An AssignmentonStatus of Import Export of Agricultural Products and Processed Vegetables Business Potential and Ways to Face the Challenges in Bangladesh

Course No. & Title: AM 508; International Marketing

Submitted BySubmitted ToId. No: 11 AEM-JJ 02MReg. No: 33554 Session:2006-07MS. In Agricultural Economics(Agribusiness & Marketing)Bangladesh Agricultural University, Mymensingh-2202Md. MoniruzzamanAssociate Professor,Department of Agribusiness and Marketing,Bangladesh Agricultural University, Mymensingh-2202

Bangladesh Agricultural UniversityMymensingh-2202

Department of Agribusiness & MarketingBangladesh Agricultural UniversityMymensinghMS in cultural Economics (Agribusiness & Marketing)Semester: July-December, 2011Course No. & Title: AM 508; International Marketing

Assignment:1. Present the situation of import and export of agricultural fresh and processed products in Bangladesh during the period from 1972 to 2011.What measures have been taken by the government to promote export of agricultural products from Bangladesh.

2. In our country we do not have processed vegetables but huge amount of vegetables are produced in winter season and price become very low, in this situation if we want to do business of processed vegetables in home country as well as for international market, how we can proceed to implement this big challenge of starting new enterprise in Bangladesh. Discuss.

Status of Import Export of Agricultural Products and Processed Vegetables Business Potential and Ways to Face the Challenges in BangladeshINTRODUCTION Bangladesh is an agro-based country. Here about 43% (WB-2008) people are directly engaged in agriculture but about 75% people live on agriculture directly and indirectly. Bangladesh achieved food self-sufficiency in 2000.But it is now a challenge for Bangladesh to ensure food security for the vast population about 160 million. Our total cultivable land is now about 62% of its total land area of 1, 47,570 sq. km. We have only about 7, 95,576 hectare arable land for crop production. So it is a great challenge for us to ensure food security and economic growth.

1. IMPORT EXPORT SITUATION OF AGRICULTURAL FRESH AND PROCESSED PRODUCTS IN BANGLADESH DURING THE PERIOD FROM 1972 TO 2011Agriculture remains the most important sector of Bangladeshi economy, contributing 19.6 percent to the national GDP and providing employment for 63 percent of the population. Agriculture in Bangladesh is heavily dependent on the weather, and the entire harvest can be wiped out in a matter of hours when cyclones hit the country. According to the World Bank, the total arable land in Bangladesh is 61.2 percent of the total land area (down from 68.3 percent in 1980). Farms are usually very small due to heavily increasing population, unwieldy land ownership, and inheritance regulations. The 3 main cropsrice, jute, and teahave dominated agricultural exports for decades, although the rice is grown almost entirely for domestic consumption, while jute and tea are the main export earners. In addition to these products, Bangladeshi farmers produce sugarcane, tobacco, cotton, and various fruits and vegetables (sweet potatoes, bananas, pineapples, etc.) for the domestic market.Rice is the staple food in the everyday diet of Bangladeshis. The production of rice, which can be harvested 2 or even 3 times a year, reached 19.9 million metric tons in 1998-99. The production of wheat reached about 2 million metric tons in 1998-99. Both crops play an important role in achieving self-sufficiency in food production. However, due to weather conditions the production of rice and wheat fluctuate greatly, forcing Bangladesh to import food from the international market or turn to international aid. Bangladesh imported 1.6 million tons of wheat (mainly from the United States) in 2000 in order to meet the demand in the local market.Jute, often called the "golden fiber" of Bengal, is the main export-earner for Bangladeshi agriculture, as Bangladesh remains the world's second-largest producer of jute (after India) and the world's largest exporter of fiber. Jute is traditionally used for the fiber of carpet backing, burlap bags, cheap paper, and various other purposes. Its importance for the Bangladeshi economy comes from the fact that almost 3 million farms are involved in jute production. In 1999 Bangladeshi export earnings from jute amounted to US$55 million, with the country producing 720,000 metric tons of jute, although this is about one-third of the jute production of the middle of the 1980s. The decline in jute production is attributed to declining world prices for this crop and to farmers switching to other crops.Bangladesh also produces tea leaves, mainly for export, although the export of this product contributes only 1 percent of the country's hard currency earnings. In 1998-99 the country produced 56,000 metric tons of tea leaves, but it could produce twice that amount. The main obstacle to increasing production is in falling prices for tea in the international market and in management and regulation problems in the industry in the country.Tropical rainforest is important for maintaining the ecological balance in Bangladesh, and forestry contributes 1.9 percent to the GDP (1999-2000). The forest covers around 17 percent of the country's territory, or 2.5 million hectares (6.18 million acres). The timber is used by the construction industry as a source of building materials, by the printing industry as a source of materials to produce paper, and in the agricultural sector as a source of firewood. Commercial logging is limited to around 6.1 million cubic feet, and the government plans to plant more trees within the next 15 years.Fishing is another important activity in the country, contributing 4.9 percent to the GDP (1999-2000) and providing 6 percent of the total export income. The overall fish production was around 1.6 million metric tons (1999-2000). Bangladesh mainly exports its shrimp to the international market. Export and ImportThe share of agro-products like vegetables, fruits and other items has remained at the same level during the last few years. Their share is around 9 per cent of VA of agriculture. The temperate, humid climate and the frequent rains can make Bangladesh a special place for some selected products if proper investment is made. The table shows that export of vegetables, fruits and betel leaves has been going on for quite a long time. Export earnings from all these products have been fluctuating. Exports of vegetables started from 1975-76. The export earnings increased steadily up to 1986-87; after that it started to decline, a trend which continued up to 1991-92. Again, exports started to rise from 1992-93, the trend of which continued up to 1995-96. In the case of fruits, in most years the export earnings increased compared to the past. It started to rise rather rapidly from 1992-93 and continued up to 1995-96. In the case of betel leaves, the trend of exports is not stable. But all these products have attained a modest level of exports.Table-1 Exports of Some Major Agro-products from Bangladesh (Value of in thousand Taka)Sl. No.Name of Products1983-841984-851985-861986- 871987-881988-891989-901990-911991-921992-931993-941994-951995-96

1.Vegetables78791102022408442531111461463299339259700154104208003313224323557348604593372

2.Fruits543579342388595062314115724228504570228127507115260278454139422

3.Betel Leaves306393566212856010418967011375148450209993696873923593696170097823

Agro-products as % of VA of AgricultureNANANANANA9.549.068.968.928.89NANANA

NA= Not Available Source: Export Promotion Bureau (EPB)The destinations of these products are in Middle East and Emirates in the east and U.K. and U.S.A. in the West. The consumers of these products are not Arabs, or British or American; they are the Bangladeshi immigrants living in those countries. So it is a kept market. But if we want to expand our exports of these products we have to sell to the non-Bangladeshis who will buy them on the basis of quality, not on emotional and psychological grounds.

Export of Livestock and FisheriesBoth livestock and fisheries products have grown steadily over the years. The growth rate increased particularly in the 1990s. The share of these two sub-sectors in total exports was about 14 per cent in 1994/95.Over 80 per cent of total production of processed hides and skins is exported in the form of wet blue leather and leather products. The export value of leather and leather products was Tk.9 billion in 1994-95 and Tk.9.9 billion in 1995-96. Leather ranked fourth in the list of Bangladeshs exports. The absolute value of exports originating from livestock has increased but the relative share in the total value of exports has declined in recent years due to the increase in the value of exports of readymade garments. A large number of hides and skins is either lost or qualitatively deteriorates every year due to faulty flaying and processing. This can be minimized by providing training to rural youths in specific areas as well as by technological up gradation of both the urban slaughterhouses and the local tanneries.The available evidence indicates that the export market for shrimps was competitive. It has been observed that the producer received 67 per cent of the CIF price. Marketing costs accounted for 7 per cent of the end price, while the traders profit accounted for 26 per cent of the CIF price. The rate of return on the traders capital was estimated at 36 per cent.A high demand for Bangladeshi shrimps in the international market (particularly in the USA and Japan), coupled with a large number of processors/exporters relative to the total production of shrimp, made the domestic market competitive and ensured a higher price to the producers. Some developed countries have put up non-tariff barriers to export of frozen fish from Bangladesh. Such a problem, if it recurs, needs to be resolved through the WTO dispute settlement mechanism. Table-2 below shows the exact position of the Export of Non-Crop Agricultural Products and the Share of Sub-Sector of Total ExportYearExport Value (crore Taka)Sub-sector share to export (%)

LivestockFisheriesForestryLivestockFisheriesForestry

1985-86180.25356.251.267.4114.650.05

1986-87409.70424.051.4112.5612.990.04

1987-88455.20454.120.3911.9511.930.01

1988-89434.50471.890.9110.6111.510.02

1989-90584.24478.770.5311.749.620.01

1990-91483.54526.620.597.988.640.01

1991-92565.83524.356.177.456.910.08

1992-93616.28700.293.826.667.570.04

1993-94766.70920.961.477.599.120.01

1994-95903.711306.942.426.489.380.02

1995-96986.541336.741.726.218.420.01

Table-3 EXPORT AND IMPORT OF COMMODITIES BY SECTION (million Tk.)Sl. No.1999-20002000-2001

ExportImportExportImport

1LIVE ANIMAL; ANIMAL PRODUCTS162375121192846095

2VEGETABLE PRODUCTS90731445200929926

3ANIMAL/VEGET FAT/OIL,EDIBLEFAT,WAX34265312324993

4PREPAREFOOD,BEVERAGE,SPIRIT,TOBACCO1731127430311301

5RAW HIDE AND SKIN,LEATHER,FURSKIN548843213670239

Table-4 Imports and Export of Principal commodities during last five year(In million taka) Imports

Principal commodities 2004-052005-062006-072007-082008-09

Milk and cream 74915764655512135 17842

Sugar 147981364017224 28247 24100

Rice858414183106783948916142

Wheat1465122025294494230239002

Raw cotton4279752734651759178379736

Exports2004-052005-062006-072007-082008-09

Vegetable textile fiber/yarn 1733222870300213456927811

Shrimps and prawn19915

27656390264189024338

Hides, skins and leather13649

15651

184211984312350

Raw jute5269900411930128749907

Table-5 Export of Major agricultural products during 2005-2011ProductsYears

2004-052005-062006-072007-082008-09

Fish234431040432574766230175

Raw jute5269900411930128749907

Jute good (except carpet)116151883626572814226151

Raw hide ,skins and leather1364915651184211984312350

Tea9787134801024844

Vegetables, fresh/chilly175142115267713410121

Measures have been taken by the government to promote export of agricultural products from Bangladesh

Export Promotion Bureau (EPB) of BangladeshExport Promotion Bureau (EPB) of Bangladesh under the Ministry of Commerce is a government agency of the country, entrusted with the responsibilities of promoting export of the country. It is mainly responsible for: 1. Coordinating export development efforts at different sectors and production level.2. Coordinating monitoring and evaluating national export trends.3. Formulating and adopting policy and program for active promotion of export.4. Exploring markets of exportable abroad.5. Carrying out promotional activities in production product development and expansion of supply side capacity.6. Collecting and disseminating trade information to the stakeholders.7. Organizing participation in international trade fair abroad.8. Imparting training for human resource development (HRD).9. Conducting studies, surveys, research etc. for expansion and diversification of export.10. Administering and monitoring readymade garments (RMG) quota. Export Policy of BangladeshExport policy is now in favor of promotion of agricultural products. The main points to be noted as an attempt to promote export of agricultural products. Export Promotion Fund (EPF):The following assistance and support would be provided out of the Export Promotion Fund to producers/exporters of new and non-traditional items including those under the crash programme for product development and product and market diversification:(a) Venture capital on easy terms and low interest rates;(b) Assistance in obtaining foreign technology and consultancy for product development and diversification;(c) Assistance in fielding marketing missions abroad and participating in international fairs for market compatibility of products;(d) Assistance in Establishing Sales and Display Centers abroad and extending warehousing facilities ; (e) Assistance for participation in overseas training programme on productdevelopment and marketing help develop technical skill and marketing expertise ;(f) Assistance in any other activity related to product and market development. Fiscal Incentives Import facilities of raw materials for export-oriented leather industries: To encourage increase in production and export at competitive price of finished leather customs duty and import license fee leviable on import of wet blue and pickled leather by export-oriented leather industries will be exempted. Income tax rebate on export earnings: Previously, 50% rebate on taxable income generated from export earning was admissible under the Finance Act every year. From now on 50% of the income tax on any income on export will be exempted through incorporation of a new provision in the Income Tax Ordinance itself rather than as a temporary relief hitherto granted under the Finance Acts on a yearly basis. Lowering the rate of AIT at source: Tax at source on all export earnings shall be deducted at the rate of 0.25%. Payment of duty drawback through commercial banks: For quick disbursement of duty drawback with a view to giving a competitive edge to our export in the international market, payments will be made by the commercial banks immediately on receipt of foreign exchange against all exports except the deemed exports, determined on the basis of the principles laid down by the National Board of Revenue. Bonding facilities for export-oriented industries: Bonded warehouse facilities have generated special enthusiasm among the import-led export-oriented industries. To sustain such interest the procedures for providing bonded warehouse facilities to such industries will be further simplified, and will be extended to all industries recognized as 100% export-oriented industries.Policy Actions for Promoting Agro-ProcessingThe measures already taken by the government:Tariff on raw materialsNBR reduced rates

Incentives for exports10 per cent of FOB value for flower export

Duty-free reefer vansNBR waived duty

High duty on cans, jarsNBR reduced rates

Finally the fiscal measures in budget of 1999-2000 to stimulate agro-processing: Sl. No.ItemsPrevious Rate (%)Reduced Rate (%)

Import Duty

1.Tetra pack: food, drinks30-4025

2.Glass bottles, jars155

3.Natural polymers etc. in primary form2515

4.Rubber gloves30-4015

5.Unpainted plain film4025

6.Stainless steel4015

7.Rope, twine, nylon cord, others30-4025

Source : ATDP

Growth of Exports:Bangladeshs total exports got a significant boost with an annual trend growth rate of14.24 percent during 1985/86 to 1999/00, compared to an annual trend growth rate of below 10 percent (in nominal US dollar terms) over the earlier period of1972/73 through 1984/85. Such a pattern of export growth over time largely reflects the effects of progress in Bangladeshs policy reforms over the period. Export products during the earlier period (e.g. jute and jute goods) did have a significant effect in limiting the overall export growth, especially starting with themid-1980s. The export upturn in the latter period also reflects the fact that the export setback in jute and jute goods was more than recouped by remarkable growth in the export of a new product group, ready-made garments.

New Products for ExportThese are Baby Corn, Gherkin (Baby Cucumber), Mushroom, Baby Pineapple, Okra, Lichi, French bean, Bobby Bean, etc., all of which can be grown in Bangladesh. Mango pulp and honey also have good prospects for export. Standardization of quality for export is essential.Baby Corn, French Beans and other vegetables can be processed in cans or in glass jars. Gherkins can be preserved in brine in plastic drums or in glass jars in bulk quantity. Mushrooms may be canned or dehydrated. Canned mushrooms have better prospects for export. Honey is another product which has good prospects for export to Middle Eastern countries if properly standardized.

2. Business of processed vegetables and ways to implement In Bangladesh there is a huge amount of vegetables are produced especially in winter season. But it is true that there is a little scope of using these vegetable all-round the year. Moreover as vegetables are perishable and have short term market so we cant utilize the full opportunity of this huge amount of produced product. As a result the prices of the vegetables are very low in the production season due to excess supply. The main reasons for not using the opportunities are as follows:a)Vegetables are perishable but we do not have the required storage facilities to preserve for future.b)There is a lack of export facilities provided by the government.c)Lack of capabilities of the farmers to preserve and export.d)Lack of efficient marketing facilities.e)There is an insufficient agro based i.e. processing facilities.f)Transportation facilities are not good and in some regions not available as we need.g)Lack of market information to the farmers.h)Farmers are not financially solvent to market the product in the higher price market.i)Lack of efficient manpower to reduce the handling loss.j)No grading system yet developed.k)Excess supply than the demand causes lower price.l)Lack of government market monitoring and initiative to maintain the demand supply of vegetable in the national market.

Rationale for Focusing on Agro-BusinessThe present study focuses on high value added export oriented agro-based industries. As stated earlier, value adding activities consist of the following: Transformation of agricultural commodities by processing, preparation, packaging and distribution. The present study focuses both on Agro- and Agro-processed products where value has been added by the above process.Growth of agro-based industries has become crucially important to Bangladesh because of the following reasons:(1) The agricultural sector has been stagnating. There has been no real acceleration of agricultural growth despite extensive Governments efforts with respect to seed-fertilizer-water technology. The government has embarked upon market-oriented reforms since the eighties which will, it is expected, provide demand stimulus to the growth of the sector. Agro-based industries will play a vital role here. (2) With the phasing out of the Multi-Fiber Arrangement (MFA), a crisis is looming in the exports of readymade garments. Garments dominate the total exports of Bangladesh and are the biggest earners of foreign exchange. The quota received under the MFA facilitated the growth of such exports from Bangladesh. However, under the Uruguay Round Agreement the MFA will be phased out. After this phasing out Bangladesh will have to face stiff competition from larger producers who are highly competitive such as China, India, Pakistan, etc. Hence there is a need to increase the competitiveness of the garments industry and at the same time we have to find new items of exports. Agro-based industries products have high export potential. Already Bangladesh is exporting agro- and agro-processed products. (3) Contribution to poverty alleviation: About 84 per cent of the population live in rural areas and are directly or indirectly engaged in a wide range of agricultural activities. The Grameen Bank, NGOs, the Bangladesh Rural Development Board, etc. have been financing agro-based projects which contribute to poverty alleviation. We can use our huge amount of vegetables in various ways. We can start agribusiness in national and also in international market.For a successful agribusiness we need some challenges to overcome. These challenges are both internal and external. Ways to overcome the challenges of vegetable processing business

For rapid vegetable processing business in Bangladesh, the constraints mentioned above have to be overcomed. Some recommendations are put forward here for attaining momentum in agro-industrialization in the country.

Frame national policy on vegetable processing business development: It is a must for the government to prepare and announce a well thought out agro-industrial national policy. The government should bring every organization involved with agro-industry to work together and lend support to all activities on agro-industry development. Specialist support/advice from countries in the region, like Thailand and Malaysia, can be availed for this.

Set up an organization to work for agro-industry: An Agro-industry Development Division may be established within the Ministry of Agriculture orMinistry of Industry. This Division will serve as a coordinating body on behalf ofthe National Committee. All the planning budgeting, monitoring should be implemented by this Division.

Set up a national committee on agro-industry development: Members of thiscommittee would come from different Ministries. Agro-industry Division willaccommodate this committee and should be responsible for organizing the meeting and act as a Secretariat. This committee will be responsible for planning, allocating budget, monitoring, evaluation and formulating policies on Agro-Industry Development of the country.

Solve problem of raw materials: This task totally belongs to the Ministry of Agriculture. But the idea of producing for marketing fresh product has to changealso to produce enough for industrial market. Experiments have to be carried outwith research organization on which crop or which variety will be fit for processing. Contract farming system may also be introduced to link up farmersand agro-enterprises.

Create well-trained human resource for agro-industry development: Theproposed National Committee on agro-industry development has to study howmany well-trained human resource is needed for Bangladesh and then ask thegovernment to support universities, which have potential to produce graduates onfood science, food technology and agribusiness according to the need of the country. Many universities in Bangladesh have science subjects, which can be thebasic sciences for these students. Some facilitation to these students in agroindustry and related subjects will help accelerate creation of good human resource locally for agro-industry development.

Increase fund for research and development: Some research institutes in Bangladesh have been equipped with very sophisticated equipment (eg., BCSIR)but they are short of personnel and fund to carry out research and developmentstudies. If Government provides them with enough skilled human resource andallocate fund for the research institutes, this problem can be solved.

Develop proper intermediate technology: If research institutes and universitiescarry out research and development projects on agro-industry/agro-businesses inthe country, the results can be applied by private sectors and small entrepreneurs.They can build up high quality products to meet demand of local and internationalmarkets.

Increase local production of food-processing equipment: This problem is a difficult one, because to produce food-processing equipment locally one needs tohave a number of personnel on food engineering. These people can design equipment and can advise private sector to build equipment for food processing.The Food Technology and Rural Industry Department of Agricultural Universityat Mymensingh has initiated food engineering courses (four year graduation study) recently. Hopefully these students can be a great help to the country if they are well trained. But we need a lot more of this kind of courses, including studies in agricultural marketing and agribusiness. Other universities should also initiatecourses towards this end.

Encourage more investment in agro-industry: Private sector is interested to invest money if there is adequate incentive. The government must extend assistance in terms of soft loan , relax tax and duties on import of food processingequipment, assist in marketing convenient to exporting etc. In such a policy environment new entrepreneurs will surely invest more money in the processingindustries. Small entrepreneurs may flood in agro-processing business if appropriate physical and social environment is ensured. Improving market information and marketing systems as well as identifying the mechanisms for acquiring technology is required for agribusiness development. The main problemof industrial investment in this country is deteriorating law and order situationwhich must be improved at any cost.

Channel soft-loan for agro-industry: Government could set up a special soft loanprogramme to support all activities involved with agro-industry development. International donors are interested to support this kind of activities because it can also help the vulnerable women group in a developing economy like Bangladesh.

There are 4 simple steps a business firm must establish to start a business for national and international marketFirst, a firm needs to achieve domestic dominance. If a company is trusted at home, it is easier to integrate their focus into the global market. A firm that only focuses on marketing to their own country will eventually run out of people to market to and lose its place. Some companies can remain successful domestic entities because the demand for the product on the home front is high. Dairy farmers are a great example of domestically oriented organizations.Second, a firm must have a home focus with exporting. The products and message from the company should be based on home values, but it should be able to cross country lines and incorporate the message to foreign markets.Third, marketing to international markets must be mixed with overseas organizations. Changing the marketing strategy to become a polycentric strategy is the best way to adapt to the needs of all the potential customers throughout the world.Fourth, the value of the product must be on demand in a global market. The company needs to focus on serving the needs over customers throughout the world; this is achieved by targeted marketing to individual countries and determining the customer needs in each country. Global strategies must be developed to recognize the financial aspect of each consumer and respond to different marketing ploys. Global marketing is unpredictable and marketers must be aware of different opportunities and be willing to adapt and create new products for global demands.

ConclusionIt is obvious that to ensure our food security we need to produce more and more food. But most of the agricultural crops are seasonal and perishable in nature. So we need to use the agricultural products for both our internal consumption and also further use by processing. Agribusiness will ensure our food self-sufficiency and foreign currency earning. Moreover agro-processing business will reduce the loss of product and ensure price stability for the farmer as well as for the whole economy.