SGF - Bangladesh's Urban Transformation: Exploring the Demographic and Economic Dimensions



Approval Date
Proposal Focus
Core Focus
Secondary Cities
Country Type


Bangladesh is one of the fastest urbanising countries in South Asia, and urbanisation is expected to continue as the country transitions from low- to middle-income country. Spatially, there is high demographic and economic concentration, with Dhaka and Chittagong – the two largest metro areas – dominating the size distribution. Industrialisation is driven by an export-oriented, labor-intensive garment sector, which benefits from the country's comparative advantage as a labor abundant economy. The fast pace of urbanisation, combined with a concentrated spatial pattern, poses enormous challenges for service delivery, urban management and sustainable growth. High and rising congestion costs have started eroding the productivity advantage associated with agglomeration economies in the Dhaka core center. Recent empirical evidence has documented an incipient process of sub-urbanisation of garment employment, traditionally located in Dhaka's core urban centre. This trend indicates that firms' private costs of locating in the core Dhaka urban centre may now be prohibitively high. Yet, urbanisation remains highly concentrated. The sub-urbanisation of garment employment has led to the creation of a greater Dhaka metro area, rather than a more dispersed pattern of urbanisation. No alternative hub is emerging outside Dhaka metro area, and preliminary evidence suggests that secondary urban centres may be losing competitiveness in attracting jobs. In light of this evidence, the proposed study, which will be conducted as part of Bangladesh's next Country Economic Memorandum (CEM), will aim to explore the nexus between the country's urban governance environment and its concentrated spatial pattern of urbanization. The study will empirically test the hypothesis that the country's governance framework has not only contributed to shape its current spatial urbanisation pattern, but has also prevented the country from reaping the full benefits of agglomeration economies. Bangladesh is one of the most centralised countries in the world. Its highly centralised government structure provides firms with high incentives to locate their businesses near or close to the capital city, adding to the market-driven incentives to agglomerate. The highly centralised government structure is also stifling the development of secondary cities. In addition, urban services have not kept up with the growth of the two largest metro areas. As a result, the costs of living and doing business in the metro areas are rising. The social costs associated with large migratory flows to metro areas are also mounting, because of inadequate low-income housing, rising crime and violence and dismal living conditions in Dhaka's growing slum settlements.
The study aims to (a) raise awareness and facilitate policy dialogue on Bangladesh's urbanisation; (b) strengthen the analytical foundation for urban policy making and develop policy recommendations to guide Bangladesh in its transition to an urbanised economy; (c) inform and leverage Bank's urban and local government operations, and (d) facilitate the sharing of lessons of experience between Bangladesh and comparable countries. The following main questions will be addressed as part of the study: 1) What are the main spatial patterns of Bangladesh's urban transition? The first section of the CEM's urban chapter will provide the analytical base for understanding Bangladesh's demographic and economic transformation. This Section will largely draw on the recently completed paper on Bangladesh's urban demographic and economic transition co-funded by the World Bank and DFID. A limited primary data collection will be undertaken if necessary to update the key findings of the paper. 2) What are the main linkages between the country’s governance environment and its spatial patterns of urbanisation? The second part of the study will rely on a firm survey instrument to explore the nexus between the country's urban governance and decentralisation framework and the relative costs and benefits of economic concentration. The survey will investigate the main factors driving or constraining manufacturing firms’ location choice. The factors will include not only the standard market-driven incentives – such as labor markets, localisation and urbanisation economies – but also policy-induced incentives, such as access to government and other centralised services, land availability, housing markets, infrastructure and connectivity. The survey will also investigate the social implications of firms' location choices, with respect to the availability of adequate housing facilities, and more broadly to the safety of garment workers, who are mostly women. 3) What types of policy interventions can support the sustainable development of Bangladesh's secondary cities? The third part of the study will review Bangladesh's policies vis-à-vis secondary cities, and provide a framework for evaluating the effectiveness of alternative policy instruments in reducing economic distance across localities. Countries often resort to a variety of spatially targeted interventions to stimulate economic growth outside of the main urban agglomerations for a more balanced distribution of economic activities. Examples include fiscal incentives, or special regulations for export processing zones. Empirical evidence suggests that these policies are seldom successful in dispersing economic density, when they are applied instead of, rather than in addition to, policies that improve institutions and infrastructure. Complementing connective infrastructure with spatially-blind policies that support, rather than work against, market forces, have instead been more successful in reducing the economic distance between localities.
This study will address a combination of fact-finding, analytical and policy questions related to the nexus between urban governance and decentralisation and urban development. The following main activities will be undertaken as part of the study. Wks 1: Update key findings of the urban study related to the spatial patterns of the demographic and economic transition. The recently completed study on Bangladesh's urban transition is based on the last two rounds of population census data (1991 and 2001) and economic census data (2001 and 2006). The update of key findings will require a population count in selected wards of main urban areas to roughly estimate population growth trends over the period 2001-2011. It will also require an update of the registry of firms in selected sectors and urban areas to cross-check key findings, such as the sub-urbanisation of garment employment. Wks 2: Conduct a targeted firm survey to explore linkages between urban policy and governance environment and firms’ locational choices. The survey, which will investigate the main drivers of firms’ location decisions, will target garment firms which are mostly concentrated in the greater Dhaka metro area, Chittagong City Corporation, and to a lesser extent Comilla municipality, one of the few non-metro Pourashava with significant employment in the garment sector. Wks 3: Document and evaluate Bangladesh's strategy and main policies for the development of secondary cities, in light of international experience from comparable countries. A short analytical piece will be commissioned to classify government policies vis-à-vis secondary cities, including but not limited to public expenditure. This section will also provide a framework for assessing their effectiveness, and review Bangladesh’s experience vis-à-vis comparable countries by commissioning a number of country case studies.
Expected Impacts and Results
The expected outcomes of the activities are: 1) Enhanced policy dialogue on Bangladesh's urban development. The high visibility of the CEM will provide a platform for raising awareness and fostering policy dialogue on urban development issues, which are the core of both NSAPR-2 and CAS; and 2) Strengthened analytical base to inform urban policy making. The urban study will also provide the analytical foundation to support informed policy-making on urban development. Success of the urban study, and CEM, will be ultimately measured by any specific concrete government actions that can be in whole or part attributed to the dialogue conducted through the preparation, discussion and dissemination of the report.