SVRK Prabhakar,
Senior Policy Researcher, Natural Resource Management Division, IGES, Japan
To be published in Business i. Eneco, March 2012
Asia is one of the fastest growing regions in the world,
both in economic and population terms. In 2010, the economies in the region have
grown at a rate of 8.2% while the rest of the world grew only at a rate of 5%.
This story appears to be phenomenal by any standard. However, examining the
role of rural Asia in contributing to the overall growth will reveal a
different picture to us. The contribution of agriculture sector to the total
GDP has been declining over the years in the region, standing at 10% in 2010.
This means that nearly 58% of Asian population, of which 81% is dependent on
agriculture for their livelihoods, that lives in rural areas contribute to only
10% of the total wealth produced in the region. This appears to be, by any
standard, a gross mismanagement of valuable human resources in any corporate
firm’s strategy book. As a result, rural Asia is characterized by highest
unemployment rate, high poverty and resource-deprived.
The organized private sector employs 30-35% of the total
work force in many ASEAN countries, which is second only to the unorganized
agriculture sector putting government at third as an employer and similar trend
could be expected in other Asian countries too. However, the penetration of
organized private sector in rural Asia is almost negligent due to limited
purchasing power in these areas and limited manpower that can cater to the
services offered by the sector. Most governments in the region operate with
limited financial resources and cannot offer gainful employment to rural
population. This further leaves the rural areas out of mainstream economic activities
and hence often don’t attract corporate attention for investments.
Reasons behind poor wealth creation in rural Asia
Several issues play a role in poor contribution of rural
areas to the total wealth created in the region and most often these issues are
interlinked with each other as in daisy chain. Some important issues include
wide prevalence of manual- labor oriented agricultural production systems that
engage only seasonal employment, poor infrastructure facilities such as energy
and transportation, high poverty and most importantly the lack of educational
and vocational training facilities that can produce the talent for the needy
industrial production and service sectors. One important argument that explains
the existence of these problems is the ‘growth-center approach’ adopted by many
countries as a developmental model wherein developmental investments are often concentrated
at a single or few locations in an administrative unit. Though this approach
has helped in developing certain regions as industrial hubs and eventually
urban growth centers, the rest of the areas were deprived of the talent with the
talent available in rural areas migrating to these ‘growth-centers’ as internal
migration and brain drain. Though the growth-center approach is expected to be
undertaken at the initial phases of development and to be supported by income
distribution policies, it is the later part that has failed in most Asian
countries. As a result, much of the rural areas were deprived of the talent and
other resources. This has continued over the years taking the rural Asia in a
downward spiral depriving them of their fair share in the overall economic
growth story of Asia.
Strategies for greater business penetration in rural areas
The situation in rural Asia is changing, though, as
suggested by recent developments. Realizing the potential of rural markets for
untapped markets (read consumers) and source of human resources, the private
sector is devising new strategies to reach out to these areas. One example to
be cited is the Grameenphone in Bangladesh. Grameenphone has achieved a 98% of
coverage area in Bangladesh with 35 million subscriber base within few years of
its establishment. For most people, Grameenphone is a telecommunication revolution
while very few know that it created record revenue and employment from
predominantly poor and rural subscriber base. Grameenphone has become a source
of livelihood for more than 300,000 people (working as its dealers, retailers,
scratch card outlets, vendors etc) in a country of 149 million while producing
a revenue worth one billion dollars per year (a per capita income of 6.7 USD by
Grameenphone itself). Such cases suggest several lessons for other corporate
ventures that consider capturing potential rural markets in Asia. Technology
ventures need to make products affordable for rural population, make them within
the reach of technical and educational abilities of the rural consumers, design
secondary services that provide local gainful employment, and stress the need
for wider social benefits apart from the intended direct benefit of the product.
A multi-utility vehicle using water pump. Sustaining local
innovations would be one of the greatest role that corporate sector can play in
rural Asia.
The public-private partnerships are enabling the greater
corporate penetration in rural Asia. In South Asia, self-help groups are being
formed to utilize these emerging development opportunities. Micro-finance in
Bangladesh and installation of bioenergy production plants in India can be
taken as examples for this wherein financial institutions and energy technology
firms work with local governments to support micro-finance schemes and installation
of bioenergy based power plants. Here too, designing products and services
simple and affordable has enabled rural consumers to accept them at a rapid
rate. Combining capacity building programs along with product introduction is
helping rural artisans to take up new income generation activities associated
with the products being introduced. For example, as a part of the rural
electrification program through solar power panels, technology firms and local
NGOs are training rural artisans in assembling and repairing solar panels and
servicing batteries. These approaches are creating an entirely new local
economy that is supplementing the agriculture income in most rural areas.
However, more could be done to further hasten the rural economic growth. Ideas
such as ‘Pura’ (Provision of Urban Amenities in Rural Areas) put forward by Dr
A.P.J Abdul Kalam, the President of India, have even greater potential to
kick-start rural economies. Seen as an overarching concept, ‘Pura’ encourages
greater public private partnerships between Gram Panchayats (lowest tier of
self governance system in India) and private sector for developing urban
amenities and advanced infrastructure such as warehouses, integrated business
hubs, in rural areas while enhancing the rural income and skill base. There is
even more potential for rural employment generation through schemes such as
reducing emissions from deforestation and forest degradation (REDD), ecotourism
and soil carbon sequestration wherein local communities can get benefit from
related payments and from the employment generated through these activities
while safeguarding the environment.
To be published in Business i. Eneco, March 2012
