* Reduction of inequality and
* Ensuring pro-poor growth

Pro-poor growth will consist of growth of sectors which generate employment with higher productivity and higher wage/salary. This will be possible only through the growth of industrial sector and particularly small/medium enterprises based on hired labour. The process must be initiated before the limits of employment growth in agriculture is exhausted.

Budget is not only a process of channeling resources in particular directions. The national budget of 2004-2005 is expected to provide a vision of long-term sustained growth of the economy which is compatible with acceleration of poverty reduction in Bangladesh. Budgetary allocations and modification of incentives through specific proposals of the budget can provide a guideline about the vision of transformation of the economy. In the proposed budget poverty reduction should not be viewed as isolated programme but as integral part of the growth process.

Such a vision does not exclude the need for continuing the emphasis on the currently performing sectors, namely agriculture and RMG. A lack of acceleration of agricultural growth during the last financial year has meant an increasing concern about support for this sector. Moreover, the need for stabilising food prices is expected to run supreme. Therefore the routes through which effective support can be channeled to this sector are being discussed and a combination of traditional and innovative routes is likely to evolve.

The other deserving sector for support is RMG which will face the post-MFA phase. Strategies have been well thought out, although sometimes with inadequate emphasis on the interests of workers of RMG enterprises who will lose jobs in this new phase. Most of the formal sectors can voice their needs through their associations and business chambers which has been accomplished during the last few weeks. But no one is considering those sub-sectors/sectors of the economy which do not exist in a form so as to place their demand for channeling of resources. Here lies

the need for vision by the planners and policy makers.

In the present day world, traditional farming cannot continue to play the pivotal role of economic growth. But large scale capital intensive industries cannot and should not be created overnight. Bangladesh can neither afford such investment, nor is it desirable in view of its inability to absorb the growing labour force. Therefore, a new strategy of industrial growth must be planned along with tertiary sector policies to supplement such growth. Examples of such pro-poor growth programmes are being presented here, although a set of comprehensive suggestions is not being attempted.

In an inequality-reducing industrial growth programme, the following aspects deserve priority:

*Manufacturing growth must be accelerated and incentives should not aim only at raising present capacity utilisation but new enterprises must be encouraged. Special incentives must go to entrepreneurs of large scale industry in locations other than the major towns.

*Growth of hired labour based enterprises in regionally dispersed growth centres can provide an impetus to both employment generation and sustained growth of manufacturing. Entrepreneurs can thrive by drawing upon local labour force, especially the underemployed female labour force. An enabling environment for development of local entrepreneurship can be created through provision of low cost power, transport, communication systems and marketing services. NGOs and private sector financial institutions should be encouraged to extend suitable package of financial services. Protected areas for marketing and storage may be established as a component of the growth centres. A few growth centres may be initiated as pilot schemes.

*Regional dispersion of incentives for secondary and tertiary sector activities can be an effective way to reducing inequality. Special schemes for depressed areas should be taken up. Infrastructure for linkage between semi urban growth centers and rural hinterland may help in direct and indirect employment generation.

*Pilot schemes of special non-conventional employment programmes for young school educated girls may be initiated through the secondary schools. Goods and services to be produced may target local demand and may also be supplied to urban centers. Nursery items, furniture and wood products, services like typing etc. and other non-conventional activities may be encouraged. Such programmes can link formal schooling with development of entrepreneurial skills.

*Human capital development strategy must place emphasis on improving the employability of secondary educated school dropouts, who are mostly poor. This is particularly important because the growth centres in the peri-urban areas are expected to draw upon these sources of surplus labour. All vocational and technical training promoted through public investment must link training with effective employment generation.

*Year after year, the relevant organisations of the government are trying to think of steps to attract FDI but with not-so-encouraging results. It is unlikely that success on that front will be bright while our own investors are not coming forward. Investment growth rate is not showing the expected impact of policies for easing the constraints on the supply side of investible funds. Domestic investment growth requires innovative steps to encourage demand side so that entrepreneurs are encouraged to undertake such investment.

Growth of hired labour based industrialisation can reach a large number of assetless, low income, unemployed labour force which will in turn have a positive impact on wage and earning. Wage labourers in agriculture are employed only for a part of the year. Therefore the young school educated labour force are enthusiastic about regular employment. Generating employment for this group should be a part of the long-term development strategy.

The slow growth of real wage rate in agriculture and in informal sectors imply that the rate of GDP growth in these sectors are not keeping pace with the growth of labour force. A small manufacturing sector confined to large cities cannot influence the wage rate of workers at the source of supply, i.e. the rural and informal sectors. It is difficult to directly implement interventions in the form of minimum wage legislation for agriculture. Rapid growth of a regionally dispersed modern sector is, therefore, a top priority not only for a sustained GDP growth but also for transmitting a pressure on the wage rates in the informal sectors and agriculture.

It should be clarified that a national budget formulated with a long term vision does not conflict with the short term steps for accelerating GDP growth and for supporting the deserving components of economy and the society. Allocations for the traditional programmes of poverty reduction and inequality reducing human capital development must continue along with steps to implement the new growth strategy.

Dr Rushidan Islam Rahman is research director, BIDS