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Bangladesh J. Agric. Econs. XX, 2 (1999): 21-41
SOCIAL RETURNS TO RICE RESEARCH IN BANGLADESH
Uttam Kumar Deb
B.A.A. Mustafi
ABSTRACT
Using economic surplus technique, the study estimates ex-post returns to rice research in Bangladesh for
the period 1970-92 and ex - ante returns to rice research at BRRI- to be conducted during the period 1996-2000. The
estimated results show that during 1970-92, rice research has generated an amount of TK. 12314 million to the
society and the marginal internal rate of return (MIRR) to rice research during this period was 252 percent and the
benefit cost ratio (BCR) was 35.83. Ex - ante returns to research estimates show that on-going BRRI
research(during 1996-2000) would generate 8700 million taka while the estimated MIRR is 160 percent- when
the potential benefits are realized for 1,5 vears. The study concludes that T. A man should be the highest priority
rice crop followed by Boro and T. Aus and B. Aman in terms of resource allocation at the BRRI during the period
1996-2000.
1. INTRODUCTION
Rice is not only the staple food of Bangladesh but also the driving force of Bangladesh
agriculture. Rice contributes about 50 percent of the agricultural GDP. About 78 percent of
the total cultivated area is under rice production, while 55 to 60 percent of the total
aaricultural labour force is employed in rice production, processing, marketing and
distribution. In a land scarce country like Bangladesh. increase in rice production largely
depends on the increase in per acre yield which is in turn depends on the technological
progress achieved through research. Realizing this, the Government of Bangladesh and donors
have invested a substantial amount of money on rice research . Systematic research on rice in
thee geographic area presently comprised in Bangladesh started in 1911 (Great Britain 1928).
Bvt it experienced many ups and downs in the next 50 years and faced serious set back in the
early 1960s when the Government of Pakistan took over the experimental rice fields to
build its second capital. "Thousands of germplasm collected during the last fifty years at a
The authors are: respectively, Senior Scientific Officer and Principal Scientific Officer of the
Bangladesh Rice Research Institute, Gazipur-1701.
The authors were greatly benefited from the comments of Dr. Madan Mohan Dey. Dr. Corazon T.
Aragon. Dr. Aida R. Librero, Mr. Monoranjan Kumar Mondal; Mr. Tarun Kanti Kundu. and two
anonymous referees. However, the views expressed in this paper are those of the authors and do not
necessarily reflect their affiliated institutes.
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The Bangladesh Journal ol'Agricultural Economics
tremendous cost were lost forever" (Zaman,1975). The establishment of Bangladesh Rice
Research Institute (BRRI) on October 1, 1970 ushered the new era of systematic rice research
in Bangladesh . Presently.BRRI is the principal institute mandated for conducting research on
rice . Bangladesh Institute of Nuclear Agriculture (BINA) and Bangladesh Agricultural
University (BAU) also conduct research on rice in a limited scale.
Rice researchers in Bangladesh has concentrated on developing rice varieties suited to
Bangladesh conditions and on screening and adapting lines developed in other
countries. Research has also been conducted on agronomic practices, pest control, water
management and farming systems. As a result, number of modern varieties (MVs)
cultivated. and area under MVs have increased. Total clean rice production in Bangladesh has
increased from 9.93 million tons in 1972/73 to 18.04 million tons in 1993/94(BBS.1995).
Modern varieties generated by Bangladesh are also widely grown in some other countries,
such as, Vietnam. Myanmar. India. Nepal. Bhutan and West Africa.
To allocate sufficient amount of resources to rice research, decision makers require
intormation on the pay-off of rice research since it competes with the alternative uses of
public funds. Decision makers also want to know the distribution of benefits among
producers and consumers. In the past some studies tried to generate such type of
information. Gill( 1983), using simple analytical technique, estimated the net present
value(NPV) of the additional production resulting from BRRI's research over the first 11
years as TK. 7100 million. Siddiqui(1985) conducted a study using producers and consumers
surplus technique for the period covering 1970/71 to 1983 and estimated the social returns to
rice research in Bangladesh.The estimated results indicate that one taka invested in rice
research produced an average social return of Taka 70. The major short coming of the study
was the assumption of zero lag period-between research investment and research outcome.
Dey and Evenson(1991) estimated the returns to rice research in Bangladesh using Total
Factor Productivity (TFP) decomposition method for the period of 1952-1989. The estimated
results show that, during 1973-89. one taka investment in rice research has generated an
income of TK 36.39 after 8 years. when the full potential of research impacts are realized.
These studies havepresented some ex- post evidences about the positive contribution of
rice reseaarch. but there is no sound and updated estimate on the distribution of benefits
to producers and consumers. Moreover, a high return in the past does not ensure a high return
from the future research investment. Therefore, the present study quantifies the returns to
past investment in rice research in Bangladesh for the period 1970-92 and ex-ante returns to
rice research-- to be conducted at BRRI for the period 1996-2000 using producersconsumers surplus technique.
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III. ERSULTS AND DISCUSSION
Table 1 presents the relationship between total investment in agricultural research and
aLnricultural GDP in Bangladesh. Total amount of money invested to agricultural research for
the period 1970-90 was Taka 6081.4 million (constant taka of 1984-85). In most of the years
agricultural research investment as a percentage of a=ricultural GDP was less than 0.25
percent indicatina that for each 100 taka of agricultural GDP Bangladesh has invested only 25
paisa to its agricultural research. The lowest amount was 8 paisa while the highest amount was
35 paisa for each 100 taka of agricultural GDP. This amount is really very low compared to
other developed and developing countries.
Table 2 shows the relationship between total investment in agricultural research, rice
research investment. agricultural GDP and rice GDP in Bangladesh. During the period 197O92, rice research investment in Bangladesh was Taka 111.82 million (constant taka of 198485).
Rice research investment was always less than 0.10 percent of rice GDP and less than 0.05
percent of agricultural GDP. This means that for each 100 taka of rice GDP. Bangladesh has
invested less than 10 paisa to its rice research. The lowest amount of investment to rice
research was 3 paisa while the highest amount was 9 paisa for each 100 taka of rice GDP.
This amount is really very low compared to other developed and developing countries
investment rate in rice research. On the other hand, for each 100 taka of agricultural GDP
Bangladesh has invested less than 5 paisa to its rice research. Except few years, the share of
rice research investment was less than I I percent of the total agricultural research investment. In
short. rate of investment in agricultural research was low in general and investment rate in rice
research was lower in particular.
Based on this limited investment, rice research in Bangladesh has brought out both direct
and indirect positive effects on the economy of Bangladesh. Adoption of MVs and rice
production in Bangladesh has increased significantly. About 90 percent of the Boro rice
acrea-e of the country. 28 percent of the Aus rice, and 53 percent of the transplant Aman rice
is under MV rice. These varieties all together account for 73 percent of the total annual rice
production in the country and helped to increase annual rice production in Bangladesh from
9.93 million tons of clean rice in 1972/73 to 18.04 million tons of clean rice in 1993/94. Area
expansion and variety substitution have been the main vehicle for rice output growth. Output
Urowth and yield augmentation for the rice varieties have been dependent on technological
breakthrough in production (Alam. 1992). In addition to these direct benefits, there are some
indirect benefits of rice research. According to Hossain et al. (1994), adoption of modern rice
technology increased farm output. employment and farm income. It also increased the size of
the ]about- market and thereby increased labour income of the landless and marginal land
owners. who supply agricultural labour in themarke marThe asomention mentthathe diffuson
of'
Social Returns to Rice Research in Bangladesh: Deb and Mustafi
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modern rice technology positively affected to the poverty alleviation. Hossain (1987) show that
rural non-agricultural sector, compared to agricultural sector, gets a greater stimulus from(
the urowth in income through the consumption and investment linkages. He also mention that
the rate of' investment grows with the diffusion of new agricultural technology a estimated
the rate of total investment (agricultural, non-agricultural and social) about 1( percent of
income and productive investment about 9.9 percent for the technologica developed
villages. Thus. rice research positively contributed to increase rice production a helped to
increase farm employment and income level which spurred agricultural growth a has also
increased the effective demand for industrial commodities in the rural areas and act as a
positive contributor to the- total economic growth and development.
To have a precise estimate about the contribution of rice research in Bangladesh. We
have used the producers and consumers surplus - as mentioned earlier. The estimated results
of the ex-post analysis are presented in Table 3. The basic assumptions used in the analysis
were: ( I) the price elasticity of demand for rice is -0.28; and (2) the price elasticity of rice
supply is 0.13 (See Appendix I for details of the data and assumptions). Table 3 indicates that
rice research has generated an amount of Tk.12314 million as net gain from rice research to
the society. Benefit Cost ratio of 35.83 implies that each taka invested to rice research
has produced taka 36 to the Bangladesh. The internal rate of return (IRR) from rice research
was 252 percent implying that each 100 taka invested to rice research has produced an average
annual profit of taka 252. The estimated distribution of social benefits from rice research
implies that consumers benefited from the rice research due to additional consumers' surplus.
while the producers were losers as evident from the reduction in producers' surplus. This
finding is consistent with the findings of other studies conducted in Japan (Akino and Hyami
1975), the Philippines (Moya et al. 1978), and Bangladesh (Siddiqui 1985) using the same
model used in the present analysis. In Bangladesh, rice is produced mainly for home
consumption and. therefore, the small farmers were able to produce and consume rice at a
lowe4 cost due to rice research.
In our basic data about cost of rice technology generation and dissemination was less
than the actual cost since we were able to collect the cost of BRRI only. Idealiy, we should
include the rice research cost at BRRI, BINA, BAU and technology dissemination cost
(extension expenditure for rice technology, dissemination, irrigation and flood control dam
cost for rice production). This underestimated cost must have effect on the results. In addition.
the price elasticity of demand and supply plays a vital role in the magnitude and direction of
the producers' surplus (PS) and consumers' surplus (CS). To overcome these limitations, we
have done sensitivity analysis using different values about these variables. Table 4
summarizes the criteria used for sensitivity analysis. In the sensitivity analysis, we have used
combination of three types of assumptions related to the demand and supply elasticities and
cost of`
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The Bangladesh Journal qfAgricidtural Economics
technology generation and dissemination. The demand elasticity was assumed -0.40. -0.10 and
supply elasticity was assumed 0.20 and 0.07 while the actual cost of technology aeneration
and dissemination was assumed three, five and 10 times of actual BRRI expenditure.
The estimated results showed same direction of the PS and CS remained unchanged.
Table 5 presents the results of the sensitivity analysis. The lowest estimated NPV of research
was 3642 million taka while the highest NPV was 14509 million taka under alternative
sensitivity criteria. The lowest BCR was 3.58 indicating that one taka investment generated
three taka to the society while the highest BCR was 42.04 indicating that per taka investment in
rice research has generated 42.04 taka to the society. The estimated IRR varied between
89.74 percent and 264.35 percent indicating that each 100 taka invested to rice research has
produced at least an average annual profit of taka 89 74 and at best taka 264.35 as annual
profit. Thus, our analysis shows that the society has obtained a substantial benefit from rice
research.
Table 6 compares the returns to rice research estimated in this study and the returns to
rice research estimated by other studies in Bangladesh and elsewhere in this world. Our
estimate shows that during the period 1970-92 rice research contributed about 252 percent
while Dey and Evenson's (1991) estimate shows that the rate of return to rice research in
Bano(adesh. for the period 1973-89, was 165 percent. On the other hand, rate of return to rice
research in other countries varies between 32 to 155 percent. This indicates that the rice
research in Bangladesh is more productive than in other countries.
Table 7 compares the rate of return to research in rice and other commodities in
Bangladesh. It is evident from the estimates that the rate of return to rice research was hi-her
than that of other commodity researches. It is clear from these tables that the rate of return to
rice research in Ban-ladesh was reasonably high in comparison with other commodity
research in Bangladesh as well as rice research in other countries.
All these studies are ex-post studies which evaluated the returns to completed research.
Being productive in the past does not necessarily mean that rice research will also > he
productive in the future. For this reason, we have also estimated the future returns to rice
research based on scientists interview. The summary of the assumptions and data used in the
ex-ante analysis is presented in Tables 8 and 9. The estimated values of ex-ante returns to
rice research - to be conducted at BRRI - by ecosystems are presented in Table 10. The net
present value of thee technologies derived after realization of the potential benefits due to the
investment to rice research during the period 1996-2000 would be taka 8700 million. The
highest NPV from research would be in T. Aman rice research (7845 million taka) followed
hy Boro plus T. Aus (752 million taka), and B. Aman (202 million taka). During this short
period of research there would not be any net positive gain from B. Aus rice research. But
rice