Rise and evolution in film making – the Nollywood story

Rise and evolution in film making – the Nollywood story

by Péter Pölöskei

Film production has peculiarities in every continent – most readers would be familiar with the globally renowned Hollywood and Bollywood industries, and of course with the state-subsidized European ones. But you might be surprised that in the last ten years, the top 3 in number of movies produced in a country always included a contestant not mentioned in the first sentence – and this is Nigeria, the home of Nollywood, producing more than 1000 movies per year, thus only rivaled by India.

Of course you should not be shamed if you have not seen the latest Nigerian hit or artsy feature in your local multiplex – because these movies have to do with the technology that they actually have at their disposal, which means that distribution is done directly on CDs, DVDs (and yes, occasionally still on VHS!). But why is this important to us now? Because it is a great example of how a historical accident and agglomeration effects can define a continent-wide industry.

In the 1990’s technology was ready for a democratizing shift in film making in Africa, as video devices, cheap but reliable cameras - and people with a taste for cheap entertainment - was already available. While before mostly francophone countries – encouraged by France – were forerunners (more like slumping at the time) in making African films, a hit came from Nigeria titled Living in Bondage. Unlike the francophones, the movie was shot straight-to-video, and became a real blockbuster, that showed that there could be profit to made for Africans in this industry.

This was a start signal, and the few filmmakers already living in Lagos sensed the opportunity. The most populous city in the country was not only providing a readily available market, but other features as well. In a place with some experience available in filmmaking, with people ready to take a shot at African superstardom, selection of talented film crews could go easily. Since Lagos was a destination for migrants from different regions, the use of English was necessary, so most applicants had some of the necessary skills as well. The city also offered distribution connections to the new industry, as a significant share of the igbo tribe lived in Lagos – who were influential in trading activities all over the country. This only just increased the size of market available on top of the local demand. So all in all, after the initial opportunity came, the city provided the unique connections of the igbo, a significant amount of talented and skilled enough people willing to be either filmmakers or part of film crews, plus the scene soon created competition between the emerging little studies.

In a matter of years the features that started making Nollywood successful also made it capable of leaving the country. Since distribution channels are constrained by state borders, but are helped by border-crossing older trade patterns and modern technology, soon the industry was capable of supplying the many English speaking countries of the continent.

But the story of Nollywood is not simply a rise of a monocentric movie empire – just as Hollywood also helped creating Hollywood North (Vancouver), or re-shaping New York to add cinema to theatre. While Lagos is the centre of production, where all big Nigerian producers have their offices, after a while, there were other factors to consider. Lagos location-wise was not perfect, as it turned out after the first decade, that some parts of the production process – like many parts of shooting – are not ideal to take place there. To put it simply, it just became too crowded, as companies were vying for resources, like locations for shooting, which were hampering production, thus driving up prices. So came the rise of Enugu, a city that already had some shootings going on, offering vast areas for production processes. Thus in the latest years, producers moved a significant share of shooting activity to this more eastern Nigerian city, to control rising costs.

Justus Esiri, the posthumous winner of the 2013 African Movie Academy Award for Best Actor

 The case of Nollywood is a great story about how a shift in technological opportunities was seized after a historic accident, creating a new agglomeration of filmmakers in Lagos. The positive effects of agglomeration caused the industry to grow in unusually high proportions, giving Nollywood global recognition and eager consumers all over Africa. Then as the costs started shooting up, spreading to Enugu became a rational option that created a division of labour between the two.

Some further readings about Nollywood:

McCall, John C. (2004) ‘Nollywood Confidental – The Unlikely rise of Nigerian Video Film’; African American and African Diaspora Studies, Issue 95 (Vol. 13, No. 1), 2004

Saul, Mahir – Austen, Ralph A. (eds.) (2010) ‘Viewing African Cinema in the Twenty-First Century’; Ohio University Press, Athens (OH), 2010

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The industrial park of Pécs

The industrial park of Pécs 

by Márton Kormanik

This post examines the way the industrial park of Pécs was created and whether it was successful or not. It also tries to outline if the industrial park was capable of coping with the recent crisis or not.

The following post is going to be about the industrial park of Pécs. There was a campaign for encouraging the establishment of new industrial parks throughout different regions of the country. That program is called IPPP (Industrial Parks Partnership Programme) and it aimed for an increasing number of industrial parks each year beginning with 1997. The programme was considered highly successful for being enough of a force to create 165 industrial parks around Hungary until 2003. Later on the European Union contributed to this program with 138,309 EUR. 

What was a really good idea of this programme was to focus on poor regions. In 1999 there were 112 industrial parks established, and 66 of these parks were installed within the four poorest regions of Hungary (northern Hungary, the Great North Plain, the Great South Plain and southern Transdanubia). The primary goal of installing these parks in poor regions must had been to decrease regional inequalities within Hungary to an acceptable level. The programme was also supported by Italian partners, who granted training for the directors of the 66 parks established in the poorest regions.

Through this programme the industrial park of Pécs was also established. This industrial park replaced mining facilities that provided workplaces for local people, and it had overcome its predecessor in many ways. First of all mining is a very harmful industry for nature and human health too. By bringing down the mining facilities the pollution of that location dropped sharply. Second, the industrial park not just employed more people than the mines previously, but it also opened a re- and further training facilities that are now vital in supplying companies with highly trained, advance and cheap workforce. This had various results during the years since then.

First of all, the industrial park of Pécs became an agglomerating force. More and more companies settled down in the park, thus raising its importance even further. Although the financial crisis of 2008 sort of broke that trend, for many companies became bankrupt or were just simply forced to streamline their budget, and this resulted in many plots being sold.

But this still does not mean that the industrial park in Pécs is done forever. In fact, the financial crisis might be a positive impact in the end. Investments and expenditures began in the year of 2006 supported by the government that are probably becoming productive soon. Those investments focused on expanding the territory of the park and developing the infrastructure.

The raising amount of disposable land raises the supply of land that already had been boosted by those companies that went bankrupt during the crisis. This means that soon the land prices should start dropping within the industrial park, which could attract other companies or investors. Furthermore, the training facilities still operate there, creating well qualified and cheap workforce, what can also attract companies. And if more companies or investors could be attracted then soon, the industrial park of Pécs could flourish again. All in all in my opinion the industrial park of Pécs can be considered a success. There are 3 main reasons supporting my opinion. The first one is that the park replaced a harmful industry with industries that have less devastating effects on the nature and human health. Second, the park had been considered a success by companies too, because they chose to move there in great numbers. Third, despite the relapse caused by the financial crisis the industrial park still have many opportunities to utilize.

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“Canal-mania” –water system during the Industrial Revolution in Great-Britain

“Canal-mania” –water system during the Industrial Revolution in Great-Britain 

by Mónika Kiss

Britain canal-building process between 1760-1840 was extremly important in the process of industrial revolution, as it reduced the transport costs and caused agglomerations to rise. 

Transport costs are the heart of the New Economic Geography theory, as they are the most important exogenous factor. If transport costs start to fall, until a particular point, nothing happens. Then the economy sharply renders to agglomeration, to a region which the first migrant decides to move or the outcome is solely the result of a historical accident.

The story of “canal-mania” is clearly based on the process of relatively sudden lowering of transport cost. This process speeded up the development of the industrial cities. 

Let’s see the facts! Britain had very few proper canals before 1750, however its water system was perfectly suitable for such a purposes. (Year-round rainfall, perennial water supply.) The earliest canal building was undertaken as a local enterprise needing to ship goods, such as the Duke of Bridgewater's canal built to ship coal from Worsley to Manchester. The end of the American War of Independence and good years in agriculture helped the disposable income to rise, and people wanted to earn yield on their money.

In less than a generation, England was full of navigable waterways and heavy goods were carried by boat. Canal boats were massive: they could carry 30 tons pulled by a single horse, which was more than ten times the cargo per horse using a cart. Innovations: boat lifts, puddle-clay process (the process of lining the channel with puddle - a watertight material) helped the canal-building further. Historians say that this was the time when transition to the “business mentality” started, entrepreneurs were born, utilizing surpluses from agriculture and trade, and capital assured by manufacturers and other investors. But let’s get back to the transport costs!

The ‘canal mania’ of 1760–1840 converted England to an interconnected web of efficient all-year round waterways with 3,400 kilometers of navigable rivers, and 3200 kilometers of canals. Why the rush? Not only because of the trade. Coal and iron deposits were reachable via the water transport system in England, to a much larger extent than anywhere else. This made possible the raw materials to deliver to the production sites. Widely known that the manufacturing cities like Manchester or Birmingham were major economic drivers for the 'canal mania', and benefited vastly from a network of canals. Most of the traffic on the canals was solely internal. However the network linked the mainland cities with coastal port cities such as London, Liverpool, and Bristol, where cargo could be exchanged for import and export.

The end of the story? It happened also very fast, as usually things happen in revolution. From about 1840 railways began to threaten canals, canal companies were unable to compete against the speed of the new railways. With building the railway system another round of lowering of the transport costs occurred, but this is a different story. Consequence? The New Economic Geography theory showed us again: transport costs are the key.

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Failure of the M3-M30 motorway?

Failure of the M3-M30 motorway?

by Áron Iker

The Hungarian government aimed to positively affect the regional development of the agglomeration of Miskolc by constructing a motorway between the capital and the city. However,  the reduction in transportation costs between Miskolc and Budapest supposedly has driven to an equilibrium where Miskolc faces with negative agglomeration forces, so the construction of the motorway has had an adverse effect than expected.

The construction of the M3-M30 motorway in Hungary started in 1978 and after long offset periods it eventually reached Miskolc, one of the biggest Hungarian cities. The project had clear goals which were declared by the Hungarian governments. Firstly, it aimed to reduce the congestion on the Road 3 which turned over large cargo and personal traffic. Secondly, the government expected a significant development in the region around the track of the motorway. After the beginning of the 90’s when the artificially sustained heavy industry and mining ceased or rapidly declined, these areas became the poorest ones of the country. Along many economists’ suggestion that infrastructural improvements (through reducing transportation costs) boost the economic prosperity of a given region, politicians had large hopes for the opening of the highway. To sum it up, the goals of the new motorway were focused on lowering both transportation costs and congestion.

In the core model of new economic geography transport costs play a substantial role in the determination of location equilibrium. Construction of a motorway lowers transport costs directly – primarily by higher speed and consequently by less time required for transportation. Congestion can be also considered as a factor that increase transport costs – mainly by time loss and additional hiring costs. By reducing congestion we can also diminish transportation costs. The core theory of new economic geography says that in the presence of high transport costs the unique stable equilibrium is spreading and the reduction of transport costs mainly drives agglomeration forces. In the extended version of the model, where there are vertical linkages between firms, the Bell curve says us that incomplete agglomeration can be also a stable equilibrium and under low values of transport cost we can observe again spreading equilibrium. It is obvious that the result of opening a new motorway is highly depends on the initial state of equilibrium.

While the M3-M30 motorway connects Miskolc with Budapest (and of course with West-Hungary) we can describe it with a two-region model where the agents decision is whether serving the demand of Miskolc by transportation (agglomeration) or establishing local firms (spreading). The aim of the government was the enhancement of the second one. However, if the equilibrium was on the right side of the Bell-curve (the previous history of the region suggests this version), the motorway construction would have negative agglomeration effects in Miskolc.

According to the empirical evidences the decline in the transport costs resulted in a shift toward agglomeration. Firstly we can review the traffic-count data. ( I have chosen Emőd - and in earlier years Vatta - for observations, because here we can find data about the traffic of the Road 3 as well as the M30 motorway, and it is close enough to Miskolc that we can suppose that almost all of the traffic reaches it but there is just negligible local traffic.) It clearly indicates that one of the government’s goals has been fulfilled: congestion sunk significantly. The average daily traffic on the road 3 toward and from Miskolc accounted for 10514 vehicles in 2002 (directly before the opening of the M30 motorway) and 3879 in 2010. The shaping of the traffic also can sign whether agglomeration forces actuate or not. As Graph 1 shows the daily cargo traffic toward and from Miskolc permanently grew. (In order to eliminate distortions originated from measurement imperfections every data are the averages of 3 years.) It can sign that it worth for firms to satisfy demand in Miskolc by transport and also that Miskolc becomes an agglomeration where firms export from.

The conclusions of Németh (2006) highly support that the process which evolves is the first one. He shows that the construction of the M3 motorway to Polgár (and the M30 to Emőd) has had no significant effect on the wage levels (which grows if agglomeration evolves) and on the unemployment rate (which usually falls due to the more workplaces in the agglomeration). The only indicator where improvement is observable is the density of firms (all of the data are related to the Hungarian average). However, this indicator depends not only on the number of firms but also on the size of the local population. According to the data of the Hungarian Statistical Office (KSH) the population of Miskolc accounted for 185,567 in 2000 while only 166,823 in 2010. Consequently the growth in the firm density does not sign the evolving agglomeration. Other KSH data confirm that in Miskolc we can observe negative agglomeration trends. As Graph 2 shows after 2004 (when the motorway reached Miskolc) the number of operating firms in the city began to decline.

On the whole we can say that the reduction in transportation costs between Miskolc and Budapest supposedly has driven to an equilibrium where Miskolc faces with negative agglomeration forces, so the construction of the motorway has had an adverse effect than expected. The most important consequence of this story is that reducing transportation cost is not always useful for the aimed region, especially if it does not couple with other sufficient measures.

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Make the history or “Just do it”

Make the history or “Just do it” © Nike 

by Jamila Mammadova

The agglomeration in Dubai is broadly discussed by many economists as an example of  rapid growth and successful policy implementation. Its development is unusual since Dubai  has a list of obstacles to the revolutionary development it achieved. Even though, the reasons are economically explainable, and bunch of literature is provided on the subject, we would like to re-consider the Dubai case in the frameworks of the new economic geography. The main argument we are supporting here is that artificial interventions and
planning in the geographical economy matter. The statement comes from the classic economic geography, which argues that history matters for the agglomeration. By the same logic, if the history matters, it can be corrected by policymakers in such a way that forces leading to agglomeration in the target destination are activated. The theory says, after certain level of economic cluster is reached, the decreased transaction costs for market players and beneficial market conditions create sort of spiral proliferation of the agglomeration.

Why the agglomeration in Dubai would not happen by itself? Firstly, Dubai is oil rich zone that has all preconditions to fall into the pitfall called “resource curse”. In fact, it happened with similar economies of Gulf States, like Oman or Qatar, which are rich countries, but are too reliant on the oil sale. Dubai could have historically ended up there, but in contrast, its economy is highly diversified, despite the fact that oil money played a high role in the initial investments. Secondly, the climate of Dubai would keep a great part of the travelers far from the city in hot periods. This could, in theory, lead to some tourism increases in winter and sleeping periods in summer. The mirror image of economic activities can be empirically demonstrated by Antalya or Bodrum, which are Turkey resort zones, and are frozen cities in cold times of the year. By the same token, there should be strong motivation to stay in the emirate during tremendously hot summer. Even though today summer life in Dubai allows closed-air skiing, thanks to the engineers and magic of the air
conditioning, the puzzle is in the achievement of the threshold that led to this development. The confusing part is how did they manage to make the first people invest, to bring FDIs to the country? Thirdly, religious and cultural background would never suggest that emirate can open up its economy and internationally integrate to the extent that it became one of the most popular tourist destinations in the world. 

In fact, it is not only tourism, which brings money to the economy, but also business and finance activities. The history of Dubai would never foresee it. Perhaps, it is because somebody stepped in and changed the road. In fact, the intervention to the development of the city took a long path. Even though Dubai was never poor before, it was definitely not on this scale of agglomeration. Interestingly, the first investments in the economy in the 60-s were made by Ruler Rashid bin Saeed Al Maktoum, who is perceived as the main driver of today’s expansion of Dubai. Thus, it is an individual and not a simple historical outcome that is treated as the favorable reason. Interestingly, the first investments in non-oil sector of the economy, infrastructure, were made even before oil money influx started, and were borrowing-grounded.

During two generations of rulers of Dubai, the aggressive investments in the various fields of economy were made, starting from the dredging of the Dubai Creek in order to allow larger ships to accost in Dubai. Later, the investments were made in the airport, hotels, aluminum and desalination plants, tourism promotion, trade promotion in form of festival arrangements, and, importantly, establishment of the free trade zones. All of these measures successfully brought the result, despite the fact that it took long time and large volume investments. As an award, today Dubai enjoys rich and stable economy thanks to its diversification and investments continuation. Nothing is black or white, and the debt accumulated for these investments is to be repaid by the government. Nevertheless, the city attracts business units as magnet given its developed market and, thus, low transaction costs, which ensures large money turnover. 

In the framework of our theory, all these measures taken by the rulers of Dubai represent artificial intervention in the history. The theory anticipated that once threshold is achieved, agglomeration would occur on the target geographical place. Indeed, what Dubai did, it practically managed to achieve this theoretical threshold.

The Dubai case should inspire the policymakers of other “oil embraced” countries to be not led by the history, but make it. Dubai does not have to invest so hard anymore, since the market players are clustering there and trying to amaze tourists, rich country citizens, and create more and more new services. Moreover, the high concentration of the firms provides Dubai with a luxury good: easy access to information, rapid modernization, and upto-date market. Indeed, Dubai has all possible international firms, restaurants, hotels, brands. And as one of those brands would suggest to the weaker countries, “Just do it”.

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Agglomeration of population in Baku. Labor Pooling.

Agglomeration of population in Baku: Labor Pooling in action.

by Turan Orujova

 Azerbaijan republic (AR) is one of the biggest countries in the Caucasus region. It is located on the border of Europe and Asia and bounded by the Caspian Sea. The neighborhood countries are Russia, Georgia, Armenia, Iran and Turkey. Total area of Azerbaijan is 86,600 sq km and it is divided into 10 economic regions.

  The major contribution to the economic growth of the country is energy resources (oil). After gaining the independence from the USSR, the Azerbaijan Republic is considered to be a transition economy, with major export sector being oil. From the middle of 90 s the government managed to open up to the international trade and business. During last decade the total FDI into Azerbaijan exceeded $ 25 bn, and from this aspect Azerbaijan is a leading country in the region.

   The reason for enterprises to make equity investments in Azerbaijan is that in general these companies are mostly oil and petroleum oriented enterprises, and abundant natural resources make Azerbaijan an attractive target for such investments. The most interesting fact is that most of these enterprises are located in the capital of the country- Baku. If we look at the country from the point of view of the regional economy, we can easily observe the agglomeration of population in one particular part of the state, - the capital. The population of Baku has changed considerably during the last decade; moreover, there is an escalating tendency of migration to the capital during the last two decades. Below, we can see the changing pattern of agglomeration in the capital, here the increasing tendency of population growth can be observed.

What is the incentive for moving to the capital (Baku)? There are many reasons for agglomeration to occur in the capital and let us observe some of them.

Azerbaijan has access to the Caspian Sea, which oil and gas reserves are considered to be one of the major condensed gas and oil deposits. For the reason that Baku is situated on the seashore, it is a suitable location for the businesses doing oil exportation. In 1994 the ”Contract of the century” was signed, which implied the projected investment equal to $13 bn.  This is how we can explain the increasing tendency of population in the capital. Huge amounts of FDI give government a push for development, thus, creating new workplaces and that pushes people to move. The rapid increase in agglomeration started approximately in 90^ts,  when the major 11 companies invested into Azerbaijan oil sector: BP, Amoco (U.S.), LUKoil (Russia), Pennzoil, UNOCAL (U.S.), Statoil(Norway),Dermott(U.S.), Ramco (Scotland), TPAO (Turkey),DeltaNimir and SOCAR (Azerbaijan).

Consequently, during the last decade there has been a significant drop in the unemployment level. As State Statistics Committee reports, recent time (especially starting from 2003) the unemployment rate fell almost by 3.6%. Such a decreasing tendency of unemployment can be explained by the creation of new workplaces in the industry production. New investors and new firms mean expanding of productions, thus, creation of workplaces, consequently, incentive for people to move from poor rural parts of the country to the capital, where they can easily find a job.

Another reason is the new economic formation with high level of private sector participation. The increased share of private sector (98% in 2001) makes the country’s economy more competitive. Rapid growth of economy, based on the processes of globalization, led to the development of SMEs and privatization. Most of the private corporations are located in the capital, because it is less costly to find educated people, with good knowledge and background. Fine infrastructure of the city makes it convenient to do business with foreign partners, which are attracted to the emerging market with abundance in natural resources.

Finally, as a result of agreement between Azerbaijan, Georgia and Turkey in 2006, The Baku-Tbilisi-Ceyhan pipeline started to function. Since then Azerbaijan started to act on the international market. The international agreement caused migration not only within the country; it became the reason for migration of foreign workers to Baku, in order to participate in the construction of the pipeline.

Thus, on the example of Baku, we noticed that if a country is abundant in natural resources it can cause the agglomeration of people (consequently firms, workplaces, production) in a particular part of the country, which can be considered as the business center of the whole state.

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Traffic Jams in Dar es Salaam city: Blowing away benefits of agglomeration

Traffic Jams in Dar es Salaam city: Blowing away benefits of agglomeration

By Elly Chuma

Dar es Salaam, the nucleus of Tanzanian economy, is the fastest growing city in East Africa. Prospect of good life beckons and attracts all classes and types of people in Tanzania; at the same time becomes the famous for traffic jams which are eating up the benefits of agglomeration economies.

Like other cities Dar es Salaam agglomeration is not an accident episode, since the city located on a natural harbour on the Indian Ocean which serves almost 90 percent of all imports. This harbour is the heart of the Tanzanian transportation system as all of the country's main railways Tanzania and Zambia Railway Authority (TAZARA) and Tanzania Railways Limited (TRL), and several highways originate in the city. Presence of more than 15 universities, good hospitals, schools has attracted many firms to locate their businesses in the city and workers to find jobs. Firms and workers locate in Dar es Salaam because this city offers a bunch of benefit, varying from product varieties, availability of workers, jobs, and so many amenities which are very difficult to get at low prices in other cities.

The city is the main engine of economic growth and serves as a major administrative, commercial, and industrial centre in Tanzania compared to other 29 regions. It is really surprising that this city contributes of 80 percent of the total GDP and home of one half of total manufacturing employees of the country. Dar es Salaam has invariably been an attractive, persuading centripetal centre, making its population one among of the most fast-growing in Africa. The city population has been double in last decades from 2.5 million in 2002 to approximately 5 million in 2012. The rural-urban migration into Dar es Salaam has involved different groups of people but young people are dominating. This group is looking for employment, with neither capital nor skills to undertake gainful business.

Transport problem in Dar es Salaam is a recent disease. Thanks to the government who did not make significant initiative to build new roads or rehabilitation of the existing ones. The fact that this city does not have rapid mass system, small buses do not offer enough services, consequently ownership of private cheap used cars especially from Japan has been increasing geometrically in Dar es Salaam and cause traffic jams more problematic

In past, commuters were able to move 30 kms only for 20 minutes which is quite difficult these days, now it takes more than 2 to 3 hours in the pick time. Minister of Works in 2011 lamented, "Dar es Salaam contributes nearly 80% of the national income, at the same time people are wasting a lot of time in the traffic jams. The latest study shows the jams cost the economy more than 4 billion Tanzanian shillings a day (equivalent to US dollar 2.5 million)."

“Do you want to be on time in your office”? Here is the deal; you have to wake up at 4:00 am to prepare yourself and make sure you get to the road around 5:00 am so that you can avoid traffic jams in the morning. Working hours starts from 7:30 am to 4:00 pm, but you have to wait until 8.00 pm when majority of people in the city center have already left. This is the innovative way used by some people to avoid using too much oil in the traffic jam.

Traffic jam in Dar es Salaam has influenced the location of the firms significantly. Traffic jam has increased cost of production for firms, and workers also are using a lot of time to commune and use a lot of oil in the queue. Some big companies like Heritage Insurance Company Limited, Tanzania Communications Regulatory Authority, and large cellular network companies (Airtel Tanzania Limited, Vodaphone Tanzania Limited), and Stanbic Bank Tanzania Limited have relocated to the periphery of the commercial capital to escape overhead costs caused by traffic jams, parking fees and other related problems.

It has been estimated by the Confederation of Tanzania Industries (CTI) that traffic jams costs up to 20 per cent of annual profits losses of most businesses in the city. Those companies that deal with the supply of fast moving consumer goods such as beverages, edible oil, bread and soap are the most affected since it is very hard to make timely deliveries of their products to customers.

Furthermore, traffic jam contributes to the increase level of crimes. Thieves used to walk along the cars’ queues and steal citizens’ belongs like handsets, jewelries. Also impatient drivers particularly dala dala drivers (famous public transport buses) in usually violate regulations cause killings of pedestrians. Traffic jam has led to significantly increase use of motorcycle (famous name boda boda) which has boomed the numbers of accidents in Tanzania killing hundreds of people.

The future of Dar es Salaam city is still uncertain, regardless of current attempt of government to curb this problem. Introducing train transport and a new plan to replace small buses with a government-managed rapid mass transit system are difficult to assess yet.

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Agglomeration in Dhaka: How does Read Made Garment (RMG) industry make Dhaka the fastest growing city of the world?

Agglomeration in Dhaka: How does Read Made Garment (RMG) industry make Dhaka the fastest growing city of the world?

by Md Masud Karim

In a sunny day of last summer, I was shopping with my German friend in one outlet of H&M in Budapest and suddenly she shouted “Oh My God! This T-shirt is too cheap! Masud, you see it is from your country”.  There is no doubt that the magical role of Ready Made Garment (RMG) industry in the agglomeration of Dhaka, the capital of Bangladesh, is more surprising.

Between 1990 to 2005, Dhaka, the fastest growing city on the earth, doubled in number- from 6 million to 12 million. According to United Nations, Dhaka which is the residence of 17 million people by 2011 will be the home of more than 20 million by 2025. It is well known that massive migration, high birth rate and new experience of free international trade are swelling cities in developing world; however, these factors are perhaps more strongly intense in Dhaka than anyplace in the world. Thanks to the concentrations of export oriented textile industry in Dhaka, which starts in 1980s and flourished in last thirty years, and thus created this massive agglomeration.

The RMG sector of Bangladesh has experienced a dramatic growth in last three decades. At present, Bangladesh ranks the third largest garment exporter after China and Turkey in the world. Before 1980, the country’s RMG industry’s role was mainly import substitution; hence, was not subject to export limit under the Multi-Fiber Arrangement (MFA). This opportunity did not escape the attention of Daewoo Corporations of South Korea, one of the largest RMG manufacturers losing from quota system. Without making delay, Daewoo teamed up with a Dhaka based new enterprise Desh Ltd. in 1979.

Knowledge and technological spillovers seems to be the first cause of RMG industry development in Dhaka. In 1979, Desh sent 130 new employees to Daewoo’s factory in South Korea, where they took part in an eight-month intensive training course on garments industry. Within few years, like employees of Silicon Valley companies who started their own business, most of these employees had left Desh and started their independent RMG business in Gazipur and Mirpur area of Dhaka. In retrospect, even though it was a great blow to Desh and Daweoo, it was boon for Bangladesh. In 1980, number of RMG factory was 47 which increased to 804 by 1990 and 5000 by 2011.

The contribution of government in the sustainable development of this sector is beyond question. In 1985, special benefit under MFA was withdrawn; however, the growth of RMG was thriving. At present, this sector accounts for 75% of countryexport and 25% of GDP. 

Figure: Number of garments factories in Bangladesh                        

Figure:     Employment (million workers)

Source: Bangladesh Garments Manufacturers and Exporters Association

Perhaps no other industry in the world contributed in agglomeration of a city like RMG has done to Dhaka city. As majority of RMG factories are set up in Dhaka city, it attracted unskilled and semi skilled labor from the whole country. At present this sector employs 3.6 million people of which 85% are woman.

This sector has created job opportunity not only for unskilled and semi-skilled but also for university graduates. Nowadays many universities in Dhaka city offer degree on textile. This makes it easier for the industry to recruit employees and at the same time employees have choice whom to work for.  

The concentration of the RMG industry in Dhaka has also induced the growth of other related business with close proximity to the RMG factories. Importers of raw materials and agent offices of foreign buyers find it advantageous to be close to production units. Consequently, it increases efficiency of this industry.

In comparison to other cities in Bangladesh, Dhaka has the largest high and middle income consumer base. Moreover, people in Bangladesh have a tendency to travel to the capital for shopping which also makes Dhaka more important local market. Even if foreign buyers cancel orders, garments owners still can have sound sleep as they know these garments can be sold in clothing markets of Dhaka like hot cake.

In the long run, garments industry in Dhaka likely to be hurt by high labor cost pushed by high living expenses, labor unrest which has become a common phenomenon; however, the wave of agglomeration this industry has created seems to be long-lasting. At present, out of 87 universities in the country, Dhaka city, which is one of 64 cities in Bangladesh, is the home of 52 universities. Moreover, the presence of all the urban amenities such as healthcare, theaters, and stadiums are also biased toward Dhaka.  These factors will continue to attract rich, educated people of the country, who are willing to pay extra living expenses to enjoy urban amenities.

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Introduction

Regionomist is a fairly new blog I started about the role of space in economics. The idea is to write about issues in Europe and around the world about the interaction of agglomeration and development, transportation and business. Like why cities exist and develop or why some regions are richer than others. Or what impact transportation may have on development. How companies decide about where to locate a new plant and how business conditions may affect it. Sure, its mostly economics but we are interested in geography, transport, urban development or even architecture. So far partners include ELTE University and Central European University.
Enjoy.

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The advantages of a high-speed rail – an example between Madrid and Barcelona

In 2008 a high-speed rail connection has been opened between Madrid and Barcelona shortening the time getting from one city to the other to 2 hours and 38 minutes. The main goals of the construction were the reduction in travel time on the corridor and the increase of capacity and safety conditions on the rail line (Frontier, 2011).

There are numerous changes that followed the launch of the HSR between Madrid and Barcelona. It shifts passengers from other transport modes, for example car, traditional rail and air (Dyjak et al., 2011). Constructing a new line between the two cities that are 600 km far from each other has a significant effect on air transport too (Rus, 2008). Previous to 2008 nearly 90 percent of the people travelling between Madrid and Barcelona went by air, but since the HSR has been built the number of passengers that go with train are increasing and even surpassing passengers going with planes. This trend is pointing towards a more environmentally friendly future as emissions per passenger on a high-speed train are approximately one-fourth of the emissions generated by flying by plane or driving a car. This is a great advantage as there is a growing public concern about environmental issues in Europe (Bachtler & Wren, 2005).

Lowering the emission of carbon dioxide is however not the main goal of most of the passengers who choose HSR to other means of transport. It is also more comfortable and convenient to travel with HSR. The train offers assigned reclining seats, computer outlets, movies, headsets, good food and gloved attendants to make people satisfied while travelling in these trains. Also, people can get to the station just 10 minutes before the departure unlike at airports, thus lowering the time spent on travelling. These are the main reasons why though it is not cheaper to travel by HSR than by plane between Madrid and Barcelona many choose this form of travelling (Rosenthal, 2010).

Also, polycentricism is a goal in Spain. As there is a low location index in Spain, with expanding the high-speed railway network the country tries to avoid concentration and centralization of the economic activity (Dyjak et al., 2011). The HSR line between Madrid and Barcelona has an impact on mobility, accessibility, socio-economic structure, urban image and spatial effects. These factors are considered to be significant but it is hard to quantify them in monetary terms (Frontier, 2011).

One of the most striking examples for the growing economic activity caused by HSR is the town of Ciudad Real located 120 miles from Madrid which has completely vanished because of the railway and the highway that bypassed the town. Now that an HSR station is located near the town and makes travel a lot less time-consuming, Ciudad Real has come alive as the HSR attracted a host of industries. Also, the University of Castilla-Lamancha has grown in size and importance too just because it is linked by the HSR (Catan, 2009).

Spain was always a top destination of tourists from all around the world. Now that more and more HSR lines are being built connecting cities all over the country it is easier not just for the workforce to be more flexible but also for the tourists to discover the cultural diversity of different Spanish regions (Raileurope, 2011). First, mostly business travelers were expected on the line between Barcelona and Madrid, but it is busy on the weekends too which means that Spanish people and tourists also use it to discover the cities. The government says that high-speed trains boost tourism which is the nation’s biggest industry and business travel. Also, constructing and maintaining a line make jobs for thousands of people. In the cities near the lines many companies that are involved in the different sectors of high-speed rail are investing in offices, plants and yards near the stations (Sheehan & Bee, 2012).

However, there are downsides too of the HSR line between Madrid and Barcelona. One of the problems is the corridor effect that shows the problem of the development of regions located between junctions of HSR lines. In these cases the infrastructure passes through the regions in between the stops without having much impact (Dyjak et al., 2011).

Moreover, the Spanish government wants to spend up to 77 billion dollars to expand and improve the lines while there is still an economic crisis.  When they built the Madrid-Barcelona line Spain it the economy was rising, but maybe now it would be wiser to cut the spending. Even if the number of passengers that choose HSR rises, the railroad system cannot cover its costs yet even between Madrid and Barcelona (Sheenan, 2012).

There are protests against the HSR too. A violent separatist group in the Basque country called Eta has launched an environmental campaign against the train. They even shot a local contractor in 2008 because he worked on the line (Tremlett, 2009). This shows that some people don’t want the country that is separated out somewhat to be intertwined (Catan, 2009), because they fear their independency and that they would assimilate to the rest of the country.

Nóra Szabó

References

Bachtler, J., & Wren, C. (2005). The evaluation of EU cohesion policy: Research questions andpolicy challenges.

Catan, T. (2009). Spain’s Bullet Train Changes Nation. The Wall Street Journal. 

Dyjak, R., Magda, I., Rosik, P., Zawistowski, J., Gapski, T., & Bienias, S. (2011). Evidence based Cohesion Policy and its role in achieving Europe 2020 objectives. In T. Gapski, S. Bienias, & E. Opalka (Eds.), . National Cohesion Strategy.

Raileurope. (2011). High Speed Rail News: Travel by High-Speed Train inSpain. High Speed Rail News.

Rosenthal, E. (2010). High-Speed Rail Gains Traction in Spain. The New York Times. Retrieved from 

Rus, G. D. (2008). The economic effects of High Speed Rail investment. OECD/ITF Joint Transport Research Centre Discussion.

Sheehan, T., & Bee, F. (2012). Economic impact of high-speed railvaries in Spain. San Francisco Chronicle.

Sheenan, T. (2012). Spain’s high-speed rail system offers lessons forCalifornia. The Orange County Register.

Tremlett, G. (2009). High-speed rail in Spain: From Madrid to Barcelonain a flash. Guardian.

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SR-520 Bridge Project: Reconnecting Seattle

by Brandon Musser

State Route 520 (SR 520) is a 12.8 mile corridor linking downtown Seattle and its Eastern suburbs of Bellevue, Kirkland, and Redmond (collectively known as the “Eastside”) which are separated by the 30 mile long Lake Washington. The route is of considerable economic importance to the greater Seattle area as it provides one of only two passages across the lake, connecting the dense downtown residential area to several large commercial centers, including Microsoft's main campus in Redmond which employs nearly 40,000 people (another employer in the area you may have heard of is Boeing). Every day, around 115,000 vehicles travel the four-lane, 2,285 meter long floating bridge which currently spans the lake. However, the bridge, which was opened in 1963, was originally designed to accommodate only 65,000 vehicles per day. During peak rush hours, traffic merging onto the bridge creates a bottleneck, turning the freeway into a parking-lot and the short 10-15 minute journey from Redmond to Seattle into an insufferable hour-long nightmare.

Construction is to begin in 2012 on a new bridge which will replace the existing bridge and expand the flow of traffic to six lanes, as well as a pedestrian path, and will be compatible with future inter-city light-rail proposals (http://www.wsdot.wa.gov/Partners/Build520/ ). Additional upgrades will be made to both on- and off-ramps, further improving the flow of traffic along the entire corridor, but especially in the vicinity of the bridge. The additional third lane (in each direction) will be a designated HOV lane (reserved for car-pools, motorcycles, and public transit), improving the reliability and attractiveness of using means of public transportation to commute to and from work. Much wider shoulders will also dramatically decrease the time of accident/breakdown response and cleanup/removal, which are often responsible for the worst traffic delays. The eventual implementation of light-rail will provide residents of the metropolitan centers of Bellevue and Seattle with a very quick, reliable point-to-point means of commuting which will avoid traffic all-together. The new bridge is scheduled to open in 2014, while a definite time-line has not yet been set for the light-rail.

The new bridge, along with the upgrades being made along the entire corridor in general should greatly reduce the cost of commuting between Seattle and the Eastside, not only in terms of dollars but in the opportunity cost of time as well. Using two different models of economic geography, we can speculate as to what kind of implications the drastically reduced transportation costs could have on the economic dynamics of the region. Predictions depend largely upon how one views the greater Seattle area; as two distinct regions (Seattle and the Eastside) or as one larger integrated economic region. According to the Krugman model of New Economic Geography, in a two region scenario exhibiting a mobile labor force, there are two forces in which reduced transport costs could induce agglomeration. The first being the price-index effect and the second being the home market effect (HME). Under the price-index effect, the larger market has an advantage because the price-index will fall with the size of the market, making products cheaper in that region. According to the HME, the region with higher aggregate income will enjoy a more than proportional amount of variety of consumer goods and a more than proportional amount of the higher-skilled workers, making the larger market more attractive. The NEG model would, therefore, suggest that lowering the transport costs between Seattle and the Eastside could spur agglomeration in the larger market (Seattle) at the expense of the smaller market.

On the other hand, if we consider the greater Seattle area to be one large market, the classic Von Thunen could offer insight as to the effects of reduced transport costs between Seattle and the Eastside. The model is used to examine crop selection based on bid-rent functions which depend heavily on the transport costs of various crops. In this case, we can think of different economic functions (industrial/commercial activities) with activity locations being based off of the same bid-rent functions.  According to the model, as transport costs fall, so should the area of land profitable for agricultural activity, introducing opportunities for new activities that were once unprofitable under high transport costs to become profitable. To me, this scenario depicts a region becoming increasingly integrated as the flow of goods (or people) becomes less costly.

I believe the second model is more applicable to this case of decreasing East-West transport costs in the Seattle area as I believe the area is much more resemblant of an integrated market than two separate regions. Reduced transport costs could allow smaller or less profitable firms to locate on the periphery, where it was once unprofitable to do so because of the high costs of attracting skilled-workers from the core (downtown). In other words, reducing the costs of labor flows throughout the greater metropolitan area will make the region more attractive to (external) firms looking to relocate to the area by being able to locate near the periphery (taking advantage of lower big-rent costs) while still being able to draw from a very large pool of skilled-workers in the core. Relocation of firms to the area will also attract new workers, enhancing the overall economic activity of the region.

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