nuances explicit to each case. By contrast, this paper, withinthe purview of ‘analytical narratives’, takes efforts to employ the term ‘analytic’that “conveys use of a theoretical framework or set of theoretical concepts”75, andthe term ‘narratives’ that “conveys use of historical qualitative and quantitativeevidence”76 for selecting and analysing cases on various firms exercising theJMPs from the different developing countries such as Brazil, China, Malaysiaand Turkey. Finally, this paper compares observations on few-countries based onthe following matrix:

Indicators of flexibility Findings forBy employers

Indicators Brazil China Turkey MalaysiaOn employees

While explanation on different firms and studies observed from the fewdeveloping countries are included in Section IV, just a list of those firms andstudies and their references is given below in a tabular form.

Table 1: List of Firms and Studies Observed

CountriesObserved

Firms and Studies References

Brazil Brastemp in Rio Claro producing‘White Goods’

Lee Pegler77

Reliable/Sao Bernardo plant Scott B. Martin78

China A Japanese-owned electronic plant Bill Taylor79

74 Todd Landman, “Social Science Methods and Human Rights”, Studying Human Rights,Oxford: Routledge, 2006, p. 6675 Lee J. Alston “The Case for Cases Studies in Political Economy”, The PoliticalEconomist, Vol. 12, Issue 4, Spring-Summer, 2005, p. 876 Ibid.77 Lee Pegler, “Employer ‘Dependence’ and Worker ‘Allegiance’ within the Factory ofthe Future: Evidence from Brazil”, School for Social Sciences Working Paper No. 17,Cardiff: Cardiff University, 2001, pp. 2-1978 Scott B. Martin, “The Social Embedding of Flexibility: Contrasting Patterns of WorkerIntegration in Automobile Plants of the Americas”, this paper is a minimally adaptedversion of the introduction to the author’s Ph.D. dissertation, Working in the GlobalFactory: The Social Embedding of Flexibility, which is presented to and accepted by theDepartment of Political Science, 2000, pp. 1-37


A Chinese auto assembly plant Lu Zhang80

Turkey Brisa, a tyre manufacturer company Engin Yildirim81

“Turkish Managers and TQM” – astudy

Power Ekonomy82

Malaysia A Japan-based electronic transplantproducing automated machinery androbots

Jos Gamble, Jonathan Morrisand Barry Wilkinson83

A electronic transplant Yamashita Shoichi84

Source: Author’s self initiative

After providing information on various firms and studies observed in thispaper, immediate essence is to clarify rationale of undertaking four differentdeveloping countries.

Since 1970s, Chinese auto firms have experienced steady growth. Autoproduction has increased from 0.7 million units in 1991 to 7.28 million in 2006.This makes China the third largest vehicle producer and the second largestautomobile seller in the world. 85 On the other hand, Chinese and Japanese“suppliers have fairly complex divisions of labour and technologies, with lower-value-added production being transferred from Japan, higher-value-addedproduction being retained in Japan and production technology in China beingimported from Japan” 86 . Additionally, a resemblance is observed betweenChinese and Japanese firms in terms of union’s role. These extract interests inChina.

79 Bill Taylor, “Patterns of Control within Japanese Manufacturing Plants in China:Doubts about Japanisation in Asia”, Journal of Management Studies, Vol. 36, 1999, pp.853–73; Bill Taylor, “The Management of Labour in Japanese Manufacturing Plants inChina”, The International Journal of Human Resource Management, Vol. 12, 2001, pp.601-62080 Lu Zhang, “Lean Production and Labour Controls in the Chinese Automobile Industryin an Age of Globalisation”, International Labour and Working Class History, No. 73,Spring, 2008, pp. 24-4481 Engin, op. cit., pp. 693-70982 “Turkish Managers and Total Quality Management”, Power Ekonomy, Issue 8, 1996,pp. 69-7183 Jos Gamble, Jonathan Morris and Barry Wilkinson, “Mass Production is Alive andWell: The Future of Work and Organization in East Asia”, The International Journal ofHuman Resource Management, Vol. 15, No. 2, 2004, pp. 397-40984 Yamashita Shoichi, “Japanese Investment Strategy and Technology Transfer in EastAsia”, in Harukiyo Hasegawa and Glenn D. Hook (eds.), Japanese BusinessManagement: Restructuring for Low Growth and Globalisation, London: Routledge,199885 Lu, op. cit., pp. 24-4486 Jos, op. cit., p. 402

From Southeast Asian bloc, Malaysia adopts “a ‘follow-the-leader’ approachand attracts low-cost labour to market potential of manufacturing beyond itsexisting customers”87. This increases Japanese foreign direct investment and jointventure in Malaysia in industrial respect, and, in turn, helps the country to be anemerging developing nation. Additionally, both Malaysian and Japanese firmsentail limited role of unions.

From Eurasian bloc, Turkey with its large domestic market and strategicgeographical position has been experiencing trade liberalization andindustrialization and high economic growth rate.88 With these driving forces, thecountry has by now been a promising country and attracted as an importantinvestment site by many Japanese multinationals. While there were only twoJapanese companies in Turkey in 1982, the number has risen to 34 in 1997.89 Onthe other hand, culture of company union is being practiced by a good number ofJapanese and Turkish firms.

From Latin American bloc, Brazil maintains dynamic potency of a developednation. However, it still contains enormous income disparity, high inflation andinadequate infrastructure. Therefore, it has already been accredited that no singlemodel of management practices entirely suits local conditions of Brazil, exceptadaptation.90 Even after that, a good number of Brazilian auto industries havebeen practicing JMPs, for example, ‘lean model’. On the other hand, role ofunion is significant in many Brazilian auto firms, while unionism is rarelyobserved in few Japanese firms. These extract interests in Brazil.

Therefore, consideration of diverse geographical representation, emergingdeveloping phenomenon and role of union has been a basis of undertaking foursample developing countries – China, Malaysia, Turkey and Brazil. It could herebe noted that unionism has been a factor since until now workers expect role ofunion as an important way of improving basic labour rights. By contrast,employers usually observe unionism as an unfavourable factor to achieve moreflexibility. However, instant essence of this paper is to unearth empiricalevidences from the selected developing countries, which have already transferredand have been practicing JMPs to their firms to observe impacts on flexibility forboth employers and employees.

87 Ibid.88 Engin, op. cit.89 YASED Bulletin, Issue 2, 1997, pp. 7-890 Anne, op. cit.


IV. Empirical EvidenceIV.I Cases Studies on Developing Countries SelectedIV.I.I Case of Brazil

Looking into Reliable/Sao Bernardo plant demonstrates that the plant hasbeen experiencing “breakthroughs toward higher levels of labour flexibility suchas stemmed job loss, flattened job classification hierarchy, extensive multi-tasking, merit pay, flexible workweek, workers’ active participation in makingdecisions, and improving working conditions”91. These facilitate productivity andquality standards of the plant. Such scenario is also observed from Brastemp inRio Claro producing ‘white goods’. Practicing just-in-time and kanban, the firmhas been introducing diversified tasks, shorter workweek, higher wages, reducedsupervision, and new participative mechanisms for workers, lower labourturnover, closer relations between employees and employers, and reduction inhierarchies.92 These accelerate workers’ commitment to workplace and smoothfirm’s productivity. However, judging flexibility with these positivedevelopments could mislead one.

Observations on Brastemp reveal that workers have new tasks but there arestill “fear of substitution, powerlessness, more onerous and highly monitoredwork conditions, and general employer abuse” 93 . Workers are also founddevalued through hire and fire policies, and authoritarian management. Theselead to withdrawal of workers’ cooperation to the firm. Such scenario is alsofound from Reliable/Sao Bernardo plant. Instead of being participative anddemocratic, the plant is still characterised by constraints of performance targetsand penalization of workers, ever-increasing employment insecurity due toautomation, wage differentials between core and periphery workers, inadequateopportunity of communication, participation and representation, extensiveworkload, overt supervision, and less autonomy over labour movements.94

Usually, employers in the two firms observed search issues such as annualperformance, errors in production, strike, recession or hostile environment topenalise workers. The penalisation reduces work stability of labours. Therefore,employers though succeed in retaining profitability and quality circle, workers’cooperation to the firms is limited, and they attempt to be associated with unions.But there is an ambiguity between workers and unions due to market-orientedreforms, inadequate labour laws and attractive offers given by employers. Evenafter that, workers still certify role of unions in collective bargaining andaddressing unusual situations.95

91 Scott, op. cit., p. 992 Lee Pegler, op. cit., pp. 2-1993 Ibid., p. 894 Scott, op. cit.95 Lee Pegler, op. cit.; Scott, op. cit.

IV.I.II Case of China

Looking into a Japanese-owned electronic plant in China studied by BillTaylor96 shows that the plant is employing local young workers and migrants,avoiding ex-state-owned enterprise workers, and recruiting workers directly fromschools, through local government labour agencies, adverts or by word-of-mouth.Therefore, employment of workers with increasing labour turnover has relativelybeen insecure. Although seniority-based higher wages are observed, theopportunity is confined to only core workers. Though employee participationincorporates alleged quality circles, and some evidences of communications andsuggestions schemes are found, decreasing worker allegiance to the plant iswitnessed due to marginalised and often dysfunctional role of union tied byChinese law. Therefore, the plant advances to be routinized and fragmented withconsiderable surveillance and control over both workers and production volumesand quality. However, such contradictory scenario can also be experienced froma Chinese auto assembly plant.

Observations on a Chinese auto assembly plant studied by Lu Zhang 97

unearth a conflicting situation that emerges from ever-increasing division oflabour. In the plant, while proportion of production workers in entire populace offormal employees ranges from 50 to 80 per cent, declining proportion of theformal production workers has been of typical setting due to increasingdeployment of agency workers in production.98 Accepting dualism in workforce(adjusting agency workers usually at unskilled positions in regards to fluctuatingdomestic car market), the plant avoids laying off formal workers, and becomesable to lower labour costs and increase flexibility.99 Although using of duallabour force benefits employers, the dualism results in uneven treatment betweenformal and agency workers, inequality in job security and vulnerability foremployees.

In fact, vulnerability consists of usual long working hours, mandatoryovertime without advance notice, delay in paying for excessive overtime,intensified work, arbitrary exercise of managerial authority, declining real wages,unhealthy working conditions, military-style regimentation and in-humantreatment, and limited opportunity for participation in the plant. 100 Thesemobilize labour forces to address potential workplace bargaining power and urgeemergence of union actions. Although “factory union and party factorycommittees play important role in preventing and mediating conflict between

96 Bill Taylor, op. cit., pp. 853–73; Bill Taylor, op. cit., pp. 601-62097 Lu, op. cit.98 Workers are formal with regular labour contracts. Agency workers are hired by labourservice agencies. They sign labour contracts with the agencies. According to needs, aplant employs or withdraws agency workers sent by the agencies.99 Lu, op. cit.100 Ibid.


workers and managers”101 in the plant, their actions are debated. This is becauseof market reform initiatives of China, and uncertainties on whether union isactually in favour of improving labour rights or self-benefiting ones.

IV.I.III Case of Turkey

Observations on Brisa102, a tyre manufacturing firm, reveal that the firm isimplementing total quality management. It is valuing employees ‘classifyingjobs’103, fixing working hours, providing ‘higher wages’104, paying for overtime,observing errors as a means of improving production, addressing promotionbased on knowledge and length of deployment. It is also ensuring workingcondition, participation, trust, cooperation and communication betweenworkforce and management. Additionally, the firm has accepted moderate role ofunion. These offer workers with more or less secure jobs105, accelerate workers’commitment to workplace, invigorate relations between firm and employees, andstrengthen union’s position and production capability. However, there is stilldebate on wages, rights, rules, policies and other issues.106 Such discrepancy isalso observed from a literature.107

Observation from a study 108 demonstrates that employers still restrainworkers’ participation up to a certain level, for example, in various low profilecommittees so that workers could not perceive more power and influence overmanagement. Moreover, representation of workers is kept related to production,not in making decisions on intensified work, wage differentials or unhealthyworking environment. These result in class struggle between employers andemployees. Therefore, union claims written document of no lay-off policy andurge for reducing workload. But management refuses the proposal. By contrast,there is also a doubt about union’s role. Although union agrees on extendingparticipation in making decision, it factually seems contented with itsparticipation restricted just in various committees. Therefore, union’s role is in

101 Ibid., p. 37102 Brisa is a joint venture of Sabanci Holding (second largest industrial group in Turkey)and Bridgestone (a leading Japanese tyre multinational). It has 1300 permanentemployees, 250 temporary workers and about 500 people employed by conductors. It isunionized. See, Engin, op. cit., p. 694103 Jobs are of two types: non-union jobs (managerial white collar jobs) and union jobs(blue collar jobs). See, Ibid., p. 699104 Statutory minimum wage is about $120 per month. Average wage is about $1100. See,Ibid., p. 699105 Labour turnover rate per annum has been reduced from nearly 8 per cent to below 2per cent. Average service length has risen from 8.6 years to 11.9 years. Some temporaryworkers have been transferred to permanent status. See, Ibid., p. 700106 Ibid.107 “Turkish………”, op. cit., pp. 69-71108 Ibid.

doubt about whether union would escape from being no more than a conventionalcompany union.

IV.I.IV Case of Malaysia

Looking into an electronic transplant (characterized by automation andrelatively high level of quality) studied by Yoshio Yamashita109 show that thetransplant is providing workers with long-term employment, high wage,opportunity for participation and communication. Results of such arrangementsfacilitate simplifying and dividing work into small parts to make speedypreamble of unskilled employees, relations between employers and employees,and developing local productivity.

By contrast, observations on a Japan-based electronic transplant (producingautomated machinery and robots) studied by Jos Gamble, Jonathan Morris andBarry Wilkinson110 reveal that the plant is recruiting young, female, and ruralworkers and migrants; providing relatively low wage (about £75 per month);temporary jobs; and limited opportunity of participation for workers. In the plant,opportunity of employee representation is observed weak, while process ofcommunication is found perfunctory basically through banners, newsletters,slogans, and monthly meetings. These along with high rate of labour turnover(around 6 to 13 per cent per month) result in low-commitment workplace culture,and demand role of union. With limited representation for the deprived workers,role of union is also found even more complex owing to union avoidance policiesof government. Therefore, a clear ambiguity on flexibility for both employersand employees is observed.

Since workers are becoming valuable asset to work organization, basicdemands of labours are major concerns for employers. Therefore, employers’attitude to workers is very essential so that workers can be secure. However, theprevious cases studies give a chaotic situation on flexibility for both employersand employees. Following discussion attempts to provide a comparative look onthe cases studies.

IV.II Impact on Flexibility: A Comparative Look

Generalizing the fact that whether transferring JMPs increases changes onflexibility for both employers and employees is challenging. Therefore, this papermakes a comparison i.e. a comparative table (see Table 2) based on the casesstudies and flexibility indicators for employers and employees derived fromconceptual part.

109 Yamashita, op. cit.110 Jos, op. cit.


Table 2: Findings’ Matrix: Transferring JMPs and Its Impact on FlexibilityIndicators

FlexibilityIndicators

Brazil China Turkey Malaysia

ByEmployers

Labouremployed

Growing useof secondarylabour

Rising use ofperipheral labourfrom counties

Core labourseems to beusedincreasingly

Increasing use ofperipheral andforeign migrants

Variation inworking hour

Varied andextended

Highly varied andextended

Varied but fixedfor each shift

Increasinglyvaried

Mode ofemployeeinvolvement inworkplace

Not so muchinvolved

Involved just infew firms, othersnot

Going to befairly involved

Involvementseems to bedecreased

OnEmployees

Job security Seems to beinsecure

Insecurity hasbeen increased

Seems to besecure

Seems to bequite insecure

Rate of labourturnover

Going to behigh

Seems to berelatively high

Turnover hasbeen reduced

Turnover hasbeen very high

Level of wages Increasing butstill low

Decreasing interms of realwages

Seems to berelatively high

Minimal andlow in manyfirms

Working hour Seems to beunstructured

Long with forcedovertime

Seems to befixed

Going to beunstructured

Participationlevel

Implicitlybargaining

Seems to bealmost limited

Open but stillinadequate

Appears to beweak

Way ofcommunication

One-way One-way andhierarchical

Almost both-way

Perfunctory

Representationlevel

Uneven inmany firms

Rather uneven inmost of the firms

Tends to bestrong

Going to bemore weak anduneven

Mode ofsupervision

Seems to benew style butstill overt

More or lesstraditional andstrict

Quasi-managerial

Stillauthoritarian

Workenvironment

Tedious Irksome Improved Monotonous

Work pressure Have beenIntensified

Have been veryintensified

Seems to befairly intensified

Highlyintensified

Mode ofunionism

Unions’ rolehave beenfocused less onlabour rights

Going to be lessfunctional inmany firms

Union’s role hassteadily beenincreased

Role of unionseems to bevulnerable

Source: Author’s self initiative. This is an average result having support fromobservations on firms and studies included in Table 1.

It is obvious from Table 2 and discussions given in cases studies that transferof JMPs has not worked evenly. Sometimes, employers are gaining through usinglabours and working hours varied. At times, employers are facing problems withworkers’ commitment to workplace. By contrast, employees in somewhere areenjoying their jobs with expected demands. But in most of the times, they are introuble with securing jobs and establishing labour rights. This impedes trust andbalance of power between employers and employees. Therefore, consideringfirms and studies from Brazil, China, Turkey and Malaysia express that transfer

of JMPs offers changes on flexibility indicators: almost positive for employers,but negative and in some cases positive for employees.

While objective of this paper is not to study causes of the variation, it is atleast important to look for some causal explanations. Otherwise, addressing whatfactors or conditions may make flexibility a positive thing for both employersand employees would not be an easy task.

V. Factors Influencing FlexibilityV.I Factors Challenging to Flexibility: A Cross-country Observation

Observations on the Brazilian firms reveal some factors that are challengingto flexibility for both employers and employees: difference in managementstructure, ability to introduce new technique, partial or selective adaptation ofnew organisational technique, and form of competition prevailing in varioussectors. Additionally, there are some practical causes for non-identical results onflexibility. These are: existing social relations or network ties in which changestake place; particular local and regional agglomerations (for example, sectors,clusters, chains, etc.) of firm; capability of firms; comprehensive understandingand evaluation of relevant management model; possible transferability ofmanagement practice and context of coordination; degree of labour laws andregulations; contractual agreements with unions; and workers’ participationrights.111 These lead to workers’ deprivation, and impede to go beyond zero-sumconflicts over flexibility for both employers and employees.

The scenario aforesaid is not only observed in the Brazilian firms but alsoobvious in the Chinese and Malaysian firms. Bill Taylor112 and Lu Zhang113 inthe Chinese firms find some factors that are challenging to flexibility for bothemployers and employees. The factors are: control mechanism (ill-suited toaffiliates in China) of JMPs, lack of workers’ involvement to workplace, limitedcareer opportunities, limited information flows, and lack of appraisal andperformance assessment. By contrast, Jos Gamble, Jonathan Morris and BarryWilkinson 114 and Yamashita Shoichi 115 in the Malaysian firms unearth fewfactors such as non-reciprocity, low-trust and low-commitment HRM policiesand practices, and lack of ‘company ownership’. As a result, way ofcommunication has been limited, top-down and one-way, and workplace hasbeen insecure and fragmented for employees. Therefore, immediate essence ofthe following discussion is to unearth factors that may promote a win-winsituation on flexibility for both employers and employees.

111 Lee Pegler, op. cit.; Scott, op. cit.112 Bill Taylor, op. cit.113 Lu, op. cit.114 Jos, op. cit.115 Yamashita, op. cit.


V.II Factors that May Make Flexibility A Positive Thing

It is accredited that transferring process of a management practice “does notend with adoption of formal rules describing the practice, but continues until therules become internalized at subsidiary”116. In fact, an effective adoption relies ondegree of institutionalization of the management practice at two levels: (i)implementation stage when employees just follow prescribed regulations, and (ii)internalization stage reached when employees have loyalty “to the new workpractice, and acquire perceptions of ownership of the newer workarrangements”117. Although “macro contextual conditions (e.g., lack of a clearand stable industrial policy) may constrain pace of adoption rather than supportimplementation of the two prescriptions” 118 , they could make flexibility apositive thing for both employers and employees. This prescription could beundertaken if objective of achieving flexibility is through transferring of aspecific management practice. But in a broad-spectrum, what factors orconditions may turn flexibility into an optimistic phenomenon for both employersand employees need to be categorised.

Factors (Internal and External) to Promote A Win-win Situation on Flexibility

There are inadequate literature that clearly separate internal and externalfactors that can act to promote a win-win situation on flexibility. According to aset of literature, internal factors include changing perception of flexibility,making mutuality in work and developing trust between employers andemployees, and introducing new labour laws. By contrast, external factorsinclude developing role of trade unions and civil society organisations (CSOs),and bringing the drive of CSR (corporate social responsibility) to light.

From the internal factors, it is initially important to change perception offlexibility that may facilitate “setting up of policies in which flexibility couldonly be traded off with security measures, and accommodate a mutual flexibilitygoal”119. This would possibly ensure that both employers and employees may notbe at odds with each other. In making mutuality and developing trust, employershave to look for ways out to fix patterns of working and flex supply of labour.120

By contrast, employees and their representatives need to realize a changeundertaken by employers. In dealing with the change effectively, employers infact need to attain trust of workforce. The trust could be secured when both

116 Wolfgang Stehle and Ronel Erwee, “Transfer of Human Resources Practices fromGerman Multinational Enterprises to Asian Subsidiaries”, Research and Practices inHuman Resources Management, Vol. 15, No. 1, 2007, p. 67117 Ibid.118 Gustavo, op. cit., pp. 64-65119 Heejung, op. cit., p. 25120 Peter Reilly, op. cit.

employers and employees anticipate that their demands would be valued and theywould not be intentionally hurt.121

In addition to the factors aforesaid, introducing new labour laws may offeremployers a directive to categorize essential practices on which they could focuson securing long-term employment relations not only with primary but secondaryworkers also. This could facilitate to respond to rising labour abuses and protectworkers’ rights. As an instance, Chinese New Labour Contract Law 2008 thatpledges employment security to workers could be undertaken. The Law favourslong-term employment contract in lieu of short-term pact that could easily beterminated. It specifies the contract that “must be put in writing within a monthof employment”122. It controls undue employ of periphery workers. Moreover,the Law makes unnecessary dismissal of workers harder. Therefore, employeesget a bargaining opportunity for an open-end contract with employers, and attainemployment guaranteed.

The internal factors abovementioned would not be fruitful if pressures do notcome from other stakeholders. From the external factors, unions, within thedomain of CSOs, may reasonably put pressure on employers to ask improvedwork environment and partake in a bargaining united to secure workers’ jobs.123

Empirical studies also make evidence available supporting unions’ presence tolengthen and stabilize employment relations and reduce labour turnover.124 Sinceunion’s representation and collective input is associated with both “employeeturnover rates and productivity” 125 , it may increase performance of a firm.Therefore, reciprocal achievements to labours and their firms call for “a uniquecombination of recognized and representative unions and workers, showingallegiance to both firms and unions”126.

Besides, a potential line of debate is developed by several scholars127 whoemphasize potentially optimistic impact on workers throughout the drive of fair

121 Ibid.122 Lu, op. cit., p. 44123 Mark Anner, “Forging New Labour Activism in Global Commodity Chains in LatinAmerica”, International Labour and Working Class History, Vol. 72, Fall, 2007, pp. 18-41124 Lee Pegler, op. cit.125 Ibid., p. 17126 Lee Pegler and Peter Knorringa, “Integrating Labour Issues in Global Value ChainAnalysis: Exploring Implications for Labour Research and Unions”, in Verena Schmidt(ed.), Trade Union Responses: A Review by the Global Union Research Network,Geneva: International Labour Office, 2007, p. 43127 Mick Blowfield, “Ethical Trade: A Review of Developments and Issues”, Third WorldQuarterly, Vol. 20, 1999, pp. 753-770; Stephanie Barrientos, Catherine Dolan and AnneTallontire, “A Gendered Value Chain Approach to Codes of Conduct in AfricanHorticulture”, World Development, Vol. 31, 2003, pp. 1511-1526; Deirdre Shaw, TerryNewholm and Roger Dickinson, “Consumption As Voting: An Exploration of Consumer


trade, CSR, ethical sourcing, and the related initiatives. Better CSR might bepromoted “to help bolster an argument that better labour rights are good businessand to put forth the argument that unions should be a more significantstakeholder in the CSR” 128 . Perhaps Ethical Trading Initiative is a well-recognized instance of the CSR. In the initiative, “a group of well-known brandname firms work together with trade unions and NGOs to ensure that labourconditions meet or exceed international labour standards” 129 . There are fewrecent studies (such as the study of Stephanie Barrientos, Catherine Dolan andAnne Tallontire130) on ethical trade indicating “that such international labourstandards are successfully met for core workers, but that the picture becomesmore variegated for workers indirectly employed” 131 . Furthermore, whereasethical trade can lead to developments in labour conditions, constructive codes ofconduct on labour standards can push out well employers who offer irregular aswell as lower wages to non-standard workers. However, prime task of CSRshould be “to support ongoing struggle by workers in developing countries andtheir collective action representatives, whether unions or NGOs, in an effort toincreasingly implement decent work agenda of International LabourOrganisation”132 so that notion of flexibility could emerge as a positive thing forboth employers and employees.

VI. Concluding remarks

Based on characteristics of flexibility and observations on cases studies andmatrix of findings, it has been obvious that flexibility for employers is concernedwith three things: variation in labour employed, variation in working hours, andmode of employee involvement to workplace. In other words, these three thingsmay be the best capturing indicators of flexibility for employers. On the otherhand, flexibility for employees is concerned with a set of things: job security, rateof turnover, level of wages, working hour, participation level, way ofcommunication, representation level, mode of supervision, work environment,working pressure, and mode of unionism. In any circumstance, these notions mayotherwise be the best capturing indicators of flexibility for employees.

On the basis of the indicators of flexibility for both employers and employees,the notion of flexibility for both parties in a transnational firm of a developingcountry behaves in a different way, sometimes positive for employers butnegative for employees, and occasionally positive for both. In the variation, there

Empowerment”, Mimeograph, Glasgow: Glasgow Caledonian University, 2005; PeterKnorringa, op. cit.128 Lee Pegler and Peter Knorringa, op. cit., p. 45129 Peter Knorringa, op. cit., p. 476130 Stephanie, op. cit.131 Ibid., in Peter Knorringa, op. cit., p. 476132 Peter Knorringa, op. cit., p. 477

could be some additional factors that may also have an impact on flexibility. Forexample, structure and role of government, and role of trade unions in Brazil arequite different than that in China, Malaysia and Turkey. By contrast, marketreforms initiatives to increase level of productivity, flow of foreign directinvestment, and particularly national labour laws are far different in thedeveloping countries. Therefore, some specific factors that may make flexibilitya positive thing for both employers and employees need to be focused.

If objective of achieving flexibility is through transferring any managementpractice, adoption of formal rules describing the transfer process and practice,and then internalization of the rules at any firm need to be prioritized. On theother hand, within the list of internal factors, changing perception of flexibility,making mutuality in work and developing trust between employers andemployees, and introducing new labour laws are very important. By contrast,from the external factors, developing role of trade unions and civil societyorganisations (CSOs), bringing the drive of CSR to light, forcing the initiative offair trade, ethical sourcing, and the related drives, constructive codes of conducton labour standards, and decent work agenda of the ILO are also very crucial.Only the effective execution of the internal and external factors aforesaid may actto promote a win-win situation on flexibility for both employers and employees.


Nasreen Ghufran

AFGHAN MIGRATION: THREAT OR OPPORTUNITYFOR PAKISTAN?=====================================================

Abstract

Pakistan has been hosting Afghan refugees over three decades now. Whilearound 3.5 million Afghans have repatriated to their country in recent years,around an estimated 1.7 million registered refugees, are still residing inPakistan.133 There have been many studies about Afghan refugees burdening theeconomy of Pakistan and becoming a security threat for the host. However, onedoes not come across much research enquiring whether they have actually beena threat or an opportunity. Largely perceived as threat, one cannot overlook howrefugees provide political or economic opportunity for a host state and how theycontribute positively to the social structures. Most writings about refugeeshighlight the tribulations they create for the receiving state; however, thegovernments do not present the flip side of refugees, neither to their own peopleor the international community regarding the prospects they bring for the host.This paper analyzes the threat and opportunity dimensions of Afghan refugees inPakistan. Why the refugee issue as a threat has been highlighted whereas itsopportunity under narrated? Have the refugees been an economic burden orasset? Have refugees contributed to social ills of Pakistani society or have theyimpacted positively? Answering all these questions is expected to provide abalanced view of Afghan refugees in Pakistan in the paper.

1. Introduction

Afghans and Pakistanis have been moving across the Durand Line (Pak-Afghan border) since time immemorial, and have never been considered as

Nasreen Ghufran is currently a professor in the Department ofInternational Relations, Pashwar University, Pakistan. Her email no is :[email protected]

© Bangladesh Institute of International and Strategic Studies (BIISS), 2010.

133Nasreen Ghufran (2009), Afghans in Pakistan: Plight, Predicament andthe Way Forward, Roundtable Conference, Institute of Policy Studies,Islamabad.

refugees. They were termed as seasonal migrants who came with their family andstayed till the winters were over in Afghanistan. This movement was nevercontroversial and was not seen in the refugee framework. It was the Sovietintervention in Afghanistan in December 1979 that led to massive influxes intoPakistan. This was forced migration as distinct from the earlier movementsacross the border.

Pakistan is not a Contracting Party of the 1951 UN Convention Relating tothe Status of Refugees, (hereafter referred to as the 1951 UN Convention),therefore, initially it had difficulties in housing large number of refugees withoutany legal protection. Politically, the country was receptive to Afghan refugeesand welcomed them. It justified its action in providing shelter and refuge to theserefugees on the basis of religion (Islam) and humanitarian grounds. Thegovernment opined that Islamic duty requires them to offer safe haven to fellowMuslims, facing persecution in their home countries. In comparison with manyasylum countries, Pakistan has been liberal as it has allowed Afghan refugeesfreedom of movement within the country, where they can work and do smallbusinesses to earn their livelihoods. This openness on the part of Pakistangovernment reflected that Afghan refugees were initially not considered a threatto either their security or economy. Pakistan’s Afghan policy played a major rolein welcoming millions of Afghans on its soil and using these refugees forpolitical and strategic purposes.

Barring introduction and conclusion, the paper is divided into four sections.The second section discusses Pakistan’s Afghan policy toward refugees. Thethird second assesses the local perception of the Afghan refugees. The fourthsection evaluates whether Afghans have been an economic burden or not andlastly how they have impacted on the society. An objective and balanced analysisof both the perspectives will enable the policy makers in both Pakistan andAfghanistan to chalk out a pragmatic policy to resolve the problem of refugees.

2. Afghan Refugees: Strategic Asset for Pakistan’s Afghan PolicyAfghan refugees pouring into Pakistan through the long, permeable frontier

provided an opportunity to policy makers to pursue their desired policy inAfghanistan with renewed vigor. The refugees came to be regarded a strategicasset and a foreign policy tool utilized in the larger interest of the host country.The humanitarian crisis turned into a political blessing as refugees came to attractlarge foreign assistance, leading to aid inflows which were used by Gen. Zia-ul-Haq to contain Soviets in Afghanistan and pursue his Islamist agenda bysupporting the mujahideen resistance. Commonly perceived as a securityconcern, Afghan refugees were said to have placed an enormous financial burdenon the limited resources of Pakistan, however, the country opened itself andwelcomed massive numbers to settle in the adjoining provinces of NWFP (nowknown as Khyber Pukhtunkhwa) and Balochistan. Pakistan accepted the


responsibility of providing these afflicted people with shelter and basicnecessities of life as a humanitarian and Islamic duty. The generous help receivedfrom friendly countries and international humanitarian organizations, particularlythe UNHCR and the International Red Cross(IRC) was deeply appreciated.

The military regime of General Zia-ul-Haq was politically fragile and lackedlegitimacy to confront the situation alone and without any external support.Moreover, India’s friendship with Afghanistan further complicated the situation.The Soviets had supported both Afghanistan and India in their disputes withPakistan. General Zia cashed the situation by playing the ‘frontline state’134 and

134 Rasul Bakhsh Rais (1997), War without Winners: Afghanistan’sUncertain Transition after the Cold War. Oxford University Press, Karachi.236-238

supporting the Afghan Islamic resistance forces against the socialist regime ofPeoples Democratic Party of Afghanistan (PDPA). Mujahideens were seen asallies by the US in containing the Soviets in Afghanistan. The political andstrategic interests of Pakistan, the US and the mujahideen converged― undoingthe Soviet intervention of 1979 and installing a regime in Kabul, catering to theneeds of all the parties involved. The partnership between the US and Pakistanwas one of many instances of cooperation serving complementary interests. Forthe United States, it served the primary purpose of expanding the scope of thepolicy of containment; for Pakistan it served primarily the purpose of increasingits political, military and economic potential vis-à-vis its neighbor, i.e., India andthe Soviet-backed Kabul government. General Zia, who was the architect of thenew alignment, explained Pakistan’s motives in cooperating with the US in thesewords, “Our main and prime objectives are to keep out the Soviet Union andAfghanistan in the north and to safeguard the safety and security of Pakistanfrom Indians in the east.”135

The US Central Intelligence Agency (CIA) started supporting the resistancecovertly through its ally― Pakistan. The Inter-Services Intelligence (ISI) agencybecame the main arbiter of Pakistan’s Afghan policy as funds were channelizedthrough it. During the years 1982-1987, the United States had provided $7.4billion economic and military assistance to Pakistan to fund a massive militarybuild-up. The modernization program included improved warning andcommunication systems, anti-tank missiles, ground attack aircraft, tanks, andarmored personnel carriers.136 Pakistan’s security was further enhanced by theemergence of a broad coalition of international forces supporting Islamabad’seffort to expel the Soviet forces from Afghanistan.137 Their goal according to thelate Pakistani Prime Minister, Benezir Bhutto, was to “radicalize the influence ofreligious factions within Afghanistan.” 138 Furthermore, the internationalassistance which began to pour into Pakistan for the Afghan refugees and

135 A.Z. Hilal (2005)i, US-Pakistan Relationship: Soviet Invasion ofAfghanistan (US Foreign Policy and Conflict in the Muslim World, AshgatePublishing Limited, England. 193

136 Ibid.

137 War without Winners: Afghanistan’s Uncertain Transition after theCold War. 38

138 Khushal Arsala & Stephen Zunes. “ The US and Afghan Tragedy”posted February 18, 2009 www. fpif.org retrieved August 20, 2010


mujahideen helped General Zia to stabilize his military regime, neutralize hisdomestic opponents and assume a central position in regional power politics.

Pakistan tried to organize political parties of Afghans139 on its soil and theassistance went to these parties through the ISI that further distributed the aid inthe refugee camps. Political analysts criticized Pakistan’s grooming of Afghanresistance parties and perceived it as a negative policy on the part of the militaryregime. Before December 1979, the Pakistani based Afghan parties and refugeeorganizations had no public following to speak of. In order to have support fromthe refugees, these parties brought in a new law which required that all Afghanrefugees should register with one Afghan political party or another. As a rule, arefugee had to be registered with one of the parties to get food rations. Peoplewho were unregistered did not get rations and thus could starve or have anextremely difficult time keeping themselves and their children fed.140 The refugeecamps became "places where the Mujahideen (guerrillas) could return for restand see their families", writes Brig Mohammad Yousaf in his book, The BearTrap. He further declared that the camps were “a huge reservoir of potentialrecruits for jihad.”141

139 Mahaz-Milli-yi Islami-yi Afghanistan (National Islamic Front ofAfghanistan, NIFA), headed by Pir Sayyid Ahmed Gilani;Jabha-yi Nijat –I-Milli-yi-Afghanistan (Afghanistan National Liberation Front, ANLF) led bySibghatullah Mujaddidi; Harakat-I-Inqilab-I-Islami-yi-Afghanistan(Movement of the Islamic Revolution, HAR) led by Maulwi MuhammedNabi Muhammedi;Hizb-I-Islami-yi-Afghanistan (Islamic Party ofAfghanistan, Hikmatyar, HIH) led by Gulbadin Hikmatyar; Hizb-I-Islami-yi-Afghanistan (Islamic Party of Afghanistan, Khalis, HIK) led by Yunus Khalis;Jamiat-yi-Afghanistan (Islamic Society of Afghanistan, JIA) led byBurhanuddin Rabbani and the last of the seven parties was

Ittihad-I-Islami Bara-yi Azadi-yi-Afghanistan (Islamic Union for theFreedom of Afghanistan, ITT) led by Abdul Rasul Sayyaf.

140 Raja Anwar (1988), The Tragedy of Afghanistan: A First Hand Account.Verso London-New York. 238

141 Azhar Hassan. “Refugee Crisis: Revisiting Afghan Diaspora”, PakInstitute for Peace Studies, July 30, 2007

A considerable number of Afghan refugee orphans entered the network ofmadrassas of the NWFP, especially in tribal areas where they were supported ascharity by Islamic organizations. The Jamiat Ulema Islam (JUI), a longestablished Pakistani political party led by Maulana Fazlur Rehman, establishedmadrassas specifically for the orphans of the Afghan jihad. While on surface, itseemed a humanitarian act on the part of the JUI, but it used these verymadrassas to serve and further the political interests of the party. The JUI had itsstronghold in the frontier Pushtun and Baloch regions where it regularly secureda greater vote in elections than did the more prominent Jamat-I-Islami foundedby Maulana Abu Ala Maudidi.142

At the same time, Pakistan propagated that the military presence of theSoviets in neighboring Afghanistan produced a threat and made it insecure vis-à-vis a super power, which was believed to pursue an expansionist policy in theregion. 143 Intervention by a large powerful neighbor into a small and weakcountry was in violation of the norms of international law; secondly, thedisappearance of a century old buffer state and the advance of a superpower tothe Pakistan border made the Soviet threat more credible; thirdly, the ambivalentIndian response to the Soviet action increased Pakistan security concerns andfourthly, the influx of Afghan refugees into Pakistan and Iran made it prone toSoviet attacks. 144 This sense of insecurity was compounded by its own ethno-linguistic divisions (the Punjabis, Sindhis, Pushtuns and Balochis), which haveleft an indelible impact on its political and social structures. These divisions haveexposed the country to several externally backed secessionist threats, particularlyby Pushtuns and Balochis, who had been supported by Afghanistan in the contextof the country’s border dispute with it.145

142Ralph H. Magnus and Eden Naby (1998), Afghanistan: Mullah, Marxand Mujahid. Westview Press-Pak Book Corporation, Pakistan. 179

143 Amin Saikal and William Maley eds. (1989), The Soviet Withdrawalfrom Afghanistan, Cambridge University Press, New York, 1989 p.53I

144 Agha Shahi (1987), “Pakistan’s Relations with United Sates.” in Soviet-AmericanRelations with Pakistan, Iran and Afghanistan, edited by Hafeez Malik; Macmillan Press,London..370-375145 Nasreen Ghufran (2009), ‘Pushtun Ethnonationalism and the TalibanInsurgency in the North West Frontier Province of Pakistan’ Asian Survey,Vol.XLIX, No.6 November/December, Berkley, University of CaliforniaPress, 1095-1099


Therefore, the spillover security effects of the Soviet war in Afghanistanwere there due to the presence of refugees and guerrilla fighters. However,looked at from a different angle, the security threat was there even if refugeeshad not come to Pakistan. Given the historically “free” character of the tribalareas and the porous border, Pakistan was in no position either to stop the inflowof refugees or to effectively control the movement of guerrillas from and toAfghanistan. The active military involvement of a superpower in support of anarrow-based regime increasingly hostile to Pakistan presented difficult securityproblems.146

The threat factor was highlighted to receive political and economic supportfor mujahideens, who were then supported by refugees. Thus refugees came to beused in advancing its political goals of Afghan policy. The security risks andcosts were conveniently ignored during this period. Neither the authorities northe general public considered them a major security threat. Rather they perceivedthe refugees as ‘insecure and vulnerable’ populace who needed Pakistan’s andthe international community’s protection.

Although the termination in February 1989 of direct Soviet militaryinvolvement in Afghanistan removed the security threat to Pakistan, theunfinished war continued to occupy a central place on Islamabad’s diplomaticagenda. New streams of Afghan refugees trickled into Pakistan as the internalconflict intensified after the Soviet withdrawal. As long as the Najibullah regimeremained in power, Pakistan continued to support its removal through the Afghanresistance, and continued to bear the burden of refugees. 147 Most of theserefugees were politically connected to the various competing resistance partiesand had direct access to arms.

Taliban force, a creation of madrassas took over Kabul in 1996. Pakistan’srecognition of the Taliban regime led to its political isolation not only in theregion but also internationally. Pakistan’s relations with Iran came under greatstrain, as the Sunni dominated Taliban were not liked by the Ayatollahs of Iran.Russia and Central Asian Republics (CARs) were concerned over the extremereligious views of Taliban. The possibility of Taliban’s rigid religious valuesspilling over into Pakistan increased. Pakistan recognized Taliban in the hopethat peace would return to Afghanistan, and that others would follow suit. Theyfurther believed that the route to Central Asia would open and the Afghanrefugees would start going back to their country. Unfortunately none of theseassumptions came true. During this period, Pak-US relations nose-dived. Osamabin Ladin and his Al-Qaeda network operating in Afghanistan, became the target

146 War Without Winners. .237

147 Ibid. 239

of USA. Taliban were condemned for harboring Al-Qaeda. Pakistan’s connectionwith Afghanistan during Taliban’s rule earned her worldwide condemnation,which it could not afford politically.148

Pakistan continued to support the Taliban politically and militarily in aneffort to establish a friendly, if not client, Pushtun-based regime in Afghanistan.Pakistan's long-standing policy of supporting Pushtun political forces inAfghanistan was generated from a belief that such a government could providePakistan with strategic depth vis-à-vis India and quell Pushtun nationalist forcesat home. The concept of “strategic-depth” has been much debated and criticizedbut even the present army chief General Ashfaq Pervaz Kiani stated in February2010 that, “we want strategic depth in Afghanistan.”149 This reflects that theconcept is still very much alive in the military circles, and that Afghanistanremains strategically important for Pakistan.

Pakistan joined hands with the US in its war against terrorism after the 9/11terrorists attacks, thereby changing its pro-Taliban policy. Talibans were soonousted from power and a transitional government of Hamid Karzai supportedboth by the US and Pakistan was installed in December 2001 through the BonnAgreement in Germany. Between mid 2000 and early 2001, the largest influx ofAfghan refugees in several years, an estimated 170,000 new arrivals – crossedinto Pakistan. As the influx developed, Pakistani officials feared that the ongoingconflict in Afghanistan and the effects of the worst drought to hit that country in30 years might result in a much larger number of Afghans heading to Pakistanthan actually arrived. That fear was exacerbated by Pakistan’s concerns about itsfaltering economy, resentment toward the international community for itsdiminished interest and assistance to Afghan refugees, changing attitude oflocals towards refugees by and the appointment of Iftikhar Hussain Shah asgovernor of NWFP, who was dubbed to have anti–refugee sentiments. Thecombination of these factors resulted in what a UN refugee official called an‘irreversible and qualitative’ change in Pakistani government attitudes, policies,and actions toward Afghan refugees.150

148 Derek Brown (2001), “What the Pakistan Papers Say,” http://media.guardian.co.uk/ press review/ September 21, retrieved January 6, 2005

149 Zahid Hussein, “Pakistan Spells Out Terms for Regional Stability.”Dawn, February 2, 2010

150 USCR interview with UNHCR representative Hasim Uktan, Islamabad,June 2001. See for details Pakistan: Afghan Refugees Shunned andScorned. .5


However, after the passage of 9 years, peace and tranquility has not returnedto Afghanistan despite an elected president and parliament. The neo-Talibaninsurgency continues, which has sympathizers among the residual Afghanpopulation in Pakistan. Afghan refugees who are supportive of the insurgencyare being exploited by various agencies (both Pakistanis and international) topursue their anti-American agenda ― removal of international forces fromAfghanistan and the puppet regime of Hamid Karzai. Pakistan started adoptingstrict measures against the refugees in the wake of these developments, and hasbeen pursuing a steady policy of Afghan repatriation with UNHCR’s assistancesince 2002, but there is no denying the fact that these refugees have been used asa foreign policy tool by Pakistan in making alliances and pursuing its objectivesin Afghanistan. The strategic importance of refugees may have waned over theyears, but it has not vanished and therefore is on and off used as a bargainingchip in negotiations with the international community and Afghan government.

3. Local Perception of Afghan Refugees― Threat or Opportunity?

Most of the Afghan refugees fleeing from their country settled in twoprovinces of Pakistan ― NWFP and Balochistan. They settled in other parts too,but these two provinces housed majority of the refugee camps. Friction betweenthe local and refugee population has been expected ever since the massive influxtook place. However, the local population has demonstrated no major hostility sofar. There was more tolerance of refugees in 1980s in comparison with the 1990s.They were not perceived as economic or social threat. They were treated asMuslim brethren who were in need of support and refuge, and the locals willinglyprovided these to the displaced population.

In a nationally representative survey conducted in April 1980, 87 percentrespondents said that the government of Pakistan must help the Afghan refugees.A follow up question in the same survey educated the respondents on thepossible cost of supporting the Afghan refugees. This was an attempt to see ifthey would revise their views in that light. Only 3 percent became reluctant tosupport the Afghan refugees when they were told it could provoke Soviethostility151

This public opinion survey was repeated in 1982, 1983 and 1984. There wasa slight decline in public support for the Afghan refugees, but it remainedoverwhelming high. The survey in 1984 also showed the willingness to giveprivate help to the refugees: only 13 percent disapproved that Pakistanis in theirpersonal capacity should help the Afghan refugees. It is significant to note thatthis high level public support to the Afghans was maintained despite realizing

151 Ijaz. S. Gillani (1994). The Four R’s of Afghanistan, Pakistan Institute ofPublic Opinion, Islamabad. 9

that the refugees were an enormous burden, and the fear that they may beinfiltrated by saboteurs. About two-thirds of the respondents believed that therefugees were an economic burden and about half feared the infiltration bysaboteurs. The tranquil situation between the refugees and the local populationseemed to rest on widespread public support on the refugee question, which wasnot naïve about the costs of supporting the refugees in terms of inviting Soviethostility, economic cost and threat to the local law and order situation.152

Over the period of time, the attitude of local population changed.153 Initially,the refugees had been greeted with open arms, as Muslim brothers and sisters.But as their numbers swelled and the burden of their care began to weigh heavilyon Pakistan, there were calls by locals residents for their control, if not forcedrepatriation. They had become weary of their prolonged stay and wanted them toreturn but some were realistic enough to observe that they may never opt forrepatriation as they had better living here than in their war torn country.

The mind-set of locals had begun to change with the policy of thegovernment, which hardened its attitude towards Afghan refugees, adevelopment that was summed up by Muhammed Harooon Shaukat, DirectorGeneral of the Ministry of Foreign Affairs, as follows, “if donors have donorfatigue... then we have asylum fatigue… If donors’ patience with the Afghansituation has run out, then so has ours.”154 Government officials justified theirchanging policy and attitude due to a number of factors155:

152 Ibid

153 Pushtuns from South Waziristan and other tribal areas were amongthe first to complain about the privileges accorded to refugees, whichthey, claimed enabled the Afghans to live better than they did.Specifically, they criticized the wide array of services available in thecamps as compared with far less access to education, housing servicesavailable to the border area people in Pakistan. Local people alsobelieved that domestic expenditure on the refugees meant thatassistance was at the expense of development programs for theirimpoverished areas. Gallup Reports 1984-1988 (Islamabad: GallupPolitical Weather Report, 1985, 1986, and 1989

154 David Turton and Peter Maderson (2002), Taking Refugees for a Ride?The Politics of Refugee Return to Afghanistan, Issues Paper Series,Afghanistan Research Evaluation Unit. Kabul, December. .15

155 USCR (2001), Afghan Refugees in Pakistan at Risk. July 31


1. Pakistan’s declining economy, which they say makes it impossiblefor the government to continue assisting refugees;

2. declining international financial support for the refugees;3. the withdrawal of Soviet forces from Afghanistan in February 1989.

Refugees noticed this change in approach and they did complain about thefading hospitality. They felt that in a way they were being asked to return to theirhomeland as soon as possible. They no longer felt welcome and faced difficultieswhich early refugees had not. Refugees faced police harassment as thegovernment of NWFP started airing the idea that refugees need to return, becausethey considered Afghanistan was safe after the Taliban take-over. Thegovernment wanted their repatriation in safety and dignity, though conditionswere still not conducive for return. However, as the Northern Alliance156 opposedthe Taliban government, the conflict continued and instability prevailed.Therefore, refugees found it difficult to repatriate despite the strong signals fromthe government of NWFP.

The demise of Taliban government, replaced by an internationally backedregime of Hamid Karzai, has altered the Pakistani perception that refugees areunduly prolonging their stay and they must return. There is, however, aconsensus that repatriation should not be coerced.157 The local populace does notperceive them a threat but a burden that has to be shed off sooner than later. TheMinister for States and Frontier Regions, Najmuddin Khan, said ‘althoughPakistan has been hosting these Afghans for a long time but now the problemsassociated with their presence have aggravated more than ever before. Thegovernment never budged from its stance to cater to the needs of such a large andscattered number of refugees with the help of international community, but as thenormalcy has been returning to Afghanistan, these refugees ought to berepatriated without any delay’, he added. 158 The refugees, however, havedisplayed displeasure over the discrimination they face in the country in generaland continue to look up to the local and international community for support andstay till stability returns to their country. Pakistani government has extended thestay of registered Afghans who possess the Proof of Registration (PoR) cards till

156 An alliance of Afghan parties fighting against the Taliban.

157 Saba Gul Khattak, Nazish Brohi, Saleem Shah, Kiran Habib & ShahbazBokhari. “Afghan Refugees: Dilemmas and Policy Solutions”, SDPIResearch & News Bulletin, Vol. 13. No 4 &5. July-October 2006.Islamabad.

158 Balochistan Times, Pakistan. January 31, 2010

2012.159 They were issued these cards in a registration drive during 2006- 2007.These cards were initially valid till December 2009, but due to the presence of anestimated 1.7 million registered refugees, the government decided to extend theirstay till 2012.

Many of the refugees say that Pakistanis officials and locals alike have madeit clear that they are unwelcome, and have increasingly made life here difficultfor them. "Everything is being done by the government to harass the Afghanrefugees," says Dost Mohammad, an acknowledged leader of Afghans who usedto live at the Shamshato refugee camp in Peshawar, near the Pakistani borderwith Afghanistan. "We are poor people and the international community shouldnot leave us in a lurch." 160 The welcoming door is being shut by the locals butthey have not openly demonstrated against the protracted stay of Afghans andallow them to continue their businesses and movement.

159 Pajhwok Afghan News. Kabul, Afghanistan January 11, 2010

160 Asfaque Yusufzai. “Pakistan: Afghans Find Their Welcome RunningOut” Global Geopolitics & Global Economy. posted July 5, 2010.www.globalgeopolitics.net

4. Afghan Refugees: Economic Burden or Asset?

The economy of NWFP, where the largest concentration of Afghan refugeesreside, is deficit with regards to food production and revenue resources. TheFederal Government finances almost the entire developmental budget, becausethe revenue base of the province is small. In the beginning, the government incollaboration with international agencies and foreign governments provided reliefassistance to the refugees. The support to refugees from the government ofPakistan and international agencies was not enough to sustain them. Somerefugees moved with their movable property and invested in Pakistan. Therefugees, therefore, in addition to self-employment entered into the full-fledgedlabor market.161 Afghan refugees who brought capital resources or took to self-employment have positively contributed to the local economy. Peshawar has seenthe influx of more money looking for return. One key position in this regard isthe involvement of refugees in various trades owning shops in the main tradecenters of Peshawar. There was visible expansion in the transportation servicesdue to the arrival of refugee transport in form of buses and trucks. A privatesurvey conducted in 1992 reported that at least 75% of the city’s mini-buses aswell as wagons belonged to the Afghans. According to the same report, they havea substantial stake in the freight haulage.162

As refugees themselves stimulated a number of local markets, internationalaid contributed to the regional infrastructure. It led to development projectsincluding forestation, irrigation, and road construction. This employed not onlyrefugee labor but locals too that directly benefited the economy of Pakistan.There are two viewpoints prevailing in the NWFP, regarding the economicimplications of refugees for the province. Some view that many refugees havenot become a part of the provincial economy, it has received most of the supportfrom external sources, independent from the provincial economy. They have notostensibly drained provincial resources nor directly altered the welfare of thelocal inhabitants of Peshawar. They inhabit land provided to them independently,they receive food independently; in essence their shelter, their livelihood theirmoney come directly to them leaving them essentially tangential to the provincialeconomy.163

161 Ibid. p.17

162 Mariam A. Khan, “Welcome to Mini-Afghanistan” The NewsInternational. October 2000

163Ashraf, Asif & Arif Majid (1988). Economic Impact of Afghan Refugees in NWFP,Pakistan Academy for Rural Development. Peshawar, Pakistan. 4-5


Others have shown their apprehensions that despite the outside help, therefugees are a drain on the provincial economy. They have entered into thecities and the hinterlands, got jobs and business to the resentment of the localinhabitants. In the villages, they have taken over natural pastures and pitchedtents on them. The calm and equilibrium of the rural set up has been disturbed.Over grazing, cutting of foliage for fuel and pressure on water resources haspolluted the rural environment. The refugees brought with them more than 2.5million livestock, which had a detrimental effect on the environment because ofgrazing on the scarce pastures. Overgrazing extensively damaged the ecology ofthe green areas in the NWFP and Balochistan. 164

After food aid to most camp residents ended in 1995, 165 the number ofrefugees migrating to the cities increased (at about the same time, new refugeesfrom Kabul–many of whom were urban professionals–entered Pakistan andsettled in the cities). Employment became more scarce, local people’s wageswere driven down by the abundance of cheap labor, and rents went up ascompetition for housing rose. Refugees were willing to work for lower wagesthan their Pakistani counterparts – on an average, 25 percent less. And evenwhile incoming refugees – created a larger demand for goods and services in thefrontier region, increasing the supply of goods by opening up new businesses andsmuggling goods in from Afghanistan, the increasing flow of goods led toinflation in some markets and to lower prices in others. Similarly, relief foodwhen adequate or in excess found its way to the market, where it contributed toprice deflation and thus subverted local food production.166

Within local communities there were now signs of growing resentment to theprolonged presence of the refugees. Local Pakistani officials made intermittentstatements about the need for repatriation of Afghan refugees. In September 1998,bureaucrats in North West Frontier Province reportedly met to devise a strategy

164 Ibid.

165 USCR (2001). Pakistan: Afghan Refugees Shunned and Scorned,September. 20

166 Frederic Grare (2003), “ The Geopolitics of Afghan Refugees inPakistan in Refugee Manipulation: War, Politics, and the Abuse of HumanSuffering, edited by Stephen John Stedmam and Fred Tanner, TheBrookings Institution, Washington D.C..64

for repatriating the refugees. In February 1999, the provincial Chief Ministerannounced plans to restrict all refugees to the camps in response to complaintsthat Afghans were taking away jobs from local people. Although the plans couldnot be implemented, the Chief Minister made repeated calls to the internationalcommunity to assist the refugees to return to their homes in Afghanistan.167

The government prohibits the refugees to buy property but refugees do notconsider the law and get involved in such ventures due to weak governance. Thelocal population interacts with them in such dealings and show them ways andmeans to bypass the law. Many refugees have bought houses or built houses onbought lands. It is said that the revenue staff themselves have been involved insuch activities.This has resulted in refugees owning property.168 Sometimes, therefugees buy land by proxy, producing Pakistani identity cards or by providingforged back dated nikah-namas (marriage contracts) as another way of becominga Pakistani citizen.169

Afghans avail any business opportunity that comes their way. There havebeen two reasons for it; firstly the increased population of NWFP due to therefugee influx needed additional service, to meet the rising demands. To this boththe local population and refugees have responded by investment wheneverfeasible. Secondly, the Afghans brought with them resources that they haveinvested. The concentration of investment in NWFP and Balochistan was mainlydue to their limitation to move out freely to other parts of Pakistan. Ethnicity andproximity played an important role in it. This does not mean that the Afghanshave not invested in businesses in other parts of the Pakistan. Islamabad andKarachi are other urban centers where refugees have set up businesses and rentedplaces. These activities boosted the economy of the country, with refugees beingviewed to have benefitted Pakistan economically. However, this perception is notheld up by all the people, as all refugees are not rich and have no resources toinvest in the host country.

Refugees are doing small businesses and charge competitive prices mainly toestablish their business. Many local traders observed that refugee incomes aresupplemented by the aid they get through outside agencies and the government ofPakistan. Since they do not have many social obligations like the local tradersand do not pay the taxes, they can afford to work on smaller margins and stillmake profits. Thus the local traders are the main sufferers of this situation. They

167 Amnesty International Report (1999), Refugees from Afghanistan: The World’sLargest Single Refugee Group, November,http://www.amnestyusa.org/regions/asia/document168 Ibid.

169 The Muslim August 27,1983


are facing tough competition from the refugees. In many markets in Peshawar,local traders have switched their trades or moved out. 170 Thus, the Afghanwealthier class generated tension with the local business class, because rentswere pushed beyond the reach of the small commercial class. The wealthyAfghan refugees also found a way to get around the law that restricted their rightto purchase property by obtaining National Identity Cards, domiciles and evenpassports through agents who charged handsome fees for such procurements.171

Most of the refugees living in camps were the poor sections of population ofAfghanistan and mostly unskilled agricultural workers. Since the farm sector inthe NWFP did not have much absorption capacity and secondly these jobs wereseasonal, majority of the refugee laborers subsequently entered into the urban jobmarket, which consisted of mostly construction and other day-to-day casual workincluding service industry. This large number of refugees entering into the labormarket increased the supply of labor. This led to the lowering of labor wages. “Ifwe ask for Rs.100 a day, they settle for Rs.70 or Rs.80. They have ruined overlivelihood,” said a laborer from Peshawar.172

The price of real estate and rents went up after the influx of refugees. In theNWFP, particularly in Peshawar where all the head offices of the foreignmissions and administration of Afghan refugees reside has had a real upsurge inprices of real estate and rents. Surveys of trade, commerce and rents of shopswere carried out but with limited success as neither the refugees nor the localpopulation revealed the correct rates. According to a report a house worth ofRs.5000/-per month in 1980 was worth Rs.50,000/ in 1985 with two years ofadvance rent. Many property dealers confirmed this.

For the refugees, the rent per capita was not high as multiple families wouldreside in one house. This was true for a large number of refugees residing aroundPeshawar. The local residents who moved into Peshawar for business or servicesfaced tremendous difficulty in obtaining houses at affordable rents.173 The localowners of the house especially in University Town area where the majority ofrich refugees and foreign missions were present moved out to less expensiveareas renting out their own houses for handsome rents. The cantonment area didnot witness this kind of situation. The refugees and foreign missions werediscouraged to occupy houses in the cantonment for security reasons. The city

170 Economic Impact of Afghan Refugees in NWFP. 1988 p.10

171 US-Pakistan Relationship: Soviet Invasion of Afghanistan, p. 202

172 The News International. October 2000

173 Economic Impact of Afghan Refugees in NWFP. 17

area and centers for jobs and business faced a major housing problem. Peshawarfetched the same rents as Karachi and Islamabad, other two high rent citiesthough for different reasons.174 The situation in villages was, however, different.Villages did not have the tradition to let houses. In NWFP, a house was given toa tenant or any body else free of rent in return for certain free services to thelandlord. Many refugees who were not residing in the camps and could not affordhigh rents in the cities took over residences in the villages where rents werecomparatively low. The poor villagers benefited out of this as it added to theirmeager sources of income.

Environmental damage caused by refugees is mostly irreversible. The impactof these refugees on renewable natural resources is of particular concern as it canhave a drastic long-term effect. Trees are cut down to provide support for shelterwhile branches are collected for firewood and charcoal. Foliage is cut to feedlivestock. Ground vegetation is cleared to make way for farming; even tree rootsare dug up in extreme conditions and used as firewood. Eventually the landbecomes unfit for even most basic forms of agriculture. The resulting rapid anduncontrolled deforestation since the 1980s has left the area with only about 12%of its original forest cover. According to a UNHCR research report, since theinflux of Afghan refugees started in the 1980s, Turmeric Forest of Gird-e-Junglein the Chaghai district (Balochistan) has been completely depleted and there hasbeen no rehabilitation in the area at all.175

Pakistan is going through tough times currently. The on-going militancy andextremists acts by the Tehrik Taliban Pakistan (TTP) has made the country’ssecurity fragile, natural disasters (flash floods) during July-August 2010 have ledto massive displacement of its own people and brought the economy to a standstill. Internal displacement has compounded the position of Afghan refugees assome of them have been displaced due to military operations in the restive partsof NWFP as well as floods. The despair of refugees continue amidst officialstatements that presence of refugees population serve as safe havens forterrorists and extremists elements from Afghanistan, thereby adding to instabilityand insecurity. It is generally believed that some of these refugees indulge inillegal activities like drug peddling, arms smuggling and have also been foundinvolved in incidents of terrorism in the country.176 These activities have had a

174 Ibid.32

175 Hania Aslam. “The Impact of Afghan Refugees on the NaturalResources of Pakistan.” http://www.takingitglobal.org retrievedDecember 12, 2002

176 Balochistan Times, Pakistan. January 31, 2010


downward impact on the domestic economy. However, Afghan refugees cannotbe exclusively held responsible for the financial woes of Pakistan.

5. Social Costs and Benefits of Hosting Afghans

The Afghans brought with them their own style of dressing and eating. Someof it was adopted by the locals e.g., Afghan style baggy trousers and long shirtsbecame popular with the youth of the NWFP and Balochistan provinces.Similarly restaurants run by Afghan have considerably attracted consumers.“People in Peshawar always love to eat and now with all these eating places, wehave more choice,” said Rehman, a Pakistani.177 A survey conducted by TheFrontier Post revealed that the local restaurants lagged behind in competitionwith Afghan restaurants. The factors responsible for the growing popularity ofAfghan food among the consumers include cheaper cost, quick service, simplefood and informal environment projecting their culture. Afghan refugees haveabundance of restaurants and cuisine in other parts of the country as well. Theirdecoration of cars for weddings has become particularly popular with the locals.

Intermarriages between the local Pushtuns and Afghans have becomecommon. It is not only for the passport or for identity that the Afghans areentering the bond of marriage, it itself is another lucrative business. Thoseinvolved in it, earned large amounts of money, as an Afghan possessing aPakistani Identity Card, gave him social and economic security. Many Afghansadmit that it is easier to get the Identity Card. Who would mind paying a fewthousand rupees for security?178

Their impact on Pushtun culture has been enormous. In NWFP andBalochistan the standard of Pushto music has improved, its journalism developedand its literature advanced. Dr. Fazal Rahim Marwat, Pakistan Study Centre,University of Peshawar, mentioned in an interview that 22 countries startedbroadcasting Pushto service. Pushto dailies like Sahar and Wahdat started withimpressive circulation along with other Pushto newspapers, weeklies andmonthly journals. Afghan singers have earned popularity amongst the locals andtheir folk music along with remixes of old and new Pushto songs are now a dayshighly admired by the youth of the two provinces.

Negative impact of Afghan refugees on Pakistani society has also beenobserved. A large number of refugees are involved in drug trafficking and armssmuggling and a small number in prostitution. The government did not takenotice of the so-called Bara markets in Pakistani towns, where smuggled goods

177 The News International. October 8, 2000

178 Ibid.

are openly available. In these markets now, along with local tribal people,refugees are involved too.

Many Afghan poppy growers shifted their production to Pakistan’s tribalareas due to the war. The growers set up laboratories in both Pakistan andAfghanistan, and, as a consequence of the smuggling, heroin consumptionincreased dramatically in Pakistan itself. Before the 1980s, drug addiction wasrelatively unknown to most Pakistanis. By 1982, Pakistan reportedly had 1.3million addicts: 100,000 on heroin. By 1986 the number of heroin addicts hadexceeded 450,000, and in 1987 the official count rose to 657,842. AlthoughAfghan refugees are not solely responsible for this situation, however, theirarrival in Pakistan correlates with it.179 It worsened the drug problem in Pakistan.While smuggling of drugs became a lucrative business for some refugees, itbecame a major menace to Pakistani youth. This massive drug trafficking hasdefamed Pakistan internationally because Pakistan was used as the mainshipment point for heroin trafficking abroad.

Klashankov culture has been introduced in the Pakistani society due to thepresence of unlimited weapons in the refugee camps, though legally the refugeesare not allowed to keep weapons in camps. During the early period of jihad, theUS Congressmen alleged that corrupt officials and mujahideen siphoned off 40percent of the total arms aid to Afghan freedom fighters. “The weapons whichcame to Pakistan from abroad for Afghan jihad, one thirds of the total weaponswere taken by political figures and the Inter-Services Intelligence (ISI), onethirds by Afghan commanders and the remaining went to mujahideen.”180

Due to the possession of heavy weapons, many refugees became assassinsand they regularly took part in local feuds on payment, using their own weapons.Not only were the arms and ammunition supplied by donor countries sold in theopen market but also the once crude armament factories of Darra Adamkhelbegan producing sophisticated weapons. With the result that what was once anessential item for the Afridis, Mohmands, and Wazirs in the tribal areas,Klashankov became commonplace among the landlords, politicians, universitystudents and private militias throughout Pakistan.181

179 Refugee Manipulation: War, Politics, and the Abuse of HumanSuffering. .64

180 Pervaiz Iqbal Cheema (1988), “Impact of Afghan war on Pakistan”,Pakistan Horizon, Vol. XI. January, 27-31

181 Ibid


The rapid growth of population of both the locals and the refugees182 is acontributing factor for the high crime rate. The rates of crime in different parts ofthe country have risen considerably and the law enforcing agencies haveattributed it to the long presence of Afghan refugees. “90 percent of the accusedarrested during the first 15 days of the year 1999 in various cases were Afghanrefugees. After committing crimes, the criminals cross over to their country andstay there till the case subsides.183

The influx of Pushtun speaking Afghan refugees in Balochistan disturbed thedelicate ethnic balance in the province by strengthening the ranks of the Pushtuns,thereby reducing the Balochis to a minority in their own province. The refugeesnot only increased the ratio of Pushtun population by 10% to 15%, but also wereinstrumental in rapidly reducing Balochi predominance. The Baloch had longresented the domination of Pushtun tribes in their area. Quetta is heavily Pushtun,and with the influx of mostly Pushtun refugees, the province appeared likely todevelop a Pushtun majority. Thus, in contrast with the NWFP, the refugeesprovoked the Baloch leaders, but their presence also neutralized Balochnationalists’ dream of creating a Greater Balochistan. 184 There were calls inBalochistan for the refugees to return to Afghanistan. Benazir Bhutto along withother members of the opposition also held the same view. These opponents of thegovernment also claimed that the government was inflating reports of numbers ofthe refugees in order to increase aid received from abroad.185

Former Chief Minister of Balochistan, Sarder Akhtar Mengal held Afghanrefugees responsible for increasing crime rate and introducing Klashankovculture and narcotics in Balochistan and argued that refugees have also created

182 The ratio of refugees to local population in NWFP and Balochistan isone to six/seven, except in some high density area, where it is one toone. See Hasan Askar Rizvi. “Afghan Refugees in Pakistan: Influx,Humanitarian Assistance and Implications” in Pakistan Horizon,Vol.XXXVII No.1 1984

183 Business Recorder. January 17,1999

184 A. Z. Hilali (2002), “Costs and Benefits of Afghan War for Pakistan,”Contemporary South Asia,) 11,(3) Routledge, UK pp.291-310

185 Afghan Refugees in Pakistan: Will They Go Home? p.8

law and order problems in the province, otherwise the overall law and order inthe province was better as compared to other parts of the country.186

Conclusion

Refugees have been an opportunity as well as threat for Pakistan. Refugeeshave benefited the host in several ways and the political costs and risks posed bythem have been exaggerated. However, the security, economic, political andsocial threats arising out of the protracted stay of Afghans is because of theflawed Afghan policy rather than the refugees. This does not mean that thepresence of over 1.7 million refugees do not pose any threat at all. They havetheir economic and political fall out given the present situation of Pakistan, butthat can be reduced provided the government devises an effective strategy inmanaging these refugees and making their return possible in future. Had thegovernment not used them for strategic purposes, refugees would not havebecome a major threat. Had the locals and government officials not beeninvolved in illegal activities such as providing fake identity cards, buyingproperty, smuggling etc. refugees would not have contributed to increasingcrimes and social ills in the society. As the stay of refugees started taking its toll,and the implications became stark, it compelled Pakistani policy makers to revisetheir refugee policy, and start stressing on the need for safe repatriation ofAfghans. They realized that repatriation of Afghans was the only solution tofreeing the country from the political and economic costs of hosting them.

Pakistan should evolve institutional mechanisms to manage the residualAfghan population in a manner that they benefit the hosts and reduce threats thathave affected the country. Refugee businesses, accommodation outside campsand education need monitoring and vigilance on the part of authorities that willreduce the mounting resentment amongst refugees and locals alike. The businessand educated Afghans should be allowed to engage in constructive activities thatcontribute positively and help both the refugees and locals. Those Afghans whoare supporting the Taliban insurgency on both sides of the border are a securitythreat for both the countries. Therefore, the two governments―Pakistan andAfghanistan― should jointly take steps to curtail their movement and actions.

186 The News International. October 26, 1997


Sharif M. Hossain

SOUTH ASIAN FREE TRADE AREA: EXAMININGBANGLADESH’S TRADE POTENTIAL.

=============================================Abstract

The current paper has analysed the impact of South Asian Free Trade Area(SAFTA) on Bangladesh in terms of export generation within member countries. Astandard gravity model has been used to analyse Bangladesh’s export potentialusing cross section data. From the estimated result, it is observed that Bangladeshhas huge export potential to South Asia in general, and India in particular. IfSAFTA agreement is properly implemented then Bangladesh’s exports within thisregion would be much higher than the estimated potential export. In terms ofimports, Bangladesh has exceeded its potential level. Therefore, the expectedincrease in import by Bangladesh from SAFTA member countries might not be aslarge as the expected increase in export. But it should be mentioned that theexpected results can only be achieved by free trade in real sense, i.e. goods andservices can move freely across countries without any tariff and non-tariffbarriers.

1. Introduction

There is a growing evidence for the emergence of Regional TradingArrangements (RTA) in different parts of the world over the last two decades.The establishment of such an arrangement in South Asia is no exception. Theprocess of regional cooperation in South Asia was initiated by establishing theSouth Asian Association for Regional Cooperation (SAARC). In 1985, the sevenSouth Asian countries – Bangladesh, Bhutan, India, Maldives, Nepal, Pakistanand Sri Lanka formed SAARC to promote economic, social and culturalcooperation. The newest member of SAARC is Afghanistan which has beenincluded in 2005. In 1993, the SAARC Preferential Trading Arrangement

Mr. Sharif M. Hossain is Research Fellow at the Bangladesh Institute of Internationaland Strategic Studies (BIISS). His email address is [email protected]. This paper isa reduced form of author’s Dissertation in MA in International and DevelopmentEconomics from the University of Applied Sciences, Berlin, Germany. The author isgrateful to his supervisors, Professor Dr. Sebastain Dullien and Dr. Camille Logeay fortheir valuable comments and suggestions.

© Bangladesh Institute of International and Strategic Studies (BIISS), 2010.

(SAPTA) was initiated by the SAARC member countries as the first step towardsachieving higher levels of trade and economic cooperation in the region.187 Someprogress was achieved in the economic area under the framework of SAPTA.188

Subsequently, the member countries of SAARC launched the South Asian FreeTrade Area (SAFTA) in 2004 which came into force on January 01, 2006. Thekey motivation behind the creation of SAFTA was to enhance intra-regionaleconomic cooperation to maximize the potentiality of trade and development inthe region.189

During the last decade, South Asia has experienced an increase in intra-regional trade. This increase is mainly generated from India’s export to itsneighbours. However, India is not a fast growing destination for herneighbouring country’s export. The major export destinations of India’sneighbours are located in North. India’s high protectionist policy towards otherSouth Asian neighbours is one of the reasons for this one way export flow.However, it is also argued that because of the similar production structure andlack of trade complementarities, smaller countries in South Asia have supply sideconstraint to fulfil India’s import demand. In such a scenario, some argue that afree trade area in South Asia might increase Indian exports to the smallermember countries without any reciprocal export growth for them to India.190 Incontrast, there is a general belief among the policy makers and business people inSouth Asia about the potentiality of significant increase in intra-regional trade.191

It is also expected that the small member countries will generate significant intra-regional export because of the large market access to India. On the other hands,there is argument against low level of trade complementarities in this region.Evidence shows that, despite low level of trade complementarities, some tradingbloc like ASEAN generated significant intra-regional trade.192 Hence, there aredivergent views about the possible impact of SAFTA on small member countriesin terms of intra-regional trade expansion.

187 “Agreement on SAARC Preferential Trading Arrangement (SAPTA)”, 1993, availableat: http://www.worldtradelaw.net/fta/agreements/saptafta.pdf, accessed on January 04,2010.188 Kant K. Bhargava, “EU – SAARC: Comparisons and Prospects of Cooperation”,Discussion Paper No. C 15, Bonn: Center for European Integration Studies, 1998, p.8.189 “Agreement on South Asian Free Trade Area (SAFTA)”, 2004, available at:http://www.saarc-sec.org/data/summit12/saftaagreement.pdf, accessed on December 28,2009.190 Rehman Sobhan, “The Twelfth SAARC Summit: Charting a Road Map for SouthAsian Cooperation”, South Asian Survey, Vol. 12, No. 1, 2005, p. 6.191 Selim Raihan, “SAFTA and the Bangladesh Economy: Assessments of PotentialImplications”, Discussion Paper No. 2, Dhaka: South Asian Network on EconomicModeling, 2008, p. 13.192 Intra regional trade in ASEAN has been increased from 6 percent in mid-1970s to 23percent in 1997 after the enforcement of FTA in that region (Than 2005, p. 23).


The impact of RTA in South Asia has gained attention in different studieswhich expressed different views about the possible impact on member countries.Some studies193 expressed optimism about the impact of SAFTA, arguing thatregional trade liberalisation in South Asia generates significant benefits for itsmember countries by increasing intra-regional trade. Alternatively, manyscholars 194 are skeptical about the impact. Using gravity model, T. N.Srinivasan,195 and T. N. Srinivasan and G. Canonero196 argued that multilateraltrade liberalisation on a global basis would yield higher return to the regioncompared to preferential trade liberalisation within the region. Jayatilleke andWusheng197 addressed the question of desirability of SAFTA and showed thatSAFTA would not be beneficial for this region. Therefore, the existing literaturesreflect the lack of consensus regarding the outcomes of SAFTA. While most ofthese studies analysed the overall impact of SAFTA considering total trade, avery few studies considered the export potentiality of small member countries ofSAFTA.

Against this backdrop, for Bangladesh, one pertinent question may be raised:Is there any export potential for Bangladesh to other member countries ofSAFTA? This paper aims to seek answer of this question using gravity model ofinternational trade. The total trade and import potentiality of Bangladesh, withinSAFTA region, are also analysed. A standard gravity model is used to analysethe world trade/export/import flows of Bangladesh. The estimated coefficients,obtained from standard gravity model, are then used to predict thetrade/export/import potentiality of Bangladesh to all other SAFTA membercountries. The study inferred that Bangladesh has untapped export potential toSouth Asia in general, especially to India, Maldives and Nepal.

193 Miria Pigato, Caroline Farah, Ken Itakura, Kwang Jun, Will Martin, Kim Murrell andT. G. Srinivasan , South Asia’s Integration into the World Economy, Washington D. C.:The World Bank, 1997; Selim Raihan, op. cit.; Selim Raihan and M. A. Razzaque,“Welfare Effects of South Asian Free Trade Area (SAFTA) Regional TradingArrangements (RTAs) in South Asia: Implications for the Bangladesh Economy”, Paperprepared for the UNDP Regional Centre Colombo, 2007, available at:http://www.gtap.agecon.purdue.edu/resources/download/2956.pdf, accessed on April 10,2009.194 Jayatilleke S. Bandara and Wusheng Yu, “How Desirable is the South Asian FreeTrade Area? A Quantitative Economic Assessment”, The World Economy, Vol. 26, No.9, 2003, pp. 1293-1323; T. N. Srinivasan, “Regional Trading Arrangements and Beyond:Exploring Some Options for South Asia, Theory, Empirics and Policy.”, Report No. IDP-142, 1994, Washington DC.: The World Bank; T. N. Srinivasan and G. Canonero, 1995.“Preferential Agreements in South Asia: Theory, Empirics and Policy.” Yale GrowthCentre, Yale University (mimeographed).195 T. N. Srinivasan, op. cit.196 T. N. Srinivasan and G. Canonero, op. cit.197 Jayatilleke S. Bandara and Wusheng Yu, op. cit.

The structure of this paper is as follows. Following the introduction, Section2 discusses the evolution of SAFTA. Section 3 provides intra-regional tradestructure of Bangladesh within South Asia. In Section 4, impacts on trade flows,using the gravity model, are analysed. In this Section methodology and database,econometric issues and estimation results are presented and discussed. Section 5provides a discussion on the results and offers some concluding remarks.

2. Evolution of SAFTA

The first concrete initiative to establish a regional cooperation in South Asiawas initiated by Bangladesh in May 1980. Although, India and Pakistan weresuspicious about Bangladesh’s intention, other South Asian countries promptlyaccepted the idea. India thought that Bangladesh’s proposal to establish aregional organisation might create a group of other South Asian countries to addup all bilateral issues against India. On the other hand, Pakistan viewed it as anIndian strategy to corner Pakistan. For these reasons, the original Bangladeshworking paper on SAARC indirectly laboured to tone down the divergentsecurity and political perceptions of the South Asian countries and only includednon-political and non-controversial issues. Many believed that such misgivingsbetween India and Pakistan delayed the formation of the regional cooperation inthis region. The first South Asian Foreign Ministers’ Conference officiallylaunched a regional organisation known as South Asian Regional Cooperation(SARC) in 1983. Following the creation of SARC, the foreign ministers couldmeet on a regular interval. Subsequently, South Asian Regional Cooperation(SARC) transformed into South Asian Association for Regional Cooperation(SAARC) to promote and develop cooperation among the member countries. TheSAARC charter was adopted in 1985 during its first summit of heads of state orgovernment of the South Asian countries 198 . The first attempt, towards aneconomic integration in South Asia, was initiated by the establishment of theCommittee of Economic Cooperation (CEC) in 1991. The CEC recommended adraft agreement of SAPTA in order to prevent the marginalisation of SouthAsia’s trade in global market by improving the productive capacity of themember countries particularly in manufacturing sectors.199 In April 1993, theagreement of SAPTA was signed which came into effect in December 1995.

SAPTA was considered as a milestone for the member countries of SAARC.Although, SAPTA was a mildest form of integration, it provided the opportunityfor greater forms of economic cooperation. Three rounds of tariff concessionhave been implemented following the formation of SAPTA. In addition, Special

198 Kishore C. Dash, “The Political Economy of Regional Cooperation in South Asia”,Pacific Affairs, Vol. 69, No. 2, 1996, pp. 187-188.199 Mohan Lohani (2008), “SAARC Economic Cooperation: From SAPTA to SAFTA”,The Weekly Telegraph, August 06, 2008, online edition, available at:http://www.telegraphnepal.com/news_det.php?news_id=3859, accessed on April 25,2009.


and Differential Treatments (SDTs) are offered to Least Developed Countries(LDCs)200 in terms of coverage of commodities and depth of tariff cuts. Tariffconcessions offered by different countries in different rounds of SAPTA areshown in Table 1.

Table 1: Tariff Concession Offered Under SAPTA

Concessionofferingcountry

SAPTARound

No. of HS Lines offeredFor all countries For LDCs Total

Bangladesh I 11 (10) 1 (10) 12II 215 (10) 11 (10) 226III 338 (10) 143 (10 &15) 481

Bhutan I 4 (15) 7(10, 13 & 15) 11II 37 (10) 10 (15) 47III 23 (10) 101 (10, 18, 20) 124

India I 44 (10, 25, 30, 50 & 90) 62 (50 & 100) 106II 390 (10, 15, 25 & 40) 514 (25 & 50) 904III 43 (10 & 20) 1847 (50) 1917

Maldives I 17 (7.5) 17 (7.5) 34II 5 (10) 2 (15) 7III 390 (5 & 10) 368 (5 & 10) 758

Nepal I 10 (7.5 & 10) 4 (10) 14II 166 (10) 67 (15) 233III 52 (10) 137 (10 & 15) 189

Pakistan I 20 (10) 15 (15) 35II 227 (10) 131 (15) 358III 24 (20) 271 (30) 295

Sri Lanka I 20 (10 & 20) 11 (10 & 15) 31II 72 (10) 23 (10, 50 & 60) 95III 28 (10) 54 (10, 30, 50 & 75) 82

Total I 126 100 226II 1109 759 1868III 876 2580 3456

Note: Figures in parentheses represent percentage concessions in tariff rates.Source: S. K. Mohanty, “Regional Trade Liberalization under SAPTA and India’s Trade Linkageswith South Asia: An Empirical Assessment”, Discussion Paper No. 48, 2003, New Delhi: Researchand Information System for Non-Aligned and Other Developing Countries (RIS), p. 24.

Table 1 represents that in SAPTA-I 226 products at 6-digit HS201 level wereconsidered for tariff reduction among which 100 products are allocated forLDCs. Total product coverage for tariff concession under SAPTA-II andSAPTA-III are 1864 and 3456 respectively. The amount of tariff cut differs fromcountry to country which is indicated by the figures in parentheses in Table 1.

200 Bangladesh, Bhutan, Nepal and Maldives are LDCs within SAARC.201 The Harmonized Commodity Description and Coding System (HS) of tariffnomenclature is an internationally standardized system of names and numbers forclassifying traded products developed and maintained by the World CustomsOrganization (WCO).

However, the issue of non-tariff measures was considered only from SAPTA-II.The evaluations of intra regional trade under different round of SAFTA wereexamined in different studies.202 Some of these studies concluded in favor ofSAPTA in case of potential intra-regional trade.

In 1997, the regional approach to FTA in South Asia was firstly initiated bythe member countries of SAARC. A year later, the member countries decided toestablish SAFTA by 2001. But due to the political tension between two bigcountries in South Asia, India and Pakistan, the establishment of SAFTA wasdelayed. However in 2004, at SAARC summit at Islamabad, the frameworkagreement of SAFTA was signed. The member countries of SAARC also set up avision to establish South Asian Custom Union (SACU) by 2015 and South AsianEconomic Union by 2020 to drive to the final stage of economic union.203 WhenSAFTA agreement was signed in 2004, a number of issues like finalising thesensitive list, criteria for rules of origin, revenue compensation mechanism forLDCs, and areas for technical assistance for LDCs were left out. In order tofinalise the agreement, a committee of expert was convened to discuss and takedecisions about these issues before January 2006. Subsequently, SAFTA cameinto force on January 01, 2006, after taking decisions on above issues. However,because of the delay in ratification of the agreement by the member countries,trade liberalisation program came into force on July 01, 2006. In order to achievethe objective of SAFTA, the framework agreement has set the followinginstruments.204

Trade Liberalisation Program Rules of Origin Institutional Arrangements Revenue Compensation Mechanism Technical Assistance for LDCs Safeguard Measures Consultations and Dispute Settlement Procedures

3. Intra-regional Trade in South Asia

The volume of intra-regional trade in South Asia is very low compared toother regional trading blocs in the world. The establishment of a free trade areawith low volume intra-regional trade generates limited scope of gaining from

202 Charan D. Wadhva, “Assessing SAARC Preferential Trading Arrangement(SAPTA)”, South Asian Survey, Vol. 3, No. 1 & 2, 1996, pp. 173-195; Swapan K.Bhattacharya, “Regional Trading Arrangements among SAARC Countries and India’sImports”, South Asia Economic Journal, Vol. 2, No. 2, 2001, pp. 281-312; S. K.Mohanty, op. cit.203 Jayatilleke S. Bandara and Wusheng Yu, op. cit., p. 1300.204 For details please see the “Agreement on South Asian Free Trade Area (SAFTA)”, op.cit.


such free trade arrangement.205 This is one of the major criticisms against thesuccess of SAFTA. Figure 1 compares the intra-regional export of South Asiawith some other trading blocs in the world. The figure shows, South Asia haslowest intra-regional export share. Although South Asian intra-regional exportshare rose slightly from 3.2 percent in 1970 to 7.4 percent in 1999, still it is verylow. However, in case of MERCOSUR, 206 it is observed that afterimplementation of regional trading arrangement in 1991, intra-regional exportincreased significantly from 8.9 percent to 20.3 percent in 1995.

Figure 1: Intra Regional Export as a Share of Total Export of South Asia

0

10

20

30

40

50

60

70

80

1970 1990 1995 1999

Year

(Per

cent

age)

APEC

EU

NAFTA

ASEAN

MERCOSUR

SAARC

Source: Based on Nazneen Ahmed (2006), “Bangladesh Apparel Industry and its Workers in aChanging World Economy”, PhD. thesis, 2006, Wageningen University, The Netherlands,available at: http://library.wur.nl/wda/dissertations/dis3942.pdf, accessed on June 10, 2009, p. 85

Within this limited intra-regional export, India dominates the export marketwithout any strong contender. Figure 2 and figure 3 show the share of individualSouth Asian country’s intra-regional export and intra-regional import as apercentage of total intra-regional export and import respectively. Figure 2identifies India as the single largest exporter in this region comprising 62.2percent of intra-regional export in 2005. Bangladesh’s share of intra-regionalexport is very low, 2.2 percent only. This figure reflects that at present SouthAsia is not a significant export destination for Bangladesh. However, Bangladeshis the largest import destination for neighbouring country’s export. Bangladesh’sshare in intra-regional import is 28.2 percent which is the highest among member

205 Jayatilleke S. Bandara and Wusheng Yu, op. cit., p. 1296.206 Common Market of the South (Spanish: Mercado Común del Sur) is the largesttrading block in South America. MARCOSUR encompasses four countries: Argentina,Brazil, Paraguay and Uruguay.

countries. India’s intra-regional import share is only 17.2 percent which isnoticeably low compared to its export share.

Figure 2: Share of South Asian Countries Intra-regional Export in 2005

Source: Calculated from Direction of Trade Statistics Yearbook 2008, IMF.

Figure 3: Share of South Asian Countries Intra-regional Import in 2005

Source: Calculated from Direction of Trade Statistics Yearbook 2008, IMF.

The different patterns of Bangladesh’s intra-regional export and import canbe understood by huge trade deficit with India and Pakistan, two largesteconomies in this region. Figure 4 and figure 5 illustrate Bangladesh’s bilateraltrade with India and Pakistan respectively. From figure 4 it is observed that for a


long period Bangladesh continued to have a high trade deficit with India which isworsening over time. Bangladesh’s trade deficit with India was US dollar 895million in the year 2000 which substantially increased to 1.8 billion in 2005.Apart from high non-tariff barriers, the reason behind this huge trade deficit ishigh concentration of Bangladesh’s export on Ready Made Garments (RMG)products on which India has been imposing relatively high specific tariff.207 Onthe other hand India’s export is highly diversified and its scale of production ishigh, probably, due to its huge domestic market. Furthermore, India facesrelatively lower tariff for some of its exports to Bangladesh. The continuous andvery high volume of bilateral trade deficit with India is a great concern in termsof balance of payment position for Bangladesh. Whether it matters or not is adebate, because Bangladesh is maintaining high trade surplus with United Statesand European Union. India’s main export items to Bangladesh comprise primaryagricultural products, processed food, textile and capital-intensive manufacturing.A large share of imports from India is raw materials which mainly used inBangladesh’s export oriented industries like textile and RMG sectors. Accordingto Bangladesh’s import policy, any imports of raw materials for export orientedindustry are duty free. Therefore, India already has a duty free access inBangladeshi market for some of its commodities. Such import from India helpsBangladesh to achieve trade surplus with other countries. Similarly, Bangladeshhas trade deficit with Pakistan amounting US dollar 92 million in 2005.

Figure 4: Bangladesh’s Trade with India

Source: Based on Direction of Trade Statistics Yearbook, Various Issues, IMF.

207 Selim Raihan, op. cit.

Figure 5: Bangladesh’s Trade with Pakistan

Source: Based on Direction of Trade Statistics Yearbook, Various Issues, IMF.

Under SAARC Preferential Trading Arrangement (SAPTA), although tariffhas been reduced on large number of products, there has hardly been any increasein Bangladesh’s intra-regional export. This is because firstly, the level of tariffcut under SAPTA was not enough. Second, most of the Bangladesh’s exportableitems was excluded from tariff concession. Third, there was no agreement underSAPTA to reduce non-tariff and para-tariff measures. Furthermore, stringentrules of origin have shrinked Bangladesh’s export growth in this region. It is alsoargued that comparative advantage in similar products and absence of strongcomplementarities also generated low level of export growth for Bangladesh inthis region. Analysis based on revealed comparative advantage ratio, A. R.Kemal208 found that South Asian countries have comparative advantage in a lowrange of products. Bangladesh has comparative advantage only in 7 groups out of71 commodity groups. Similarly, bilateral trade complementarity betweenBangladesh and other SAFTA member countries is not strong.209 This lack oftrade complementarity also acted as a constraint to increase Bangladesh’s export

208 A. R. Kemal, “SAFTA and Economic Cooperation”, Paper Presented at SAFMARegional Conference, August 20-21, 2004, Dhaka, available at:http://www.southasianmedia.net/conference/Regional_Cooperation/safta.htm, accessedon June 11, 2009.209 Nihal Pitigala, “What Does Regional Trade in South Asia Reveal about Future TradeIntegration: Some Empirical Evidence”, Policy Research Working Paper No. 3497,Washington D. C.: The World Bank, 2005, p. 39.


under SAPTA. But, the counter argument against revealed comparativeadvantage ratio and trade complementarity index is that both of them have beencalculated based on existing trade data. In such a case, if South Asian countriesmaintain a restrictive trade regime then future trade flows in the absence of tradebarriers might not be understood by revealed comparative advantage and tradecomplementarity analysis.

4. Impact on Trade Flows

4.1 Theoretical Consideration

Econometric analyses that try to evaluate trade flows of any free tradearea are mainly based on gravity models. Jan Tinbergen, 210 HansLinnemann211 and James E. Anderson212 initially used the gravity model inempirical analysis of international trade flows. Currently, the gravitymodel has widely been used in quantitative analysis of trade flows becauseof its strong explanatory power. 213 The gravity model of internationaltrade is based on Newton’s gravitational law and used to explain theinternational trade flows. According to the model, the volume of bilateraltrade between two countries is positively related to the product of theirGDPs and inversely related to the distance between them. The standardgravity model in log linear form can be stated as follows:

)1...(..........)()*()( 210 ijijjiij UDISTLogGDPGDPLogTradeLog

Where,

ijTrade = Bilateral trade between country i and country j;

iGDP = Gross Domestic Product of country i;

jGDP = Gross Domestic Product of country j;

ijDIST = Distance between country i and country j;

ijU = Error term; and

210 Jan Tinbergen, Shaping the World Economy: Suggestions for an InternationalEconomic Policy, New York: Twentieth Century Fund, 1962.211 Hans Linnemann, An Econometric Study of International Trade Flows, Amsterdam:North-Holland, 1996.212 James E. Anderson , “A Theoretical Foundation for the Gravity Equation”, TheAmerican Economic Review, Vol. 69, No. 1, 1979, pp. 106-116.213 Suresh Moktan (2008), “Evaluating the Intra-regional Exports and Trade Creation andTrade Diversion Effects of Trade Agreements in SAARC Countries”, South AsianEconomic Journal, Vol. 9, No. 2, 2008, p. 237.

210 ,, = Coefficients to be estimated.

This standard gravity model is frequently augmented by adding a number ofdummy variables to capture the impact of contiguity and historical ties. Dummyvariables that normally added are common border, common language, coloniallinks and common membership in a regional trading arrangement.

Since Jan Tinbergen,214 a large number of empirical works on internationaltrade efficaciously applied the gravity model to analyse various bilateral, regionaland multilateral trading arrangements. When Tinbergen used the gravity model,there was no theoretical basis behind this model. Hans Linnemann 215 firstanalysed theoretical foundation of the model arguing that this model is a reducedform of a partial equilibrium model of export supply and import demand.According to Linnemann’s approach, there are three contributing factors thatdetermine trade flows between two countries, for example home and foreign. Thefirst two contributing factors determine the home country’s potential supply andforeign country’s potential demand on world market respectively. These twofactors include the size of home and foreign countries GDP, population and percapita income. The third factor is denoted as “resistance” factor. Because itrepresents the “resistance” to trade flows between home and foreign. Resistancefactor includes transportation cost and other barriers to trade like tariff, para-tariffand non-tariff measures. In order to get the equilibrium condition of the homecountry’s potential supply and the foreign country’s potential demand, a fixedexchange rate and a moderate price level are assumed in both countries. Now, theformula of trade flows from home country to foreign can be expressed by thefollowing equation.

)2......(............................................................)(*)(

*21

0HF

PF

PH

HF R

DSEx

Where,

HFEx = Potential exports from home country to foreign country;PHS = Total potential supply of home country;PFD = Total potential demand of foreign country; and

HFR = Resistance.

If in equation 2, three explanatory factors are replaced by their determiningvariables, then it will be similar to an extended form of a gravity equation.216 A

214 Jan Tinbergen, op. cit.215 Hans Linnemann, op. cit.216 Mohammad Mafizur Rahman, “A Panel Data Analysis of Bangladesh’s Trade: TheGravity Model Approach”, mimeograph, 2006, available at:


number of theoretical works established the consistency of gravity equation withvarious trade flow models. Incorporating the product differentiation approach,James E. Anderson217 derived the gravity equation which explains the presence ofincome variables in the model. On the basis of empirical work on fourteenindustrial countries, Elhanan Helpman 218 established a linkage between thegravity model and the monopolistic competition model. After that Alan V.Deardorff219 derived a gravity model from the Hecksher-Ohlin model both in thecase of frictionless trade and with complete specialisation. Most recently, JamesE. Anderson and Eric Van Wincoop 220 developed a method to estimate atheoretical gravity model which can solve the “border puzzle”.

The majority of the studies, which applied gravity models, predict tradepotential between pairs of countries.221 The wider use of gravity model in traderelated literatures is twofold. Firstly, econometric studies show that GDP anddistance are highly significant in explaining trade flows which is consistent withthe gravity model. Secondly, as discussed above, gravity equation is consistentwith various theoretical models of trade flows.222

4.2 Methodology and Data

4.2.1 Model Specification

Most of the empirical studies on international trade used bilateral total tradeas dependent variable. However, it is not possible to analyse the potential exportand potential import separately, using total trade as a dependent variable for agiven pair of countries. To analyse Bangladesh’s potential trade, export andimport separately, this study has estimated three gravity models for Bangladesh,using bilateral total trade, export and import as dependent variables respectively.

http://www.etsg.org/ETSG2003/papers/rahman.pdf, accessed on May 39, 2009, pp. 4, 33-34.217 James E. Anderson , op. cit.218 Elhanan Helpman (1987), “Imperfect competition and International Trade: Evidencefrom fourteen industrial countries”, Journal of the Japanese and InternationalEconomics, Vol. 1, No. 1, 1987, pp. 62-81.219 Alan V. Deardorff (1998), “Determinants of Bilateral Trade: Does Gravity Work in aClassical World?”, in Jeffrey A. Frankel (ed.), The Regionalization of the WorldEconomy, Chicago: University of Chicago Press, pp. 7-22.220 James E. Anderson and Eric Van Wincoop (2003), “Gravity with Gravitas: A Solutionto the Border Puzzle”, The American Economic Review, Vol. 93, No. 1, 2003, pp-170-192.221 Amit Batra, “India’s Global Trade Potential: The Gravity Model Approach”, WorkingPaper No. 151, New Delhi: Indian Council for Research on International EconomicRelations, 2004, p. 5.222 Michele Fratianni, “The Gravity Equation in International Trade”, in Alan M. Rugman(ed.) The Oxford Handbook of International Business, Oxford: Oxford University Press,2008, pp. 87.

A standard gravity model as stated in equation 1 is adopted by including aregional trading arrangement dummy for all these three models of Bangladesh’strade. These three models are stated in equation 3, 4 and 5 as follows.

Gravity model of Bangladesh’s trade:)3.....()()*()( 3210 ijijijjiij URTADISTLogGDPGDPLogTradeLog

Gravity model of Bangladesh’s export:)4.....()()*()( 3210 ijijijjiij URTADISTLogGDPGDPLogExportLog

Gravity model of Bangladesh’s import:)5.....()()*()( 3210 ijijijjiij URTADISTLogGDPGDPLogImportLog

Where,

ijTrade = Bilateral trade between country i (Bangladesh) and country j;

ijExport = Bilateral export from country i (Bangladesh) to country j;

ijImport = Bilateral import by country i (Bangladesh) from country j;

iGDP = Gross Domestic Product of country i (Bangladesh);

jGDP = Gross Domestic Product of country j;

ijDIST = Distance between country i (Bangladesh) and country j;

ijRTA = Regional trading arrangement dummy;

ijU = Error term; and

30 .... = Coefficients to be estimated.

4.2.2 Hypotheses

The first explanatory variable is the product of GDPs between Bangladeshand country j which measures the size of the economy as well as the income. Thebetter-off countries usually can spend more on imports from other countries andalso attract a large share of other countries’ expenditures. Hence, they tend totrade more than the poorer countries and thus the expected sign of the firstcoefficient is positive in all the three gravity models for Bangladesh. The secondexplanatory variable is distance which is a good proxy of transportation andinformation cost of trade. Therefore, a negative sign is expected for thecoefficient of distance. The third explanatory variable is a RTA dummy variablefor South Asia. When both Bangladesh and its trading partner belong to the sameregional trading arrangements then the dummy variable equals to 1, otherwise 0.The estimated coefficient of RTA affirm how much of the trade can be createdfor establishing a regional arrangements. Very often RTA positively impacts ontrade flows between countries, thus a positive sign is expected for this RTA


dummy in Bangladesh’s gravity model. This RTA dummy is included to analysethe impact of SAPTA on Bangladesh.4.2.3 Sample Size and Database

For the purpose of estimating the gravity models for Bangladesh, data of 116countries have been used in this study. These countries have been selectedconsidering the major trading partners of Bangladesh, both in terms of exportsand imports, and availability of data. Among the member countries of SAFTA,Afghanistan is excluded because of data constraint. The model is estimated basedon cross-section data for the year 2003. Although the panel data approach hassome advantages to capture the impact of changes in GDPs on changes in tradepatterns, the cross-section data approach has popularly been used to estimate theclassical gravity model.223 The present study has taken the classical approach toestimate three gravity models for Bangladesh’s trade, export and import. Annualdata on bilateral trade, export and import have been obtained from Direction ofTrade Statistics (DOTS) CD ROM database of International Monetary Fund.Data on GDP, at current US dollar, has been collected from World DevelopmentIndicators (WDI) CD ROM database of the World Bank. Data on distance inkilometer between capital of Bangladesh and capital of country j has beencollected from a distance calculation website(http://www.timeanddate.com/worldclock/distance.html).

4.3 Evaluation of Trade Flows Using Gravity Model

4.3.1 Results from Gravity Models

The results of the Ordinary Least Squares (OLS) estimates of gravitymodels for Bangladesh are presented in Table 2. The estimatedcoefficients also reflect the standard features of gravity model withexpected sign and magnitude. The estimated results of standard gravitymodels (without RTA dummy) of Bangladesh’s trade, export and import,show that both gravity variables are statistically significant at 1 percentlevel of significance. In case of model for total trade, the coefficient ofLog(GDPi*GDPj) is 1.1 means that if the product of Bangladesh’s GDPand country j’s GDP is increased by 1 percent bilateral trade betweenBangladesh and country j will be increased by 1.1 percent, ceteris paribus.In case of SAFTA, this implies that if the member countries experiencehigher economic growth then trade flows between Bangladesh and otherSAFTA member countries will be increased significantly. The coefficientof Log(DISTij), which reflects the transportation and information cost,shows a negative sign as expected. The estimated value of -1.6 reflects

223 Amit Batra, op. cit., p. 10.

that the trade between Bangladesh and country j will be decreased by 1.6percent as a result of 1 percent increase in bilateral distance between thesetwo countries, ceteris paribus. The R2 in trade model is 0.68 which meansthat the model explains 68 percent of the variation of the log ofBangladesh’s bilateral trade. Similar to the gravity model of total trade,the estimated coefficients of Bangladesh’s export and import models arealso statistically significant at the 1 percent level of significance and havethe expected sign and magnitude. The estimated coefficients reflect thatBangladesh’s bilateral export and import are positively related to theproduct of Bangladesh’s GDP and country j’s GDP and negatively relatedto the distance between them. The goodness of fit, R2 of export and importmodels are 0.65 and 0.62 respectively, which are also quite nice, given theparsimonious specification.

Table 2: Estimation Results of Gravity Models

Coefficient without RTA Coefficient with RTATrade Model Dependent VariableConstant -8.276251 (2.432453)* -8.513072 (2.852143)*Log(GDPi * GDPj) 1.108855 (0.076095)* 1.109944 (0.076725)*Log (DISTij) -1.566968 (0.229926)* -1.543314 (0.273751)*RTAij -- 0.134338 (0.834933)R-squared 0.678254 0.678329Adjusted R-squared 0.672560 0.669713Export Model Dependent VariableConstant -9.919784 (2.418910)* -10.51935 (2.877279)*Log(GDPi * GDPj) 0.967227 (0.072791)* 0.968975 (0.073222)*Log(DISTij) -1.151071 (0.221886)* -1.088686 (0.274595)*RTAij -- 0.333675 (0.858642)R-squared 0.647860 0.648365Adjusted R-squared 0.641215 0.638319Import Model Dependent VariableConstant -5.016117 (2.084003)* -3.623849 (2.556811)Log(GDPi * GDPj) 0.797116 (0.077065)* 0.785678 (0.078081)*Log (DISTij) -1.121134 (0.209066)* -1.247288 (0.248470)*RTAij -- -0.633045 (0.672389)R-squared 0.627156 0.632098Adjusted R-squared 0.616027 0.615375

*Significant at 1% level, Figures in parentheses represents standard errors.

The estimated coefficients of the gravity models with a RTA dummyreveal that GDPi*GDPj and DISTij are statistically significant in all threemodels but the RTA dummy is not. This implies that South AsianPreferential Trading Arrangements (SAPTA) which came into force in


1995 was not a viable trading arrangement in terms of Bangladesh’sbilateral trade/export/import creation. The three rounds of tariff reductionunder SAPTA as mentioned in Table 1 do not have any significant impacton existing trade/export/import flows of Bangladesh within this region.

4.3.2 Bangladesh’s Potential Trade under SAFTAIn this section, Bangladesh’s bilateral trade potential with SAFTA

member countries has been estimated using the coefficients arrived at bythe standard gravity model. Bilateral export potential and import potentialhave also been estimated in order to predict the future flows of export andimport separately under SAFTA. The estimated trade/export/importpotential and actual trade/export/import are then used to calculate the ratioof potential and actual trade/export/import. If the calculated value of thisratio of Bangladesh’s trade/export/import is greater than 1 for anyparticular country then it indicates that, for Bangladesh, there is a scope ofbilateral expansion of trade/export/import with that respective country.Similarly, values less than 1 indicate that Bangladesh has exceeded itstrade/export/import potential with respective countries.

It should be noted that the potential trade generated from gravity modelis a long run equilibrium situation of bilateral trade/export/import flows.Thus, any type of interventionist policy that interrupts to reach theequilibrium situation, produces a gap between actual flows and long runequilibrium situation, the potential values.224 In fact, the estimated gravitymodels used in this study have excluded one important variable whichrepresents barriers to bilateral trade/export/import. This variable includesall sorts of tariff and non-tariff barriers as well as domestic rules andregulations which are usually very difficult to quantify. The actual valueof this variable is not similar across countries and heavily differs fromcountry to country. That means different countries impose different levelof tariff and non-tariff barriers on imported goods from other countries.These differences of bilateral trade barrier generate different values of theratio of potential/actual trade. In case of a country’s export, if this ratio isgreater than 1 (less than 1) for a particular country, then it means that thecountry’s exports face relatively higher (lower) trade barriers to enter intothat particular country compared to the rest of the world. Similarly, if theratio of the potential/actual import is greater than 1 (less than 1) for aparticular country, this reflects that this country is imposing relativelyhigher (lower) barriers on import from that particular country compared tothe rest of the world.

Trade potential is nothing but the predicted trade flows estimated fromgravity model. The gap between this predicted and actual trade flows canbe interpreted as “untapped” trade potential. Now, if it is assumed that the

224 Chan-Hyun Sohn, “Does the Gravity Model Explain South Korea’s Trade Flows?”,The Japanese Economic Review, Vol. 56, No. 4, 2005, pp. 426.

only excluded variable from the gravity models used in this study is tradebarrier, then untapped trade potential is the result of this trade barrier. Insuch a case, bilateral trade may be raised by the amount of this gap as aresult of removal of this trade barrier or maintaining similar trade barrieracross the world. A country with a higher ratio is considered to be adesirable FTA partner. Lars Nilsonn225 and Matthieu Bussiers et. al.226

used the ratio of potential and actual trade to define the degree of tradeintegration. An RTA with a country having higher ratio of potential andactual trade can increase bilateral trade substantially, recovering the largeuntapped trade potential. This recovery is possible if the member countriesof an RTA reduce all sorts of trade barriers to a similar level of the rest ofthe world. If member countries of an RTA completely remove the tradebarriers among themselves but maintain existing trade barriers to the restof the world then the expected increase of trade under that RTA will bemuch higher than that of the potential trade.

Table 3: Bangladesh’s Bilateral Trade, Export and Import Potential within SAFTA

Partner Countries Actual Trade(Million US$)

Potential Trade(Million US$)

Potential/Actual

Trade ModelBhutan 6.22 4.25 0.68India 1549.56 1268.82 0.82Maldives 0.40 0.26 0.64Nepal 7.84 24.49 3.12Pakistan 138.19 81.45 0.59Sri Lanka 15.04 13.34 0.89South Asia 1717.25 1392.61 0.81Partner Countries Actual Export

(Million US$)Potential Export(Million US$)

Potential/Actual

Export ModelBhutan 2.38 0.87 0.37India 55.34 163.74 2.96Maldives 0.01 0.11 11.27Nepal 2.98 4.44 1.49Pakistan 42.7 16.08 0.38Sri Lanka 5.8 3.38 0.58South Asia 109.21 188.63 1.73Partner Countries Actual Import

(Million US$)Potential Import(Million US$)

Potential/Actual

Import Model

225 Lars Nilsonn, “Trade Integration and the EU Economic Membership Criteria”,European Journal of political Economy, Vol. 16, No. 4, 2000, pp. 807-827.226 Matthieu Bussiers, Jarko Fidrmuc and Bernd Schanatz, Trade Integration of Centraland Eastern European Countries: Lessons for a Gravity Model, Working Paper No 545,Frankfurt: European Central Bank, 2005.


Bhutan 3.84 7.43 1.94India 1494.22 449.78 0.30Maldives 0.40 1.00 2.49Nepal 4.86 26.23 5.40Pakistan 95.49 62.59 0.66Sri Lanka 9.24 17.06 1.85South Asia 1608.05 564.09 0.35

Source: Own calculation based on gravity model estimation

Table 3 represents Bangladesh’s bilateral trade/export/import potentialwith SAFTA member countries. From Table 3 one can observe thatBangladesh has exceeded its trade potential in South Asia in general andwith all the member countries except for Nepal in particular, as the valueof Bangladesh’s potential/actual trade for all SAFTA member countries,except for Nepal, is less than 1. This implies that Bangladesh is tradingmore with SAFTA member countries than what is predicted by the model,and further scope to improve bilateral trade within this region is very little.Since, bilateral trade adds up both export and import, only analysing thetrade potential, it is not possible to predict whether Bangladesh has exportpotential to SAFTA member countries or not. A careful observation ofexport potential figures obtained from gravity model of export reveals thatBangladesh has huge export potential to South Asian countries as thevalue of potential/actual export figure for South Asia is 1.73. The differentphenomenon of trade potential and export potential can be realised if weconsider Bangladesh’s import potential to SAFTA members. The value ofpotential/actual import is only 0.30 and 0.66 for India and Pakistanrespectively, which represent that Bangladesh’s imports from these twocountries are much higher than the potential imports, predicted by themodel. Since, India is the largest economy in South Asia followed byPakistan, exceeding potential import from these two countries is the mainreason for this contradictory feature of Bangladesh’s potential trade andpotential exports in South Asian region.

Now, let us analyse the viability of SAFTA using this estimated tradepotential in terms of Bangladesh’s export and import. The value ofpotential/actual export figure for South Asia is 1.73 which implies thatBangladesh’s export to SAFTA member countries will be increased by 73percent, if trade barriers are reduced similar to the rest of the world underSAFTA. If all sorts of bilateral trade barriers are removed under SAFTA,as mentioned earlier, then the expected increase of Bangladesh’s exportwill be much higher than the estimated potential export. Some studiesargue that complete removal of tariff and non-tariff barriers under an FTA

could increase export to the potential level.227 But this interpretation willonly be true if tariff and non-tariff barriers are also completely be removedfor the rest of the world. However, if the member countries of an FTAmaintain the existing tariff for the rest of the world then the outcome froman FTA will be much higher. The magnitude of Bangladesh’s exportpotential is the highest with India. Figure 6 shows the gap betweenpotential and actual export from Bangladesh to SAFTA members. Fromthis figure, it can be observed that Bangladesh has untapped exportpotential to India amounting US dollar 108.4 million which is almostdouble to actual export of US dollar 55.34 million. So under SAFTA,Bangladesh’s expected export to India will be more than that of untappedtrade potential. Considering other members of SAFTA, Bangladeshexceeded its export potential to Pakistan which is around US dollar 26.62million while the gap is not substantial with Bhutan, Maldives, Nepal andSri Lanka. Now, the question is what will be the expected export toPakistan from Bangladesh to whom Bangladesh has exceeded its potentiallevel. A complete removal of tariff and non-tariff barriers can also boostBangladesh export to Pakistan as there are still some barriers to exportfrom Bangladesh to Pakistan. Obviously this increase in export to Pakistanwill not be as high as that to India, since Bangladesh has untapped exportpotential to India but not to Pakistan.

Figure 6: Gap between Bangladesh’s Potential and Actual Export within SAFTA

227 Pratima Dayal, Abhijit Das, Rashmi Banga, Kavita Iyengar and Shahid Ahmed,Quantification of Benefits from Economic Cooperation in South Asia, New Delhi:Macmillan, 2008, p. 46.


Source: Based on data from Table 3.

Accordingly, the gravity model analysis of this study shows thatBangladesh has exceeded its import potential from SAFTA members.However, from preceding analysis it can be argued that there is also scopeto increase Bangladesh’s import from member countries as well byremoving all sorts of trade barriers. This trade potential can only berealised by not only removing the tariff barriers but also non-tariff barriers.For example, in the presence of non-tariff barriers, although under SAPTA,bilateral import tariff had reduced (Table 1), the exports from Bangladeshto other South Asian countries had not improved. This might be theunderlying reason why RTA variable is found insignificant in explainingBangladesh’s trade/export/import flows within SAFTA region.

5. Conclusion

This study has examined the gravity model to estimate the bilateral tradepotential for Bangladesh in SAFTA region. Cross section approach has beenperformed using OLS estimation technique in EViews package. The analysis ofthis study is based on the majority of Bangladesh’s trade partners. Three gravitymodels of Bangladesh’s trade, export and import have been estimated which fitthe data. Estimated coefficients, delivered by the model, found that gravityvariables are statistically significant and have expected sign and magnitude.However, the RTA dummy, found by the model, is not a statistically significantvariable to explain Bangladesh’s trade flows. From the estimated results, it isobserved that Bangladesh has export potential to India, Maldives and Nepal.However, Bangladesh has exceeded export potential to Bhutan, Pakistan and SriLanka. The magnitude of export potential is very high with India compared toother South Asian countries which generated an overall export potential forBangladesh in SAFTA region. On the other hands, Bangladesh has importpotential from Bhutan, Maldives, Nepal and Sri Lanka while she exceededimport potential from India and Pakistan. The high magnitude of imports fromIndia, compared to potential level, produced that for the region as a whole,Bangladesh exceeded import potential as well as trade potential.

The fundamental objective of this paper has been to find out whether SAFTAwill increase Bangladesh’s export to other member countries or not. The analysishas shown that Bangladesh has huge potential to increase intra-regional export inSAFTA member countries. According to results from gravity models,Bangladesh can increase its export three times of current exports to India. This

new export from Bangladesh to India will be generated if India reduces its importtariff under SAFTA and other restrictions similar to the rest of the world. Theexpected export will be much higher if all barriers to trade are completelyremoved. Similar situation can be expected in case of Bangladesh’s export toMaldives and Nepal. In terms of export to countries like Bhutan, Pakistan and SriLanka, positive effect in terms of export generation might be achievedconsidering complete removal of trade barriers under SAFTA. Although,Bangladesh exceeded its potential import form SAFTA member countries, itmight be increased under the same condition when trade barriers are completelyremoved under SAFTA. But, the overall increase in import from SAFTAmember countries to Bangladesh might not be as large as the overall increase inexport from Bangladesh to other SAFTA members. It is relevant to mention thatthe expected results can only be achieved by free trade in real sense, i.e. goodsand services can move freely across countries without any tariff and non-tariffbarriers. Unfortunately, the previous attempts of SAPTA have not generated anysignificant increase in Bangladesh’s export because of much tougher non-tariffbarriers faced by Bangladeshi exports particularly in Indian market.

Finally, the expected outcomes are fully dependent on successfulimplementation of SAFTA agreement which depends on political stability in thisregion particularly between India and Pakistan. The political tension betweenIndia and Pakistan delayed the progress of SAFTA several times. To increaseintra-regional trade under SAFTA, some other important issues need to beresolved also. These include reducing the size of sensitive list, settlingappropriate rules of origin, improvement of physical infrastructure and crackingthe problem of illegal border trade. Until and unless such issues are properlyidentified and resolved, the expected benefits from SAFTA cannot be realised.With a view to realising fully the potential benefits of SAFTA, this studysuggests the following measures, which the policy makers of Bangladesh as wellas other member countries might take into consideration:

Emphasis should be given on the successful implementation of SAFTAagreement within its scheduled time. Although, SAFTA treaty came intoforce in 2006, there are some additional instruments which are supposed to befully implemented by the year 2017.

Bangladesh should take initiatives to fully eliminate all types of trade barriersincluding non-tariff barriers, especially which are involved in case of exportfrom Bangladesh, in order to enhance Bangladesh’s export as predicted bythis study.

To get the full benefit of SAFTA, the size of the sensitive list should beshortened. This will also reduce the informal trade across SAFTA membercountries.


SAFTA member countries should give transit facilities to each other tofacilitate trade among them. If India gives transit facility to Bangladesh toexport goods to Nepal and Bhutan, Bangladesh’s export to these twocountries would increase considerably. Similarly, Bangladesh can easily getaccess to Pakistan and Afghanistan market. This brings the issue ofconnectivity in its broader perspective.

Since Bangladesh’s exports are heavily dependent on a very fewcommodities, It should diversify its export basket and maintain proper qualityof its exports.

Finally, all member countries of SAFTA should jointly try to resolve thepolitical conflicts within the region, thereby generating a common politicalwill and commitment for cooperation in the region.

Segufta HossainMd. SaifuzzamanMohd. Shamsul Alam

URBAN ENVIRONMENTAL CHANGE: A CASE STUDYON EASTERN DHAKA CITY WETLANDS TRANS-FORMATION FROM 1963-2009=======================================================

Abstract

The present study aims at understanding the state, and process of wetlandstransformation of the eastern part of Dhaka city. Multi date satellite images,maps and documents related to city wetlands have been used. Extensive fieldsurveys were conducted to verify the spatial extent and condition of thewetlands. The study reveals that, the wetlands of the urban fringe areas are in theprocess of rapid transformation. The rate of permanent wetlands transformationappears to be drastic. The permanent and seasonal wetlands are converted tobuilt-up areas. Factors like physical, socio-cultural and legal regime influencethe processes of urban fringe wetlands transformation. The urban fringewetlands transformation process is continuous, and non-cyclic. The studyrecommends that there should be a control on wetlands transformation withoutdelay.

1. Introduction

Environmental threats are emerging security threats for a number ofcountries. Unlike potential conventional military threats, these environmentalthreats are real and on-going.228 Wetlands are important part of the environment.

Segufta Hossain is a Research Fellow, Bangladesh Institute ofInternational and Strategic Studies (BIISS), Dhaka. Her e-mail address is:[email protected]

Md. Saifuzzaman is a Lecturer, Department of Geography andEnvironment, Jahangirnagar University, Savar, Dhaka. His e-mail addressis: [email protected]

Mohd. Shamsul Alam is a Professor, Department of Geography andEnvironment, Jahangirnagar University, Savar, Dhaka. His e-mail addressis: [email protected]


One of the most significant environmental problems the world is facing today isthe pollution of the waterbodies. The preservation of the world’s wetlands can bedescribed as a natural security issue as they have a significant role to play inmaintaining the environment. Now-a-days, with increasing urbanization, urbanenvironmental degradation issues are coming in the discussion as emergingthreats. Transformation of waterbodies in and around the city for variousdevelopment purposes is creating different types of environemntal problems inthe urban areas. The urban fringe areas are also facing constant pressure for newdevelopment activities which is creating environmental hazards.

The term urban fringe has different dimensions in terms of definition,characteristics and delimitations. The term was introduced by Smith to describebuilt up area just outside the corporate limit of the city and then later the conceptof ‘rural-urban fringe’ was formulated by George Wehrwein as the area oftransition between well recognized urban land uses and the area devoted toagriculture.229 Urban fringe areas are now in a process of increasing urbanizationwhich includes changes in landownership patterns, activities of the people, socio-economic and environmental conditions of the fringe area. The problems of theurban fringe areas are similar in the developing countries and most of thedeveloping countries experience spontaneous development pattern rather thanplanned growth.230

© Bangladesh Institute of International and Strategic Studies (BIISS),2010.228 Elizabeth L. Chalecki, Environmental Security: A Case Study of ClimateChange, available at:http://www.pacinst.org/reports/environment_and_security/env_security_and_climate_

change.pdf, accessed on: May 15, 2010.

229 T. L. Smith and George S. Wehrwein cited in Fahria Masum, “UrbanFringe Management and Role of Good Governance: IntegratingStakeholders in Land Management Process”, paper presented in the 7th

FIG Regional Conference on Spatial Data Serving People: LandGovernance and the Environment – Building the Capacity, Hanoi,Vietnam, October 19-22, 2009, available at:http://www.fig.net/pub/vietnam/papers/ts01b/ts01b_masum_3648.pdf, accessedon: May 10, 2010.

230 Ibid.

Urban wetlands are those wetlands that are located in or around the city. InBangladesh, the urban wetlands in the capital Dhaka have different types of uses.The wetlands inside the city and on the fringe areas have immense importance inthe environmental, socio-economic and cultural sectors. They are used as watersources for people, other wetlands, groundwater, agriculture and industry. Thesewetlands are used as the water reservoirs and drainage network and controlerosion, recharge soil fertility and form new lands. The wetlands work as genebank and provide shelter, feeding, breeding and necessary support to wildlife andplants that are used for biological purification. The urban wetlands of Dhaka cityare used for different cycles like hydrological cycle, production cycle, etc. Theurban wetlands have important contribution in the socio-economic and culturalsectors too.

In spite of the immense importance of urban fringe wetlands, they areshrinking very rapidly due to rapid expansion of urban settlements,industrialization and development of new infrastructures on the wetlands. But, nospecific study is done on this issue and literature on this issue is also inadequate.Barbier (1993) in his paper described that tropical wetlands are increasinglydisappearing as a result of development decisions.231 According to him suchdevelopment decisions are taken without considering the loss in wetlandsbenefits arising from damages and conversion. He also described the valuationapproaches and methodology, economic appraisal methodology, partial valuationand total valuation of some wetlands. Adams (1993) in his article described aboutthe indigenous use of wetlands and sustainable development in West Africa. Hefound a wide variety of wetlands environments in West Africa most of whichsupport substantial communities of people who depend on their natural resourcesand ecology and hydrological patterns that maintain them.232 Mandal (1995) inhis article highlighted the economic, cultural and ecological values of thewetlands in north-east India. This paper shows how marshy and waterloggedareas can be utilized in a better way in order to create a sound ecological balanceand environmental adjustment within various parameters of economic

231 E. B. Barbier, “Sustainable Use of Wetlands Valuing Tropical WetlandBenefits: Economic Methodologies and Applications”, The GeographicalJournal, Vol. 159, No. 1, 1993.

232 W.M. Adams, 1993. “Indigenous use of wetlands and sustainabledevelopment in West-Africa”, The Geographical Journal, Vol. 159, No. 2,1993.


development. There is also an attempt to examine current problems faced by thebigger wetlands in north-east India. Khan (2001) in his paper provided anoverview of the wetlands of Bangladesh, its importance as a very productiveecosystem, other benefits and attributes and the need of a sustainablemanagement strategy.233 Das (2000) in his paper exhibited the present status offreshwater wetlands of the country.234 He identified the importance of freshwaterwetlands of the country, evaluated the environmental impact of variousdevelopment activities on wetlands and prepared recommendations for futureaction programmes. National Environment Management Action Plan (NEMAP)(1995) in its report included water resources, wetlands issues and recommendedactions, types of actions, actors or agencies and specific action related with theseissues. Khan et. al. (1994) in their book described the definition, history, heritageand importance of wetlands for Bangladesh. The types, ecology and resources,socio-economic values and development activities and threats are also describedhere. This book also includes wetlands legislation, future actions andorganizations involved in conservation of the wetlands. Nishat et.al. (1993) intheir monograph discussed about the focus issues pertinent and relevant toconservation of freshwater wetlands in Bangladesh. 235 This monograph hasbrought under one cover an overview of concerns, issues, extent of dataavailability and possible freshwater wetlands management approaches perceivedby professionals, academics and researchers. Japan International CooperationAgency (JICA) (1991) in Flood Action Plan (FAP) 8A described the MasterPlan for greater Dhaka protection project. This report has a Master Plan on floodmitigation and storm water drainage improvement measured for Dhakametropolitan area. Reviewing all the available literature, it appears that most ofliteratures concern little on urban fringe wetlands transformation. These studiesmainly include the definitional aspects, importance, types, etc. Particular rigorousstudy on wetlands use, transformation and conservation from local to nationalscale is missing. The present study is undertaken to explore the transformation

233 M. H. Khan, “The Wetland Ecosystem of Bangladesh”, in Chowdhury,Q. I. (ed.), Bangladesh State of Bio-diversity, Dhaka: Forum ofEnvironmental Journalists of Bangladesh (FEJB), 2001.

234 Das, S. C., “Environmental Impact of Development Activities on Wetlands inBangladesh”, The Jahangirnagar Review, Vol. XXIII – XXIV, No. II, 1999-2000.

235 A. Nishat et, al., Freshwater Wetlands in Bangladesh – Issues andApproaches for Management, Dhaka: IUCN – The World ConservationUnion, 1993.

nature of the urban fringe wetlands with emphasis on the spatial extent, natureand consequential effects.

A large number of published and unpublished data have been used in thepresent study. Different satellite images and maps are also used to collectinformation about the urban fringe wetlands transformation. Satellite images areused to identify the wetlands, discriminate the boundaries of the wetlands, andgather information on the state and nature of the wetlands. Information about thetypes of wetlands, uses and problems of the fringe wetlands, drainage problemscreated due to the increase of paved area, consequential effects of wetlandstransformation are collected from the field. The secondary information aregathered from different published books, articles of journals, population censusreport, district gazetteer, Dhaka Metropolitan Development Plan and differentunpublished thesis, report, etc. Initially, the inhabitants of the study area wereinterviewed to know about the characteristics of the wetlands, drainage, floodingnature, etc. The administrative map of 1963 is used in the present study as thebase map. The scale of the map is 1:31680. The area of the map is measuredmanually by graph method. The SPOT236 image of 1990, the Landsat TM237

image of 2000 and IRS238 P6 LISS3 image of 2009 are used in the present study

236 SPOT (Satellite Pour l'Observation de la Terre) is a high-resolution,optical imaging Earth observation satellite system operating from space.It is run by Spot Image based in Toulouse, France. It was initiated in the1970s. The SPOT system includes a series of satellites and ground controlresources for satellite control and programming, image production, anddistribution.

237 The Landsat program is the longest running enterprise for acquisitionof imagery of Earth from space. The first Landsat satellite was launched in1972. Thematic Mapper (TM) is one of the Earth observing sensorsintroduced in the Landsat program. TM sensors feature seven bands ofimage data (three in visible wavelengths, four in infrared) most of whichhave 30 meter resolution.

238 Indian Remote Sensing satellites (IRS) are a series of Earth Observationsatellites, built, launched and maintained by Indian Space ResearchOrganization. India developed the indigenous Indian Remote Sensing(IRS) satellite program to support the national economy in the areas of


to identify the spatial extent of transformation of the wetlands. The scale of theseimages is 1:100000. The satellite images are digitally interpreted and the area isalso measured digitally. Then, these data are combined and presented by differentstatistical methods.

Urban fringe wetlands are one of the most important parts of the vastwaterbodies located in and around the city. But, at present, these fringe wetlandsare in a very fragile condition and they are being transformed rapidly. In thiscontext, the study aims to understand the nature and processes of transformationof the urban fringe wetlands. More specifically, the objectives of the presentstudy are to identify the types of wetlands, to record the uses and problems of thefringe wetlands and to understand the spatial extent of the wetlandstransformation and their consequences. The present paper is divided into sixsections including the introduction and conclusion. The second section of thepaper deals with the impacts of urban wetlands depletion in Dhaka, thedescription of the study area i.e. the eastern part of Dhaka city is provided in thethird section, the Fourth section discusses the transformation of the easternDhaka city wetlands between 1963-2009, and the nature, process and impacts ofeastern Dhaka city wetlands transformation is analyzed in the fifth section.

2. Impacts of Urban Wetlands Depletion in Dhaka

Although wetlands are one of the most important features of nature, whichcan be considered as the ecological safety valves, they are being reduced in avery fast pace. In the initial days of formation of Dhaka city, there was acoexistence of human being and nature, which is now under threat. Until 1850,development of the city took place on the higher terrain and the encompassingrivers, networks of canals and wetlands were harmoniously used fortransportation, defence, fishing or agricultural purpose. 239 The inter-connectedcanals of the city worked as the life lines of the city. Most of the vital wetlands ofDhaka are almost nonexistent now-a-days. It has been reported that a network of22 canals, that used to form the natural drainage for the capital from the earlierdays has disappeared or shrunk over the last four decades.240

agriculture, water resources, forestry and ecology, geology, water sheds,marine fisheries and coastal management.

239 Ishrat Islam, “Wetlands of Dhaka: Alarming depletion”, The Daily Star,May 19, 2006.

240 A K M Shamsuddin, “Saving Dhaka Wetlands – the city’s lifeline”, TheFinancial Express, April 19, 2007.

Among the city canals241 the Dholai Khal, which once used as an importantnavigational route for country boats to and from destinations within themetropolis, has almost disappeared due to four decades of wrong policies of thecity administration. The canals had their outlets to the Buriganga, the Sitalakya,the Balu and the Turag rivers, which were inter-connected. The blocking of theKhal has had far-reaching impact on the drainage system of the city. TheSegunbagicha Khal that extended from Shahbagh to the Jirani Khal via theManda Bridge used as the main drainage channel of central Dhaka. A major partof it is under illegal encroachment by influential people in the Segunbagicha,Purana Paltan and Naya Paltan areas. The Hatirjheel, which once ran from thebackside of the present Sonargaon Hotel to Gulshan-1, is now being illegallyoccupied by different organizations and local land grabbers. Only 5 percent ofthe original Hatirjheel remains now. The Gulshan lake directly drained south-west into Hatirjheel and into east through the Rampura Khal to the Balu River.The Gulshan lake was connected to Dhanmondi lake via the Begunbari khalwhich then drained through the Katasur Khal into river Turag. In the west theKatasur khal also drained the water of Rayerbazar and Mohammadpur areas.Ramchandrapur and the Dholai Khal were used as the drainage channels of oldDhaka. The Motijheel and the Segunbagicha Khal drained all of south centralDhaka. The Jirani Khal, the Shajahanpur Khal and the Mohakhali Khal used tobear the load of eastern Dhaka’s storm water. Similarly the Kalyanpur,Ibrahimpur and Diabari Khals were the lifelines of north Dhaka. Other importantcanals of the city, such as the Begunbari Khal was extended from the DhanmondiLake to Trimuhani via Rampura before emptying into the Balu River, theIbrahimpur canal, the Khathalbagan-Rajarbagh canal and the Gopibagh canaltogether with other minor canals of the city were disappeared due to either illegalencroachment or acquisition for construction of either roads, box culverts orunderground drains. All these projects have changed the original purpose whichthe old networks of canals were meant to serve.

Excepting a few, most water bodies in Dhaka are either lined by slums orsmall industries who use them for waste disposal. The disappearance of the canalnetworks has not only aggravated the city’s drainage problems, but also, apartfrom depriving the city of its natural beauty, has been causing loss of the annualrecharge of ground water of the city, thereby leading to the fall of ground watertable every year at an alarming rate. With the increasing of population, the,unplanned development activities started in the vast low lying areas around thecity violating all rules and regulations. Low lying areas are being filled up todevelop new settlements. Land filling activities in the eastern fringe of Dhaka

241 The information on Dhaka city canals are compiled from A K MShamsuddin, Ibid.


city is also continuing although it was mentioned in the study of JICA that evenafter completion of the Eastern Embankment, 12 percent of land should be keptas retention area for storm water storage.242 The land filling process involves thetransfer of ownership from the local farmers to the private real estate developerswho have encroached huge areas of lands to establish new settlements. In manycases these lands are encroached by aggression and exploitation. Filling of thewetlands by the real estate developers are not only creating an imminentenvironmental disaster but also increasing water logging and creating a mess inthe sewer system. The established and renowned private developers arecomparatively in favourable position to use political influence and personalcontact to grab the lands of the fringe areas.243 Loss of urban wetlands has variousimpacts on the environment of the city. Wetlands around Dhaka city act as thenatural retainer of storm water. The natural drainage system is damaged due tothe unplanned destruction of the fringe wetlands. Water congestion and waterlogging is frequently observed for this. Wetlands have significant impact on thelocal ecology and biodiversity, which is constantly being deteriorate with thedevastation of the wetlands. The wetlands play an important role of rechargingthe ground water. The decrease of wetlands would also decrease the groundwater level of the urban areas which would further hamper the water supplysystem of the city.

The laws related to water bodies in Bangladesh includes – the Bengal CanalAct 1864, the Bengal Irrigation Act 1876, East Bengal Embankment andDrainage Act 1952, Inland Water Transport Ordinance 1958, East PakistanIrrigation (Imposition of Water Rate) Ordinance 1963, Ground WaterManagement Ordinance 1985, Water Supply and Sewerage Authority Act 1996,etc. which are mainly sectoral in nature. Bangladesh Environment Protection Act1995 also focuses mainly on the pollution of water bodies by industries andtransports. The grabbing of rivers or any other water bodies does not come underthe jurisdiction of this Act and its rules. Bangladesh Government enacted NaturalWater Bodies Protection Act 2000 to rationalize the use of water bodies fordevelopment work as well for human settlements. The Act prohibits any kind ofdevelopment activities on the areas which are demarcated in the Master Plan asriver, canal, depression areas, lake, stream, wetlands or places which are declared

242 JICA Study cited in Ishrat Islam, “Wetlands of Dhaka: Alarmingdepletion”, The Daily Star, May 19, 2006.

243 Fahria Masum, op.cit.

as ‘flood flow zones’. Despite all the laws and policies, conversion of wetlands inDhaka is still continuing.

3. Study Area- Eastern Dhaka City

The eastern part of Dhaka city is selected as the study area for present studyas the wetlands of this area are under severe threat of transformation. The studyarea lies between 23° 42' - 23° 54' N latitude and 90° 23' - 90° 29' E longitude. Itis limited by the Tongi Khal on the north, the Buriganga River on the south, andthe Balu River on the east and on the west the western part of the Dhaka city(Figure 1). The total area of study is 145 sq. km. Three types of landforms areobserved in the study area. These are:

High terrace land Low lying flood plain Permanent water bodies

Among these land types, the high terrace lands are flood free. The low-lyingfloodplains are shallowly inundated with occasional flooding. The deep valleysare deeply flooded mixed with permanent water bodies. The surface elevation ofthe study area ranges from 1.5 to 7.5 m AMSL244. The Dhaka city constitutes thesouthern part of the Madhupur Tract having Madhupur Clay Formation, theoldest exposed rock of the city. It is underlain by the Dupi Tila Formation andoverlying by Alluvium Formation. The study area is characterized by humid sub-tropical climate where the mean annual rainfall ranges approximately from 1800mm to 2200 mm. The Balu River is the tributary of the Lakhya river. Khals areone of the major geomorphic features in the study area. These khals are playing amajor role in the drainage system of the study area. The average temperature is25°C. In the eastern part of Dhaka city, the Balu river is very important as itdrains local runoff and excess flood water to the river Lakhya.

244 Above Mean Sea Level.


Figure 1: Map of the study area – eastern Dhaka city

According to 1991 census report, the population of the study area is about 1.9million.245 The population of this area is growing very fast. Most of the lands ofthe study area are used as settlements and agriculture. As the highlands inside the

245 BBS, Bangladesh Population Census, 1991. Analytical Report, Vol.1.Dhaka: Government of the People’s Republic of Bangladesh.


city are limited and expensive, people are shifting to the low lying fringe areas.In this way, the low lying areas, back swamps, etc., which are acting asdepression storages, are constantly being filled up.

The important features of the study area are246:

Most of the eastern parts of the city are being filled up quickly,particularly along the city fringe areas and along the newly built uproads.

Flood free highlands in the eastern part are not abundant. Most of thelands are relatively flood prone and seasonally inundated for 5-6 months.

As the areas are close to the city, middle and lower middle class peoplehave moved towards these areas to develop their own housing. For this,the process of transformation is going on very rapidly.

Inadequate provision of access to basic sanitation, utility andcommunication facilities are observed.

Frequency and severity of floods and localized water logging hasincreased.

4. Wetlands Transformation 1963-2009

Wetlands transformation may be considered as a change of form and utilityof land which is supposed to have water at or near the surface. The wetlandstransformation of the eastern part of Dhaka city from 1963 to 2009 is given inTable 1.

Table 1: Areal extent of built-up areas and open spaces of different years

Features1963 1990 (SPOT) 2000 (Landsat TM) 2009 (IRS P6 LISS)

Area(hector) % Area

(hector) % Area(hector) % Area

(hector) %

Built-uparea

765 12.80 6305 44.70 7506 53.14 8115 57.21

Openspaces

5210 87.20 7799 55.30 6620 46.86 6050 42.71

4.1. Wetlands in 1963

From the map of 1963 (Figure 2), it is observed that, in 1963, 7.65 sq. km.area was under built up category which is 12.80 percent of the total area. In thesame period the area of open space was 52.10 sq. km. which is 87.20 percent ofthe total area (Figure 2 & Table 1). This open space is mainly the wetlands thatinclude permanent and seasonal water bodies. The seasonal water bodies stay

246 Observations of the field visit.

under water for five to six months in the wet season and used as agriculturallands in the dry season.

Figure 2: Eastern part of Dhaka city in 1963


4.2. Wetlands in 1990

From the interpretation of SPOT image of 1990 (Figure 3), the area underseasonal water bodies is 27.51 sq. km. (19.51%). These seasonal water bodies areflooded under 10-12 feet of water during the wet season and used as agriculturallands in the dry season. The area of permanent water bodies is 26.58 sq. km.(18.85%). These permanent water bodies held water for all throughout the year.During this period, about 63.05 sq. km. (44.70%) of built up areas are observed.Agricultural land with other vegetation is observed in 22.45 sq. km. (15.76%) ofarea. The area of filled up land is 1.67 sq. km which is 1.18 percent of the totalarea (Figure 3 and Table 2).

Digital interpretation of SPOT image 1990 and Landsat TM 2000 and IRS P6LISS image 2009 reveals that the fringe wetlands transformation trend continuesas appeared in the previous image. The areal extent of different features of theimages is given in Table 2.

Table 2: Areal extent of different features of the images

Features

1990 (SPOT) 2000 (LandsatTM)

2009 (IRS P6LISS)

Area(Hector) %

Area(Hector) %

Area(Hector) %

Seasonal water bodies 2751 19.51 2308 16.33 789 3.46

Permanent water bodies 2658 18.85 1663 11.77 659 3.96

Built-up areas 6305 44.70 7506 53.13 9615 57.45

Agricultural lands with othervegetation

2245 15.76 2330 16.95 177826.75

Filled-up areas 167 1.18 319 2.26 1285 8.39

14126 100 14126 100 14126 100

Figure 3: Features identified in the image of 1990


4.3. Wetlands in 2000 and 2009

From the Landsat TM image of the year 2000 (Figure 4), it is observed that23.08 sq. km. of areas are under seasonal water bodies which are 16.33 percent ofthe total area. The area of permanent water bodies is 16.63 sq. km. and it covers

11.77 percent of the total area. Built up area is observed on 75.06 sq. km. of area,which 18.53 percent of the total area. The area of agricultural lands with othervegetation is 23.30 sq. km. and it is 16.50 percent of the total area. Filled uplands cover 3.19 sq. km. (2.26 %) of area (Figure 4 & Table 2).



Table 2 indicates that the wetlands as well as other features of the study areaare constantly transforming. The seasonal wetlands of these areas are reduced to23.08 sq. km. (16.33%) in 2000 from 27.51 sq. km. (19.51%) in 1990 (Table 2).From this data, it can be said that, from 1990 to 2000, almost 4.43 sq .km.(3.17%) of seasonal wetlands are converted. The seasonal wetlands of these areasare converted to agricultural lands, built up areas and filled up lands. Thetransformation of the permanent water bodies is drastic. The area of permanentwater bodies in 1990 was 26.58 sq. km. which was 18.85 percent of the totalarea. But, these areas are reduced to 16.63 sq. km. in 2000 which is 11.77 percentof the total area (Table 2). Almost 9.95 sq. km. (7.08%) of permanent wetlandsare converted in 10 years. The built up areas are observed in almost all places ofthese areas. The built up areas are increasing very rapidly. In 1963, 7.65 sq. km.of area which is 12.80 percent of the total area was built up. The built up areasincreased to 63.05 sq.km. which is 44.70 percent of the total area in 1990. In2000, the built up areas of the study area increased to 75. 06 sq. km. which is53.14 percent of the total area (Table 2). From this statistics, it is observed that,the built up areas are increased at a rate of almost 8.44 percent from 1990 to2000. Between 1990 and 2000, the area under agriculture has increased onlymarginally (0.74%).


The visual comparison of the two images indicates a contrast between 1990and 2009. A large number of white dots appear on the IRS P6 LISS image of2009 (Figure 5) which are actually filled up lands. The filled up lands in 1990were only 2.26 hector which increased to 8.39 hectares at 2009 (Figure 5 andTable 2). As a consequence to such wide spread land filling, the areas of openspace are decreasing. In 1963, total area under open space was 5210 hectareswhich was 87.20 percent of the total area. The area of open space was 77.99sq.km. in 1990 which was 55.30 percent of the total area. In 2000 and 2009, thearea of open space is 66.20 and 60.50 sq. km. which is respectively 46.86 percentand 42.71 percent of the total area (Table 2). From this study, it is found that, theopen spaces are decreased at a rate of 8.44 percent. These open spaces are beingconverted to built up areas, agricultural lands and filled up lands.

Figure 6: Changes of landuse pattern over the years in the eastern part of Dhakacity

5. Wetlands Transformation- Nature, Processes and Impacts

From the images, it can be observed that, in 1990, 26.58 sq.km. (18.85%)area was under permanent wetlands. In 2009, only 5.59 sq.km. (3.96%) ofpermanent wetlands are observed. From this statistics, it can be said that, almost20 sq.km. (15%) area of permanent wetlands is lost. These permanent wetlands

are converted to seasonal wetlands, agricultural lands, built up areas and filled uplands. The area of seasonal wetlands in 1990 was 27.51 sq.km. (19.51%). In theyear 2000, the area of the seasonal wetlands is reduced to 23.08 sq.km. (16.33%).The seasonal wetlands are mainly converted to built up areas and agriculturallands. Some factors like physical, socio-cultural and legal regime influence theprocesses of urban fringe wetlands transformation. The low lying urban fringewetlands have some special physical characteristics. When people transformthese wetlands rapidly, the limit of environmental sustainability is exceeded andthey create problems like water logging, localized flooding, loss of biodiversity,etc. From this environmental perception, the legal authority has formulated somelaws. The laws related with the wetlands can not control the transformation of thewetlands as they are not directly related with wetlands transformation. In thissituation, people rapidly transform these wetlands as they are prospective fromthe economic point of view. Besides these, some factors like zoning, taxation,development incentives, natural hazard and environmental regulations alsoinfluence the transformation of the urban fringe wetlands.

The urban fringe wetlands transformation process is a continuous process.They are evolving all the time. The urban fringe areas are mainly low lyingwetlands which are flooded during the wet season under 10-12 ft. of water for sixmonths. These low lying areas of the urban fringe are being primarily convertedto agricultural lands. With the increasing of population, these low lyingagricultural lands converted to small rural settlements which lack of differentfacilities like communication facilities, utility services and the living condition isalso not well. As these areas are located very near to the city, these ruralsettlements are changing very rapidly with the increasing population in the maincity. In this stage, the rural settlements have turned into peri-urban or fringesettlements with some urban facilities like electricity, communication facilities,etc. With over increasing population, these peri-urban or fringe settlements arebeing converted to fully urbanized settlements.247 All types of necessary utilityservices are available to the people of these areas. The development of built upareas in this stage is drastic. From the description of the process of urban fringewetlands transformation, it can be observed that the urban fringe wetlandstransformation process is a continuous non-cyclic process. For this, the wetlandswhich at first change to agricultural lands in the primary stage are found as fullyurbanized settlements afterwards. These urban settlements cannot be restored towetlands again. The result being that, transformation of wetlands is almostpermanent and irreversible.

247 Summarized from the observations of field visit and interviews of localpeople.


The urban fringe wetlands transformation has negative impacts on differentsectors. The impacts of fringe wetlands transformation on different sectors are248-

The areas of fringe wetlands are decreasing very rapidly. For example-the permanent wetlands are reduced to 5.59 sq.km. (3.96%) in 2009 from26.58 sq.km. (18.85%) in 1990 and the seasonal wetlands are reducedfrom 27.51 sq.km. (19.51%) in 1990 to 23.08 sq.km. (16.33%) in 2000.

As these low lying wetland areas are filling up constantly, the possibilityof sudden flood has increased substantially.

As the built up areas are increasing from 7.65 sq.km. (12.80%) in 1963to 81.15 sq.km. (57.21%) in 2009, the net area of open space isdecreasing from 52.10 sq.km. (87.20%) in 1963 to 66.20 sq.km.(46.86%) in 2000. For this, water congestion, water-logging andlocalized flooding are observed.

As the areas of open spaces are decreasing, the area and rate of throughflow is also decreasing and the amount of ground water recharge isdecreasing. For this, ground water table is also depleting.

As the low lying wetlands which are used as agricultural lands areconverted, for example- from 22.45 sq.km. (15.76%) in 1990 to 37.78sq.km. (26.75%) in 2009, the cultivable lands are decreasing. Thesecultivable lands are converted to built up areas.

As the wetlands are converted, lots of fish and aquatic species that areused for biological purification are disappeared.

Figure 7: Built-up area increases and open spaces in the Dhaka city decreases

248 The impacts of urban fringe wetlands transformation are summarizedon the basis of field visit, interpretation of maps and satellite images andinterviews.

According to the Ramsar definition249, almost two-thirds of Bangladesh canbe classified as seasonal or perpetual wetlands. There is a growing concern in thecountry to protect and preserve wetlands. But, there are no wetlands that can betermed as such in accordance with the laws of land. As per physicalcharacteristics, there are many wetlands, but in the eye of law, there is no landthat has been or being characterized as wetlands. They exist as mono-sectoral

249 According to the Ramsar Convention, wetlands include a wide varietyof habitats such as marshes, peatlands, floodplains, rivers and lakes, andcoastal areas such as saltmarshes, mangroves, and seagrass beds, butalso coral reefs and other marine areas no deeper than six metres at lowtide, as well as human made wetlands such as waste-water treatmentponds and reservoirs, National Wetland Policies: Developing andImplementing National Wetland Policies, Ramsar Handbooks for the wiseuse of wetlands, 3rd Edition, Vol. 2, available at:http://www.ramsar.org/pdf/lib/lib_handbooks2006_e02.pdf, accessedon: May 10, 2010.


resource under relevant public agencies and private occupation.250 The existinglaws in Bangladesh are not specific to the needs and problems of wetlandsconservation and management particularly in the context of urban fringewetlands. These laws are related with wetlands forests, wildlife, fisheries, etc.Laws related with wetlands transformation or urban fringe wetlandstransformation is still missing. For this, the urban fringe wetlands aretransforming into human settlement quite rapidly.

As wetlands are important resources, concerns are raised in differentcountries to protect the wetlands and control the transformation of theseresources.

In India, the Gujarat High Court delivered a judgment in August 2002outlining policy for protecting urban wetlands in India.251 The judgment requiresGovernment authorities to notify all lakes in the state and protect them. Further,it directs the authorities to take urgent measures to regenerate the water bodies, toremove encroachments from it and to rehabilitate the affected slum dwellers. Thejudgment also precipitates critical state policy decisions on water management. Itrequires the Government to constitute Water Resources Council headed by theChief Minister “to oversee the program for protection, preservation andimprovement of water bodies.” The Government is also ordered to constitute aWater Resource Committee headed by the Chief Secretary to monitor theimplementation of the Programme in a time bound manner. The High Court hasagain made clear that “The state as the trustee of all natural resources meant forpublic use, including lakes and ponds, is legally duty bound to protect them.”

A study252 found that, in Ethiopia, wetlands play an important role in thelives of a large proportion of the population in one way or another. They are animportant contributor to groundwater and hence to the maintenance of watersupply. They also contribute a wide range of other products such as food, fodder,medicinal plants and in some cases fish. The study has shown that when wetlands

250 M Farooque, “Laws on Wetlands in Bangladesh: A Complex LegalRegime”, in Nishat, a. et.al. (eds.), Freshwater Wetlands in Bangladesh-Issues and Approaches for Management, Dhaka: IUCN -The WorldConservation Union, 1993.

251 A K M Shamsuddin, op.cit.

252 See for details, Yilma D. Abebe and Kim Geheb (Eds.), Wetlands ofEthiopia, available at: http://wetlands.hud.ac.uk/pdf/gender.pdf, accessed on:June 10, 2010.

are altered or transformed in some way, some of the benefits that they producemay be destroyed and this can be particularly damaging to the interests of thepoor and women. The study recommended that the wetlands need to be managedin ways that recognize the full range of benefits that they can provide. A useregime needs to be developed that ensures that the fullest ranges of benefits areproduced from wetlands for the local community in a sustainable way and withina framework that also maintains the wetlands’ ecological functions sustainably.Such a regime will require local experimentation for each type of wetlands andsocio-economic setting, but will generally involve building local knowledge andrecognizing the interests of the different stakeholders who are interested in therange of wetland produced benefits. The study also recommended that themanagement of wetlands needs to be developed to ensure equitable access towetland produced benefits which requires agreement amongst all wetlandsstakeholders. To achieve this, it is necessary to develop local institutions forwetlands management that can ensure equitable and democratic decision makingand can build up a consensus about the management of the wetlands.

Kristianstad wetlands are a semi-urban area of high biological and cultural-historical values in southeastern Sweden.253 Kristianstad wetlands are an exampleof a successful response to a perceived decline in ecosystem services. Theecosystems have been managed in an adaptive collaborative process since 1989,by the Ecomuseum Kristanstad Vattenrike (EKW) and local steward associations.The response consists of formulation and implementation of the ecosystemmanagement approach, including involvement of many different stakeholdergroups (local steward associations), linking scales, combining knowledgesystems, and using ecosystem services while maintaining them.

Bangladesh can also follow these examples of wetlands conservations tocontrol the rapid transformation of her wetlands.

6. Conclusion and Recommendations

Wetlands are very important resources of Bangladesh. Urban fringe wetlandshave immense importance for the urban areas. They are important both from thephysical and environmental point of view. But, these fringe wetlands aretransforming constantly. The rate of transformation is increasing day by day. Thepresent study found that the low lying wetlands of the eastern part of Dhaka cityare transforming to built up areas very quickly. The land use practices of this area

253 See for details, Kristianstad Wetlands, Sweden, Millennium EcosystemAssessment, available at:http://www.millenniumassessment.org/en/SGA.SwedenKristianstad.aspx, accessedon: June 10, 2010.


are also changed. The urban fringe wetlands of eastern Dhaka city are alsoconverted to agricultural lands as the agricultural lands near the city areconverted to built up areas. The conversion of wetlands is creating drainagecongestion and finally this drainage congestion is creating waterlogging andlocalized floods. The laws related with wetlands are not directly related withwetlands transformation. For this, these laws are not suitable to control thewetlands transformation whether it is in urban fringe areas or anywhere in thecountry.

As the urban fringe wetlands are rapidly transforming, it is necessary to takeproper steps to control the rapid urban fringe wetlands transformation. The areaof water flow of these urban fringe wetlands must be identified and these areasshould be declared as protected areas. The development activities on the wetlandsshould be done in a planned way and with proper design. Massive land fillingactivities in the fringe wetlands should be controlled for the free flowing ofwater. Proper land use pattern of the urban fringe wetlands should be set up.Proper steps should be taken to preserve the wetlands biodiversity. The lawsrelated with wetlands are not adequate to solve the problem of wetlandstransformation. Specific laws on urban fringe wetlands transformation should beformulated. Dhaka Metropolitan Development Plan (DMDP) was approved in1997 but it has not yet been implemented properly. The Detailed Area Plan(DAP) which is the most important part of DMDP was scheduled to becompleted within a year of the formulation of DMDP, but the city developmentauthority has failed to do it until now. It is necessary to have coordinationbetween Rajdhani Unnayan Kartripakkha (RAJUK), Dhaka City Corporation(DCC), Dhaka Water and Sewerage Authority (WASA) and Water DevelopmentBoard to implement the DMDP and the DAP. People should make consciousabout the adverse impacts of rapid urban fringe wetlands transformation. The citydevelopment authority in collaboration with experts, civil society, NGOs, mediapersonnel must undertake appropriate role to protect the wetlands. Lack ofproper governing system and implementation of the remaining policies has alsodeteriorated the situation. For this, it is necessary to ensure good governance.Bangladesh can adopt a collaborative approach in controlling the transformationof the wetlands involving all the stakeholder groups. For this, government andpeople should take combined effort to control the rapid urban fringe wetlandstransformation.

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Bangladesh Bureau of Statistics, Bangladesh Population Census, 1991, AnalyticalReport, Vol.1. (Dhaka: Government of the People’s Republic of Bangladesh, 1994)

Barbier, E. B., “Sustainable Use of Wetlands Valuing Tropical Wetland Benefits:Economic Methodologies and Applications”, The Geographical Journal, Vol. 159, No. 1,1993, pp. 22-32.

Das, S. C., “Environmental Impact of Development Activities on Wetlands inBangladesh”, The Jahangirnagar Review, Vol. XXIII – XXIV, No. II, 1999-2000, pp.1-21.

Dewan, A. M. and Yamaguchi, Y., “Using remote sensing and GIS to detect and monitorland use and land cover change in Dhaka Metropolitan of Bangladesh during 1960–2005”, Environmental Monitoring and Assessment, Vol. 150, No. 1-4, March, 2009, pp.237-249,

Dewan, A. M. and Yamaguchi, Y., “Land use and land cover change in Greater Dhaka,Bangladesh: Using remote sensing to promote sustainable urbanization”, AppliedGeography, Vol. 29, Issue. 3, July 2009, pp. 390-401.

FAO, Agro-ecological Regions of Bangladesh, (Rome: FAO. 1988)

Farooque, M, “Laws on Wetlands in Bangladesh: A Complex Legal Regime”, in Nishat,A. et.al. (eds.), Freshwater Wetlands in Bangladesh - Issues and Approaches forManagement, (Dhaka: IUCN -The World Conservation Union, 1993)

Jahan, S., Islam, I., Takao, K., Kanegae, H. “Shrinkage of Wetland of Dhaka: A Studyfrom Institutional Perspective”, Paper presented at the Conference of Japan RegionalScience Association International, Chiba, Japan, October 8-10, 2006.

JICA, Master Plan for Greater Dhaka Protection Project (Study Areas in DhakaMetropolitan Area) of Bangladesh Flood Action Plan No. 8A. FAP 8A, Main Report,(Dhaka: Japan International Cooperation Agency, 1991)

Khan, A. A., “Freshwater wetlands in Bangladesh: Opportunities and Options”, in Nishat,A. et.al. (eds.), Freshwater Wetlands in Bangladesh - Issues and Approaches forManagement, (Dhaka: IUCN-The World Conservation Union. 1993)

Khan, M. H., “The Wetland Ecosystem of Bangladesh”, in Chowdhury, Q. I. (ed.),Bangladesh State of Bio-diversity, (Dhaka: Forum of Environmental Journalists ofBangladesh (FEJB), 2001)

Khan, MS. et.al. (eds.), Wetlands in Bangladesh, (Dhaka: BCAS and NatureConservation Movement, 1994)

Ministry of Environment and Forest, National Environment Management Action Plan(NEMAP), Volume - Ia: Summary, (Dhaka: Government of the People’s Republic ofBangladesh, 1995)

Nishat, A. et, al., Freshwater Wetlands in Bangladesh – Issues and Approaches forManagement, (Dhaka: IUCN – The World Conservation Union, 1993)

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Md Abu Raihan

RURAL POVERTY IN BANGLADESH: TRENDS,DETERMINANTS AND POLICY ISSUES====================================================

Abstract

This paper reveals the scenario of rural poverty in Bangladesh and explores itsunderlying causes. It also analyses the ongoing government strategies to combatrural poverty and suggests several measures to produce much more success in thefield. Needless to mention, Bangladesh has been experiencing large scale absolutepoverty since her independence. The incidence of poverty is more acute in the ruralarea than in the urban area. More than 75 percent population lives in the rural area.Still now 43.8 percent rural people are absolute poor and 29.3 percent are hard-corepoor. Rapid population growth, defective land ownership, overdependence onagriculture and inequality in income distribution are the main causes of rural poverty.The government of Bangladesh has been striving to eradicate poverty through anumber of strategies including strengthening economic growth and humandevelopment, expanding credit facilities to targeted groups and building up of socialsafety nets. As an outcome of these strategies, rural poverty has registered adeclining trend. However, the impact of these strategies on the reduction of ruralpoverty has, so far, not been strongly felt. Therefore, along with the ongoing povertyreduction strategies, the paper suggests certain measures to reform land tenuresystem and develop non-crop agriculture, informal sector and handloom sector inorder to accelerate the pace of rural poverty reduction.

1. Introduction

Bangladesh has been experiencing large-scale absolute poverty since herindependence in 1971. At the national level, 40.0 percent of the population areabsolute poor (per capita daily calorie intake is less than 2122 kilocalorie) and25.5 percent are ultra-poor or hard-core poor (per capita daily calorie intake isless than 1805 kilocalorie). The rural people are more poverty stricken than theurban people. In the rural area, 43.8 percent people are absolute poor and 29.3

percent are hard-core poor254. Agriculture is the main source of employment forthe rural people. Out of 47.4 million employed labor force (15+age), 22.8million255 (48.1 percent) are employed in broad agricultural sector which has lowincome per worker and per unit of land. Being poor, they can not use improvedmethods of cultivation. Since too many people are engaged in agriculture there isdisguised unemployment. Moreover, agriculture is a seasonal occupation becauseirrigation facilities are not available throughout the year. So, many people alsosuffer from seasonal unemployment in this sector. The majority of them have noland and other productive assets to be gainfully employed throughout the year.Due to rapid rise in population and low absorption capacity of the economy,unemployment problem has taken acute form. Presently, 2.1 million people (15+age) are unemployed of which 1.6 (76.20 percent) million live in the rural area256.

The living condition of the hard-core poor begs description. The hard-core poorneed to spend more than 80 percent of their income on food. Very often, 100percent of their income is not enough to get two square meals a day257. Thevulnerability of the ultra poor of this country is aggravated by repeated floods,droughts, cyclones and other natural calamities. A large number of the hardcorepoor are widowed, divorced or abandoned women. They rarely own land or haveany male earning member in their families. With no bread earner, asset andsource of income they have no choice but to work in other people's houses for

Md Abu Raihan is an Associate Professor, Department of Economics,Islamic University, Kushtia. His email no is : [email protected]

© Bangladesh Institute of International and Strategic Studies (BIISS),2010.

254 Government of Bangladesh (GOB) 2009: Bangladesh Economic Review, 2008, Ministry ofFinance

255 Bangladesh Bureau of Statistics (BBS) 2008: Labor Force Survey 2005-06, Ministry of Planning,Government of Bangladesh256 Ibid

257 Khan, Z.A., 2007.“Ultra Poor Programme of PKSF: A milestone in Microcredit Lending”, TheFinancial Express, April 16, 2007; Muhammad Sayeedul Haque and Masahiro Yamao, Can Microcredit Alleviate Rural Poverty? A Case Study of Bangladesh, World Academy of Science,Engineering and Technology 46 2008, pp. 648-656


very nominate wage or resort to begging for their survival258. The country has sofar implemented five Five-year plans and one One-year plan. The goals of thoseplans were to reduce poverty by accelerating development process. The non-governmental organizations (NGOs) have also been trying to eradicate povertythrough micro credit program. As an outcome of government developmentprogram and NGOs’ micro credit program, the country has made commendableprogress in reducing income poverty. But still now 41.2 million rural people livein absolute poverty and 18.7 million live in hardcore poverty. Since more than 75percent of the country’s total population live in the rural area, the development ofthe whole country depends to a great extent, on the rural development and thekey to rural development is poverty reduction. Therefore, poverty reductionstrategy of the government should be accelerated to achieve the povertyreduction target set in the Millennium Development Goals (MDGs).

The objectives of the present paper are: i) to review the rural poverty inBangladesh and explore its underlying causes ii) to review the governmentstrategies to combat rural poverty and iii) to suggest measures to accelerate theprogress of rural poverty reduction. Barring introduction and conclusion, thestated objectives will be studied in four successive sections. The study is basedon mainly secondary data sources available from Bangladesh Bureau of Statistics(BBS), Bangladesh Economic Review, Asian Development Bank (ADB),ESCAP, World Bank, Books, Journal Articles and Seminar Papers.

2. Scenario of Rural Poverty in Bangladesh

In order to measure the incidence of poverty, Bangladesh Bureau of Statistics(BBS) has conducted several Household Expenditure Surveys (HES). HESconducted up to FY 1991-92 used Food Energy Intake (FEI) and Direct CalorieIntake (DCI) to measure the incidence of poverty. FEI method computes povertylines by finding the value of per capita consumption in which household can beexpected to fulfill its calorie requirement. DCI method is used to calculate theincidence of absolute poverty where population or household fall below athreshold calorie intake (2122 kilocalories per person on a daily basis). Similarly,a person having daily calorie intake less than 1805 kilocalories is considered ashard-core poor. In Household Expenditure Survey (HES) conducted in FY 1995-96, Bangladesh government for the first time adopted the Cost of Basic Needs(CBN) method for constructing poverty lines. The CBN method for measuringpoverty is more appropriate than the other methods. Similarly in the HouseholdIncome and Expenditure Surveys 2000 and 2005 respectively, CBN method was

258Haque, Muhammad Sayeedul and Yamao, Masahiro 2008. Can Micro credit Alleviate Rural

Poverty? A Case Study of Bangladesh, World Academy of Science, Engineering and Technology46, 2008, pp. 648-656.

used. With this method, an absolute poverty line is defined as the value ofconsumption needed to satisfy minimum subsistence needs (food, as well as non-food consumption).

Table-1 shows the incidence of poverty during the period 1973-74 to 2005 byHead-Count Ratio (HCR) and Direct Calorie Intake (DCI) method. During thisperiod, the percentage of absolute rural poor declined from 82.9 to 39.5 while thepercentage of hardcore rural poor declined from 44.3 to 17.9. Although there isconsiderable success in the reduction of poverty, still now 41.2 million ruralpeople are poor and 18.7 million are hardcore poor.

According to Head Count Ratio and Cost of Basic Needs Approach, 40.0 percentof the country’s population live below the upper poverty line and 25.5 percentpeople live below the lower poverty line. The rural people are more povertystricken than the urban people. The percentage of urban people living below theupper poverty line and lower poverty line are 28.4 and 13.7 respectively. On theother hand, the figures for the rural people are respectively 43.8 percent and 37.4percent (Table-2).

Based on CBN method the incidence of poverty also registered a declining trendin 2005 as compared to 1991-92. The incidence of poverty at the national leveldeclined from 58.8 percent in 1991-92 to 48.9 percent in 2000 based on the upperpoverty line (Table-3). During this period, the compound poverty reduction rateper year is recorded at 1.8 percent.

In the rural area, the incidence of poverty declined from 61.2 percent to 52.3percent during 1991-92 to 2000. But the rate of reduction of poverty is lower forthe rural area (yearly compound rate 1.6 percent) than for the urban area (yearlycompound rate 2.2 percent). On the other hand, during 2000-2005, incomepoverty at the national level also declined from 48.9 percent to 40.0 percent andthe compound reduction rate is 3.9 percent. In the rural area, the incidence ofpoverty declined from 52.3 percent to 43.8 percent during this period. Thereduction rate during this period is also lower for the rural area (yearly 3.5percent) than for the urban area (yearly 4.2 percent).

Both the depth (measured by poverty gap) and severity (measured by squaredpoverty gap) of poverty are higher in the rural area than in the urban area. In1991-92, the depth of poverty in the rural area was 18.1 percent which decreasedto 9.8 percent in 2005. But it is still higher than the depth of poverty in the urbanarea (6.5 percent). Similarly, the severity of poverty in the rural area declinedfrom 7.2 percent in 1991-92 to 3.1 percent in 2005 which is still higher than theseverity of poverty in the urban area (2.1 percent).

3. Causes of Rural Poverty in Bangladesh3.1. Rapid Population Growth:


Bangladesh has been experiencing a population explosion since 1971. During theperiod 1974-81 population increased at a rate of 2.33 percent annually. During1981-91 and 1991-2001 population increased at a rate of 2.15 percent and 1.54percent respectively259. Although the population growth rate is declining, thepresent figure of population has stood at 144.5 million (2005) which is growingat a rate of 1.48 percent annually260. Apart from large population, a tremendousgrowth potential lies in the age structure, since more than 39.0 percent of the totalpopulation is aged below 15 years, while women within the reproductive agegroup (15-49 years) represent about 48.0 per cent of the total population261.

Due to high rate of population growth, a large number of workable persons arebeing added to the labor force every year. The economically active population ofage 15+ years (labor force) increased from 36.1 million in 1995-96 to 49.5million in 2005-06, out of which 37.8 million live in the rural area262. Since thereis limited scope for this huge labor force to be absorbed in non-agriculturalsector, they remain unemployed or underemployed. The unemployed labor forcewas 1.3 million in 1995-96, which increased to 2.1 million in 2005-06263.

3.2. Defective Land Ownership:

In an agrarian economy like Bangladesh, land is the main resource or productiveasset. But land ownership in Bangladesh is much skewed (Table-4). About 6.4percent rural households own absolutely no land and about 49 percent arefunctionally landless, each household owning less than half an acre of land.About 31 percent are marginal (0.50-1.49 acre) to small (1.50-2.49 acre) farmers,about 12 percent are medium (2.50-7.49 acre) and just over 2 percent are large(7.50 + acre) farmers264.

During the last four decades the process of concentration of land in the hands offew large landowners has intensified. The share of landless households hasincreased from 19 percent in 1960 to 56 percent in 1996. In 1960, 1 percent large

259 Bangladesh Bureau of Statistics (BBS) 2003: National Report (provisional) of PopulationCensus-2001, Ministry of Planning, Government of Bangladesh260 GOB 2009, op. cit.

261 BBS 2003, op. cit.

262 BBS 2008, op. cit.

263 BBS 2008, op. cit.

264 Government of Bangladesh (GOB) 1999. Bangladesh Economic Review, 1999; Ahmed Q.K andBarkat A. 2004, ‘Bangladesh in the World Economy: Development Strategy and ExternalAssistance’ keynote presented at the International Conference on Emerging Global EconomicOrder and Developing Countries, Dhaka, 30 June 2004.

landowning households had command over 4.7 percent of land but in 1996 it hasgone up to 8.2 percent265. This tendency of concentration of land in few largelandlords has cast serious impacts on the rural economy of Bangladesh. Because40 percent of the total population of the country is poor (using upper povertyline), 46.3 percent of them are totally landless and 56.4 percent have less than0.05 acre of land. In the rural area, 43.8 percent population are living below theupper poverty line, 66.6 percent of whom have no land and 65.7 percent haveless than 0.05 acre of land (see Table 5). It is also evident from the Table-4 thatthe incidence of poverty decreases with the increase in the size of land holding.

3.3. Over Dependence on Agriculture:

More than 75 percent of the total population live in the rural area and they aredirectly or indirectly engaged in agriculture. It is the single largest contributor toincome and employment generation. The sector is marked with disguisedunemployment because it has already absorbed excess labor force than needed.Again, agriculture is a seasonal business. Therefore, there is seasonalunemployment in this sector. According to labor force survey 2005-06, out of47.4 million employed labor force, 11.6 million (24.53 percent) wereunderemployed (work less than 35 hours per week). The incidence ofunderemployment was higher in the rural areas than in the urban areas. The share ofthe employed labor force who worked less than 35 hours per week was 27.82 percentin the rural areas compared with 13.92 percent in the urban areas266. Consequently,widespread unemployment and underemployment are seen among the populationliving in the rural areas.

In addition, agricultural sector works under several constraints. Firstly,agriculture is dependent on the vagaries of nature and is risky. Bangladesh is adisaster prone country because of its geographical location. The country isvulnerable to several natural disasters including flood, cyclone and storm surge,flash flood, drought, over-rainfall, tornado, river-bank erosion and landslide.These natural disasters often affect agricultural production and hit the ruraleconomy seriously. Secondly, availability of cultivable land is decreasingbecause arable land is being destroyed to meet the residential and other needs ofthe growing population. The cultivable land is also being destroyed due to rivererosion. The average size of the cultivable land has decreased by 0.31 percent

265Barkat, A 2004: “Agrarian and Land Reforms in Bangladesh: An Inescapable Hurdle”,

Keynote Presented at the National Seminar on the Occasion of Land Rights Day, Dhaka, 09 June2004.

266 BBS 2008, op. cit.


during the last two decades267. The land holding will diminish further with therise in population which is currently growing at a rate of 1.48 percent, andgradual conversion of agricultural land for other uses. Thirdly, widespreadpoverty among the population engaged in agriculture acts as a barrier toincreasing agricultural production. Being poor, they can not use improved seedsand techniques of production which leaves them again poor. Fourthly, asdiscussed earlier, land distribution in Bangladesh is much skewed which is notcongenial to increasing agricultural production. The share of landless householdshas increased from 19 percent in 1960 to 56 percent in 1996. In 1960, 1 percentlarge landowning households had command over 4.7 percent of land but in 1996it has gone up to 8.2 percent 268.

3.4. Inequality in Income Distribution

Inequality in income both widens and deepens poverty. The share of the poorestsection of the population in national income shows a downward trend. It isevident from Table-6 that in 2000, income shares accruing to householdbelonging to Decile-1 to Decile-5 were 2.41 percent, 3.76 percent, 4.57 percent,5.22 percent and 6.10 percent respectively at the national level. All thesedeclined in 2005 where the figures were 2.00 percent, 3.26 percent, 4.10 percent,5.00 percent and 5.96 percent respectively. These five deciles jointly share only20.32 percent of total income, although they comprise 50 percent of the totalpopulation. The percentage share of income of the lowest 5 percent householdsdecreased from 0.93 percent in 2000 to 0.77 percent in 2005. On the other hand,the income share of the households belonging to Decile-6 to Decile-9 increasedfrom 39.93 percent in 2000 to 42.03 percent in 2005.

In the rural area, income share of the households belonging to Decile-1 to Decile-6 declined from 33.03 percent in 2000 to 29.90 percent in 2005. The percentageshare of income of the lowest 5 percent households of rural area also declinedfrom 1.07 percent in 2000 to 0.88 percent in 2005. On the other hand, the shareof income accruing to the household belonging to Decile-7 to Decile-10 shows anincreasing trend. The joint share of these four deciles to national income was66.96 percent in 2000 which increased to 70.11 percent in 2005. Therefore, it isclear that the poorest section of the people, both at the national and rural level,continues to receive relatively the smaller part of the national income which isone of the major reason of rural poverty.

267 Hossain, Mahbub 2008: keynote paper on "Two Decades of Change in RuralEconomy: Trends in Landownership" presented at a seminar jointly organized by theBRAC Development Institute and the Research and Evaluation Division of BRAC, Dhaka,14 July, 2008.268 Abul Barkat 2004, op.cit.

4. Current Strategies for Poverty ReductionThis section studies four major strategies for poverty alleviation as followed byBangladesh government. They are:

(i) Higher Growth;(ii) Higher Investment in Social Sectors;(iii) Targeted Programs of Income Generation and Employment Creation;(iv) Building up of Social Safety Nets.

4.1. Strategy of Higher Growth The strategy of higher growth is implementedby stimulating investment, GDP and employment. This strategy is based on thetrickle-down theory which states that benefits of economic growth virtually flowfrom the rich to the poor. High economic growth is likely to benefit the poorthrough increasing demand for labor or employment opportunities in course ofeconomic functioning, which, in turn, may lead to an increase in wage rates inthe absence of unemployment at all levels and hence create a rise in income.

The growth performance of Bangladesh economy had been relatively strongduring the 1990s showing considerable improvement over the last two decades.During the 1990s, growth performance had been around 5.3 percent per year withan impressive 3.3 percent growth rate of per capita GDP269. The growth rate ofGDP was further accelerated and reached to 5.7 percent per year over the period2001/02-2005/06 with 4.2 percent growth of per capita GDP270. The GDP growthover the period 2003/04-2007/08 consistently remained above 6 percent271. It canbe said that the economy of Bangladesh has reached a sustained growth trajectorywith strong macroeconomic fundamentals. Stable macroeconomic management,reforms of government, expansion of export oriented manufacturing industriesand virtually no impact of quota phase-out in the RMG sector are the majorcauses of robust growth of GDP. However, an equitable distribution of income,opportunities and choice should be ensured by the government to reduce povertyat the grass root level. This can be done by increasing the productive capacity ofthe rural people through education and training and ensuring their access to land,credit, infrastructure and technology. Otherwise the rural poor will not benefitfrom the growth of GDP.

4.2. Strategy of Higher Investment in Social Sectors: Investment in socialsector generates productive assets, both financial and physical and this in turn

269 Farid, S.M 1997. Rural Poverty Alleviation under Changing Economic Conditions:Bangladesh Perspective, Paper presented at the regional expert group meeting oncapability-building to alleviate rural poverty, Beijing, March 25-28, 1997.270Government of Bangladesh (GOB) 2007: Bangladesh Economic Review, 2006, Ministry ofPlanning, Government of Bangladesh, Dhaka.271 GOB 2009, op.cit.


helps the poor to get out of the vicious circle of poverty. Consistent with thedeclaration of the World Summit on Social Development (WSSD) held in 1995in Copenhagen, Bangladesh government has been allocating over 20 percent ofits total public outlay against the social sector for the last consecutive years272.Education is regarded as one of the effective instruments for humandevelopment, poverty reduction, reduction of gender disparity and attainingsocio-economic enhancement. The government launched compulsory primaryeducation all over the country in 1993. For the last several years education sectorhas been receiving the highest budgetary allocation as the government attachestop most priority to this area.

The government is committed to ensure universal primary education in thecountry by 2015. To achieve the targets set in the MDGs, the Government ofBangladesh has undertaken special programs, such as the Stipend Program, theSecond Primary Education Development Program (PEDP-II) and the ReachingOut - of - School Children (ROSC) project. Hence, the primary education sectorhas been receiving increased resources to realize its objective. In the FY 2007-08,a total allocation of Tk. 5274.89 crore has been made for the primary educationsector273.

The net enrolment rate has increased from 80 percent in 2003 to 87.24 percent in2005. Gender parity in enrolment has already been achieved. Net enrolment ofgirl students is higher (98.41 percent) than the boy students (89.34 percent)274.Literacy rate (7 years+) has reached to 63 percent. However, quality of educationand high drop out rate are challenges to achieve the goal of ensuring universalprimary education.

Likewise, adequate provision has also been made for the health. The governmentwith the active support and assistance from NGOs, private sector and voluntaryorganizations has made remarkable achievements in terms of reducing InfantMortality Rate (IMR), Maternal Mortality Rate (MMR), 275 preventing

272 GOB 2007, op.cit.

273 GOB 2009, op.cit.

274 GOB 2007, op.cit.

275 It should be mentioned that Prime Minister Sheikh Hasina ofBangladesh was awarded the MDG award for the country’s success inreducing infant mortality, one of the sectors of development asenvisaged by the UN MDG 2000. The award was given during the 65th

General Assembly session of the UN in September 2010.

communicable diseases, raising nutritional status and life expectancy at birth andalso reducing the population growth rate. The Ministry of Health and FamilyWelfare (MOHFW) along with the NGOs, international communities,development partners has strived to face the health hazards due to various naturalcalamities like floods, cyclone etc. that devastated Bangladesh in 2007. Thegovernment has been attempting to have a healthy and able population with aview to involving them in the mainstream development activities and generatingmomentum in poverty reduction programs.

Table-7 shows the total allocation in development and non-development budgetin the social sectors during FY 1998-99 through FY2007-08. It is evident fromthe statistics that the total allocation for the social sectors in development andnon-development budget shows an increasing trend over the past decade.

4.3. Targeted Programs for Income Generation and Employment Creation:Now both the government and NGOs are running direct interventions/targetgroup oriented programs for the poor extensively all over Bangladesh to increasetheir productivity through skill development and greater access to creditfacilities. The most significant aspect of this strategy is credit which is nowprovided by the government for the targeted groups at relatively easy condition.The government established Karmasangsthan Bank in 1998 to provide collateralfree credit to youths, in particular the unemployed youths of the country toengage them in production-oriented and income generating activities. The bankprovides credit financing for 33 income generating activities. The potentialyouths can undertake any income generating project within the selected fields ofeconomic activities and receive financial support from the bank to run theapproved projects. Since its inception, the bank disbursed Tk 4.6764 billion (TK467.64 crore) among the 1,22467 borrowers for setting up poultry, fishery, dairyfarms, small trading, engineering workshop, tailoring, batik shop, handloom,nursery and agro-based projects and created jobs for approximately 3,97,925persons. Besides, Department of Youth Development trained 30, 09,709 youthsup to June 2008. Out of the trained youths, 16,93,225 youths engaged themselvesin self-employment activities and 7,23805 beneficiaries have been sanctionedwith an amount of Tk. 807.69 lakh as loan up to June 2008276.

As part of poverty alleviation programs, the government has been providingcredit to poultry, livestock and fishery sector for several years. The amount ofcredit disbursed to the poultry and livestock sector was Tk. 79.77 crore in FY2000-2001 and it rose to Tk. 347.8 crore in FY 2005-06. In the fishery sector, thegovernment disbursed Tk. 57.61 crore as micro credit through 7 development

276 GOB 2009, op.cit.


projects for poverty alleviation among 390,000 beneficiaries during the period2000-2005277.

The government has taken up few micro credit programs under both revenue anddevelopment budgets for creation of employment for the poor. Up to June 2006,micro credit amounting Tk. 8128.42 crore has been distributed through differentministries/divisions/departments. The non-government organizations (NGOs) arealso engaged in micro credit programs and they are providing collateral freecredit to the rural poor on the basis of group liability which proved verysuccessful. Up to 2001, total disbursement of micro credit (cumulative) by NGOswas Tk. 13640.78 crore and the amount rose to Tk. 69183.77 crore in 2008278.

4.4. Social Safety Nets: The objective of the safety net program is to reachthe poorest section of the society and mainstreaming them in the developmentprocess. The key social safety-net programs in Bangladesh are: (a) Cash TransferPrograms (b) Food Transfer Programs; (c) Special Poverty Alleviation Programs;and (d) Micro credit Programs for Self-employment. The cash transfer programincludes i) Old-Age allowance program ii) Allowances program for widowed,deserted and destitute women iii) Honorarium program for insolvent freedomfighters iv) Training and self-employment program for insolvent freedom fightersand their dependants v) Fund for rehabilitation of the acid-burnt and thephysically handicapped vi) Allowance for the fully retarded vii) Allowance forpoor lactating mothers viii) Food for works program (cash), ix) Ruralmaintenance program, x) Primary education stipend project and xi) Femalesecondary school assistance program.

Food transfer program includes i) Food for works program ii) ii) vulnerablegroup development (VGD) Program iii) vulnerable group feeding (VGF)Program iv) Test relief (TR) program and gratuitous relief (GR) program.Finally, Special poverty alleviation program includes i) Program under Livestocksector to alleviate poverty ii) Fund for housing the homeless iii) Abashan(Poverty Reduction and Rehabilitation) Project iv) Fund for mitigating risks dueto natural disasters especially v) Program for mitigating economic shocks and vi)Program for reducing poverty and generating employment under the Ministry ofWomen and Children Affairs.

The government allocated Tk. 16,932 crore for the social safety program in FY2007-08, which was 13.32 percent of the total budget outlay and 2.14 percent ofGDP. It can be mentioned here that 113.76 lakh man and 240.54 lakh man were

277 GOB 2007, op.cit.

278 GOB 2009, op.cit.

engaged in social security and social empowerment activities respectively in thelast financial year279.

5. Measures to Accelerate the Progress of Poverty ReductionAs a result of government strategies rural poverty has shown declining trend butthe impact of these strategies on the reduction of rural poverty has, so far, notbeen strongly felt. The overall GDP growth rate has been, on average, 6 percent,enabling a per capita GDP growth rate of 4.5 percent which is commendable butnot so high to make any strong impact on poverty. Moreover, rural poverty isbeing tackled without changing land tenure where the bottom 10 percent oflandowners own 2 percent of the land, compared with the top 10 percent whoown 49 percent of the land. Rural non-farm activities have important povertyalleviation linkages which are not properly addressed by the government. Smalland cottage industries has remained a neglected sector. Non-crop agriculture likepoultry, livestock and fishery has enormous potential for rural poverty reduction.Except fishery, potentials of poultry and livestock have not been exploredproperly. This is why only modest improvement in rural poverty has occurred,despite the government efforts to reduce rural poverty. Therefore, the ongoingpoverty reduction strategies of the government should be accompanied by thefollowing measures in order to produce much wider outcome in the reduction ofrural poverty.

5.1. Developing Informal Sector: Like other developing countries, informalsector plays an important role in the economy of Bangladesh. The contribution ofthe informal sector to GDP is roughly 64 percent which outweighs thecontribution of the formal sector (roughly 36 percent). Out of 47.4 millionemployed labor force, 41.54 million (87.71 percent) are employed in the informalsector and only 5.82 million (12.29 percent) are employed in the formal sector280.Workers with informal employment are mostly in the agriculture, hunting andforestry (52 percent) and they live in the rural area. Therefore, the governmentshould emphasize on the development of the informal sector to combat the ruralpoverty. The informal sector is easily manageable, unsophisticated, less capitaldemanding and uses indigenous technology. Therefore, it is easier for thegovernment to create employment opportunities in the informal sector spendingless money and time. However, the informal sectors work under many constraintswhich limit its growth and productivity.The sector has been facing diverse andnumerous problems for long. The major problems include lack of access to

279 GOB 2009, op.cit

280 ADB 2009: Informal Employment in Bangladesh, ADB Economics Working Paper Series, No155, ADB, Manila


institutional credit, lack of infrastructural facilities, lack of education and skill,excessive government regulation, lack of awareness about governmentregulation, lack of organization and lack of social protection. The governmentshould remove these obstacles as far as possible to create work opportunities formillions of poor, illiterate and unskilled people in this sector. Otherwise, it wouldbe difficult for the government to combat the severe poverty in the rural area.

5.2. Developing Handloom Industry: The small and cottage industry has asignificant role in the economy of Bangladesh. Handloom is the main cottageindustry of Bangladesh. The handloom industry can fight rural poverty byproviding employment to a substantial part of the rural unemployed people.More than 75 percent people live in the rural area and their demand for fabricscan be fulfilled by the handloom sector. In addition, the demand for fabrics in theforeign exchange earning garment sector is increasing rapidly which is also agood market for handloom products. The foreign market for certain handloomproducts including Zamdani sari, Mirpur Banarasi sari, Tangail Musline/ Silksari, Bedsheet, Bed cover, Tapestry, Lungi is very bright. The demand-supplygap of fabrics in the country during the period 2001/02 - 2004/05 will help usrealize the prospects of this industry (see Table-8 and Figure-1). The demand-production gap was 1996 million meters in 2000-01 that increased to 2740million meters only after four years in 2004-05. The sharp rise in demandproduction gap of fabrics indicates that the handloom sector has vast scope tobroaden its contribution to the country’s total fabrics production. But it is amatter of regret that this promising sector has not been given due importance bythe government since after liberation. According to World Bank report of 1991,the production capacity of handloom is 105.50 core meters but due to variousreasons actual production ranges between 50-60 crore meters per annum 281 .Therefore, the government should undertake immediate action plan to developthis promising sector for reducing rural poverty and hereby developing the wholeeconomy.

5.3. Reforming Land Tenure System: In a country like Bangladesh land is themain resource or productive asset. Skewed land distribution is one of the mainreasons for rural poverty in Bangladesh. One of the main objectives of the landreforms so far undertaken in Bangladesh was to identify and release the totalgovernment land and distribute it to the rural poor to improve their economiccondition. There is no accurate estimate regarding the total amount ofgovernment land. According to a recent research, the estimated amount of total

281Center for Policy Dialogue (CPD) 2007: An Analysis of the National Budget for FY 2007-08,

paper prepared for IRBD, 14 June, 2007.

identified government land in Bangladesh is 3.3 million acres with 0.8 millionacres of agricultural government land, 1.7 million acres of non-agriculturalgovernment land and 0.8 million acres of government water bodies. But it ismatter of regret that only 12 percent of the agricultural government land has beeneffectively owned by the landless and the poor and 88 percent is illegallyoccupied by the powerful land grabbers. About 20 percent of the directbeneficiaries of the distributed government land comprise of those who are notentitled to receive the same. There is another inhuman device frequentlypracticed by the rich and powerful section of the society against the poor. Thelandless people receive the deed of government land but in practice they can notpossess the government land to utilize it under the barriers made by the landgrabbers. Local influentials, ruling party leaders and government officials are allmore or less involved in the whole process of depriving the poor from access togovernment land 282 . Therefore, the government should undertake stringentmeasures to release the total amount of government land (agricultural and waterbodies) and distribute it to the rural people with a view to enhancing theireconomic condition.

5.4. Developing Non-Crop Agriculture: The per capita agricultural land isshrinking in Bangladesh. Therefore, attention should be diverted to developingnon-crop agriculture. Non-crop agriculture like poultry, fishery and livestock hasa significant role in poverty reduction since land requirement is small andpotential return is high. But poultry and livestock sub-sectors work under severalconstraints including disease, poor genetic stock, shortage of land for pasture,and inadequate feed supplies which bar the growth of this sector. In addition, theproduction is dominated by small-holder farmers who are relatively unfamiliarwith basic animal nutrition, feed value of different sources, disease control andbreed selection283. Therefore, commercial production of poultry, beef and dairyshould be strengthened. Poultry and Livestock have enormous potential becausedemand-supply gap of poultry, livestock and dairy output in our country is veryhigh. This sector can be flourished by introducing modern methods ofproduction, improving technical skills of the farmers, and building supportivepolicy framework and infrastructure.

6. Concluding Remarks

282 Barkat A, Zaman S and Raihan S (2001): Political Economy of Khas Land inBangladesh, University Press Limited, Dhaka.283

ADB 2001: Rural Development Priorities for Poverty Reduction in Bangladesh, ADBEconomics Working Paper, ADB, Manila.


Addressing poverty remains a great challenge for the government mainly due tohuge population and resource constraint. The government of Bangladesh hasbeen striving to eradicate poverty through a number of strategies includingstrengthening economic growth and human development, expanding creditfacilities to targeted groups and building up of social safety nets. As an outcomeof these strategies, the country has made commendable progress in terms ofreduction of income and human poverty. However, the impact of thedevelopment programs on poverty reduction has, so far, not been strongly felt forthe rural people. More than 75 percent people of our country live in the ruralarea. If we can not reduce rural poverty more rapidly it will not have remarkableimpact on the poverty scenario at the national level. Besides agriculture, thereare some other sectors including informal sector, handloom sector and non-cropagriculture which can give productive employment to the rural people and hencereduce rural poverty. Therefore, if the ongoing government strategies for povertyreduction are accompanied by the above-mentioned measures, it will strengthenand accelerate the progress of rural poverty reduction.

Table-1: Trends and Incidence of Income Poverty based on Head CountRatio and DCI Method.

Year Upper poverty line(daily less than 2122

kilocalorie food intake)

Lower poverty line(daily less than 1805

kilocalorie food intake)Rural Urban Rural Urban

NumberOfpeople(million)

% NumberOfpeople(million)

% NumberOf people(million)

% NumberOfpeople(million)

%

1973/74

57.5 82.9

5.6 81.4 30.7 44.3

2.0 28.6

1981/82

60.6 73.8

6.4 66.0 43.1 52.2

3.0 30.7

1988/89

40.5 10.8 24.9 5.0

1991/92

44.8 47.6

6.8 46.7 26.6 28.3

3.8 26.3

1995/96

45.7 47.1

9.6 49.7 23.9 24.6

5.2 27.3

2000 42.6 42.3

13.2 52.5 18.8 18.7

6.0 25.0

2005 41.2 39.5

15.8 43.2 18.7 17.9

8.3 24.4

Source: BBS: Statistical Year Book of Bangladesh, various years

Table-2: Incidence of Poverty based on Head Count Rate and CBN Method

Residence Upper Poverty Line Lower Poverty Line2005 2000 2005 2000

National 40.0 48.9 25.5 33.7Rural 43.8 52.3 29.3 37.4Urban 28.4 35.2 13.7 19.4

Source: GOB, 2007, P.172.

Table-3: Poverty Reduction Rate during 1991/92-2005.

2005(%) 2000(%) AnnualChange(%)

1991-92(%)

AnnualChange(%)

(2000-2005)

(1991/92-2000)

Head Count IndexNational 40 48.9 -3.9 58.8 -1.8Urban 28.4 35.2 -4.2 44.9 -2.2Rural 43.8 52.3 -3.5 61.2 -1.6Poverty GapNational 9 12.8 -6.8 17.2 -2.9Urban 6.5 9.1 -6.51 12 -2.5Rural 9.8 13.7 -6.48 18.1 -2.8Squared Poverty GapNational 2.9 4.6 -8.81 6.8 -3.8Urban 2.1 3.3 -8.64 4.4 -2.7Rural 3.1 4.9 -8.75 7.2 -3.8

Source: GOB, 2009, P.178

Table-4: Land-ownership distribution of households, 1995-96 (%)

Size of Land Holding (acre) National Rural Urban


TotalLandless0.01-0.040.05-0.490.50-1.491.50-2.492.50-7.497.5+

100.009.9714.0535.1919.038.8910.881.98

100.006.4312.3436.4620.809.8411.922.16

100.0028.0222.7828.7110.044.045.361.08

Source: GOB, 1999, P.94

Table-5: Incidence of poverty (CBN) by ownership of land-2005.

Size of landHolding(acres)

Upper Poverty Line (%) Lower Poverty Line (%)

Total Rural Urban Total Rural UrbanAll sizeNo land<0.050.05-0.490.50-1.491.50-2.492.50-7.497.50+

40.046.356.444.934.322.915.43.1

43.866.665.750.737.125.617.43.6

28.440.139.725.717.48.84.20.0

25.125.239.228.220.811.27.01.7

28.649.347.833.322.812.87.72.0

14.617.823.711.49.12.73.00.0

Source: GOB, 2009, P.181.

Table-6: Percentage distribution of income accruing to households inGroups (Deciles) and Gini Coefficient.

HouseholdIncome Group

2005 2000Total Rural Urban Total Rural Urban

National 100.00 100.00 100.00 100.00 100.00 100.00Lower 5% 0.77 0.88 0.67 0.93 1.07 0.79Decile-1 2.00 2.25 1.80 2.41 2.80 2.02Decile-2 3.26 3.63 3.02 3.76 4.31 3.07

Decile-3 4.10 4.54 3.87 4.57 5.25 3.84Decile-4 5.00 5.42 4.61 5.22 5.95 4.68Decile-5 5.96 6.43 5.66 6.10 6.84 5.60Decile-6 7.17 7.63 6.78 7.09 7.88 6.74Decile-7 8.73 9.27 8.53 8.45 9.09 8.24Decile-8 11.06 11.49 10.18 10.39 10.97 10.46Decile-9 15.07 15.43 14.48 14.00 14.09 14.04Decile-10 37.64 33.92 41.08 38.01 32.81 41.32Top 5% 26.93 23.03 30.37 28.34 23.52 31.32Income GiniCo-efficient

0.467 0.428 0.497 0.451 0.393 0.497

Source: GOB 2009, P. 183.

Table-7: Allocation (Dev & Non-Dev) in the Social Sectors of SelectedMinistries by Year 1998/99-2007/08 (TK in Crore).

Sector 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08Education,Science &Technology

4850 5430 7079 6063 6736 4878 7381 9373 11057 11654

Health &FamilyWelfare

2080 2363 2627 2649 2797 3445 3175 4112 4957 5261

Labor &Manpower

38 46 54 133 70 56 90 106 96 119

SocialWelfare,Women’sAffairs &LiberationWar Affairs

255 294 322 354 484 713 1152 1353 1468 2028

TotalAllocation

7223 8133 10082 9199 10087 9092 11798 14944 17578 19062

Source: GOB 2009, P. 157.

Table-8: Demand-Production Gap of Fabrics: 2000/01-2004/05 (in million meters)

Financialyear

Demand for Fabrics TotalDemand

Domesticproduction

Demand-ProductionDomestic Export


OrientedRMG

Gap

2000-01 1595 2246 3841 1845 19962001-02 1618 2568 4186 2050 21362002-03 1754 2779 4533 2200 23332003-04 1865 3323 5188 2750 24382004-05 1960 3880 5840 3100 2740

Source: Hassan 2007

Figure-1: Demand-Production Gap of Fabrics: 2000/01-2004/05

01000200030004000500060007000

2000-01

2001-02

2002-03

2003-04

2004-05

Year

Fabrics (million meters)

Total Demand

Domesticproduction

flexibility of what and for whom? jasim uddin flexibility of what and for whom ... mr. mohammad...

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