PATTERNS AND TRENDS OF DEVELOPMENT OF MANUFACTURING BANGLADESH: A REGIONAL ANALYSIS RAWNAK JAHAN THESIS SUPERVISOR DR.

Transcription

1 PATTERNS AND TRENDS OF DEVELOPMENT OF MANUFACTURING INDUSTRIES IN BANGLADESH: A REGIONAL ANALYSIS BY RAWNAK JAHAN THESIS SUPERVISOR DR. SARWAR JAHAN DEPARTMENT OF URBAN AND REGIONAL PLANNING BANGLADESH UNIVERSITY OF ENGINEERING AND TECHNOLOGY (BUET), DHAKA, BANGLADESH JANUARY, 2017

2 The thesis titled PATTERNS AND TRENDS OF DEVELOPMENT OF MANUFACTURING INDUSTRIES IN BANGLADESH: A REGIONAL ANALYSIS submitted by RAWNAK JAHAN, Student no: , Session: April, 2012, has been submitted in partial fulfillment of the requirement for the degree Master of Urban and Regional Planning on 21 January, 2017.

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5 ACKNOWLEDGEMENT First, all praises belong to the almighty Allah for his grace and mercy throughout this research. This study wouldn t have been possible without the assistance and support of those who have been actively involved in this research. The author expresses her heartiest gratitude and indebtedness to Dr. Sarwar Jahan, Professor, Department of Urban and Regional Planning and supervisor of the thesis for his continuous guidance, encouragement, valuable suggestions and helpful criticism at different stages of preparation of this thesis. It would have been impossible to carry on the research work and make it in a final shape without his continuous guidance and encouragement. The author pays deepest homage of her parents and husband whose continuous inspiration, sacrifice, blessings and moral support encouraged her to complete the study successfully. i

6 ABSTRACT Bangladesh is one of the most populous countries in the world, facing challenges in its every aspect. Like other developing countries, Bangladesh is also experiencing industrialization and the trend of industrialization is increasing gradually. The national and regional trends of manufacturing industrial development in Bangladesh for the two consecutive census years and were studied in this research. It revealed that there is considerable spatial and temporal imbalance of industrial development in both divisional and regional (former districts) level. In census the range was between percent and in census it was between percent. In , nearly 55 percent and 16 percent of the total manufacturing industrial employment are concentrated in Dhaka and Chittagong regions. In , it becomes 58 percent and 21 percent, respectively. The interregional variation in industrial development indicates unstable economic growth and lack of policy in regions of Bangladesh. Along with this, regional inequality in the distribution of industrial employment was analyzed using Location Quotient (L.Q.) of different types of industry and regions, Shift-Share Analysis and Moran s I Spatial Correlation. The values of Moran s I Spatial Correlation were found and in the year and respectively. It indicates that the industrialization is not uniform throughout the country. The aspects which are closely associated with the level of industrialization such as- person engaged, gross output, per capita value added, gross value added and growth rate of employment were also studied here. This study was not only limited to the study of regional variation of industrial development. It explicitly analyzed some socio-economic and infrastructural factors affecting this variation with their relative and changing importance in this regard. For this purpose Bivariate Correlation Coefficients of the dependent variable, i.e. level of industrialization with independent variables were measured for two consecutive censuses. It was found that non-agricultural activities, level of urbanization, rural-urban migration, water supply coverage and electricity coverage are strongly positively correlated with the level of industrialization all along. Moreover, it was found that all the factors are not equally significant with the level of industrialization all the time. In this study secondary data were used and the main source of data was the various census and annual reports conducted by Bangladesh Bureau of Statistics (BBS). ii

7 ABBREVIATIONS AAGR- Annual Average Growth Rate BBS- Bangladesh Bureau of Statistics BDT- Bangladeshi Taka DNST Population Density ECOAP - Economically Active Person ELEC - Electricity Supply Coverage IM- Industrial Mix LITER - Literacy Rate LOIND - Level of Industrialization LOU - Level of Urbanization NAA - Non-agricultural Activities NS- National Shift NSC- Net Shift Component RDLEN- Length of Paved Road RS- Regional Shift RUM - Rural-Urban Migration TCE- Total Change in Employment WS- Water Supply Coverage iii

8 CONTENTS TITLE PAGE ACKNOWLEDGEMENT ABSTRACT ABBREVIATIONS CONTENTS LIST OF TABLES LIST OF FIGURES LIST OF MAPS i ii iii iv-vi vii-viii ix x CHAPTER 1 INTRODUCTION Background of the Study Rationale of the Study Historical Context of Industrialization in Bangladesh Objectives of the Study Outline of Methodology Study Design Data Source Selection of Industry Region Delineation Data Analysis and Processing Location Quotient (LQ) Shift-Share Analysis Moran s I Spatial Autocorrelation Pearson s Correlation (r) Regression Analysis Definition of Industrialization Definition of Level of Industrialization Aspects Considered for Estimation of Industrial Development Scope and Limitation of the Study Organization of the Study 19 Page iv

9 CHAPTER 2 TREND AND PATTERN OF INDUSTRIAL DEVELOPMENT IN BANGLADESH Introduction National Trend of Industrial Development in Bangladesh ( ) Divisional Trend of Industrial Development ( ) Level of Industrialization by Division ( ) Regional Trend of Industrial Development ( ) Region-wise Growth in Employment, Per Capita Value 38 Added and Percentage of Growth ( ) Regional Trend of Development of Major Industries ( ) Regional Trend of Industrialization ( ) Analysis of Regional Variation Intercensal Variation of Person Engaged in Industrial Work 47 by Regions Variation in Growth Rate of Industrial Employment by 48 Regions Categorization of Regions based on Level of Industrialization Summary 54 ANALYSIS OF INTER-REGIONAL VARIATION OF CHAPTER INDUSTRIAL DEVELOPMENT 3.1 Introduction Theories of Regional Development and Industrial Location Literature Review Factors Influencing Industrial Location and Development Industrial Development in Bangladesh and Surrounding Countries 58 ANALYSIS OF INTER-REGIONAL VARIATION OF CHAPTER INDUSTRIAL DEVELOPMENT 4.1 Introduction Analysis of Regional Industrial Concentration Basic and Non-basic Category of Industrial Concentration Analysis of Regional Competitiveness of Industrial Development 68 Analysis of National Share, Regional Shift and Total Change in Employment Net Shift Component Analysis 69 Page v

10 4.3.3 Analysis of Regional Competitiveness in Major Five Industry Analysis of Regional Spatial Association Description of the Factors Degree of Relationship between Industrial Development and Factors Bivariate Correlation Coefficients of Variables for the Year Comparison of the Correlation Coefficients Regression Analysis Summary 89 CHAPTER 5 SUMMARY AND CONCLUSION Introduction Summary Findings Recommendations Conclusion Scope for Further Research 96 REFERENCES APPENDICES Appendix A Appendix B xixxvii xi xix Page vi

11 LIST OF TABLES Table No. Title Page No. Table 1.1 Division and Group of Industry Selected for the Study 8 Table 1.2 Relationship between Region (Former District) and Present Administrative Districts Table 1.3 Explanation of the Shift Share Components 14 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 2.10 Intercensal Growth Rate of Person Engaged for different type of industries ( ) Growth Rate of Person Engaged in Industrial Work and Level of Industrialization in Bangladesh ( ) Percentage of Gross Output, Gross Value Added, Per Capita Value Added and Growth of Employment of Different Type of Industries in Bangladesh ( ) Percentage of Gross Output, Gross Value Added, Per Capita Value Added and Growth of Employment of Different Type of Industries in Bangladesh (2012) Division-wise Number of Establishment, Person Engaged, Gross Output, Gross Value Added, and Per Capita value Added ( ) Division-wise Number of Establishment, Person Engaged, Gross Output, Gross Value Added, Per Capita value Added and Growth in Employment ( ) Division-wise Level of Industrialization and its Ranking ( ) Region-wise Number of Establishments, Persons Engaged, Gross Output, Gross Value Added and Per Capita Value Added ( ) Region-wise Number of Establishments, Persons Engaged, Gross Output, Gross Value Added and Per Capita Value Added ( ) Region-wise Growth in Employment, Per Capita Value Added and Percentage of Growth ( ) Table 2.11 Per Capita Value Added (in BDT) by Different Type of Industries Table 2.12 Per Capita Value Added (in BDT) by Different Type of Industries Table 2.13 Region-wise Level of Industrialization and Their Rank ( ) 46 Table 2.14 Intercensal Variation of Person Engaged in Industrial Work by Regions ( ) Page vii

12 Table No. Title Page No. Table 2.15 Variation in Growth Rate of Industrial Employment by Regions and its Ranking ( ) 49 Table 2.16 Categorization of Regions based on Level of Industrialization for and Table 4.1 Location Quotient (L. Q.) and Group of Different Regions ( ) 63 Table 4.2 Basic and Non-basic category of Different Type of Industries, Table 4.3 Basic and Non-basic category of Different Type of Industries, Table 4.4 National Share, Regional Shift and Total Change in Employment of Different Regions ( ) 68 Table 4.5 Net Shift Component of Different Regions ( ) 70 Table 4.6 Analysis of Regional Competitiveness in Major Five Industry ( ) 71 Table 4.7 Value of Local Indicators of Spatial Association for Different Types of Industry 74 Table 4.8 Descriptive Statistics of all the Variables 81 Table 4.9 Bivariate Correlation Coefficients of the Independent Variables along with Dependent Variables ( ) 83 Table 4.10 Comparison of Correlation Coefficients of the Variables ( ) 84 Table 4.11 Model Summary of Multiple Regressions 85 Table 4.12 Coefficients of Multiple Regression Analysis 86 Table 4.13 Model Summary of Multiple Regressions (without RMG) 87 Table 4.14 Coefficients of Multiple Regression Analysis (without RMG) 87 Table 5.1 National Aspects of Industrial Development 91 Table 5.2 Regional Aspects of Industrial Development 92 Table 5.3 Inter-Regional Competitiveness of Industrial Development 92 Table 5.4 Correlation Coefficients of the Variables with Level of Industrialization ( ) 93 Page viii

13 LIST OF FIGURES Figure No. Title Page No. Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 Figure 2.5 Percentage (%) Share of Persons Engaged in Industrial Work ( ) Percentage (%) Share of Persons Engaged in Industrial Work ( ) Percentage (%) Share of Persons Engaged in Industrial Work (2012) Division-wise Percentage (%) Share of Persons Engaged in Industrial Work ( ) Division-wise Percentage (%) Share of Persons Engaged in Industrial Work ( ) Figure 2.6 Division-wise Per Capita Value Added ( ) 33 Figure 2.7 Division-wise Level of Industrialization ( ) 34 Figure 2.8 Figure 2.9 Percentage of Persons Engaged in Food Products and Beverages Industry ( ) Percentage of Persons Engaged in Cotton and Jute Textiles Industry ( ) Figure 2.10 Percentage of Persons Engaged in RMG Industry( ) 43 Figure 2.12 Figure 2.12 Percentage of Persons Engaged in Pharmaceutical Industry ( ) Percentage of Persons Engaged in Non-Metallic Minerals Industry ( ) Figure 2.13 Region-wise Level of Industrialization ( ) 47 Figure 2.14 Variation in Annual Average Growth Rate by Regions ( ) 49 Figure 4.1 Percentage of Regional Industrial Concentration Groups ( ) 65 Figure 4.2 Percentage of Regional Industrial Concentration Groups ( ) 65 Figure 4.3 Net Shift Component of Different Regions of Bangladesh ( ) 70 Figure 4.4 Clustering of All Person Engaged in Industrial Work, Figure 4.5 Clustering of All Person Engaged in Industrial Work, Page ix

14 LIST OF MAPS Map No. Title Page No. Map 2.1 Map 2.2 Map 4.1 Map 4.2 Level of Industrialization in the Regions (Former District) of Bangladesh in Level of Industrialization in the Regions (Former District) of Bangladesh in Spatial Associations and Level of Significance of All People Engaged in Different Types of Industry, Spatial Associations and Level of Significance of All People Engaged in Different Types of Industry, Page x

15 CHAPTER 1 Chapter 1: Introduction INTRODUCTION 1.1 Background of the Study Industrialization has been one of the dominant trends of economic and social change of the 19 th and 20 th century in both the developed and developing worlds. Industry is seen as the main engine of growth (Kaldor, 1967) and industrial development subject to cumulative causation to a larger degree than development of other sectors (Myrdal, 1957). The manufacturing sector is the most vibrant force of development, and as Weiss (1988) reported, manufacturing retains the characteristics of an engine of growth-rapid productivity growth, dynamic increasing returns to scale, rapid technological change, and various dynamic externalities (Weiss, 1988). Bangladesh is one of the most populous countries in the world, facing challenges in its every aspect. Like other developing countries, Bangladesh is also experiencing industrialization and the trend of industrialization is increasing gradually. The case for development of manufacturing as a key feature of the development strategy of Bangladesh to accelerate growth and reduce poverty has got established firmly immediately after country s liberation in the very First Five Year Plan (GOB, 1973 and Nath, 2012). After liberation, within the overall objective of attaining a self-reliant economy, the first five-year plan ( ) of the country adopted an import-substitution strategy for industrialization with emphasis on domestic production of basic needs and investment goods. But an unfortunate change in local power in 1975 and due to international change in socialism the country increasingly dependent on foreign aid and aid-financed imports covering all types commodities- food, consumer goods, consumer durables, raw materials, intermediate inputs and of course investment goods. In Bangladesh, the industrial growth took place at a slow pace. Between and , manufacturing GDP increased at an annual compound rate of 3.8 %. The trend of growth for the same period was estimated to be 4 % only (Bakshi, 2005). Bangladesh as a country with a poor land-person ratio is unlikely to prosper through agricultural growth alone. The industrial sector has historically been the sector that has driven growth as countries have moved from low to middle-income status (Mujeri et al., 2003 and Mahajan, 2005). In Bangladesh industrialization has accelerated in more recent years. Page 1

16 Chapter 1: Introduction Industrial sector now contributes more than 28% of the Gross Domestic Product (GDP), from around 11 per cent in the mid-1970s (Ahmed et al., 2011; Bakht, 2001 and Ahmed et al., 2009). According to the Bangladesh Economic Review, manufacturing remained the largest sub-sector contributing to 17.78% of the GDP in (Ahmed et al., 2011). According to BBS Labor Force Surveys, manufacturing employment increased from 3.5 million in to 5.2 million in registering a yearly compound growth of 4 percent (Bakht, 2001). In Bangladesh, labor force is increasing day by day and the absorptive capacity of agriculture is limited. Due to a variety of socio-economic factors, the scope of sustainable growth in agricultural sector remains constrained and in this respect structural shift towards industry is assumed to be especially important over the last quarter of the century. The share of agricultural sector reduced to 33 % in 1995 from 58 % in On the other hand, the share of manufacturing sector increases from 9 % in 1973 to 11.4 % in 1994/95 that paved a prospective way to industrialization (Bakshi, 2005). Industrialization has run to the front of urbanization, and the development of administrative and other service occupation, i.e. non-agricultural activities which are normally concentrated in cities. Although the administrative and organizational decisions, capital investments, technological innovations generally originate in the primate city and induced growth centers such as divisional and district headquarters, however, trickle down effects are not uniformly speeded spatially perhaps because of spatial variation in geographical conditions and socioeconomic infrastructures of the country. Infrastructure facilities are closely related to the socio-economic changes and socio-economic development is treated both as one of the causes and effects of industrialization. In Bangladesh there exists a wide spatial inequality in the rates of industrialization, economic growth and development. Thus the trend and pattern of industrialization is not uniform throughout the country. People employed in the industrial sector are concentrated in a handful of regions. In , nearly 55 percent and 16 percent of the total manufacturing industrial employment were concentrated in Dhaka and Chittagong regions (Former District). In , it becomes 58 percent and 21 percent, respectively (BBS, 2001 and BBS, 2010). These figures reflect that industrialization is not uniform throughout this country. Industrialization is recognized as one of the most important development phenomena of the contemporary world. It is most significant both as an engine of economic growth and an Page 2

17 Chapter 1: Introduction agent of modernization. As in Bangladesh the higher level of industrialization is concentrated in a few regions and these regions face lots of problems, e.g. poverty, inequality in resource distribution, severe congestions, etc. due to high population density. It is a crucial need to decrease regional variation in industrialization to ensure development of every region in a balanced way. However, industrial development is a normal process of development activities. The point at issue is the regional variation of industrial development resulting uncontrolled growth of industries and industrial employment in limited places which needs crucial attention. 1.2 Rationale of the Study In Bangladesh, studies on the overall industrial sector are very negligible and have not yet been spread out with proper importance; especially researches on industrial development with its spatio-temporal variations are rare. Most of the studies on industrial development in Bangladesh are descriptive and they seldom apply quantitative techniques. In the past, some studies were carried out only focusing ready-made garment (RMG) sector (Naumann, 2002; Rahman, 2004 and Rashid, 2006) and other studies about trade liberalization, exports and strategies for future development of the overall industrial sector (Ahmed et al., 2011; Bakht, 2001 and Ahmed et al., 2009). This research intends to perform a chronological and empirical study of the industrial sector of Bangladesh in order to investigate the patterns and trends of industrial development in the country and regional variation of industries in different regions of the country and also identify the major factors affecting regional variation. The trend analysis of any dynamic process is usually carried out for a specific period of time and place. This study analyzed the trend of industrial development in Bangladesh for the period of 1995 to 2012 (for regional level ). Regional analysis of industrial development can provide a clear picture of the regional economy by indicating the industry clusters that are growing in importance and the ones that are declining. This study not only limited to the study of regional variation of industrial development. It is assumed that there are some factors which work behind the regional variation of industrial development in Bangladesh. This study explicitly analyzed some socioeconomic and infrastructural factors contributed to this variation. Further, it also measured the changing importance of the factors affecting regional variation including their relative importance in this regard. This will help policy makers to allocate resources among Page 3

18 Chapter 1: Introduction the regions so that regional equality in development and consequently in industrialization is maintained. 1.3 Historical Context of Industrialization in Bangladesh The history of Bangladesh industrial development can be divided in two groups: Preliberation period and post liberation period. Pre-liberation Period: The industrial history of ancient Bengal was not so outstanding or promising. Then the Raja, Maharajas did not look after the industrialization. There was some small cottage industry in the region. 'Dakhai Mausline' (very fine cloths) was so prominent in ancient Bengal. However, the industrial revolution in Europe and the British East-India Company introduced the industrial goods in Indian subcontinent. But the government of India (British ruler) imposed a 'discriminatory protection' for Indian industry. The first Industries Department established in 1917 in Bengal and there was no industrial policy. There were several limitations, both external and internal restrained the government of Bengal from taking a 'forward' and 'bold' industrial policy and it was made to restrict the local cottage and small industry. From that time industrial development started at a slow pace. However, the first industry in Bengal was as Keru and Co. in Dorshona, Jessore in Bangladesh established in 1934/35 (Bakshi, 2005). In 1947, the Indian subcontinent was divided into two parts. One was India and the other one was Pakistan. Pakistan had two parts. One was West Pakistan and the other one was East Pakistan, which is now known as Bangladesh. Bangladesh part had little composition of large-scale industrial units in 1947, such as- a few textile mills, a few sugar mills, a cement factory and a number of jute bailing presses; during the period the industrial sector was developed under government patronage (Sarkar, 2014). The government created the Pakistan Industrial Development Corporation (PIDC) and Pakistan Industrial Finance Corporations (PIFC) to promote industrialization. PIDC made significant contribution in the establishment of industrial units in sectors such as jute, paper board, cement, fertilizer, sugar, chemicals, textiles, pharmaceuticals, light engineering and shipbuilding. The central Govt., however, followed a discriminatory policy. It favored West Pakistan in industrial development and drained resources from East Pakistan for the purpose. Industries like - Adamjee jute mills in Narayangonj (biggest in Asia/world) was established in 1957 and form Page 4

19 Chapter 1: Introduction 1960s- lots of industry started in Bangladesh. Jute, textile, cement, pulp and study, fish processing, etc. were the major industry developed in Bangladesh (Former East Pakistan). Official sources of the government, however, that in 1970, there were 1580 manufacturing units in East Pakistan that employed 206,058 persons. The share of the manufacturing sector in the GDP was 8.9% in 1970 as compared 3.9% in 1950 (Sumon, 2012 and Hasan, 2013). Post Liberation Period: In Bangladesh the public enterprises were created by the government right after liberation. The 1970's election manifesto of Awami League promised to nationalize the heavy industry in Bangladesh (Bakshi, 2005). Just after the liberation war of Bangladesh, the government took over the public ownership all industrial units abandoned by the Pakistanis with the assets above Tk. 1.5 million; furthermore, while promising to pay compensations, it nationalized all units owned by Bangladesh citizens in three large-scale industries, i.e. cotton textiles (excepting handloom and specialized textiles), jute manufacturing and sugar manufacturing. The nationalized industrial enterprises were initially grouped in ten sector corporations, such as chemicals & fertilizers, iron & steel, newsprint & study, food & other products, etc. By 1976, the number of sectors corporations was reduced by about half. These sector corporations were run by public administrators under the direct control of the ministry of industry. At the 1980's decade, the nationalized industrial sectors were given freedom to fix their own prices and management of their own (Hasan, 2013). However, due to various reasons the nationalized sector could not show efficiency. From the initial level of nationalization and up to date, most of these sectors are living on government subsidy or sustaining a heavy loss. The last 30 years of the history of Bangladesh, industry went through a slow and rather erratic structural transformation. It defined the classical relationship between the structural composition of an economy and its stage of development. Her share of the agricultural sector, though dropped from 58 % in 1972 to about 33 % in 1995, the share of manufacturing sector limped 9.0 % in 1973 to a mere 11.4 % in 1994/95. The service sector, on the other hand jumped from 26 % to about 48% over the same period (Bakshi, 2005). Bangladesh was born in the background of utter industrial backwardness. At the time of birth, it was so poor in the field of industry that almost all the industrial products that the required had to imported from abroad. Starting with many barriers and a few advantages, Bangladesh has amazed the world by industrial progress in less than twenty years. The Government of Bangladesh played an important role in the development of industries in this country (Hasan, Page 5

20 Chapter 1: Introduction 2014). Right at the beginning, it came forward and invited the wealthy people to invest money in industries under the protection and patronage of the state. As a result of this brisk and all round effort for several years, Bangladesh can now boast of possessing a large number of important industries. It has some jute mills, ready-made garments, fertilizer, steel mills, textile mills, paper mill, machine tool factory, electrical industries, several sugar mills, leather industries and cement factories, all of which are very big in respect of size, production and investment, besides, hundreds of other smaller and mediocre industries that have been set up in different pans of the country. 1.4 Objectives of the Study The principal aim of this study is to conduct a detailed analysis of the trend and spatial distribution of industrial development in Bangladesh and identify the major factors influencing industrial development in different regions. There are two objectivesa. To analyze the national and regional patterns and trends of industrial development in Bangladesh. b. To identify the major factors influencing regional variation in industrial development. 1.5 Outline of Methodology To fulfill the above mentioned objectives the methodology of the study contains of the following steps: Study Design The study has been designed to give an explanation for changes in the process of industrial development in Bangladesh and among its regions. Firstly, the national trend of industrial development in Bangladesh for , and 2012 census years were analyzed on the basis of level of industrialization. Secondly, the nature of industrialization was studied for the divisions. Thirdly, to study the regional variations of industrialization, Bangladesh was divided into twenty regions (former districts) and the level of industrialization has been calculated for each region. Fourthly, various socio-economic, demographic and infrastructural factors such as- economically active person, length of paved road, electricity Page 6

21 Chapter 1: Introduction coverage, water supply coverage, literacy rate, population density, level of urbanization, rural-urban migration and percentage of non-agricultural activities affecting regional variations in industrialization were studied Data Source As the study is mostly empirical, it relies solely on the quantitative data provided by the only available source on the subject. To fulfill the objectives data has been collected from different publications of Bangladesh Bureau of Statistics (BBS), such as type of industry, number of establishments, size of employment, gross value added, etc. data has been collected from the Census of Manufacturing Industries (CMI) for the year , Survey of Manufacturing Industries (SMI) for the year and 2012, and for the calculation of per capita value added population data has been collected from Population and Housing Census for the year 1991, 2001 and Statistical yearbook of Bangladesh 1997 and 2006 and Statistical Year Book: Zila Series and Community Report of Bangladesh 1991, 2001 and 2011 has been used to collect different factors related data like- road length per square kilometer, literacy rate, electricity coverage, water supply coverage, economically active population, etc Selection of Industry There are total sixty (60) divisions in Bangladesh Standard Industrial Classification (BSIC- 2001), among them Division 15 to Division 36 represented the manufacturing sector and Census of Manufacturing Industries (CMI) of Bangladesh Bureau of Statistics (BBS) only cover these divisions. As this study only considers manufacturing industry, thus the industries were selected for this study belongs to division 15 to division 36 of BSIC Table 1.1 shows the divisions and groups of industry selected for this study. Page 7

22 Chapter 1: Introduction Serial No. Table 1.1: Division and Group of Industry Selected for the Study Division of BSIC-2001 & Group of Industry Selected for the study 1 Division-15: Manufacture of food products and beverages 2 Division-16: Manufacture of tobacco products 3 Division-17: Manufacture of textiles Division-18: Manufacture of wearing apparel (Ready-made garments), Dressing and Dyeing of Fur Division-19: Tanning and dressing of leather; Manufacture of luggage, handbags, saddler, harness and footwear. Division-20: Manufacture of wood and products of wood and cork, Except Furniture; Manufacture of articles of straw and plaiting materials Division-21 & 22: Manufacture of paper and paper products, publishing, printing, and reproduction of recorded media 8 Division-23: Manufacture of coke, refined petroleum products and nuclear fuel 9 Division-24: Manufacture of Chemicals, chemicals products and pharmaceuticals, medicinal chemical and botanical products 10 Division-25: Manufacture of rubber and plastics products 11 Division-26: Manufacture of other non-metallic mineral products 12 Division-27, 28 29: Manufacture of basic metals Division-30, 31, 32, & 33: Manufacture of computer, electronic and optical products, electrical equipment, machinery and equipment Division-34 & 35: Manufacture of motor vehicle, trailers and semi-trailers, other transport equipment 15 Division-36: Other Manufacturing Region Delineation This study was covered the whole country and in the case of defining the regions the study area Bangladesh has been divided according to administrative delineation. To measure the industrial development of different regions, Bangladesh was outlined into twenty regions according to the former districts (before 1981 census). Thus the greater districts has been considered as regions (Bangladesh Bureau of Statistics (BBS) sometimes denoted the former Page 8

23 Chapter 1: Introduction districts as regions) as the data needed for this study is mostly available for the greater districts and divisions. Table 1.2 shows the delineation of regions and the current districts which were belongs to old ones. Table 1.2: Relationship between Region (Former District) and Present Administrative Districts Serial No. Former District/Region Present Administrative Districts Barisal Division 1 Barisal Barishal, Bhola, Jhalakati, Pirojpur 2 Patuakhali Barguna, Patuakhali Chittagong Division 3 Chittagong Chittagong, Cox s Bazar 4 Ctg. Hill Tracts Bandarban, Khagrachari, Rangamati 5 Comilla Brahmanbaria, Chandpur, Comilla 6 Noakhali Feni, Lakshmipur, Noakhali Sylhet Division 7 Sylhet Habiganj, Moulavibazar, Sunamganj, Sylhet Dhaka Division 8 Dhaka Dhaka, Gazipur, Manikganj, Munshiganj, Narayanganj, Narsingdi 9 Faridpur Faridpur, Rajbari, Gopalganj, Madaripur, Shariatpur 10 Jamalpur Jamalpur, Sherpur 11 Mymensingh Kishoreganj, Mymensingh, Netrokona 12 Tangail Tangail Khulna Division 13 Jessore Jessore, Jhenaidah, Magura, Narail 14 Khulna Bagerhat, Khulna, Satkhira 15 Kushtia Chuadanga, Kushtia, Meherpur Rajshahi Division 16 Rajshahi Naogaon, Natore, Nawabganj, Rajshahi 17 Bogra Bogra, Joypurhat 18 Pabna Pabna, Sirajganj Rangpur Division 19 Rangpur Gaibandha, Kurigram, Lalmonirhat, Nilphamari, Rangpur 20 Dinajpur Dinajpur, Panchagarh, Thakurgaon Page 9

24 Chapter 1: Introduction Data Analysis and Processing The data obtained from secondary source was classified, tabulated and presented in the form of tables and graphs by using MS-Excel and SPSS for processing and analysis of the collected data and to end up with meaningful results. The study has utilized economic development tools such as Location Quotient, and Shift-Share Analysis to analyze the growth of industry clusters in different regions of Bangladesh. Shift-Share Analysis method was used for regional and overall country s trend analysis of industrial development over the year; in this number of employment and time has been considered in the calculation of National Share, Industrial Mix and Regional Shift for different type of industries for each region. Another technique of analysis used in this research was simple economic-base type of analysis, such as the estimation of Location Quotients for employment size for different type of industries to find out the regional distribution of industries and growth trends over the time in respect of national conditions. The location quotient model quantifies the degree of concentration of clusters in a region relative to the nation. It has revealed the dominant clusters in different regions as well as the ones that are emerging or transforming. The study was also utilized Moran s I Spatial Autocorrelation Technique (which is measures the extent to which a given region's industrial economy correlate with others) for estimation of spatial distribution, the patterns of spatial association (spatial clusters) of different industries for each region that have been identified as regions for the purpose of this research. ArcGIS and GeoDa were used for calculating and mapping spatial correlation data. If there is any systematic pattern in the spatial distribution of a variable, it is said to be spatially auto- correlated. All the estimates were based on industrial employment statistics in preference to BBS data. For an analysis of the factors influencing regional variation of industrial development Pearson s correlation (r) was used for the analysis of two variables at a time in order to uncover whether the two variables are related. With respect to growth of industrial employment i.e. dependent variable the correlation coefficients of all independent variables were estimated for different times and different regions to find out the relative importance of the variables affecting regional variation of industrial development in Bangladesh. To Page 10

25 Chapter 1: Introduction describe the statistical relationship between one or more predictor variables and the response variable Regression analysis was used here. The techniques used in this study to analyze variations of industrialization has been made clear here Location Quotient (LQ) The location quotient (LQ) is defined as the ratio of industry cluster shares of the local economy and the share of the nation, or the state, or the region. The location quotient is a measure of relative regional concentration of a given industry compared to total national magnitudes, such as population, manufacturing, employment, or income. In the present study, a location quotient is expressed in terms of an employment percentage ratio. The numerator of the ratio is the percentage of a region's total employment accounted for by the given industry, and the denominator of the ratio indicates the percentage of the overall system's (country's) total manufacturing employment accounted for by the same industry. This may be expressed with the help of the following notation: LQ i = (e i / e) / (E i / E) = b i /B Where, LQ i = Location quotient for sector in the regional economy e i e E i E = Employment in sector i in the regional economy = Total employment in the local region = Employment in industry i in the national economy = Total employment in the national economy When the Location quotient = 1 that means the employment is equal in the sector for the national and regional economy. Therefore the sector is non-basic and supply is just equal to demand. If LQ < 1, the output is not sufficient to meet the local demand and imports are needed. It is also non-basic. If LQ > 1 the output is more than sufficient to meet the local demand and exporting the surplus is an option. It is basic. For a regional analyst seeking to analyze a policy of diversification, the location quotients would provide the basis for a qualitative judgment about the 'structural base' of the region's industrial economy. The industries with high location quotients constitute the industrial base Page 11

26 Chapter 1: Introduction of the region, and the industries with low location quotients are relatively non-concentrated and thus probably amenable to locate in the region seeking industrial diversification Shift-Share Analysis Shift-share analysis is an important tool of regional analysis. Through a descriptive analysis of the productive structure, it allows the comparison of regional differences within a country, region or state. Shift share analysis is a method of analyzing changes in industrial structure over time. The analysis makes an attempt to ascertain how well the region s economy is doing relative to the country as a whole. Shift share analysis separates employment growth of the region into three components: a national growth effect, which is the increase associated with the growth of the national economy; an industry mix effect, which is the growth in an industrial sector in excess of the national rate of growth; a competitive effect, which is the difference between the actual change in employment in a sector and the expected employment change if the sector had grown at the national growth rate for that sector. The sum of the three effects is the actual total increase in employment in the state. The third effect attempts to capture the region s comparative advantages in certain sectors and translates that into job creation above or below the national averages. National Share (NS) Component The share of local job growth that can be attributed to the growth of the national economy- t NSir t 1 Eir t E N 1 t 1 EN Industry Mix (IM) Component The industrial mix or proportionality shift component reflects differences in industry mix between the local and national levels. The mix-factor examines how national growth or decline of a particular industry translates into local growth or decline of that industry. Also estimates how many jobs were created/not created in each industry due to differences in industry and total national growth rates Page 12

27 Chapter 1: Introduction t IMir t 1 E ir t E t E E E t in N 1 t 1 in N Regional Shift (RS) Component This share of local job growth describes the extent to which factors unique to the local area have caused growth or decline in regional employment of an industry group. Even during periods of general prosperity, some regions and some industries grow faster than others do. Identifies the region s leading and lagging industries t RSir t 1 E ir t E t Eir E E t ir in 1 t 1 in Total Regional Growth = E ir = IM t ir + NS t ir + RS t ir Total Net Shift Component, (IM+RS) t ir = E ir NS t ir Where: I = specific industry in a region or nation (i=1,2,...i) r = the number of specific regions in a geographical area (r=1,2,...r) t = current time period t-1 = previous time period E = denotes employment: t 1 E ir = employment in the i th industry in the r th region in (t-1) th year t E in t 1 E in t E N t 1 E N = national employment in the i th industry in t th year = national employment in the i th industry in (t-1) th year = total national employment in t th year = total national employment in (t-1) th year Page 13

28 Chapter 1: Introduction Table 1.3 shows the explanation of the shift share components. Table 1.3: Explanation of the Shift Share Components Net Shift Component Industry Mix (IM) Component Regional Shift Component + Total Regional Growth>National Growth - Total Regional Growth<National Growth + Industry of interest is growing - Industry of interest is declining + Local competitiveness is present for economic growth - Local competitiveness is absent for economic growth Moran s I Spatial Autocorrelation In statistics, Moran's I is a measure of spatial autocorrelation developed by Patrick Alfred Pierce Moran (Moran, 1950 and Wikipedia, 2015). Spatial autocorrelation is more complex than one-dimensional autocorrelation because spatial correlation is multi-dimensional (i.e. 2 or 3 dimensions of space) and multi-directional. Global Measures: A single value which applies to the entire data set; the same pattern or process occurs over the entire geographic area and give an average for the entire area Local Measures: A value calculated for each observation unit, different patterns or processes may occur in different parts of the region and predict a unique number for each location Formula for Global Moran s I N I ( i 1 n i 1 j 1 n j 1 i 1 x)(x Where: N = is the number of observations (points or polygons) X = is the mean of the variable n n w w ij ij (x ) i n (x i j x) x) 2 Page 14

29 Chapter 1: Introduction X i = is the variable value at a particular location X j = is the variable value at another location W ij = is a weight indexing location of i relative to j Formula for Anselin Local Moran s I The Local Moran s I statistic of spatial association is given as: Where x i is an attribute for feature i, X is the mean of the corresponding attribute, w i,j is the spatial weight between feature iand j, and: With n equating to the total number of features. The z I i score for the statistics are computed as: Where, Pearson s Correlation (r) Pearson s correlation coefficient is a statistical measure of the strength of a linear relationship between paired data. It is concerned with the analysis of two variables at a time in order to uncover whether the two variables are related. In this study this method is used for Bivariate Regression Analysis. In a sample it is denoted by r and is by design constrained as follows: Page 15

30 Chapter 1: Introduction -1 r 1 The main features of this method are as follows (Bryman, 2001): The coefficient will almost certainly lie between 0 (zero or no relationship between two variables) and 1 (a perfect relationship) - this indicates the strength of the relationship; The closer the coefficient is to 1, the stronger the relationship; the closer it is to zero, the weaker the relationship; The coefficient will be either positive or negative this indicates the direction of a relationship; The closer the value is to 1 or 1, the stronger the linear correlation. Correlation is an effect size and so we can verbally describe the strength of the correlation using the guide that Evans (1996) suggests for the absolute value of r: very weak weak moderate strong very strong Regression Analysis In statistical modeling, regression analysis is a statistical process for estimating the relationships among variables. It includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables (or 'predictors'). Linear regression is the most basic and commonly used predictive analysis. Regression estimates are used to describe data and to explain the relationship between one dependent variable and one or more independent variables. Multiple regression is an extension of simple linear regression in which more than one independent variable (X) is used to predict a single dependent variable (Y). The predicted value of Y is a linear transformation of the X variables such that the sum of squared Page 16

31 Chapter 1: Introduction deviations of the observed and predicted Y is a minimum. The computations are more complex, however, because the interrelationships among all the variables must be taken into account in the weights assigned to the variables. With three independent variables the prediction of Y is expressed by the following equation: Y=a + b 1 X 1 + b 2 X 2 + b 3 X 3 Where, Y = is the value of the Dependent variable (Y), what is being predicted or explained a = (Alpha) is the Constant or intercept b 1 = is the Slope (Beta coefficient) for X 1 X 1 = First independent variable that is explaining the variance in Y b 2 = is the Slope (Beta coefficient) for X 2 X 2 = Second independent variable that is explaining the variance in Y b 3 = is the Slope (Beta coefficient) for X 3 X 3 = Third independent variable that is explaining the variance in Y Stepwise multiple regression is the most sophisticated of these statistical methods. Each variable is entered in sequence and its value assessed. If adding the variable contributes to the model then it is retained, but all other variables in the model are then re-tested to see if they are still contributing to the success of the model. If they no longer contribute significantly they are removed. In stepwise regression not all independent (predictor) variables, may end up in the equation Definition of Industrialization Industrialization is the process in which a society or country (or world) transforms itself from a primarily agricultural society into one based on the manufacturing of goods and services. Individual manual labor is often replaced by mechanized mass production and craftsmen are replaced by assembly lines. Characteristics of industrialization include the use of technological innovation to solve problems as opposed to superstition or dependency upon Page 17

32 Chapter 1: Introduction conditions outside human control such as the weather, as well as a more efficient division of labor and economic growth (Investopedia, 2015). United Nations Industrial Development Committee states that industrialization is a process through which a growing part of national income is invested in the manufacturing sector for the production of consumer goods, capital goods and for infrastructure development for the progress and welfare of a nation. 'Industry' is broadly defined to include both manufacturing and service industry. 'Manufacturing industry' includes all production, processing and assembling activities as well as repairing and reconditioning of processed goods. It is defined as the mechanical or chemical transformation of organic or inorganic substances into new products, whether the work is performed by power driven machines or by hand, whether it is done in a factory or in a premise based location and whether the products are sold wholesale or retail Definition of Level of Industrialization Level of industrialization can be expressed as the percentage share of employment activities of economically active population of a region in the industrial sector, i.e. Employment in Industrial Sector Level of Industrialization = x 100 Total Employment in a Region Aspects Considered for Estimation of Industrial Development The aspects which are closely associated with industrial development are discussed here: Manufacturing Establishment: All activities covered by BSIC-2001 divisions 15 to 36 were considered as Manufacturing for the purpose of the survey. Persons Engaged: The total number of persons who work in or for the establishment, including working proprietors, partners and unpaid family workers. Page 18

33 Chapter 1: Introduction Value of Gross Output: It includes value of products and by-products, plus receipts for work done and for services to others, plus net change in work-in-progress. Gross Value Added: It is the value of gross output less intermediate consumption. Per Capita Value Added: Per Capita Value Added is the value added per person for a specific area and time. It is determined by the ratio of Gross Value Added and total population. 1.6 Scope and Limitation of the Study Industrial development has been recognized as one of the most important development phenomena of the contemporary world. In Bangladesh research on various aspects of industrial development has not been widely undertaken yet. One of the main reasons of this fact is the unavailability of relevant data and discontinuity of data in census reports. However the main limitation of this study is that The Census of Manufacturing Industries and Survey of Manufacturing Industries 2012 did not contain any kind of regional data, that s why these two censuses cannot be included for regional data. Most of the factors data are available for census year 1991, 2001 and To match with the industrial data most of the factors data were used by projecting them for year the 1995 and 2006 by using their growth rate from the original data. As, the data on internal migration was not available for 2001, here to study the importance of migration on industrialization, migration data for 2002 collected from Report on Sample Vital Registration System-2002 of BBS published in 2004 was used as proxy data. 1.7 Organization of the Study In attempting to fulfill the research objectives, the main efforts had been directed toward data collection through secondary survey and study of relevant literature. The result of these efforts is presented in the following five chapters: Page 19

34 Chapter 1: Introduction Chapter one describes the background of this research with the rational of conducting this. The review of literature is an important content of this chapter. The objectives and methodology for achieving the objectives are stated here, along with some conceptual definitions, data analysis techniques, the scope and limitations of this study. Chapter two illustrates the trend of industrial development in Bangladesh at the national, divisional and regional levels. This also makes a comparison of various aspects closely associated with industrialization both in divisional and regional levels. All these are conducted for the period and Chapter three try to establish the theoretical framework on theories of regional development and industrial location and reviewed relevant literature regarding factors influencing industrial location and industrial development in Bangladesh and surrounding countries. Chapter four analyzes the regional variation of industrialization and the factors affecting this variation. Regional variation of level of industrialization is compared with shift-share analysis and Moran s I Spatial Association for the year and The relative and changing importance of the factors influencing regional variation of industrialization is measured by Bivariate Correlation Coefficients of the factors. Regression analysis was used to describe the statistical relationship between one or more predictor variables and the response variable in this chapter. In the last chapter five an attempt is made to summarize the findings of all the preceding chapters and the conclusion is drawn about the research. Some recommendations are provided on the basis of survey findings. Lastly, some thoughts towards further research work as a follow-up to this research has been implied in this chapter. Page 20

35 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh CHAPTER 2 TREND AND PATTERN OF INDUSTRIAL DEVELOPMENT IN BANGLADESH 2.1 Introduction The term "industry" refers mainly to manufacturing activity. Agriculture, mining, and most other services are excluded from it. The term "industrialization literally means the growth of manufacturing industry. It is thus a part of the much broader process of economic development which involves the raising of standard of living, through a steady increase in the efficiency of the factors of production. Industrialization is the period of social and economic change that transforms a human group from an agrarian society into an industrial one. It is a pan of a wider modernization process, where social change and economic development are closely related with technological innovation, particularly with the development of large-scale energy and metallurgy production. It is the extensive organization of an economy for the purpose of manufacturing. Industrialization is a process of economic and social development that inevitably emerges with urbanization and modernization, also an important trademark of civilization and development in a country or a region. The process of industrialization and the growth of industrial capitalism in Indian subcontinent were integrally connected with the consolidation of British colonial rule. Industrial capitalism emerged and developed in the Indian subcontinent in conditions basically different from those in which it had developed in the West. It arose in a dependent country, ruled by a foreign power and so was unable to develop along independent lies. Unlike in Britain, industrial capitalism grew in this country, not by beginning of the 20 th century. After the partition of Bengal in 1947, East Pakistan inherited a small share of industries of Bengal. East Pakistan got none of 108 jute mills, 18 iron & steel mills and 16 paper mills of Bengal. Only 90 of Bengal s 389 cotton mills, 10 of its 166 sugar mills and 3 of its 19 cement factories fell in the territory of East Pakistan (Sumon, 2012). The government of then West Pakistan dominated people of this country in different sectors. In the economic sector, the discrimination was the most. Most of the industries of Pakistan were in Page 21

36 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh this country. However, the profit from them was taken to West Pakistan. The progress in jute manufacturing started in that period. Jute manufacturing sector is one of the oldest traditional manufacturing sectors of Bangladesh, which emerged in previous East Pakistan in the early 1950s. During the 1960s and 1970s, major share of the manufacturing sector in national income and manufacturing employment was accounted for by this sector. Exports of jute and jute goods were the two most important sources of foreign exchange of Pakistan during the 1960s. The East was subjugated, as all the revenue went to West Pakistan (Sarkar, 2014). Industrial development is one of the most significant development issues in Bangladesh. Like other 3rd world countries, Bangladesh is a developing country. The industry sector was severely damaged during the war of liberation in Development of new industries like chemicals, paper, caustic soda, glass, fertilizer, ceramics, cement, steel and engineering in Bangladesh was slow in the period before Although Bangladesh is not developed in industry, it has been enriched in Garment industries in the recent past years. The manufacturing sector showed some growth in the 1990 s. The share of the manufacturing sector in GDP grows by 11% in the 1996 (Hasan, 2013). To have a complete understanding of industrialization process, concepts, definitions and measurements relevant to this should be made clear. In this chapter the trend of industrial development in Bangladesh has been analyzed for the period (for national level) and (for divisional and regional level). Here trend was analyzed at three levels- national, divisional and regional level. Moreover, some facts and events that happened before this specified time period has been discussed to link the past with the present. It was also discussed several aspects of industrial development, i.e. number of establishment, person engaged in industrial work, gross output, gross value added, percentage share of person engaged, percentage share of gross output, percentage share of gross value added, and per capita value added in different spatial and temporal perspectives. 2.2 National Trend of Industrial Development in Bangladesh ( ) In 1970, there were 1,580 manufacturing units in East Pakistan that employed 206,058 persons.the industry sector was severely damaged during the war of liberation in Mills Page 22

37 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh and factories in the public sector, however, soon become loosing concerns largely because of mismanagement and leakage of resources.industrialization efforts of the Government during 1990 s included investment in balancing modernization and reconstruction, creation of new industrial state and export processing zones, promotion of private investment and attraction of foreign direct investment.almost at regular interval of 4 to 6 years after 1982, the Government adopted new industrial policies with increased incentives for private investors from both home and abroad. In the year 2000, the total employment in industry sector was estimated at 6,00,000 of which the privatization sector employed 5,00,000 (Sumon, 2012). Table 2.1, Figure 2.1, Figure 2.2 and Figure 2.3 shows the person engaged, share of person engaged and intercensal variation from The intercensal variation of person engaged in industrial work shows that overall growth is 83.17% in with respect to and 35.52% in 2012 with respect to But in case of Tobacco, Leather, Wood and Furniture, Petroleum, Electrical Equipment and Motor vehicle growth is negative and for Cotton & Jute textiles, RMG, Paper & printing, Pharmaceuticals, Rubber and plastics, Other Manufacturing, etc. are expressively progressive. From the Table 2.1 it is seen that in the year , 62 percent of total industrial employment was concentrated in only two types of industry named Cotton & Jute Textiles and Ready-made Garments (RMG); which became 73 percent in the year and 71 percent in the year Other concentrations are seen in Food Products & Beverages Industry (8.87 percent, 5.95 percent and 5.99, respectively), Non-Metallic Mineral Industry (7.89 percent, 7.29 percent and 9.41 percent, respectively), Besic Metal Industry (2.78 percent, 1.75 percent and 3.30 percent, respectively) and Pharmaceuticals Industry (2.98 percent, 2.84 percent and 2.47 percent, respectively). Beside them most of the other industries, showed a decrease in employment growths. Page 23

38 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.1: Intercensal Growth Rate of Person Engaged for different type of industries ( ) Type of Industry Person Engaged ( ) Person Engaged ( ) Person Engaged (2012) Intercensal Variation ( ) Intercensal Variation ( ) Number Percent Number Percent Number Percent Number Percent Number Percent Food products & beverages Tobacco products Cotton & Jute textiles RMG Leather Wood & furniture Paper & printing Petroleum Pharmaceuticals Rubber & plastics Non-metallic mineral Basic metals Electrical equipment Motor vehicle Other Manufacturing Total Source: CMI , SMI , SMI 2012 and Author s calculation. Page 24

39 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh From Figure 2.1, Figure 2.2 and Figure 2.3 shows the percentage share of person engaged in different type of industries in , and From these figures it is seen that RMG showed significant improvement from 1995 to Cotton & Jute textiles showed significant improvement from 1995 to 2006, but in the year 2012 its growth was not significant. 4% 9% 1% Percentage (%) Share of Person Engaged ( ) Food products & beverages Tobacco products 26% Cotton & Jute textiles 36% RMG Leather Wood & furniture Paper & printing Petroleum Pharmaceuticals Rubber & plastics 8% 3% Non-metallic mineral Basic metals 4% Electrical equipment 1% Motor vehicle 2% 3% 2% 1% Other Manufacturing Figure 2.1: Percentage (%) Share of Persons Engaged in Industrial Work ( ) 33% 2% Percentage (%) Share of Person Engaged ( ) Food products & beverages Tobacco products 41% Cotton & Jute textiles RMG Leather Wood & furniture Paper & printing Petroleum Pharmaceuticals 6% Rubber & plastics 7% Non-metallic mineral Basic metals 1% Electrical equipment 3% 3% Motor vehicle 1% 1% 2% Other Manufacturing Figure 2.2: Percentage (%) Share of Persons Engaged in Industrial Work ( ) Page 25

40 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Percentage (%) Share of Person Engaged in 2012 Food 55% 2% 1% 3% 1% 9% 16% 6% 3% 1% 1% 1% d products & beverages Tobacco products Cotton & Jute textiles RMG Leather Wood & furniture Paper & printing Petroleum Pharmaceuticals Rubber & plastics Non-metallic mineral Basic metals Electrical equipment Motor vehicle Other Manufacturing Figure 2.3: Percentage (%) Share of Persons Engaged in Industrial Work (2012) Table 2.2 shows the annual average growth rate of person engaged in industrial work and level of industrialization of the nation. In level of industrialization slightly increases to 7.99 from 6.76 in and in the year 2012 level of industrialization became Highest annual average growth rate (23%) is seen in other manufacturing sector in followed by rubber & plastics industry (11%), cotton & jute textiles (9%) and paper & printing industry (9%), but in the year 2012 highest growth rate (29%) is seen for petroleum industry followed by electrical equipment industry (25%), basic metal industry (17%), RMG (11%), non-mettalic mineral (10%) and wood & furniture industry (10%). On the other hand highest decline in growth is seen in wood & furniture sector (-12%) in the year 2006 followed by petroleum (-09%), motor vehicles (-07%) and electrical equipments (-07%). For the year 2012 highest decline in growth are seen in cotton & jute textiles industry (-06%) and papper & printing industry (-06%). Page 26

41 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.2: Growth Rate of Person Engaged in Industrial Work and Level of Industrialization in Bangladesh ( ) Type of Industry Person Engaged ( ) Person Engaged ( ) Person Engaged (2012) Annual Average Growth Rate* ( ) Annual Average Growth Rate* ( ) Food products & beverages Tobacco products Cotton & Jute textiles RMG Leather Wood & furniture Paper & printing Petroleum Pharmaceuticals Rubber & plastics Non-metallic mineral Basic metals Electrical equipment Motor vehicle Other Manufacturing * Exponential Growth Rate, Source: CMI , SMI , SMI 2012 and author s calculation. Level of Industrialization ( ) Level of Industrialization ( ) Level of Industrialization (2012) Page 27

42 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.3 reveals the percentage of gross output, gross value added, per capita value added and growth of employment of different type of industries in Bangladesh from 1995 to 2006 and Table 2.4 reveals the percentage of gross output, gross value added, per capita value added and growth of employment of different type of industries in Bangladesh for the year It is seen that in most of the cases per capita value added increases. Highest increase shown for Food and beverage products, cotton & jute textiles, RMG, pharmaceuticals, nonmetallic minerals, motor vehicle, etc. From both the tables it can be seen that percentage of employment growth is also significant for cotton and jute textiles (40.18%) and RMG (46.07%) in the year , but in 2012 percentage of employment growth for RMG (95.45%) and cotton and jute textiles showed negative growth (-30.34%). In some cases share of gross output and gross value added increases; on the other hand, in some cases it is seen decreasing. Page 28

43 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.3: Percentage of Gross Output, Gross Value Added, Per Capita Value Added and Growth of Employment of Different Type of Industries in Bangladesh ( ) Type of Industry Food products & beverages Gross Output** % Percentage Per Per (%) of Gross Gross Capita Gross Capita Employment Value % % Value % Value Output** Value Growth Added** Added** Added* Added* ( ) Tobacco products Cotton & Jute textiles RMG Leather Wood & furniture Paper & printing Petroleum Pharmaceuticals Rubber & plastics Non-metallic mineral Basic metals Electrical equipment Motor vehicle Other Manufacturing *Values are in thousand ( 000), **Values are in Million ( ) Source:CMI , SMI and author s calculation. Page 29

44 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.4: Percentage of Gross Output, Gross Value Added, Per Capita Value Added and Growth of Employment of Different Type of Industries in Bangladesh (2012) 2012 Percentage (%) Type of Industry Gross Output** % Gross Value Added** % Per Capita Value Added* of Employment Growth ( ) Food products & beverages Tobacco products Cotton & Jute textiles RMG Leather Wood & furniture Paper & printing Petroleum Pharmaceuticals Rubber & plastics Non-metallic mineral Basic metals Electrical equipment Motor vehicle Other Manufacturing *Values are in thousand ( 000), **Values are in Million ( ) Source: SMI 2012 and author s calculation. Page 30

45 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh 2.3 Divisional Trend of Industrial Development in Bangladesh ( ) There are seven (7) divisions in Bangladesh. Not all of them are equally developed. From the Table 2.5 and Table 2.6 it is seen that Dhaka is the most promising division for number of establishments, persons engaged, gross output, gross value added, per capita value added and growth in employment in Bangladesh all along followed by Chittagong and Khulna in and followed by Chittagong and Rajshahi in Barishal division has lowest performance in terms of Number of Establishment, Person Engaged, Gross Output, Gross Value Added, Per Capita value Added and Growth in Employment. From the Figure 2.4 it is seen that Dhaka has the highest manufacturing employment in Bangladesh all along followed by Chittagong and Khulna. Barishal division is lowest for industrial employment. In the divisions ranked according to industrial employment with descending order are- Dhaka, Chittagong, Khulna, Rajshahi, Rangpur, Sylhet & Barishal and In the divisionswith descending order are- Dhaka, Chittagong, Rajshahi, Khulna, Rangpur, Sylhet& Barishal. From the Figure 2.4, Figure, 2.5 and Figure 2.6 it is seen that Dhaka division has the maximum share of employment and highest per capita value added in Bangladesh followed by Chittagong & Khulna in and followed by Chittagong & Rajshahi in Barishal division has the lowest share of industrial employment and per capita value addition. Significant improvement is seen in case of Dhaka, Chittagong, Rangpur, Rajshahi and Khulna for per capita value addition. Page 31

46 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.5: Division-wise Number of Establishment, Person Engaged, Gross Output, Gross Value Added, and Per Capita value Added ( ) Division Name No of Establishment Persons engaged ( ) Gross output** Gross value added** Percentage Share of Person Engaged ( ) % Share of Gross Output % Share of Gross Value Added Per capita value added ( )* Barishal Chittagong Sylhet Dhaka Khulna Rajshahi Rangpur Total *Values are in thousand ( 000), **Values are in Million ( ) Source: CMI and author calculation. Table 2.6: Division-wise Number of Establishment, Person Engaged, Gross Output, Gross Value Added, Per Capita value Added and Growth in Employment ( ) Division Name No of Establishment Persons engaged ( ) Gross output** Gross value added** Percentage Share of Person Engaged ( ) % Share of Gross Output % Share of Gross Value Added Per capita value added ( )* Growth in Employment ( ) % of Growth Barishal Chittagong Sylhet Dhaka Khulna Rajshahi Rangpur Total *Values are in thousand ( 000), **Values are in Million ( ), Source: CMI , SMI and author calculation. Page 32

47 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Percentage (%) Share of Person Engaged ( ) Percentage (%) Share of Person Engaged ( ) 8.17% 3.41% 8.85% 0.84% 19.48% 1.44% 5.38% 7% 2% 0.19% 23% 1.13% 57.80% 62% Barishal Chittagong Sylhet Khulna Rajshahi Rangpur Dhaka Barishal Khulna Chittagong Rajshahi Sylhet Rangpur Dhaka Figure 2.4: Division-wise Percentage (%) Share of Persons Engaged in Industrial Work ( ) Figure 2.5: Division-wise Percentage (%) Share of Persons Engaged in Industrial Work ( ) Per Capita Value Added (in '000) Barishal Chittagong Sylhet Dhaka Khulna Rajshahi Rangpur Per capita value added ( ) Per capita value added ( ) Figure 2.6: Division-wise Per Capita Value Added ( ) Level of Industrialization by Division ( ) Table 2.7 reveals the level of industrialization for each seven divisions and their ranks in census years and It is observed from the Table 2.7 and Figure 2.7 that, except Dhaka and Chittagong division all the other divisions, level of industrialization is decreased from to Dhaka division emerged as the highest industrializedd division in the two consecutive censuses. The rank of the divisions on the basis of level of industrialization in Page 33

48 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh 96 in descending order- Dhaka, Chittagong, Khulna, Rajshahi, Rangpur, Sylhet & Barishal and in the order as- Dhaka, Chittagong, Rajshahi, Khulna, Sylhet, Rangpur & Barishal. Table 2.7: Division-wise Level of Industrialization and its Ranking ( ) Level of Level of Division Ranking Industrialization Industrialization Name ( ) ( ) ( ) Barishal th 0.18 Chittagong nd 9.87 Sylhet th 1.50 Dhaka st Khulna rd 3.08 Rajshahi th 4.06 Rangpur th 1.27 Ranking ( ) 7 th 2 nd 5 th 1 st 4 th 3 rd 6 th Level of Industrialization Barishal Chittagong Sylhet Dhaka Khulna Rajshahi Rangpur Level of Industrialization ( ) Level of Industrialization ( ) Figure 2.7: Division-wise Level of Industrialization ( ) 2.4 Regional Trend of Industrial Development ( ) Bangladesh is divided into twenty regions (former district) for this study. Not all of them are equally developed. From the Table 2.8 and Table 2.9 it is seen that Dhakaa is the most promising region for Number of Establishment, Person Engaged, Gross Output, Gross Value Added, Per Page 34

49 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Capita value Added and Growth in Employment in Bangladesh all along followed by Chittagong. In the regionas in descending order on the basis of gross output are- Dhaka, Chittagong, Khulna, Pabna, Jessore, Comilla, Sylhet, Kushtia, Rajshahi, Rangpur, Jamalpur, Noakhali, Bogra, Dinajpur, Tangail, Mymensingh, Barishal, Faridpur, Ctg. Hill Tracts & Patuakhali and in the regional rank in descending order as- Dhaka, Chittagong, Khulna, Pabna, Dinajpur, Tangail, Comilla, Rajshahi, Sylhet, Jessore, Rangpur, Noakhali, Mymensingh, Jamalpur, Kushtia, Faridpur, Bogra, Barishal, Patuakhali & Ctg. Hill Tracts. In the regions in descending order on the basis of persons engaged are- Dhaka, Chittagong, Pabna, Khulna, Comilla, Jessore, Rangpur, Kushtia, Tangail, Sylhet, Dinajpur, Bogra, Rajshahi, Mymensingh, Faridpur, Noakhali, Barishal, Jamalpur, Ctg. Hill Tracts & Patuakhali and in the regional rank in descending order as- Dhaka, Chittagong, Pabna, Khulna, Tangail, Rajshahi, Rangpur, Jessore, Comilla, Noakhali, Sylhet, Kushtia, Mymensingh, Bogra, Jamalpur, Dinajpur, Faridpur, Patuakhali, Barishal & Ctg. Hill Tracts. In the regions in descending order on the basis of per capita value added are- Dhaka, Chittagong, Pabna, Khulna, Jessore, Kushtia, Jamalpur, Sylhet, Comilla, Rajshahi, Ctg. Hill Tracts, Barishal, Tangail, Rangpur, Dinajpur, Bogra, Mymensingh, Faridpur, Noakhali&Patuakhaliand in the regional rank in descending order as- Chittagong, Dhaka, Dinajpur, Pabna, Khulna, Tangail, Rangpur, Jamalpur, Jessore, Comilla, Sylhet, Noakhali, Kushtia, Rajshahi, Bogra, Mymensingh, Faridpur, Barishal, Patuakhali&Ctg. Hill Tracts. From the Table 2.8 and Table 2.9 it is also seen that, most emerging regions are- Dhaka, Chittagong, Pabna, & Khulna, on the other hand most lagging regions are- Barishal, Patuakhali, & Ctg. Hill Tracts. Page 35

50 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.8: Region-wise Number of Establishments, Persons Engaged, Gross Output, Gross Value Added and Per Capita Value Added ( ) Regions No of Establishment Persons engaged Gross output** Gross value added** % Share of Person Engaged ( ) % Share of Gross Output % Share of Gross Value Added Per capita value added* Barishal Patuakhali Chittagong Ctg. Hill Tracts Comilla Noakhali Sylhet Tangail Jamalpur Mymensingh Faridpur Dhaka Khulna Jessore Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Total *Values are in thousand ( 000), **Values are in Million ( ) Source: CMI and author calculation. Page 36

51 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.9: Region-wise Number of Establishments, Persons Engaged, Gross Output, Gross Value Added and Per Capita Value Added ( ) Regions No of Establishment Persons engaged Gross output** Gross value added** % Share of Person Engaged ( ) % Share of Gross Output % Share of Gross Value Added Per capita value added* Barishal Patuakhali Chittagong Ctg. Hill Tracts Comilla Noakhali Sylhet Tangail Jamalpur Mymensingh Faridpur Dhaka Khulna Jessore Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Total *Values are in thousand ( 000), **Values are in Million ( ) Source: SMI and author calculation. Page 37

52 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Region-wise Growth in Employment, Per Capita Value added and Percentage of Growth ( ) Table 2.10 shows the Region-wise Growth in Employment, Per Capita Value Added and Percentage of Growth from to From the regions in descending order on the basis of growth in employment are- Dhaka, Chittagong, Tangail, Rajshahi, Pabna, Noakhali, Khulna, Mymensingh, Jamalpur, Sylhet, Rangpur, Bogra, Jessore, Patuakhali, Kushtia, Ctg. Hill Tracts, Faridpur, Comilla, Barishal&Dinajpur. Among them Kushtia, Faridpur, Comilla, Barishal, Dinajpur and Ctg. Hill Tracts shows negative growth. From the regions in descending order on the basis of change in per capita value added are- Chittagong, Dhaka, Dinajpur, Pabna, Khulna, Tangail, Rangpur, Jamalpur, Comilla, Sylhet, Noakhali, Jessore, Bogra, Mymensingh, Faridpur, Rajshahi, Barishal, Patuakhali, Kushtia &Ctg. Hill Tracts. Among them Kushtia and Ctg. Hill Tracts shows negative growth. Table 2.10: Region-wise Growth in Employment, Per Capita Value Added and Percentage of Growth ( ) Regions Growth in Change in Per % of Change in % of Employment Capita Value Added Per Capita Value Growth ( ) (in '000) Added Barishal Patuakhali Chittagong Ctg. Hill Tracts Comilla Noakhali Sylhet Tangail Jamalpur Mymensingh Faridpur Dhaka Khulna Page 38

53 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Jessore Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Total Table 2.11 and Table 2.12 show Per Capita Value Added (in BDT) by Different Type of Industries in and From the Table 2.11 and 2.12 it is seen that Food Product and Beverage is the only industry present in all the twenty regions in and for the year , there is no industry which present in all regions. From the regions in descending order on the basis of gross per capita value added by all the industry are- Dhaka, Chittagong, Pabna, Khulna, Jessore, Kushtia, Jamalpur, Sylhet, Comilla, Rajshahi, Ctg. Hill Tracts, Barisal, Dinajpur, Rangpur, Bogra, Tangail, Mymensingh, Faridpur, Noakhali & Patuakhali and for the regional rank in descending order as- Chittagong, Dhaka, Dinajpur, Pabna, Khulna, Tangail, Jamalpur, Jessore, Comilla, Rangpur, Sylhet, Noakhali, Kushtia, Rajshahi, Bogra, Mymensingh, Faridpur, Barisal, Patuakhali&Ctg. Hill Tracts. Page 39

54 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.11: Per Capita Value Added (in BDT) by Different Type of Industries Type of FP C & RM W & P & R & NM O Industry TP L Pet Phar BM EE MV & B JT G F P P M M Regions GVA Dinajpur Rangpur Jamalpur Bogra Rajshahi Sylhet Mymensingh Tangail Pabna Dhaka Comilla Kushtia Faridpur Jessore Ctg. Hill Tracts Noakhali Barisal Khulna Chittagong Patuakhali Note: Here Elaborations are as, FP & B- Food products & beverages, TP- Tobacco products, C & JT- Cotton & Jute textiles, RMG- Ready-made garments, L- Leather, W & F- Wood & furniture, P & P - Paper & printing, Pet-Petroleum, Phar- Pharmaceuticals, R & P- Rubber & plastics, NMM- Non-metallic mineral, BM- Basic metals, EE- Electrical equipment, MV-Motor vehicle, OM- Other Manufacturing and GVA-Gross Value Added. Page 40

55 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.12: Per Capita Value Added (in BDT) by Different Type of Industries Type of FP C & W P & R & Industry TP RMG L Pet Phar & B JT & F P P Regions NMM BM EE MV OM GVA Dinajpur Rangpur Jamalpur Bogra Rajshahi Sylhet Mymensingh Tangail Pabna Dhaka Comilla Kushtia Faridpur Jessore Ctg. Hill Tracts Noakhali Barisal Khulna Chittagong Patuakhali Note: Here Elaborations are as, FP & B- Food products & beverages, TP- Tobacco products, C & JT- Cotton & Jute textiles, RMG- Ready-made garments, L- Leather, W & F- Wood & furniture, P & P - Paper & printing, Pet-Petroleum, Phar- Pharmaceuticals, R & P- Rubber & plastics, NMM- Non-metallic mineral, BM- Basic metals, EE- Electrical equipment, MV-Motor vehicle, OM- Other Manufacturing and GVA-Gross Value Added.. Page 41

56 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Regional Trend of Development of Major Industries ( ) Growth of five types of industries which hold the major portion of employment are presented below- Food Products & Beverages Industry From the Figure 2.8 it is seen that most of the person engaged in Food products and beverages industry are in the Dhaka region (23.52% and 17.46% for the year and respectively) followed by Rajshahi, Chittagong, Sylhet and Khulna regions. Dhaka, Rangpur, Dinajpur, Bogra, Kushtia, Jessore, Noakhali, etc. regions show negative employment growth; on the other hand Mymensingh, Jamalpur, Rajshahi, Chittagong, Khulna, etc. regions shows positive employment growth. Percentage of Person Engaged, Percentage of Person Engaged, Dhaka Faridpur Mymensingh Jamalpur Rangpur Dinajpur Rajshahi Pabna Bogra Kushtia Jessore Tangail Sylhet Noakhali Comilla CTG. Hill Tracts Chittagong Patuakhali Barishal Khulna Figure 2.8: Percentage of Persons Engaged in Food Products and Beverages Industry ( ) Cotton and Jute Textiles Industry From the Figure 2.9 it is seen that percent and percent employment of Cotton and Jute Textiles Industry is in the Dhaka region for the year and the year respectively. Other regions which have a good quantity of employment in this sector are Pabna, Chittagong, Tangail and Khulna regions. Page 42

57 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Percentage of Person Engaged, Percentage of Person Engaged, Dhaka Faridpur Mymensingh Jamalpur Rangpur Dinajpur Rajshahi Pabna Bogra Kushtia Jessore Tangail Sylhet Noakhali Comilla CTG. Hill Tracts Chittagong Patuakhali Barishal Khulna Figure 2.9: Percentage of Persons Engaged in Cotton and Jute Textiles Industry ( ) RMG Industry RMG industry of Bangladesh is mainly concentrated in two regions- Dhaka and Chittagong. The Dhaka region contains percent and percent of RMG industry employment in the year and the year The Chittagong region contains percent and percent of RMG industry employment in the year and the year respectively Person Engaged, Person Engaged, Chittagong Dhaka Figure 2.10: Percentage of Persons Engaged in RMG Industry( ) Page 43

58 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Pharmaceutical Industry Pharmaceutical industry of Bangladesh has very positive perspective. Concentration in Industrial employment of Pharmaceuticals industry is seen in the regions named- Dhaka, Pabna, Chittagong and Khulna. Among them Dhaka (47.53% and 66.06% for the year and respectively) and Pabna (3.89% and 10.68% for the year and respectively) regions show positive employment growth; and Chittagong (16.51% and 8.69% for the year and respectively) and Khulna (13.45% and 5.85% for the year and respectively) regions show negative employment growth. Percentage of Person Engaged, Percentage of Person Engaged, Dhaka Faridpur Mymensingh Jamalpur Rangpur Dinajpur Rajshahi Pabna Bogra Kushtia Jessore Tangail Sylhet Noakhali Comilla CTG. Hill Tracts Chittagong Patuakhali Barishal Khulna Figure 2.11: Percentage of Persons Engaged in Pharmaceutical Industry ( ) Non-Metallic Minerals Industry From the Figure 2.12 it is seen that Dhaka (34.51 percent and percent, respectively), Memensingh, Jamalpur, Rangpur, Rajshahi, Kushtia and Noakhali regions show positive employment growth in Non-metallic minerals industry from the year to the year Other regions show negative employment growth in this sector. Among them Jessore, Bogra, Comilla, Khulna, etc. regions shows drastic decrease in employment. Page 44

59 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Percentage of Person Engaged, Percentage of Person Engaged, Dhaka Faridpur Mymensingh Jamalpur Rangpur Dinajpur Rajshahi Pabna Bogra Kushtia Jessore Tangail Sylhet Noakhali Comilla CTG. Hill Tracts Chittagong Patuakhali Barishal Khulna Figure 2.12: Percentage of Persons Engaged in Non-Metallic Minerals Industry ( ) Regional Trend of Industrialization ( ) Table 2.13 reveals the level of industrialization for each twenty regions and their rank in the census year and It is observed from Table 2.13 that the level of industrialization decreases in most of the regions except- Dhaka, Chittagong, Noakhali, Jamalpur, Tangail and Rajshahi. Dhaka region emerged as the highest industrialized region in the last two consecutive censuses. Dhaka was followed by Chittagong, Pabna, Khulna and Tangail region during and in descending order of their positions. Interestingly Bogra region and Barishal region hold the 8 th and 19 th position all through the two census years. In Ctg. Hill Tracts region held the 18 th position, but it declined its rank to 20 th position in the census In Comilla region held the 9 th position but it declined its rank to 12 th position in the census During , Jessore region degraded from 6 th to 9 th rank position. Some regions such as Noakhali, Tangail, Rajshahi also improved their positions significantly from the census year to The highest degree of variation in the level of industrialization observed in Naokhali and Rajshahi; while they improved their positions from the rank 13 th & 14 th to 6 th & 7 th. Another variation was found in Kushtia, Jessore and Dinajpur regions for degradation of their rank from 7 th to 10 th, 6 th to 9 th and 10 th to 16 th respectively. Page 45

60 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh The lowest industrialized regions are Patuakhali, Faridpur, Barishal and Ctg. Hill Tracts. Another remarkable observation is that the rank of Dhaka and Chittagong region remained unchanged in the last two census years holding position 1 st and 2 nd respectively. Table 2.13: Region-wise Level of Industrialization and Their Rank ( ) Regions Level of Level of Ranking Ranking Industrialization Industrialization ( ) ( ) ( ) ( ) Barisal th th Patuakhali th th Chittagong nd nd Ctg. Hill Tracts th th Comilla th th Noakhali th th Sylhet th th Dhaka st st Faridpur th th Jamalpur th th Mymensingh th th Tangail th rd Jessore th th Khulna th th Kushtia th th Bogra th th Pabna rd th Rajshahi th th Dinajpur th th Rangpur th th Page 46

61 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Figure 2.13 provides a vivid picture of regional variation in level of industrialization for the census year and Level of Industrialization Level of Industrialization ( ) Level of Industrializationn ( ) Figure 2.13: Region-wise Level of Industrialization ( ) 2.5 Analysis of Regional Variation The spatio-temporal variation of industrial development is analyzed here for the twenty regions of Bangladesh in the years and The variation in regard of person engaged in industrial work, intercensal variation and the annual average growth rate of industrial employment have been estimated for the two census years. Again to make a clear-cut distinction among the regions in respect of level of industrialization the regions weree categorized into three groups- low industrialized region, medium industrialized region and highh industrialized region based on the range of level of industrialization Intercensal Variation of Person Engaged in Industrial Work by Regions In Table 2.14 the intercensal variation of person engaged in industrial work and the percentage of this variation by region during the period has been presented. From this Table it is revealed that the nature of variation is mixed; in some regions, there is positive growth and for others the growth is negative. The lowest negative growth shown in Ctg. Hill Tracts region ( %) followed by Barishal (-80.87%), Dinajpur (-45.58%), Faridpur (-34.32%), Comilla ( ) and Kushtia (-7.38%). The highest positive growth seen in the Noakhali region (219.43%) Page 47

62 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh followed by Tangail (211.01%), Rajshahi (161.82%), Chittagong (136.91%), Jamalpur (135.32%) and Dhaka (93.05%). Table 2.14: Intercensal Variation of Person Engaged in Industrial Work by Regions ( ) Regions Intercensal Variation Regions Intercensal Variation Number Percent Number Percent Barishal Jamalpur Patuakhali Mymensingh Chittagong Faridpur Ctg. Hill Tracts Dhaka Comilla Khulna Noakhali Jessore Sylhet Kushtia Tangail Bogra Pabna Dinajpur Rajshahi Rangpur Total % Source: Table 2.8, Table 2.9 & Table 2.10 and Author s Calculation Variation in Growth Rate of Industrial Employment Table 2.15 shows the annual average growth rates of the regions and their corresponding ranks from 1995 to It is apparent that the growth rates showed very wide range of fluctuations (Figure 2.14). Out of twenty regions the growth rates of fourteen regions viz. Noakhali, Tangail, Rajshahi, Chittagong, Jamalpur, Mymensingh, Dhaka, Sylhet, Pabna, Rangpur, Khulna, Bogra, Patuakhali and Jessore were increased while the growth rates of Ctg. Hill Tracts, Barishal, Dinajpur, Faridpur, Comilla and Kushtia regions were declined. Page 48

63 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.15: Variation in Growth Rate of Industrial Employment by Regions and its Ranking ( ) Regions Annual Average Growth Rate Barishal Patuakhali 0.01 Chittagong 0.09 Ctg. Hill Tracts Comilla Noakhali 0.12 Sylhet 0.04 Tangail 0.12 Jamalpur 0.09 Mymensingh 0.07 Source: Calculated from Table 2.7 and Table 2.8 Ranks Regions Annual Average Growth Rate Ranks 19 th Faridpur th 13 th Dhaka th 4 th Khulna th 20 th Jessore th 16 th Kushtia th 1 st Bogra th 8 th Pabna th 2 nd Rajshahi rd 5 th Dinajpur th 6 th Rangpur th Annual Average Growth rate Barishal Chittagongg Patuakhali Comilla Ctg. Hilll Tracts Noakhali Tangail Jamalpur Mymensingh Dhaka Sylhet Khulna Jessore Faridpur Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Figure 2.14: Variation in Annual Average Growth Rate by Regions ( ) Page 49

64 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Categorization of Regions based on Level of Industrialization In this study all the regions of Bangladesh have been categorized into three groups on the basis of level of industrialization. These are: (1) Low Industrialized Region: Regions which have level of industrialization up to 2.00 Percent. (2) Medium Industrialized Region: Regions having the level of industrialization 2.01 percent to 5.00 percent. (3) High Industrialized Region: Regions having the level of industrialization 5.01 percent and above. In Table 2.16 all the regions with their respective category, range, number has been presented for the year 1995 and It is found that the number of low industrialized regions is increasing from 1995 to On the other hand the number of medium industrialized regions is decreasing from 1005 to And highly industrialized region is increased from 1995 to Dhaka, Chittagong, Khulna and Pabna were the high industrialized regions with the level of industrialization more than 5 percent during and in Tangail region was also included in this group. In census, there were nine low industrialized regions with the level of industrialization up to 2 percent and in census three more districts Dinajpur, Rangpur and Kushtia were included in the group; on the other hand Rajshahi and Noakhali were included in the group of medium industrialized regions from low industrialized regions with the level of industrialization between 2.01 percent to 5.00 percent in Tangail increased its level up from medium industrialized region to high industrialized region in census. In Map 2.1 and Map 2.2 the regions of Bangladesh have been divided into three categories low, medium and high industrialized regions according to their level of industrialization for and Page 50

65 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Table 2.16: Categorization of Regions based on Level of Industrialization for and Category Range Low Up to 2.00% 9 Medium 2.01%-5.00% 7 High 5.01% and Above Source: Prepared based on Table Number Regions Number Regions 4 Rajshahi, Jamalpur, Mymensingh, Sylhet, Faridpur, Noakhali, Ctg. Hill Tracts, Barishal and Patuakhali Dinajpur, Rangpur, Bogra, Kushtia, Jessore, Comilla and Tangail Dhaka, Chittagong, Khulna and Pabna Dinajpur, Rangpur, Sylhet, Jamalpur, Mymensingh, Faridpur, Kushtia, Comilla, Ctg. Hill Tracts, Barishal and Patuakhali Bogra, Rajshahi, Jessore and Noakhali Dhaka, Chittagong, Khulna, Pabna and Tangail Page 51

66 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Map 2.1: Level of Industrialization in the Regions (Former District) of Bangladesh in Page 52

67 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh Map 2.2: Level of Industrialization in the Regions (Former District) of Bangladesh in Page 53

68 Chapter 2: Trend and Pattern of Industrial Development in Bangladesh 2.6 Summary The level of industrialization showed an upward trend during in Bangladesh, but which is not true for every region. The regional trend of level of industrialization was not uniform throughout Bangladesh in the years and There existed remarkable spatio-temporal variations in the level of industrialization in Bangladesh. These variations regarding levels of industrialization were found at the divisional and regional levels. Dhaka and Chittagong regions emerged as the highest industrialized regions in the two consecutive censuses. Page 54

69 Chapter 3: Theoretical Framework and Literature Review CHAPTER 3 THEORETICAL FRAMEWORK AND LITERATURE REVIEW 3.1 Introduction Industrial location is an increasingly important decision facing by both national and international industries. Given that no operational measures of the critical factors affecting an industrial location decision exist. Industrial development is essential for raising the economic growth in a developing country like Bangladesh. However, the regional variation in the industrial development is one of the primary causes of the regional disparities in Bangladesh. The purpose of this chapter is to use a literature review and theoretical framework to raise a number of issues, theories, factors and variables available in the public domain with respect to industry and regional growth. 3.2 Theories of Regional Development and Industrial Location Thunen developed the general framework for the economic analysis of Location Theory (Thunen, 1875 and Isard, 1956). He was primarily concerned with the aggregate analysis of agricultural location. He utilized the "least-cost" approach to location. Of the early theorists, Launhardt, whose work appeared in 1885, provided the most significant contributions (Laundhardt, 1885 and Miller, 1977). Launhardt explained the differences in the location of industry by variations in cost and demand factors at alternative locations. He demonstrated the importance of transportation costs. Weber developed a comprehensive theory in 1909 for the location of manufacturing activities (Weber, 1929 and Isard, 1956). Three determinants or factors are considered: transportation costs, labor costs, and what Weber referred to as agglomeration forces. Many location studies use the Weberian theory to better understand the decision making process (Tellier and Vert Fenille, 1995). Location theory was developed as an early response to the ignorance of space in traditional economic analyses. Originally developed by Alfred Weber (1929) and later extended by Edgar Hoover (1937), and Walter Isard (1956), location theory has focused primarily on developing formal mathematical models of the optimal location of industry given the costs of transporting raw materials and final products. The concept of economic Page 55

70 Chapter 3: Theoretical Framework and Literature Review base is the most popular among the theories. It explains the development of a region by dividing the economy into two types of activity (exogenous and endogenous) and by determining the causal relations occurring in the process of the development of a region (Isard, 1960). Simply stated, firms will tend to locate near markets when the monetary weight of the final product exceeds the monetary weight of the inputs required to produce that product. Conversely, firms will tend to locate near primary input sources when the monetary weight of raw materials is large relative to the weight of the final product. Although location theory alone does not provide a theory of regional economic development, the explicit models of transportation costs have been highly influential in later theories of economic growth and development, particularly the new economic geography. Walter Isard (1956) eventually drew on concepts from location theory to develop the field now known as regional science, a branch of the social sciences that examines the impact of space on economic decision making. The analytic methodologies developed by Isard (1960) and extended by Isard et al. (1998) have become standard items in the regional planning professional s toolbox. Marshall (1961) have pointed out, industries may cluster together for reasons unrelated to internal cost considerations. Instead, firms may cluster to take advantage of external economies that result from close proximity to a large number of other firms. Following Hoover (1937), these external economies may include (1) localization economies that result from the firms in the same industry co-locating in the same area and (2) urbanization economies, which result from the co-location of firms in different industries. Harold Hotelling (1929), has produced a considerable literature on the role of space as it affects the pricing behavior of firms. The essence of Hotelling s argument is that spatial proximity gives firms market power, because nearby customers would be willing to pay more for goods that can be consumed without incurring substantial transportation costs. An early attempt to bring some of these perspectives together in a more general theory of the spatial location of firms can be found in the work of Christaller (1933) and Losch (1954). Christaller first formulated central place theory. Losch expands on the initial ideas of Christaller and places them into an economic context. The basic idea elaborated by Losch is that the relative size of a firm s market area, defined as the territory over which it sells its product, is determined by the combined influence of scale economies and transportation costs to markets. Page 56

71 Chapter 3: Theoretical Framework and Literature Review The mainstream neoclassical economic view of regional economic growth draws heavily on the literature of national economic growth developed by Roy F. Harrod (1939). In contrast to the demand-side approach of export base theory, neoclassical growth theory models regional growth using supply-side models of investment in regional productive capacity. The export base model developed in the 1950s by Douglass North (1955). North (1955) argues that regional growth in local political, economic, and social institutions is largely determined by the region s response to exogenous world demand. As regions grow, their economy becomes more diversified, due to increases in local production to serve increasing local per capita incomes and the emergence of new industries serving export markets. Over time, regions will tend to lose their identity as regions (North 1955). Gunnar Myrdal (1957) argues that increasing returns to scale produces clustering of economic activity within those regions that are first to industrialize. Moreover, the process of growth tends to feed on itself through a process of cumulative causation. Although underdeveloped regions offer the advantage of low-wage labor, these benefits tend to be offset by the agglomeration economies found in the industrialized regions. Myrdal (1957) argues that underdeveloped regions may benefit from growth in developed regions through spread effects resulting from the diffusion of innovations into a lagging region and the growing export markets for lagging region products. However, these benefits will tend to be offset by the backwash effects resulting from the flow of capital and labor from the lagging region into the developed region. Free trade results among regions only serve to reinforce this process of cumulative causation by further catalyzing growth in developed regions at the expense of lagging regions. Hoover and Fisher (1949) present an early theory of sectoral change through various stages of regional growth. Thompson (1968) presents another stage theory of urban/regional economic growth. According to Thompson, urban areas grow by progressing from an early stage where the local economy is largely equated with a single large industry or firm through various phases of export-led growth until the export of services becomes the major function in the final stage. Kaldor (1970) elaborates on and expands Myrdal s theory of cumulative causation by introducing ideas from export base theory and the concept of an efficiency wage. Like Myrdal s model, Kaldor assumes that increasing returns to scale give early industrializing Page 57

72 Chapter 3: Theoretical Framework and Literature Review regions the advantage in international trade. Cumulative causation sets in when an exogenous shock increases the worldwide demand for an industrial good. The Myrdal (1957) and Kaldor (1970) cumulative causation model of growth-upon-growth is similar to the circular process that holds Krugman s (1991) core regions in place. 3.3 Literature Review Factors Influencing Industrial Location and Development In the study of industrial location planning, many authors (Greenhut, 1959; Greenhut and Colberg, 1962; Nicholas, 1974; Brown, 1979; and Moriarty, 1980) repeatedly emphasize the importance of critical demand factors (location of competitors, proximity to consumer markets, etc.), and cost factors (land, labor, materials, transportation, etc.). Most often cited factors of industrial location are distance to market, distance to materials, prevailing wage rates (labor costs), productivity of workers, availability of labor, adequacy of transportation, closeness to producers, industrial climate, taxes, anticipation of market growth, transportation costs, availability of land for future site expansions, cost and availability of utilities, political climate toward business, population growth, and income levels of consumers. Some new factors of industrial location have emerged that are worthwhile considering. These factors include type of linkage between vertically linked industries (Venables, 1996; Carod, 2005), characteristics of population trends (Braid, 1996; Mazzarol and Choo, 2003), amount of expected development potential in the region (Wojan and Pulver, 1995), changes in transport rates (Leitham et al., 2000; Mazzarol and Choo, 2003), and types and availability of resources (Vaughn, 1994) and many more Industrial Development in Bangladesh and Surrounding Countries On the basis of an examination of the industrial structure of different states of India and changes in it between 1951 and 1965, a study (Alagh et. al.1971) found that states with specialization in resource (raw material) based industries have less diversified industrial Page 58

73 Chapter 3: Theoretical Framework and Literature Review structure, while the industrial structure of states with a base of rounded spectrum of industries including capital goods and demand based industries is more diversified. Also, more industrialized states had a more diversified industrial structure than those with lower levels of industrialization. Papola (1981) empirically examined the traditional theoretical propositions of industrial location and the impact of official and institutional efforts to bring about regional balance in industrial development. Specifically locational structure of industries in Uttar Pradesh a state of India has been examined in detail on the basis of secondary as well as primary data and policy implications, particularly concerning industrial development of backward areas, have been brought out. It was found that the industrial structure of most of the districts was of a highly specialized nature and industrial backwardness and lack of diversified structure were closely associated. It was also found that incentives, fiscal or financial, play only a marginal role in the diversification of industries. Another study of Alagh et al. (1982) has analyzed Indian industrialization during the seventies. Industry-wise growth rate had been calculated to show India's industrial performance, whereas the states, industrial structure were analyzed with the help of coefficient of specialization for 1960, 1965 and During 1965 to 1978, it was found that the states of Tamil Nadu, Karnataka, Punjab, Haryana, Gujarat and Maharashtra have shown a remarkable increase in industrial diversifications. Like Rajasthan, Madhya Pradesh, U.P and Kerala have shown high growth rate in output and employment, but their industrial economies were not diversified. In a study of Jalaja (2004) it is shown that, among the middle income group states of India, Madhya Pradesh state continues to remain very different from other states and all-india pattern and hence has been lagging in growth despite the growth revival of the overall economy. According to this study, the industrial growth rate in Madhya Pradesh was relatively higher in the 1990s than 1980s. This study underlined some structural as well as regional specific constraints to the accelerated growth of the manufacturing industry in Madhya Pradesh state. Again, Papola (2011) studied the growth and structure of manufacturing industry in different states of India, in a comparative framework. In also analyzed the differences in the industrial structure and factors responsible for variations in the extent and structure of industrialization. Page 59

74 Chapter 3: Theoretical Framework and Literature Review Interstate variations in the levels of productivity and capital intensity were also studied. It also examined the differences in the pre- and post-reform trends at regional levels and pattern of industrial development, as the earlier studies have covered only a short period after economic reforms. Bakshi (2005) and Hasan (2014) attempted to study the problems and potentials of industrialization that faces a transition economy like Bangladesh from the historical perspective. These studies showed that predominantly agriculture base country like Bangladesh with the limited industrial output, economy becomes much vulnerable as the industrial structure and output are not diversified enough and hence suffers very often from the external shocks. These studies also attempted to study the structural bottleneck of the Bangladesh industry, its problems and suggest some policy implications. Ahmed et al., (2009) studied about promoting employment-intensive growth in Bangladesh on the basis of policy analysis of the manufacturing and service sectors. According to this study, during the 1990s and the first half of the 2000s, the economy of Bangladesh attained moderately high rate of growth and achieved significant reduction in poverty. Beside that the degree of income inequality has been increasing in recent years because of the employment intensity of economic growth, especially in the manufacturing sector, has been declining. The study looked at the performance of the manufacturing sector of Bangladesh in terms of employment generation since the early 1990s, examined the structural shift in the manufacturing sector in terms of factor intensity and the performance of the service sector in terms of employment generation. Ahmed et al., (2011) made a study on the size structure of manufacturing industry in Bangladesh and implications for growth and poverty. This study showed that manufacturing employment recorded modest growth during the inter census period of , the share of manufacturing employment in total non-farm employment declined from 42.9 percent in 1986 to 31.1 percent in 2002, which was largely taken up various service activities. This study emphasized on different size of industry based on employment. In this study an analysis of the factors contributing to structural change in the manufacturing sector of Bangladesh showed that shift in public policy with regard to the relative role of the public and the private sector, reforms in trade and exchange rate policy, differential access to institutional finance, preferential market access, fiscal incentives and growth in domestic demand shaped the pattern of structural change in the sector during the past three decades. Page 60

75 Chapter 3: Theoretical Framework and Literature Review Nath (2012) studied the role of manufacturing in the transformation of the Bangladesh economy, analyze the pattern of its growth and structural change in the economy as well as within itself and identify critical areas of growth and sort out strategic options for its future development destined to move the Bangladesh economy forward. The study was highlighted sources of Growth and growth potentials of manufacturing by size, market orientation, factor intensities and subsectoral contribution. The study showed the structure of manufacturing in terms of value added, employment and export earnings. It also studied the constraints and challenges of manufacturing sector and sort out the desirable strategies for its development. Shonchoy and Tsubota (2013) studied manufacturing employment statistics for twenty sectors into district level (locally known as "zila") for the year It showed clear differences among the sectors. Among sectors, there were different trends in geographical distribution and that the employment size distribution of manufacturing industries is far from the usual rank size distribution. This study showed that sectors which spread over the nation such as food products, tobacco products, textile and RMG, etc. and their average employment levels are high. On the other hand, when there were only small amounts of employment over the nation, such a sector only locates in Dhaka and some local cities like Chittagong and Khulna. These sectors were Beverages, Coal and refined petroleum products and computer, electronics, and optical. This study also showed that, since the export is limited to RMG, jute and leather industries, most of the manufacturing activities contribute to domestic supply, so it is natural for some sectors to have concentration of capital and rural cities. Sarkar (2014) showed that, after 1971, Bangladesh is slowly and steadily turning its attention to develop its economy, through industrial development, moving away from the agricultural sector. In the 1980s, the Pharmaceutical Sector made advancement in Bangladesh and becomes one of the most developed hi tech sector which is contributing to the country's economy. This study also pointed that, during the 1980s, other sectors like tea manufacturing, leather factories, etc. also gained importance and in 1990s, sectors like ship breaking, steel, cement and cold storage goods, etc. developed and gained momentum. From 2000 to 2012, many industries like- electronics, glass, aluminum, plastic, cycle, and ceramic, etc. started their journey successfully, and contributed to the economic growth of Bangladesh. Page 61

76 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development CHAPTER 4 ANALYSIS OF INTER-REGIONAL VARIATION OF INDUSTRIAL DEVELOPMENT 4.1 Introduction Industrial development is influenced by a number of factors, including- different utility services, urbanization, rural-urban migration, infrastructure development, non-agricultural activities, etc. The relative importance of each of these various factors of industrial development varies both within and between regions and countries. Similarly, in Bangladesh there is spatio-temporal variation of industrialization from region to region. It is observed from Table 2.12 (Chapter 2) that the range of industrialization varied from census to census. In census the range was between percent and in census it was between percent. The interregional variation in industrial development indicates unstable economic growth and lack of policy in regions of Bangladesh. Regional economic analysis can help local government agencies understand the industry cluster structure of their local economy, monitor the economic growth rate, interpret local and national trends, and forecast the impact of current policies on future growth (Quintero, 2007). The regional economic models, such as location quotient, shift-share analysis, and economic base models, are widely used by local and economic development agencies in industrial targeting, economic impact analysis, and regional comparisons (Dinc, 2002). In this chapter the inter-regional variations of industrial development in Bangladesh has been studied. The economic development tools utilized in the study are Location Quotient (L.Q.), Shift-Share Analysis and Moran s I Spatial Association. These tools complement each other and together they can furnish necessary information to local economic development agencies in developing policies for business retention and attraction. Location Quotient identifies strengths and weakness in a local economy with respect to industry clusters of different regions. The shiftshare analysis measures performance of local economy with respect to the national trends. Moran s I Spatial Association shows the spatial cluster. Page 62

77 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development This study analyzed the factors causing regional disparity in industrial development and for this various socio-economic and infrastructural factors have been taken for analysis. Again, all the factors are not equally significant all along. In this regard the changing and the relative importance of these factors have been studied using Bivariate Correlation Coefficient. 4.2 Analysis of Regional Industrial Concentration An idea about the extent of concentration of industrial employment in different regions for different types of industry of Bangladesh can be obtained from Table 4.1. It shows the location quotient (L.Q.) of industrial employment in different industries of all the regions for and For this analysis L.Q. values are represented in four groups. They are as- SI. No. L.Q. Value Group Denotation of Group A No/Low Concentration B Medium Concentration C High Concentration and Above D Very High Concentration It appears that the regions whose location quotients exceed unity represent the concentration of industrial employment in those regions. On the other hand, those regions whose L.Q. s are less than unity are no/less/medium concentrated or deficient with industrial employment. The wide variation of the values of L.Q. indicates that industrial employment is highly concentrated in a few regions. Table 4.1: Location Quotient (L. Q.) and Group of Different Regions ( ) Regions L.Q. ( ) Group L.Q. ( ) Group Barisal 0.13 A 0.02 A Patuakhali 0.15 A 0.08 A Chittagong 1.83 D 2.42 D Ctg. Hill Tracts 0.30 A 0.03 A Page 63

78 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Regions L.Q. ( ) Group L.Q. ( ) Group Comilla 0.36 A 0.17 A Noakhali 0.14 A 0.25 A Sylhet 0.26 A 0.21 A Dhaka 2.48 D 2.40 D Faridpur 0.17 A 0.07 A Jamalpur 0.23 A 0.31 A Mymensingh 0.15 A 0.16 A Tangail 0.71 B 1.17 C Jessore 0.70 B 0.39 A Khulna 0.89 B 0.66 B Kushtia 0.74 B 0.39 A Bogra 0.47 A 0.30 A Pabna 1.41 C 1.01 C Rajshahi 0.28 A 0.41 A Dinajpur 0.52 B 0.15 A Rangpur 0.38 A 0.27 A From the Table 4.1 it is seen that for both of the year and the year , most of the regions (12 and 15 respectively) are in group A, which mean these regions have less concentration in industrial employment. It can be said that many regions fail to improve their position in industrial employment concentration. In medium concentration group there are five regions (Dinajpur, Jessore, Kushtia, Khulna and Tangail) and one region (Khulna) respectively, for the year and the year Pabna region remains in high concentration group C for both the years. Khulna region upgrades its position from medium concentration group B to high concentration group C in the year Dhaka and Chittagong regions maintain their place in very high concentrated regions group D for both the year. From the Figure 4.1 and Figure 4.2 it is seen that about 60 percent and 75 percent regions belongs to group A for the year and the year On the other hand 25 percent Page 64

79 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development regions are in group B in the year , which become 5 percent in the year From these values it can be easily said that all the regions were not growing equally; most of them experienced decline in their position are in case of industrial employment. Percentage of Regional Industrial Concentration Group ( ) 70% 60% 50% 40% 30% 20% 10% 0% 60% 25% 5% 10% Group A Group B Group C Group D Percentage of Regional Industrial Concentration Group ( ) 80% 70% 60% 50% 40% 30% 20% 10% 0% 75% 5% 10% 10% Group A Group B Group C Group D Figure 4.1: Percentage of Regional Industrial Concentration Groups ( ) Figure 4.2: Percentage of Regional Industrial Concentration Groups ( ) Basic and Non-basic Category of Industrial Concentration Table 4.2 and Table 4.3 shows the basic and non-basic category of different industry in different regions for the year and the year Food products & beverage industry is basic in the category for most of the regions for both the year on the other hand, petroleum industry is only basic for the Chittagong region in the year and in the year it is basic for Khulna, Chittagong, Comilla, Sylhet and Rajshahi regions. Woods & furniture industry has very high concentration CTG. Hill Tracts and Tangail regions in the year , which became Sylhet, Dinajpur, Rangpur, etc. in the year So it can be said that not all the industry have the same type of concentration on a particular region. One industry which is basic in one region can be there in non-basic group in an adjacent region of the previous. Table 4.2 and Table 4.3 reveals the basic and non-basic type of industry for all the twenty (20) regions. If the value of L.Q. lays between <=1 than it is non-basic in category and the category become basic if the value of L.Q. is >1. Page 65

80 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Table 4.2: Basic and Non-basic category of Different Type of Industries, Type of FP C & RM W & P & R & NM Industry TP L Pet Phar & B JT G F P P M Regions BM EE MV OM Khulna Barishal Patuakhali Chittagong CTG. Hill Tracts Comilla Noakhali Sylhet Tangail Jessore Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Jamalpur Mymensingh Faridpur Dhaka Note: Here Elaborations are as, FP & B- Food products & beverages, TP- Tobacco products, C & JT- Cotton & Jute textiles, RMG- Ready-made garments, L- Leather, W & F- Wood & furniture, P & P - Paper & printing, Pet-Petroleum, Phar- Pharmaceuticals, R & P- Rubber & plastics, NMM- Non-metallic mineral, BM- Basic metals, EE- Electrical equipment, MV-Motor vehicle, and OM- Other Manufacturing. Page 66

81 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Table 4.3: Basic and Non-basic category of Different Type of Industries, Type of FP C & W & P & Industry TP RMG L & B JT F P Regions Pet Phar R & P NMM BM EE MV OM Khulna Barishal Patuakhali Chittagong CTG. Hill Tracts Comilla Noakhali Sylhet Tangail Jessore Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Jamalpur Mymensingh Faridpur Dhaka Note: Here Elaborations are as, FP & B- Food products & beverages, TP- Tobacco products, C & JT- Cotton & Jute textiles, RMG- Ready-made garments, L- Leather, W & F- Wood & furniture, P & P - Paper & printing, Pet-Petroleum, Phar- Pharmaceuticals, R & P- Rubber & plastics, NMM- Non-metallic mineral, BM- Basic metals, EE- Electrical equipment, MV-Motor vehicle, and OM- Other Manufacturing. Page 67

82 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development 4.3 Analysis of Regional Competitiveness of Industrial Development Shift share analysis is a useful addition to location quotient analysis as it can help determine how much of the regional job change can be attributed to national trends and how much is due to uniqueregional factors Analysis of National Share, Regional Shift and Total Change in Employment The national share measures the potential change in local employment, assuming the local economy is similar to the national economy. The regional shift measures the ability of the local economy to capture an increasing (decreasing) share of a particular sector s growth. A positive regional shift indicates that the region gained additional jobs over those due to national growth and its industrial structure. This gain suggests that the region is more competitive (efficient) in securing additional employment than is the rest of the nation. Table 3.4 shows the national shift, regional shift and total change in employment of different regions from the year 1995 to the year From the table it is seen that there are only seven regions which shows a positive regional shift which indicates that the regions gained additional jobs over those due to national shift and its industrial shift. This also indicates that other thirteen regions are not enough competitive in case of securing more employment than the rest of the nation. Table 3.4 also indicates there are fourteen regions which show positive values for total change in employment and other six regions named Kushtia, CTG. Hill Tracts, Faridpur, Comilla, Barishal and Dinajpur show negative growth in total employment change. Table 4.4: National Share, Regional Shift and Total Change in Employment of Different Regions ( ) Regions National Share Regional Shift Total Change in Employment ( ) Khulna Barishal Patuakhali Chittagong Ctg. Hill Tracts Comilla Page 68

83 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Noakhali Sylhet Tangail Jessore Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Jamalpur Mymensingh Faridpur Dhaka Source: Calculated From Appendix A Net Shift Component Analysis The Net Shift Component column also known as Competitive Effect in Table 4.5, which is equal to the difference between the Expected Change in employment based on industry and national trends and the total actual Job Change in the regional economy, is the focal point of the shift-share analysis. Apositive Net Shift Component may indicate a unique competitive advantage for regional clusters. It is important to note that a cluster can lose jobs and still have a positive Net Shift Component if the loss is less than the Expected Change. From Table 4.5 it is seen that only seven regions have positive net shift component which indicate a unique competitive advantage for regional clusters. The regions are in descending order- Chittagong, Dhaka, Tangail, Rajshahi, Noakhali, Jamalpur and Mymensingh. Page 69

84 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Table 4.5: Net Shift Component of Different Regions ( ) Regions Net Shift Component Regions Net Shift Component Khulna Kushtia Barishal Bogra Patuakhali Pabna Chittagong Rajshahi Ctg. Hill Tracts Dinajpur Comilla Rangpur Noakhali Jamalpur 5361 Sylhet Mymensingh 1315 Tangail Faridpur Jessore Dhaka Source: Calculated From Appendix A All the other regions the value of net shift component is negative, which indicates loss in jobs. Among them Pabna holds the highest negative net shift component followed by Comilla, Khulna, Jessore, Dinajpur, Kushtia, etc. It is matter-of-fact that the net shift components were disorganized with a very wide range of fluctuations (Figure 4.3) Net Shift Component Chittagong Noakhali Tangail Rajshahi Jamalpur Mymensingh Dhaka Khulna Barishal Patuakhali Ctg. Hill Tracts Comilla Sylhet Jessore Kushtia Bogra Pabna Dinajpur Rangpur Faridpur Figure 4.3: Net Shift Component of Different Regions of Bangladesh ( ) Page 70

85 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Analysis of Regional Competitiveness in Major Five Industry Table 4.6 shows the national share, industrial mix, regional shift, total change in employment and net shift component of different regions from the year 1995 to the year 2006 for major five industries named- food products & beverage industry, cotton and jute textiles, ready-made garment industry, pharmaceutical industry and non-metallic mineral industry. From the Table 3.6 it is seen that there are only nine regions named- Chittagong, Tangail, Dhaka, Rajshahi, Mymensingh, Rangpur, Jamalpur, Sylhet and Noakhali, which shows a positive regional shift which indicates that the regions gained additional jobs over those due to national shift and its industrial shift. This also indicates that other eleven regions are not enough competitive in case of securing more employment than the rest of the nation. Table 4.6 also indicates there are thirteen regions which show positive values for total change in employment and other seven regions named CTG. Hill Tracts, Barishal, Kushtia, Faridpur, Bogra, Dinajpur and Comilla show negative growth in total employment change. Table 4.6: Analysis of Regional Competitiveness in Major Five Industry ( ) Regions National Share Industrial Mix Regional Shift Total Change in Employment Net Shift Component Khulna Barishal Patuakhali Chittagong Ctg. Hill Tracts Comilla Noakhali Sylhet Tangail Jessore Page 71

86 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Kushtia Bogra Pabna Rajshahi Dinajpur Rangpur Jamalpur Mymensingh Faridpur Dhaka From Table 4.6 it is seen that only seven regions have positive net shift component which indicate a unique competitive advantage for regional clusters. The regions are in descending order- Chittagong, Dhaka, Tangail, Rajshahi, Mymensingh, Jamalpur and Rangpur. All the other regions the value of net shift component is negative, which indicates loss in jobs. Among them Comilla holds the highest negative net shift component followed by Pabna, Khulna, Dinajpur, Kushtia, Jessore, Bogra, etc. 4.4 Analysis of Regional Spatial Association This study aims to reveal the industrial spatial pattern by analyzing the employment data of fifteen (15) different types of industry in Bangladesh. This study attempted to map the characteristics of the industrial structures and interindustrial spatial associations. A comparative study on the spatial pattern of industries among the regions (former districts) was also performed to discuss the development density of industries and the spatial relationship of establishments among different regions and industries. The philosophy behind this part of the study is based on Tobler First Law of Geography, everything is related to everything else, but near things are more related than distant things (Tobler, 1970). Spatial clustering shows the similarity or dissimilarity of industrial employment in neighboring units here the regions and spatial autocorrelation measures the strength of the spatial clustering. Global spatial autocorrelation Page 72

87 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development (Moran s I) analysis yields only one statistics to summarize the pattern of industrial employment in the whole study area. That is, global Moran s I assumes homogeneity of the study area (that industrial employment pattern is the same in all the regions). This is the limitation of global Moran s I. Moran scatter plot utilizes graph only to identify observations that are similar as well as different (outliers: neighboring regions that has contrasting industrial employment rates) from their neighbors. Demonstrated that the slope of the regression line through the points in Moran scatter plot expresses the global Moran s I value. Figure 4.4 and Figure 4.5 shows the Global Moran s I statistics of all person engaged in industrial work in the year and As it is known that, a strong positive statistic indicates positive spatial autocorrelation (clustering of like values). This means that most regions would be found in the high-high or low-low (first and third quadrants) areas. Positive values of Moran s I suggest spatial clustering of similar values across geo-space. And a strong negative statistic indicates negative spatial autocorrelation suggests most regions with high (low) industrial employment concentration would be found in the vicinity of low (high) industrial employment regions (outliers) (both in Figure 4.4 and Figure 4.5). A significant negative value indicates that neighboring values are more dissimilar than expected by chance, that is high values are frequently found in the vicinity of low values. Figure 4.4: Clustering of All Person Engaged in Industrial Work, Figure 4.5: Clustering of All Person Engaged in Industrial Work, Page 73

88 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development A local indicator known as Local Moran s I was hereby chosen to investigate an industry's spatial relationship between each region and its neighboring regions. To localize the presence and magnitude of spatial autocorrelation, a measure such as Anselin s Local Indicators of Spatial Association (LISA) is necessary. LISA indicates significant spatial clustering for each location.for each location (regions), LISA values allow for the computation of its similarity with its neighbors and also to test its significance. Spatial association can be decomposed into four components, viz:regions with high concentration of industrial employment with similar neighbors: high-high or hot spots ; Regions with low concentration of industrial employment with similar neighbors: low-low or cold spots ; Regions with high concentration of industrial employment with low concentration of industrial employment neighbors: high-low; Regions with low concentration of industrial employment with high concentration of industrial employment neighbors: low-high and Regions with no significant local autocorrelation. Spatial autocorrelation refers to the correlation of a variable with itself in space. It can be positive (spatial clusters for high-high or low-low values) and negative (spatial outliers for highlow or low-high values). Table 4.7 shows the value of local indicators of spatial association of different types of industry. Negative values for all the industry indicates that similar kind of industry located haphazardly all over the country. Table 4.7: Value of Local Indicators of Spatial Association for Different Types of Industry Name of the Industry Moran s I Value ( ) Moran s I Value ( ) Food & Beverage Industry Tobacco Industry Textiles Industry RMG Industry Leather Industry Wood Industry Paper Industry Petroleum Industry Pharmaceuticals Industry Rubber Industry Page 74

89 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Non-metallic Mineral Industry Basic Metal Industry Electrical Equipment Industry Motor Vehicle Industry Others Industry Total Industrial Employment Map 4.1 and Map 4.2 shows the spatial associations and level of significance of all people engaged in different types of industry for the year and Because of the unplanned development most of regions become not significant. From the Map 4.1 it is seen that in case of the year , eighteen (18) regions becomes not significant and Chittagong & CTG. Hill Tracts regions shows high-low and low-high spatial association. In case of the year it is seen that, Sixteen (16) regions becomes not significant, and Sylhet & Mymensingh regions shows low-low spatial association with neighboring regions, Faridpur region shows highlow spatial association with neighboring regions and Pabna regions shows low-high spatial association with neighboring regions. The local Moran's I was employed to generate a series of maps displaying the spatial pattern of employment in each industrial category shown in Appendix B. Page 75

90 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Map 4.1 Spatial Associations and Level of Significance of All People Engaged in Different Types of Industry, Page 76

91 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Map 4.2 Spatial Associations and Level of Significance of All People Engaged in Different Types of Industry, Page 77

92 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development 4.5 Description of the Factors In Bangladesh, industrialization at regional level is affected by some socio-economic and infrastructural factors. In this study for analysis of regional variation of industrialization nine variables (with availability of data) from different socio-economic and infrastructural factors viz. Economically active person (ECOAP), Length of Paved Road per sq. Km (RDLEN), Electricity coverage (ELEC), Water supply coverage (WS), Literacy Rate (LITER), Density per sq. Km (DNST), Level of Urbanization (LOU), Rural-Urban Migration (RUM) and Percentage of nonagricultural activities (NAA) has been taken into account. These variables are discussed below with the rational of selecting those: i) Economically Active Person Economically active person comprises all persons of either sex who furnish the supply of labor for the production of economic goods and services as defined by the United Nations System of National Accounts during a specified time-reference period. In Bangladesh, there were 45.65% and 61.38% of the total population is economically active person for the year 1995 and 2006 accordingly (BBS, 1997 and BBS, 2007). ii) Length of Paved Road This study included the total amount of paved road (in km.) available in each region of Bangladesh. It has taken into account the national highway, regional highway and feeder roads under Roads and Highways Department. It is assumed in this study that infrastructural facilities, especially road network promotes industrial development. iii) Electricity coverage It is expressed as the percentage of dwelling households in a region having an electricity connection. The electricity coverage in Bangladesh increased from census to census. In 1991, 2001 and 2011 censuses electricity coverage in Bangladesh was %, 32.02% and 55.41% respectively (BBS, 2005 and BBS, 2013). Page 78

93 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development iv) Water supply coverage It is expressed as the percentage of dwelling households in a region having supplied water. For this study only those households having tap water facilities are considered. In Bangladesh tap water supply coverage was 4.3% in 1991 census. In 2001 the percentage of households having tap water facility increased to 6.18% and in 2011 it becomes 10.45% (BBS, 2005 and BBS, 2013). v) Literacy Rate In Bangladesh literacy rate increases from census to census. In the 1991 census, it was 32.4% increased to 46.2% and 54.79% for the year 2001 and 2011 respectively (BBS, 2005 and BBS, 2013). vi) Population Density Population density (people per sq. km) in Bangladesh was last measured at 1203 in 2013,according to the World Bank. In Bangladesh population density were 845, 1035 and 1175 for the year 1991, 2001 and 2011 respectively ( vii) Level of Urbanization The level of urbanization is an important indicator of industrialization. Urbanization refers to the proportion of a nation s population living in urban areas. The level of urbanization can be denoted as, U n = (Up / Tp) x 100 Here, U n = Level of Urbanization Up = Total Urban Population Tp = Total Population So, urbanization is indicated by an increase in U n over a period of time. In 1991, urbanization rate of Bangladesh was 19.71%, it increases to 23.53% and 28.40% for the year 2001 and 2011 respectively (Kakon, 2007). Page 79

94 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development viii) Rural-Urban Migration For this research only rural to urban internal migration (excluding immigration) by place of birth is taken into account. Some of the reasons are as- rural push factors:more poverty, less work opportunities, limited education opportunities, fewer medical facilities, etc. and urban pull factors: possibilities of jobs, better education, better medical, more available/ affordable housing, etc. The role of migration in industrialization is obvious in all societies and at almost all times, since rural-urban migration is one of the important components of industrialization. ix) Percentage of non-agricultural activities This study includes all population age 10 years and above who are engaged in non-agricultural activities. These activities include population engaged in industry, water/gas/electricity, construction, transport & communication, hotel & restaurant, service, business and other sectors. In Bangladesh the non-agricultural activity is 37.24% in 1991 which increased to 45.16% in 2001 and in the 2011 census, it further increased to 52.46% (BBS, 2005, 2013 and 2014) Degree of Relationship between Industrial Development and Factors It is assumed that there are some factors which work behind the regional variation of industrial development in Bangladesh. In particular region where strong positively correlated variables are available in large amount, the industrialization will be high in that region. For this study, nine variables from socioeconomic and infrastructural factors viz. Economically active person (ECOAP), Length of Paved Road per sq. Km (RDLEN), Electricity coverage (ELEC), Water supply coverage (WS), Literacy Rate (LITER), Density per sq. Km (DNST), Level of Urbanization (LOU), Rural-Urban Migration (RUM) and Percentage of non-agricultural activities (NAA) were taken for Analysis. The changing aspects of each variable are studied. Here Relationships of industrial development with each of the variables are illustrated. Table 4.8 shows descriptive statistics of all the variables. Page 80

95 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Table 4.8: Descriptive Statistics of all the Variables SI.No. Variable Description Minimum Maximum Mean Std. Deviation 1 LOIND Level of Industrialization ECOAP Economically Active Person (in '000) RDLEN Length of Paved Road per Sq. Km ELEC Percentage of Household with Electricity Connection WS Percentage of Household with Tap Water Supply LITER Literacy Rate DNST Density per Sq. Km LOU Level of Urbanization RUM Rural Urban Migration NAA Percentage of Household with Non-Agricultural Activities Note: Level of Industrialization (LOIND) is dependent variable. Page 81

96 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development To estimate the degree of relationship between industrial development and factors Pearson s Correlation is used here. With respect to level of industrialization (LOIND) i.e. dependent variable the correlation coefficients of all the independent variables are estimated for the pooled data for both the year 1995 to the year The total numbers of variables in this study are nine (9) and these are- Economically active person (ECOAP), Length of Paved Road per sq. Km (RDLEN), Electricity coverage (ELEC), Water supply coverage (WS), Literacy Rate (LITER), Density per sq. Km (DNST), Level of Urbanization (LOU), Rural-Urban Migration (RUM) and Percentage of non-agricultural activities (NAA). It is shown in Table 4.9 that all the variables are not equally significant. Table 4.9 shows the correlations between all the independent variables along with the dependent variable of the pooled data for the year 1995 to the year It is evident that all the variables are positively correlated to lend support in favor of the assumptions of this study. Now it can be clearly stated whether a particular variable is important or not and what is its importance relative to others Bivariate Correlation Coefficients of Variables for the Year The relative importance of the variables affecting regional variation of industrialization in Bangladesh for the year 1995 to the year 2006 is easily distinguishable from Table 4.9. Water supply coverage has emerged as the most strongly correlated variable with coefficient This has been followed by level of urbanization with coefficient Electricity coverage, rural-urban migration and non-agricultural activities are strongly correlated with coefficient 0.724, and Among the other four variables population density (coefficient 0.670) strongly correlated; economically active population (coefficient 0.432) and road length (coefficient 0.545) are moderately correlatedand literacy rate (coefficient 0.371) is weakly correlated with level of industrialization. It is also remarkable that all the independent variables are positively correlated with each other. Page 82

97 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Table 4.9: Bivariate Correlation Coefficients of the Independent Variables along with Dependent Variables ( ) (Statistical Analysis is Performed with N= 20) VARIABLE LOIND ECOAP RDLEN ELEC WS LITER DNST LOU RUM NAA LOIND Pearson Correlation **.545 **.724 **.920 **.371 *.670 **.843 **.794 **.790 ** Sig. (2-tailed) ECOAP Pearson Correlation.432 ** **.627 **.631 **.536 **.742 **.455 **.451 **.463 ** Sig. (2-tailed) RDLEN Pearson Correlation.545 **.440 ** **.604 **.430 **.571 **.343 *.435 **.549 ** Sig. (2-tailed) ELEC Pearson Correlation.724 **.627 **.748 ** **.705 **.600 **.659 **.647 **.851 ** Sig. (2-tailed) WS Pearson Correlation.920 **.631 **.604 **.761 ** **.785 **.816 **.787 **.765 ** Sig. (2-tailed) LITER Pearson Correlation.371 *.536 **.430 **.705 **.425 ** *.394 *.376 *.661 ** Sig. (2-tailed) DNST Pearson Correlation.670 **.742 **.571 **.600 **.785 **.339 * **.507 **.537 ** Sig. (2-tailed) LOU Pearson Correlation.843 **.455 **.343 *.659 **.816 **.394 *.596 ** **.733 ** Sig. (2-tailed) RUM Pearson Correlation.794 **.451 **.435 **.647 **.787 **.376 *.507 **.747 ** ** Sig. (2-tailed) NAA Pearson Correlation.790 **.463 **.549 **.851 **.765 **.661 **.537 **.733 **.779 ** 1 Sig. (2-tailed) ** Correlation is Significant at the 0.01 level (2-tailed), * Correlation is Significant at the 0.05 level (2-tailed) Page 83

98 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Comparison of the Correlation Coefficients Table 4.10 is summary Table of the 4.9 and from this it can easily distinguish the relative and the changing importance of the variables affecting regional variation of industrialization in Bangladesh. Here a comparison of the correlation coefficients of all the independent variables with the level of industrialization (LOIND) is shown for the pooled data of two consecutive years 1995 and The total number of variables was nine. Among them all nine were found significant in explaining the research objectives for the year 1995 to the year Table 4.10: Comparison of Correlation Coefficients of the Variables ( ) Correlation Between Correlation Coefficients LOIND-ECOAP LOIND-RDLEN LOIND-ELEC LOIND-WS LOIND-LITER LOIND-DNST LOIND-LOU LOIND-RUM LOIND-NAA From Table 4.10 It can be clearly stated that economically active population is weakly related with coefficients Road length, i.e. availability of paved road is moderately related with coefficients is moderately related. Water supply coverage has emerged as the strongest related factors with coefficient This research has taken into account the tap water supply coverage and in Bangladesh it is mostly available in metropolitan and municipal areas which accommodate a significant portion of the population. Electricity coverage is another variable which is closely related to level of industrialization. The coefficients of this variable are The availability of electricity connection is a criterion of industrial development. Literacy rate is weakly related with coefficients Population density per square kilometer is strongly related with coefficients Page 84

99 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Level of urbanization is a potent factor affecting regional variation of industrialization with coefficient of correlations Rural-urban migration is another strong factor affecting regional variation of industrialization with coefficient of correlations Non-agricultural activity is another most significant variable affecting regional variation of industrialization. It is strongly associated with coefficients So it is evident that all variables are not equally significant, i.e. their importance varies. 4.6 Regression Analysis The main purpose of this analysis section is to know to what extent the level of industrialization (LOIND) is influenced by the nine independent variables. In this study a Stepwise multiple regression analysis is done by using pooled data of the year and of the year considering the dependent variable level of industrialization (LOIND) with the other nine independent variables. This regression method has been conducted in order to test the relationships between influencing factors and level of industrialization (LOIND) because all independent variables are assumed of equal importance. Table 4.11 and Table 4.12 represent the multiple regression result. Table 4.11: Model Summary of Multiple Regressions Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate a b c a. Predictors: (Constant), % with Water Supply, b. Predictors: (Constant), % with Water Supply, , ECOAP (in '000), c. Predictors: (Constant), % with Water Supply, , ECOAP (in '000), , Level of Urbanization, Page 85

100 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Table 4.12: Coefficients of Multiple Regression Analysis Coefficients a Model Unstandardized Coefficients Standardized Coefficients t Sig. Collinearity Statistics B Std. Error Beta Tolerance VIF 1 (Constant) % with Water Supply, (Constant) % with Water Supply, ECOAP (%), (Constant) % with Water Supply, ECOAP (%), Level of Urbanization, a. Dependent Variable: Level of Industrialization From Table 4.11 and Table 4.12 it is seen that three different models are found based on the pooled data. From the Table 4.11 and Table 4.12 it is also seen that not all the independent variables are related with the dependent variable positively. For model 1 (one) only percentage of piped water supplies (WS) is considered and the value of R is R² value for the model 1 of analysis regression model is (refer to Table 4.11), which means that the influencing factors explain 85 per cent of the variance in the level of industrialization (LOIND). The adjusted R² value in this model was 0.843, indicating strong relationship. For model 2 (two) percentage of piped water supplies (WS) and economically active population (ECOAP) are considered and the value of R is R² value for the model 2 of analysis regression model is (refer to Table 4.11), which means that the influencing factors explain 88 per cent of the variance in the level of industrialization (LOIND). The adjusted R² value in this model was 0.877, indicating very strong relationship. And for model 3 (three) percentage of piped water supplies (WS), economically active population (ECOAP) and level of urbanization (LOU) are considered and the value of R is R² value for the model 3 of analysis regression model is (refer to Table 4.11), which means that the influencing factors explain 90 per cent of the variance in the level of industrialization (LOIND). The adjusted R² value in this model was 0.894, indicating very strong relationship. By using the value from Table 4.12 regression equations are prepared for all the three models. Equations are as: Page 86

101 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development Model 1 - Regression Equation: LOIND= *WS Model 2 - Regression Equation: LOIND = *ECOAP *WS Model 3 - Regression Equation: LOIND = *ECOAP *WS *LOU As readymade garments (RMG) industry is only concentrated in Dhaka and Chittagong regions that s why another stepwise multiple regression analysis is done by using pooled data of the year and of the year considering the dependent variable level of industrialization (LOIND) with the other nine independent variables without readymade garments (RMG) data. Table 4.13 and Table 4.14 represent the multiple regression result. Table 4.13: Model Summary of Multiple Regressions (without RMG) Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1.818a b c a. Predictors: (Constant), % with Water Supply, b. Predictors: (Constant), % with Water Supply, , ECOAP (in '000), c. Predictors: (Constant), % with Water Supply, , ECOAP (in '000), , % with Electricity Connection, Table 4.14: Coefficients of Multiple Regression Analysis (without RMG) Coefficients a Model Unstandardized Coefficients Standardized Coefficients t Sig. Collinearity Statistics B Std. Error Beta Tolerance VIF 1 (Constant) % with Water Supply, (Constant) % with Water Supply, ECOAP (%), (Constant) % with Water Supply, ECOAP (%), % with Electricity Connection, a. Dependent Variable: Level of Industrialization Page 87

102 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development From Table 4.13 and Table 4.14 it is seen that three different models are found based on the pooled data. From the Table 4.13 and Table 4.14 it is also seen that not all the independent variables are related to the dependent variable positively. For model 1 (one) only percentage of piped water supplies (WS) is considered and the value of R is R² value for the model 1 of analysis regression model is (refer to Table 4.13), which means that the influencing factors explain 67 per cent of the variance in the level of industrialization (LOIND). The adjusted R² value in this model was 0.660, indicating moderate relationship. For model 2 (two) percentage of piped water supplies (WS) and economically active population (ECOAP) are considered and the value of R is R² value for the model 2 of analysis regression model is (refer to Table 4.13), which means that the influencing factors explain 73 per cent of the variance in the level of industrialization (LOIND). The adjusted R² value in this model was 0.710, indicating moderate relationship. And for model 3 (three) percentage of piped water supplies (WS), economically active population (ECOAP) and percentage (%) with electricity connection (ELEC) are considered and the value of R is R² value for the model 3 of analysis regression model is (refer to Table 4.13), which means that the influencing factors explain 75 per cent of the variance in the level of industrialization (LOIND). The adjusted R² value in this model was 0.733, indicating strong relationship. By using the value from Table 4.14 regression equations are prepared for all the three models. Equations are as: Model 1 - Regression Equation: LOIND= *WS Model 2 - Regression Equation: LOIND = *ECOAP *WS Model 3 - Regression Equation: LOIND = *ECOAP *WS *ELEC Page 88

103 Chapter 4: Analysis of Inter-Regional Variation of Industrial Development It is seen that only three (3) models are built for both cases, but with the RMG data level of industrialization (LOIND) is positively related to level of urbanization (LOU) on the other hand, without RMG data level of urbanization (LOU) do not relate to level of industrialization (LOIND) but in this case percentage (%) of electricity connection (ELEC) is positively related to level of industrialization (LOIND). Though growing economically active population is a positive factor for initiating the level increasing for industrialization, it is observed that economically active population (ECOAP) is negatively related to level of industrialization (LOIND) in both cases. 4.7 Summary Over seventy percent of the industrial employment belongs to Dhaka and Chittagong; it implied that the distribution of person engaged in industrial work in this country is highly skewed. This fact has become easily understandable by comparing the inter-regional competitiveness of industrial development among the twenty regions from the year to It indicates that the distribution and growth of person engaged in industrial work are unequal in the regions of Bangladesh. It is seen that only seven regions show positive net shift component all others are negative. It is found from this study that level of urbanization, water supply coverage, electricity coverage, rural-urban migration and non-agricultural activities are significant variable affecting regional variation of industrialization. Page 89

104 CHAPTER 5 Chapter 5: Summary and Conclusion SUMMARY AND CONCLUSION 5.1 Introduction This Study was designed towards understanding the trend of industrial development in Bangladesh in the last two census years, i.e and with their spatial, temporal and spatio-temporal variations. The nature of industrial development at different hierarchies like- national level, divisional level and regional level were examined in this study. Besides this, factors affecting regional variation of industrialization were analyzed using quantitative techniques with a view to learning how much and to what extent they are contributing to regional variations of industrial development. The relative and changing importance of these factors in this regard was analyzed for two consecutive censuses of and Summary Findings It is tired here to summarize the main findings of this study: National Aspects of Industrial Development: The level of industrialization showed an upward trend during in Bangladesh, but which is not true for every region. The level of industrialization measured by the proportion of industrial employment was 6.76 percent in , which increased to 7.99 percent in It implies that industrialization in Bangladesh is increasing, but not very significantly. Annual average growth rate (AAGR) of person engaged in industrial work was 0.06% from the year to The intersensal variation of person engaged in industrial work in Bangladesh was 83.17% from the year to In most of the cases per capita value added increases. Highest increase shown for Food & beverage products, Cotton & Jute textiles, RMG, Pharmaceuticals, nonmetallic minerals, motor vehicle, etc. Percentage of employment growth is also significant for Cotton & Jute textiles (40.18%) and RMG (46.07%). Page 90

105 Chapter 5: Summary and Conclusion The Table 5.1 shows the above mentioned aspects at a glance. Table 5.1:National Aspects of Industrial Development Particulars Level of Industrialization (%) Per Capita Value Addition (in 000) Annual Average Growth Rate of Industrial Employment (%) 0.06% Intercensal Variation of Industrial Employment (%) 83.17% Regional Aspects of Industrial Development: The regional trend of level of industrialization was not uniform throughout Bangladesh in the years and There existed remarkable spatial, temporal and spatio-temporal variations in the level of industrialization in Bangladesh. These variations regarding levels of industrialization were found at the divisional and regional levels. Dhaka and Chittagong regions emerged as the highest industrialized regions in the two consecutive censuses which were followed by Pabna, Khulna and Tangail in descending order over the study period. It is interesting to note that four regions Dhaka, Chittagong, Bogra and Barishal have never changed their ranks throughout the two census years. This is indicative of regional primacy. In there were nine low industrialized (level of industrialization up to 2%) regions and in this number increases to eleven regions. In case of medium industrialized (level of industrialization 2.01% %) and high industrialized (level of industrialization 5.01% and above) regions the number was seven and four in and four and five in respectively. Some regional aspects are given in the Table 5.2. Page 91

106 Chapter 5: Summary and Conclusion Table 5.2: Regional Aspects of Industrial Development Particulars Range of Level of Industrialization (%) No of Regions with Level of Industrialization: (i) Up to 2% 9 11 (ii) 2.01%-5.00% (iii) Above 5.01% Inequality in Inter-Regional Competitiveness of Industrial Development: As over seventy percent of the industrial employment belongs to Dhaka and Chittagong, it implied that the distribution of person engaged in industrial work in this country is highly skewed. This fact has become easily understandable by comparing the inter-regional competitiveness of industrial development among the twenty regions from the year to Table 5.3: Inter-Regional Competitiveness of Industrial Development Regions Positive Net Shift Component Regions Negative Net Shift Component Chittagong Patuakhali Dhaka Ctg. Hill Tracts Tangail Sylhet Rajshahi Faridpur Noakhali Bogra Jamalpur 5361 Barishal Mymensingh 1315 Rangpur Kushtia Dinajpur Jessore Khulna Comilla Pabna These values (Table 5.3) indicate that the distribution and growth of person engaged in industrial work are unequal in the regions of Bangladesh. It is seen that only seven regions show positive net shift component all others are negative. Page 92

107 Chapter 5: Summary and Conclusion Relative and Changing Importance of the Factors Affecting Industrial Development: The study showed that all the independent variables viz. Economically active person, Length of Paved Road, Electricity coverage, Water supply coverage, Literacy Rate, Population Density, Level of Urbanization, Rural-Urban Migration and Percentage of non-agricultural activities positively correlate with the dependent variable level of industrialization. The Table 5.4 shows the correlation coefficients of the variables with the level of industrialization in the two census years. Table 5.4: Correlation Coefficients of the Variables with Level of Industrialization ( ) Correlation Between Correlation Coefficients LOIND-ECOAP LOIND-RDLEN LOIND-ELEC LOIND-WS LOIND-LITER LOIND-DNST LOIND-LOU LOIND-RUM LOIND-NAA From Table 5.4 it can be clearly stated that economically active population is moderately related with coefficients Road length, i.e. availability of paved road is weakly related with coefficients is moderately related. Water supply coverage has emerged as the strongest related factors with coefficient This research has taken into account the tap water supply coverage and in Bangladesh it is mostly available in metropolitan and municipal areas which accommodate a significant portion of the population. Electricity coverage is another variable which is closely related to level of industrialization. The coefficients of this variable are The availability of electricity connection is a criterion of industrial Page 93

108 Chapter 5: Summary and Conclusion development. Literacy rate is weakly related with coefficients Population density per square kilometer is strongly related with coefficients Level of urbanization is a potent factor affecting regional variation of industrialization with coefficient of correlations Rural-urban migration is another strong factor affecting regional variation of industrialization with coefficient of correlations Non-agricultural activity is another most significant variable affecting regional variation of industrialization. It is strongly associated with coefficients So it is evident that all variables are not equally significant, i.e. their importance varies. 5.3 Recommendations The regional inequalities are accentuated when localities grow at the expense of other regions which are stagnant, therefore, some policies should be taken to lessen the inequalities. Here some recommendations are given on the basis of research findings: Effective measures should be taken to raise the level of industrialization in the less industrialized regions such as Barishal, Patuakhali, Dinajpur, Mymensingh, Faridpur and CTG. Hill Tracts. To reduce the spatial disparity of industrialization, Government should take initiative to redistribute and relocate various types of establishments and institutions from developing to underdeveloped regions. For example, the RMG industries should be shifted from the main city of Dhaka. It is found from this study that level of urbanization, percentage of piped water supplies and percentage with electricity connection are significant variables affecting regional variation of industrialization. So, new industries as far as possible should be established away from congested regions like- Dhaka and Chittagong. It will also help to reduce regional disparity in industrial development and so as the migration tendency. Hence, the creation of employment opportunities in underdeveloped regions is the paramount weapon to regulate the pace of migration and uniform regional development. It is found that, above seventy percent of industrial employment is concentrated in only two regions. To overcome this problem emphasis should be given to the provision and development of various infrastructure and services such as water Page 94

109 Chapter 5: Summary and Conclusion supply, electricity, roads, etc. in all the underdeveloped regions. So, that these regions can also attract industrialist to establish various new industrial establishments. Cluster development and economic zoning and at the same time initiatives for geographical diversification of manufacturing. Special economic zones should be established in the underdeveloped regions or less industrialized regions with some subsidies. The role of Government should be ensured infrastructure development in underdeveloped regions, coordinated and effective management system, establish agro-based industries and introduce modern technology in agriculture & industry through encouraging young adults and ensure the role of non-government organizations to establish different cottage industries and create employment opportunities in the underdeveloped regions. 5.4 Conclusion Bangladesh is still an agrarian society, though nearly eight percent of its population engaged in manufacturing industrial work. As industrial development is an indicator of development, it increases with the socio-economic development of the country. Industry sector is one of the major sectors for an income source in Bangladesh. There were many flaws in this sector, but Bangladesh could come up with phenomenal results for the enrollment of people and to come out Bangladesh from poverty though this industry sector. As in Bangladesh the higher level of industrialization is concentrated in a few regions. Accelerated growth of manufacturing will be necessary in the coming years to absorb the incremental labor force, strengthen backward and forward linkages with agriculture and services sectors, cater to the growing domestic demand for industrial goods, and take advantage of emerging opportunities in the global market.industrial development is essential for raising the economic growth in a developing country like Bangladesh. However, the regional variation in the industrial development is one of the primary causes of the regional disparities in Bangladesh. It is a crucial need to decrease regional variation in industrial development to supply the utilities and facilities needed to develop industrial establishment. The point at issue is the regional variation of industrial development resulting uncontrolled growth of industrial establishment in few regions which needs urgent attention. Above all adoptions and implementation of a comprehensive industrial policy and improvement of the industrial Page 95

110 Chapter 5: Summary and Conclusion management system within a government system are essential for a sustainable future of the country. 5.5 Scope for Further Research This study attempted to utilize the limited data available to provide some insights into the recent trend of industrial development in Bangladesh explore regional variations and analyze the factors affecting this variation. Thus, it provides a basis for comparative insights for follow-up researchers. The present study includes only some socio-economic and infrastructural factors. But there are other factors of industrialization such as market, raw materials, labor availability, financial condition and others which deserve to be incorporated. There is a scope to utilize dummy variables in further research on industrial development. So in future detail the research work in boarder extent is recommended including these factors and variables. Page 96

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117 zz Appendix A Page xi

118 zz Table A: Shift-Share Analysis for Different Industries of Different Regions of Bangladesh ( ) Regions Chittagong Ctg. Hill Tracts Comilla Type of Industry NS IM RS TCE NSC NS IM RS TCE NSC NS IM RS TCE NSC FP & B TB C &JT RMG L W&F P&P Pet Phar R & P NMM BM EE MV OM Total Page xii

119 zz Table A: Shift-Share Analysis for Different Industries of Different Regions of Bangladesh ( ) (Continued) Regions Khulna Barishal Patuakhali Type of Industry NS IM RS TCE NSC NS IM RS TCE NSC NS IM RS TCE NSC FP & B TB C &JT RMG L W&F P&P Pet Phar R & P NMM BM EE MV OM Total Page xiii

120 zz Table A: Shift-Share Analysis for different industries of different regions of Bangladesh ( ) (Continued) Regions Noakhali Sylhet Tangail Type of Industry NS IM RS TCE NSC NS IM RS TCE NSC NS IM RS TCE NSC FP & B TB C &JT RMG L W&F P&P Pet Phar R & P NMM BM EE MV OM Total Page xiv

121 zz Table A: Shift-Share Analysis for different industries of different regions of Bangladesh ( )(Continued) Regions Jessore Kushtia Bogra Type of Industry NS IM RS TCE NSC NS IM RS TCE NSC NS IM RS TCE NSC FP & B TB C &JT RMG L W&F P&P Pet Phar R & P NMM BM EE MV OM Total Page xv

122 zz Table A: Shift-Share Analysis for different industries of different regions of Bangladesh ( ) (Continued) Regions Pabna Rajshahi Dinajpur Type of Industry NS IM RS TCE NSC NS IM RS TCE NSC NS IM RS TCE NSC FP & B TB C &JT RMG L W&F P&P Pet Phar R & P NMM BM EE MV OM Total Page xvi

123 zz Table A: Shift-Share Analysis for different industries of different regions of Bangladesh ( ) (Continued) Regions Rangpur Jamalpur Mymensingh Type of Industry NS IM RS TCE NSC NS IM RS TCE NSC NS IM RS TCE NSC FP & B TB C &JT RMG L W&F P&P Pet Phar R & P NMM BM EE MV OM Total Page xvii

124 zz Table A: Shift-Share Analysis for different industries of different regions of Bangladesh ( ) (Continued) Regions Faridpur Dhaka Type of Industry NS IM RS TCE NSC NS IM RS TCE NSC FP & B TB C &JT RMG L W&F P&P Pet Phar R & P NMM BM EE MV OM Total Note: Here Elaborations are as, FP & B- Food products & beverages, TP- Tobacco products, C & JT- Cotton & Jute textiles, RMG- Ready-made garments, L- Leather, W & F- Wood & furniture, P & P - Paper & printing, Pet-Petroleum, Phar- Pharmaceuticals, R & P- Rubber & plastics, NMM- Non-metallic mineral, BM- Basic metals, EE- Electrical equipment, MV-Motor vehicle and OM- Other Manufacturing, NS- National Shift, IM- Industrial Mix, RS- Regional Shift, TCE- Total Change in Employment ( ) and NSC- Net Shift Component. Page xviii

125 zz Appendix B Page xix

126 zz Map of Spatial Association of Different types of Industry based on Person Engaged, Map B 1. 1 Food & Beverages Industry Map B 1. 2 Tobacco Industry Map B 1. 3 Textiles Industry Map B 1. 4 RMG Industry Map B 1. 5 Leather Industry Map B 1. 6 Wood Industry Map B 1. 7 Paper Industry Legend: Map B 1. 8 Petroleum Page xx

127 zz Map of Spatial Association of Different types of Industry based on Person Engaged, Map B 1. 9 Pharmaceutical Industry Map B Rubber Industry Map B Non-metallic Mineral Industry Map B Basic Metal Industry Map B Electrical Equipment Industry Legend: Map B Motor Vehicle Industry Map B Other Industry Page xxi

128 zz Map of Significance of Spatial Association of Different types of Industry based on Person Engaged, Map B 2. 1 Food & Beverage Industry Map B 2. 2 Tobacco Industry Map B 2. 3 Textile Industry Map B 2. 4 RMG Industry Map B 2. 5 Leather Industry Legend: Map B 2. 6 Wood Industry Map B 2. 7 Paper Industry Map B 2. 8 Petroleum Industry Page xxii

129 zz Map of Significance of Spatial Association of Different types of Industry based on Person Engaged, Map B 2. 9 Pharmaceuticals Industry Map B Rubber Industry Map B Non-Metallic Mineral Industry Map B Basic Metal Industry Map B Electrical Equipment Industry Lege nd: Map B Motor Vehicle Industry Map B Others Industry Page xxiii

130 zz Map of Spatial Association of Different types of Industry based on Person Engaged, Map B 3. 1 Food & Beverages Industry Map B 3. 2 Tobacco Industry Map B 3. 3 Textile Industry Map B 3. 4 RMG Industry Map B 3. 5 Leather Industry Legend: Map B 3. 6 Wood Industry Map B 3. 7 Paper Industry Map B 3. 8 Petroleum Industry Page xxiv

131 zz Map of Spatial Association of Different types of Industry based on Person Engaged, Map B 3. 9 Pharmaceuticals Industry Map B Rubber Industry Map B Non-Metallic Mineral Industry Map B Basic Metal Industry Map B Electrical Equipment Industry Legend: Map B Motor Vehicle Industry Map B Others Industry Page xxv

132 zz Map of Significance of Spatial Association of Different types of Industry based on Person Engaged, Map B 4. 1 Food & Beverages Industry Map B 4. 2 Tobacco Industry Map B 4. 3 Textile Industry Map B 4. 4 RMG Industry Legend: Map B 4. 5 Leather Industry Map B 4. 6 Wood Industry Map B 4. 7 Paper Industry Map B 4. 8 Petroleum Industry Page xxvi