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VINAY CHAND ASSOCIATES

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Bangladesh Agriculture
 
 
Contracts in Bangladesh
 
 
Back from Bangladesh. A new contract as Team Leader on a DANIDA assignment on the preparation of a background study on growth and employment in relation to the Integrated Farming Systems Development Programme 2013-2017 in Bangladesh. The local support was from ADSL with whom the last project was undertaken.
 

In accordance with the Strategy for Denmarks Development Cooperation, the new programme to support agricultural development in Bangladesh, which is planned to start in January 2013, will have a dual focus on (i) agricultural production as well as on (ii) private sector agro-business development and marketing.

 

 

The Mission to Bangladesh has now been completed and the report is submitted. DANIDA has a $100 million budget for Bangladesh and, in agriculture, has been focussed on farmer field schools and working with the UNDP programme in the Chittagong Hills. Their past activity is strongly regarded within the development community but would like to work more proactively with developing the value chain for agri-business.

 

 

Bangladesh has a dynamic agricultural sector where positive price signals have resulted in steadily increasing production. However, the rate of growth in the economy also increases demand and, in particular, for higher value food items. The sector is characterised by low investment, low value. It is a creaking system with very high wastage rates leaking away many of the potential benefits that would have come from increased production. The growth in demand for processed products and for premium quality has not yet resulted in growth beyond basic structure but in the next 5 years it should achieve critical mass.

 
 
Vinay last completed an assignment in the country where he supervised 7 sector surveys and reports for SEDF/IFC. The seven sectors covered were:
 
 
1 Agribusiness
2 Poultry
3 Seeds
4 Electrical products
5 Foundries
6 Garmenting
7 Washing and Dyeing
 
 
It was very instructive to work closely with so many local Consultants, nearly 100, who became good friends. The contract was with ADSL who are a Bangladeshi Consultancy with aspirations to be international. The 7 are areas of interest to IFC in its country strategy. Quantitative research is difficult anywhere but particularly so in a LDC. Nevertheless, a great deal of efforts was expended on getting questionaires right and targeting surveys. There were also qualitative aspects with focus discussion groups and one to one interviews.
 
 
Agricultural Sector
 
 
In terms of agriculture, Bangladesh is primarily a rice growing country. It remains a net food importer with serious development problems. For a brief period the country actuallyy not only achieved self sufficiency in rice but had a surplus for export. However, this was short lived and with increasing consumer purchasing power mainly concentrated in major urban concentrations, the shortfall between production and consumption threatens to grow.
 
Rice dwarfs all other crops grown and it is national policy to encourage its cultivation for understandable food security reasons. Bangladesh has not quite achieved self-sufficiency in rice but is not far from it.
 
 
The increase in production achieved has indeed been impressive and has mainly been due to farmer efforts although government policy and research and development of higher yield seeds has undoubtedly been a contributing factor.
 
The gap between consumption and production continues to grow at a rapid pace and it is now most unlikely that Bangladesh can ever achieve self sufficiency in food. This was really quite inevitable given the density of the population. The country has to focus on minimising the trade imbalance and paying for the imports.
Excluding rice, the area allocated to other crops was:
 
 
 
Based on FAOstats
Production of jute, however, has declined with a gradual reduction in area planted. Jute is grown in rotation with rice and is conducive to higher productivity of the main crop.
The production of fresh fruits and vegetables and potatoes is as follows. The most impressive development in rrecent years has been the increase in production of potatoes.

In 2007, horticultural production stood at around 13 million tons per annum. By 1995-1996 total fruit and vegetable and potato production in the country had reached 1.5 million tons each. Potato production alone today exceeds 5 million tons, that of vegetables, including melons 3.5 million tons and fruits slightly in excess of 3 million tons. It is estimated that by 2003 around 10 million farmers were growing vegetables on 253,036 hectares of land.

The last decade has seen a significant increase in production of potatoes, a near trebling of production. In the last five years production of fruit and vegetables has joined the trend and doubled during this period.

Of the 13 million tons of horticultural produce produced in Bangladesh in 2007, only around 50,000 tons, or 0.38% was exported fresh with a roughly equivalent volume probably being processed before export. The remainder was mostly consumed fresh with less around 200,000 tons being processed.There are over 90 vegetable varieties and 60 types of fruit grown in the country.Bangladesh’s exports of fruits and vegetables, approximately $14 million in 2003 and $40 million in 2007, have strengthened in recent years but cannot be described as being significant, with the primary destination being the South Asian ethnic markets in the UK and MiddleEast.

The export value of agricultural products in 2007 was US$ 339.5 million, although roughly half that figure was accounted for by jute. Fresh vegetables were prominent and accounted for US$ 31 million, with impressive recent growth in edible nut exports to US$ 15 million and fruits at nearly US$ 4.5 million. The leading processed export item was fruit juice at US$ 3.6 million in 2007, followed by Arecanut nuts, pastry, spices and potato flour.

The agricultural exports of US$ 339.5 million are dwarfed by imports of US$ 3.9 billion in 2007, more than ten times the value of exports. Of the imports, nearly one billion dollars were for cotton lint for the garment industry. The remaining items serve to underline the basic shortcomings of the local sector with a heavy dependence on imports of edible oils, wheat, rice and sugar despite substantial national production. Edible oils, mainly palm and soyabean oils accounted for over a billion dollars in imports in 2007. Imports of oilcakes and poultry feed, are significant with poultry feed imports growing markedly in more recent years.

There are strong indications that this trade gap is actually broadening and, coming as it does, on top of a complete imbalance in industrial trade, it is a serious development.

2008 FAOstats
The most important point that emerges from the chart above is that edible oils . wheat, rice, sugar and onions are the most important shortfalls. The production of wheat has been rising and in some years there is actually a rice surplus. Production of vegetables and fruits is crucial to minimising highvalue item import bills.
Part of the problem is that the country is very heavily populated and more of one commodity in general has to be at the expense of another. That is a difficult matrix to consider. In any case there is more than enough scope for increasing production by higher yield rates and less wastage. Bangladesh agriculture, like that of so many other developing countries, is a low value, low input sector. Huge advances are possible merely by gearing the ector to a higher value threshold but to do that you need a market that is willing to pay more for better quality.
Donor Focus
For the last two decades emphasis of Government policy and consequently donor support has concentrated on trying to meet the growing consumption levels in Bangladesh. The programmes have been production focussed. There was no reason to undertake detailed studies or analysis since the need for food and the widening gap with imports outstripping imports has meant that there has been an increasing dependence on imports even if they are a relatively minor part of overall consumption. The import bill is a drain on resources.
Production largely kept pace with consumption most of the time and briefly led to a surplus of rice. However, the country has been developing not only due to the increases in agriculture but more importantly inother sectors including industrial, services and now gas. This has resulted in a higher spending power, growing populations in urban concentrations, particularly in Dhaka and Chittagong and consequently changing patterns of consumption.
From a low investment, rickety system that has been delivering variable quality at a high price, Bangladesh is moving to higher value diversification, developing agro-processing and agri-business. A small number of larger firms have resulted with an increasing capacity to invest and grow and IFC is actively assisting them.
The sector is still crude. The bucket may have got larger but it is riddled with holes. Wastage rates are astronomical. Bangladesh could easily double horticultural production just by cutting down wastage. The infrastructure is weak and suffers from a long period of unde-investment. The need for money far exceeds what is available but the growing private sector is capable of meeting that need as the market develops.
Donors have a marked preference for playing a broker role rather than one of an investor or trader. So Katalyst is considered the big success as it basically introduces prospective buyers to producers and spends some money through service deliverers on providing assistance to overcome obstacles. The scope for such a role is limited and it is very dubious to claim the resulting value from a marriage as due to the broker role.
There is actually little or none cost effectiveness awareness on the part of donor programmes. In stark contrast to what the donors would like to teach the sector, they do not know if the returns to their aid are proportionate and in many cases they are not. In such a situation you can ened up spending a million dollars to create 1,000 and that does not make sense. The suspicion is that lack of cost effectiveness awareness is rather convenient for most of the programmes as they would find it difficult to justify what they are spending. Clearly, this situation cannot continue for long.