46
Envisioning the Future: A Competitive Urban Space for Growth
Scenario A is reached by increasing the value added of production (higher urban economic density). Scenario B is reached by diversifying into nonfarm economic activities (greater urbanization). The scenario analysis shows that to reach lower-middle-income country status, Bangladesh needs to increase its economic density and urbanize even more forcefully than historical trends suggest. In fact, to become a lower-middle-income country, Bangladesh needs the economic density of an upper-middle-income country. Even if it reaches a level of urbanization in line with other lower-middleincome countries (52 percent), it will still require urban economic density four times as high as the average lower-middle-income country (see figure 3.4). Doubling rural productivity would reduce the minimum urban economic density associated with the level of urbanization of the average lower-middle-income country by only 15 percent. Bangladesh’s spatial economic paths to lower-middle-income country status are unique because of the country’s exceptionally high population density (the highest in the world). High population density (population per square kilometer) needs to be supported by high economic density (GDP or value added per square kilometer) if Bangladesh is to reach lower-middle-income status. This finding has important implications for Bangladesh’s growth agenda. It provides supportive evidence that Bangladesh needs a competitive urban space to accelerate growth, as only competitive urban areas can achieve the high economic density Bangladesh needs to become a middle-income country. It also shows that Bangladesh needs to simultaneously pursue both types of spatial transformation. Bangladesh cannot reach middle-income country status without “making Dhaka’s mountains taller.” Creating a “taller” Dhaka requires a fundamental shift in the economy of the metropolitan area toward a more diversified economic base and a higher-value-added industrial and service mix in order to increase its competitiveness. Empirical evidence suggests that urban diversity and knowledge spillovers across rather than within industries matter for long-term growth (Glaeser and others 1992; Jacobs 1969). International evidence indicates that city diversity promotes innovation into higher-value-added products as knowledge spills over industries. Specialized industrial cities such as Manchester and Detroit eventually declined, whereas broadly diversified cities such as New York flourished (see box 6.2 in chapter 6). Bangladesh needs to accelerate the process diversification of its rural economy to create “more hills.” Agro-processing and textiles are significantly contributing to the growth of nonfarm activities in rural areas. The share of agro-processing jobs located in rural areas has increased steadily from 42 percent in 2001 to 55 percent in 2009; the share of textiles jobs rose from 38 percent to 50 percent over the same period (map 3.1). The density of nonfarm employment reveals that proximity to Dhaka favors diversification out of agriculture in rural areas (figure 3.5). Creating “taller mountains” and “more hills” may lead to further concentration of economic activities. But it does not necessarily imply a widening of regional Bangladesh • http://dx.doi.org/10.1596/978-0-8213-9859-3