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Welcome to the PresentationGroup I

Presented BySk. Faijan Bin Halim (MSS 151510)

Faria Hossain Nity (MSS 151511)

Saddam Hossain (MSS 151528)

S.M. Yusuf Ali (MSS 151529)

Economics Discipline

Khulna University

Khulna

Special Thanks ToNishad Nasrin

Assistant Professor

Economics Discipline

Khulna University

Khulna

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Group I

Shrimp Industry Study: Problems, Prospects and Intervention

AgendaA Paper By ATDP Research Team

September 18, 2005

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Acronyms and Abbreviations

ATDP = Agro-based Industries and Technology DevelopmentDANIDA = Danish International Development AgencyEC = European CommissionEU = European UnionGovt. = Governmentha = Hectaremt = Metric TonPL = Post LarvaeR&D = Research and DevelopmentSPS = Sanitary and Phyto-SanitarySSOQ = Shrimp Seal of QualityUSAID = U.S. Agency for International DevelopmentWTO = World Trade Organization

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Terminology Antibiotics: Generally used for the treatment of a bacterial infection. Bio-security: Bio-security is a set of measures designed to protect a

property from the entry and spread of pests and diseases. Brackish Water: Normally known as brack water. It is salt water and fresh

water mixed together. It is saltier than fresh water but not salty as sea water. Brood Mother: Brood mother is a specific pathogen free variety of shrimp

for commercial aquaculture today. This ultimately helps the marginal farmers and increase export.

Greater Noakhali Agriculture Extension Project (GNAEP): A fisheries management model developed and tested for fisheries, giving genuine fisherman access to fishing rights direct from the government and aiming at a sustainable utilization of resources. It was first started in July 1998, with a project duration of 7 years.

Hatchery: A place where the hatching of fish is artificially controlled for commercial purposes.

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Terminology (cont…) Hazard Analysis Critical Control Point (HACCPP): It is a systematic

preventive approach for food safety from biological, chemical and physical hazards that can make the finished product to be unsafe, and designs measurement to reduce these risks to a safe level.

Land Grabbing: Land grabbing means buying or leasing of large pieces of land in developing countries by domestic and transnational companies, government and individual.

Mortality Rate: The number of deaths in a given area or period, or from a particular cause.

Post Larvae: Hatcheries sell two products. One is nauplii (tiny, newly hatched and first stage larvae) and post larvae means which have passed through three larval stage.

Sanitary and Phyto-sanitary (SPS): SPS measurement enteed into force with the establishment of WTO in 1995. SPS measurement sets out the basis rule for food safety, and animal and plant health standard. It allows countries to set their own standard.

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Terminology (cont…) Shrimp Seal of Quality (SSOQ): SSOQ prepares certification

standard pertaining to food safety, quality assurance, environmental sustainability and social responsibility in the Bangladesh shrimp sector. These standards apply to all operators in the shrimp sector.

Tax Holiday: It is a temporary reduction and elimination of tax. Government usually creates tax holidays as incentives for business investment.

Value Chain: A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.

Wild Fry: Wild fry is also known as wild post larvae. There are abundant supply of naturally occurring post larvae therefore there is no need to develop hatchery technology.

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Summary of The Study Shrimp is one of the leading export items of Bangladesh and

accounts for roughly 2.5 percent of global exports and fetches a fair amount of foreign exchange ($250-330) million for last three years.

It has ample demand in international market and Bangladesh is blessed with an environment congenial for shrimp production.

A primary study was undertaken to detect the problems plaguing the different levels of the value chain of shrimp in the country.

Motive of the Study This study aims to identify obstacles to the growth of the industry

and develop some intervention strategies that would help eradicate these obstacles and begin to develop a strategic model to achieve an export target of $1 billion by 2010.

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Problems of the Study Inefficient Management High Mortality Rates Low Quality Shrimp Negative Country Image Abroad Indiscriminate Catching Brood Mothers Lack of Integrated Agriculture Policy Inadequate Sanitary and Phyto-Sanitary Measures Lack of Standard Virtual Competition Among Different Actors Lack of Coordination among Donor Agencies Lack of Awareness Unfair Practice by Agents Non-existent R&D endeavor

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Intervention Strategies Towards Achieving Target

The study strongly recommends an integrated model for both Golda and Bagda projects.

Strategic business units can be cooperative based, where groups of farmers work together under a commercial umbrella and disseminate technical information and training to their farmer clients

Dialogues and forums should be held regularly with exporters and importers to raise and address questionable trade practices and standards.

The government must formulate an integrated agricultural policy to ensure sustainable development in this sector.

Instead of working in isolation, the donors should address these problems collaboratively so that transfer of learning and experience is ensured.

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Intervention Strategies Towards Achieving Target (cont….)

Donors should also formulate smooth exit strategies whereby projects are handed over to the private sector after completion.

Ecological protection and gender equity issues can be controlled by working with the aforementioned strategic units to prohibit certain dangerous practices like land grabbing, indiscriminate catching, child labor and participation of women across the value chain, etc.

Mass awareness can be generated on such issues as bio-security by again working through the established industry channels that will benefit from them. These again are the business units and association groups.

The SSOQ and DANIDA models can be applied in this area. The positive aspects of both the models may be applied in the value chain.

It is found that such intervention can be done quite possibly if all the stakeholders confront them jointly in an integrated fashion.

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Shrimp Industry in Bangladesh Largest export commodity of the country. Bangladesh Produces 2.5 percent of the global

production of shrimp generating more than US$ 300 million annually.

Main cultured species is the tiger shrimp (bagda shrimp) a marine shrimp and mainly cultivated in brackish water. Around $250 million contributed from Bagda alone.

Next cultured species for export is the fresh water variety locally called golda.

Shrimp industry provides direct employment to over 6,00,000 people who in turn support over 3.5 million dependents.

Suffers from lack of vision and strategic direction.

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Shrimp Sector ContributionYear Percentage

Contribution to Total Export

Export to EU (mt)

Value (million taka)

2001-2002 4.76 19235 7925.702002-2003 5.10 21941 9392.602003-2004 5.71 25522 11775.002004-2005 5.90 27508 12628.952005-2006 4.56 29177 15230.002006-2007 4.90 36851 1660.00

Japan, EU and USA are the main importer of Bangladeshi shrimp

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Shrimp Culture Follow traditional method and

annual yield is 250-300 kg/ha Total Shrimp farming area-2,76,000

ha Marine Shrimp-195000 ha and

Freshwater Shrimp-86,000 ha District involved-20, Upazila-52 Bangladesh captured only 2-3

percent of world production of shrimp.

Shrimp sector contributes 84% share of total fishery export in Bangladesh (2012-13).

Country-wise ShareUSA-26%, Belgium-21%, UK-13%,

Netherland-5%, Germany-8%, Japan-4%, Russia-3%, Others-20%

Supply Chain of Shrimp

Culture

Supplier

Agent

Depot

Commission Agent Factory

Boat, Rickshaw

Boat, Truck

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Objective of the StudyThe objective of this study is to identify the industry-embedded

problems and then to layout intervention strategies at each step of the value-chain to address the same.

Ultimate Goal of the StudyThe ultimate goal of the research is to assess the possibilities of

developing a strategic business model that can help achieve an export target worth US$1 billion by 2010.

Methodology of the Study The methodology entailed both secondary and primary qualitative

study. Secondary research included both local and international studies conducted on the subject. Primary study involving depth interviews of actors across the value chain.

The findings of the first phase of the study was validated in a stakeholders workshop focusing on problems outlined by the members of the value chain and the intervention strategy developed based on the outcome of the study

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Interviewed Representative Members of Value Chain

Scope of the StudyThe scope of the study included the

entire value chain and covered both bagda and galda. Geographical coverage was Cox’s Bazaar, Chittagong, Noakhali, Dhaka, Bagerhat, and Khulna.

Brood AgencyHatchery/NurseryTransport AgencyTrade AgencyDepotFarm-Shrimp/NurseryProcessing IndustryFinancial AgencyLaboratoryWholesale MarketDepartment of FisheriesFacilitating AgencyShrimp TechnologistAssociationDonor Agency

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Sector Map of Bangladesh Shrimp Industry

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Additional Problems of Shrimp Industry (General) Lack of integrated agricultural policy Wild fry collection Land grabbing Lack of standard at all level of value chain Hatcheries operating under capacity High demand but inadequate supply due to high

mortality rates and farms are unable to supply to the processors despite of high international demand

Change in price due to inconsistency in supply chain

Farmers sometimes inject illegal material to shrimp for necessary weight requirement

Lack of proper monitoring mechanism Government provided extension workers perform

very poorly. Post Larvae of Shrimp

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Additional Problems of Shrimp Industry (Brood Parent Collectors)

According to experts indiscriminate catching of brood mothers may extinct from our country within two to three years

In Bangladesh male and female shrimps are harvested together. There is no mechanism for harvesting brood mothers separately

Inadequate policy measures regarding the time of catching, technology and human resource

Lack of local expertise in the time of fry collection from the sea

People involved in this business have no knowledge regarding wild life

Lack of monitoring compliance affect the value chain as well

Brood Parents

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Additional Problems of Shrimp Industry (Agents and Hatchery)

Agent Agents are mostly traders and

most of them entered into business by force. Traders force the farmers to buy PL in stocks.

Quality and price control mechanisms are compromised due to inadequate supply.

Inadequate control and monitoring by law enforcing agencies is also a troubling issue.

Hatchery/Nursery This portion complies too many

players and all of them are engaged in marginal operation.

Most investors are motivated to turn black money white. Production and sales figures are often exaggerated to override the low.

Inadequate bio-security measures such as drainage, bacterial and viral control and use of medication lead to low quality of product.

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Hatchery/Nursery (cont…) In case of golda bio security related problems EU imposed a ban

on Bangladeshi shrimp import due to failure to comply with EU regulation.

Lack of trained human resources. Majority 70% are from outside country and of which 50% are from Indian nationals. Illegal application of technology and medication represents a potential threat to bio-security.

Unethical business practice arises due to the direct result of govt. programmes directed in favor of the hatcheries.

Cost of R&D activities at the hatchery level is highly uneconomical.

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Additional Problems of Shrimp Industry (Agent-PL, Transport

Agency)Agent-PL

Lack of working capital and availability of special interest rate is the main constraint

High mortality rate during transshipment from hatchery to farm especially in case of bagda

These agents control both farm and hatchery. They purchase on credit from the hatchery owner and receive commission from farm

In case of golda, a large number of PL imported from India which contains nitrofurine (a prohibited substance)

Transport Agency Poor infrastructure makes

hindrance incase of transporting bagda from Cox’s bazar to Khulna.

Lack of landing facility from air transport in Khulna, it increase time and transportation cost. Policy for licensing air transport is inadequate.

Due to time heavy time consumption some hatcheries try to transport PL by road but the situation is still unimproved.

Temperature and oxygen controlled vans for road transport are still at the experimental stage.

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Additional Problems of Shrimp Industry (Farmer/Nursery)

Low awareness level resulting high mortality rate. Inadequate banking support and financial ability hinder progress of

daily work. Processors of shrimp mostly get the benefit from export and pass

some of benefit to agent from the higher price but other members do not absorb much of the benefit.

Higher production cost due to inefficient management bodies and high mortality. Higher price for the product does not always ensures higher profit due to higher production cost as like in Bangladesh.

Sale price is completely independent of cost. However due to low production cost, survival of this sector is quite

easy than from the other shrimp producing countries. Cost of maintaining nurseries is too risky and expensive.

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Additional Problems of Shrimp Industry (Agent Shrimp,

Processor)Agent Shrimp

Huge gap between demand for shrimp by processors and supply of the same by the farmers .

Processors dictate price based on international market.

Shrimps are injected with fluid and chemical substance to increase its weight.

Monitoring of compliance are alarmingly inadequate.

Processor Quality of shrimp supplied to

the processor is not of good quality due to adulteration.

Processor engaged in their business during the tax holiday extension after that they shift their profession which rises financial default.

Low marketing effort and low prices reduces the demand in the international market and it also creates a negative image in the outside market.

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Processor (cont…) Inadequate technology and knowledge transfer impact market

operation. Hazard Analysis Critical Control Point (HACCP) is still inadequate. It is sometimes difficult to maintain the international standard of

exported shrimp. For example: EU regulation for using nitrofurans is very low to maintain health standard which is not highly maintained in our country and it may ban the export of shrimp to EU.

What We have Learnt ????Have a Closer Look on the Marked Portion

This is a perfect example of inappropriate grounds for rejection by the developed countries. International laws can therefore sometimes be questionable.

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Business Development System

Co-ordination Related Problems No coherent coordination and

hatchery business is mainly set up for interest.

Industry needs are not well communicated with donor activities.

Donor activities also not well communicated among themselves.

Non-existent government activities.

Technological Problems Non-existent R&D activity. Donor programmes are not well

designed to develop appropriate technology.

Inappropriate imported technology.

Human resource development is not long term sustainable.

Hatcheries seem to be interested in profit sharing not technology sharing.

Some General Barriers

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Business Development System (cont…)

Feed Price of feed is beyond the

quality of the poor farmer. Most available feed suppliers

are substandard, therefore we often have poor quality of shrimp.

Inefficient monitoring of feed and drug manufacturing system.

Financial Problems Financial agencies found

financial farm non profitable therefore are reluctant in extending loan.

Inadequate knowledge of financial operator regarding the demand and supply status.

Large extent loan is disbursed towards hatcheries and processors as they seem to be larger in the actor of the value chain.

Some General Barriers

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Business Development System (cont…)

Bio-Security Problems As agents are commercially driven, therefore they tend to oversell

medications such as antibiotics and hormones just to gain more profit.

Inadequate laboratory facilities result in low R&D advantage. Due to low level of knowledge regarding bacterial and fungal

infestation lot of exports turn out to be infected.

Some General Barriers

Bacterial disease of shrimp

Antibiotics of Shrimp

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Target Achievement It is evident that the target rate of US$ 1 billion target is achievable

provided that certain bottlenecks are removed.

Here the main bottleneck is production level is unacceptably low.

With the dissemination of technology through the programmes like

SSOQ production in the farmers level may be increased 4-5 fold

making it possible for the industry to reach its desired target.

Concentration on increasing management efficiency ultimately reduce

the high mortality rate and manifold the production level.

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Intervention StrategyStrategies that were previously uncovered in the primary study

illustrated below: 1. Agricultural Policy Ministry of agriculture and land should initiate an integrated policy

to enhance land productivity while considering different sub-sectors like shrimp, jute, horticulture etc.

Fisheries department should prepare different policies for bagda and golda as requirement for these two species are completely different.

As 70% of the foreign exchequer from shrimp is contributed by bagda, therefore; emphasis should be placed there.

Hatcheries, farmers and processors should be considered as single unit rather than competitors while formulating any policies.

Policy assessment and updating should be done on annual basis based on foreign technician and international market scenario.

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Intervention Strategy (cont…)2. Policy on Brood and Hatcheries Brood parents catching for bagda and golda should be strongly monitored

during some specific seasons whereas experts suggest that it should be banned in some specific areas specially in Sundarbans and Satkhira to enable a consistent flow of brood mothers.

Brood mothers collecting method should be changed in our country observing from others developed countries. Training facilities will be helpful in this case.

A 100% ban should be imposed on collecting PL for Bagda which makes industries non-existent. However such ban should not be imposed before making any alternative livelihood for the individuals whose main occupation rely on it.

In Cox’s Bazar govt. initiate tax holiday for bagda hatcheries, similar steps should be taken for golda.

Restrictions should be imposed on using net and individuals without trade license should not be allowed in this trade.

Private sector operation and support from the donor should be introduces.

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Intervention Strategy (cont…)3. Policy on Bio-Security A free market mechanism across the value chain with biologically safe food

force the farmers to adopt bio-security measures. Rather than depending on foreign technicians local manpower should be

trained on testing measurement. Certification program like SSOQ plays a major role for creating value addition

in the form of better quality and enhance image. SSOQ has laboratory in Cox’s bazar which test the post larvae and then send it to the farmers.

Bio-security policy should include viral, bacterial and fungal diseases. Policies must be adopted in the use of harmful chemical substances.

Traceability is important which helps farmer to receive training on record keeping and certification procedure. It should be adopted at each and every stage of the value chain including importer. This proactive measurement helps to achieve larger export also.

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Intervention Strategy (cont…)4. Financial Policy Restriction on number of hatcheries to control financial corruption

which may eradicate unethical practices rampant in this sector. Government should undertake investigation before granting any

hatcheries/processors to operate. Tax holiday should be directed towards the farmer in the form of low

interest rate to ensure that traders do not take all the advantage. Incentives can be more effective that helps farmer to meet certain bio-

security measures.5. International Policy In the last few years consumers are more conscious about whether

imported shrimp is produced maintaining international codes for food safety, produced in an environment friendly way. Therefore, international standard should be ensured.

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International Policy (cont…) Concerted effort on a global scale is necessary to assist LDCs in order

to build capacity necessary to guarantee compliance. The SPS (Sanitary and Phyto-sanitary) provisions should be

formulated in a transparent and accountable manner. If standards are to be harmonized, these should be take into

consideration of regional condition. For example, though EU ban import shrimp but exporters are able to divert some a part of consignment to USA and Japan.

Adequate preparatory measures should be ensured for exporting countries (SPS measure) prior to imposition of any penalty.

Adequate financial and technical assistance should be provided to the LDCs to facilitate conformity with SPS requirement.

Certification procedure should be clearly addressed to avoid any conflicting interpretation with respect to standard.

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Intervention Strategy (cont…)6. Policy of Donor Agency Donor agencies should develop a joint country strategy to ensure smooth

and effective functioning. Ensure greater transfer of knowledge which increases the effectiveness of

the project by learning from other mistakes and implementing other success stories.

Donor agencies should develop a plan based on long term exist strategy rather and transfer of ownership should follow a smooth and efficient process.

Instead of acting only a financing source only donor agencies can also function as a broker and aid govt. to formulate an integrated agricultural policy.

Emphasis should focus on the private sector as from 1986 to 1996 govt. established only a few hatcheries whereas private sectors established total of 55 hatcheries with less fund.

Donors can aid in country image promotion and export diversification.

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Intervention Strategy (cont…)7. Operational Strategy: General A shrimp association should be formed taking one representative from

each value chain group. There exist two hatcheries and one processor association but they work in isolation with each other but they should work under an umbrella organization.

There are few agents who have control over farmers and hatchery supply. However they need to be enlisted to collect information from them and disseminated it to monitor of farm activities.

SSOQ model could be used in ensuring increase in production. National target on exports as well as performance target should be

directed towards the value chain to ensure efficient integration. Bagda and Golda are two different generic brand therefore, their

promotional strategies also need to be different. In developing an operational strategy, grass root problems should be

solved in the organization level.

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Intervention Strategy (cont…)8. Operational Strategy: Golda For Golda project regional integration model may be helpful where all

the value chain actor performed regionally and whey it matured then attempt to form a limited company.

GNAEP model is very much effective and have a goal of transition from project phase to private sector phase.

Regional association may be considered fro financial support. All movement of good from hatcheries to processor recorded properly

since a single entity is in operation. Golda can also be cultivated in a poly-culture system with Carp to

boost production.

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Intervention Strategy (cont…)9. Operational Strategy: Bagda For the hatcheries to be stationed across the country, they have to

consider the production of bagda as they are located near coastal belts and the strategies need to be different due to geological proximity.

Hatcheries can jointly run the PL and use technology using road as a means of transport. Code number for hatcheries, certification system improved efficiency in transport, distribution and traceability.

Farmers should be helped to form a group. Bargaining power of famers should be boosted for equitable distribution of benefit. Farmers of a specific geo-graphical region should be tagged for easy accessibility, supervision and traceability.

Govt. agencies should monitor bio-security measures and provide financial support to the farmer to develop export oriented industry.

Cooperatives have to be allowed freedom.

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Intervention Strategy (cont…) 10. Processor

Support can be sought from the govt. and the donor agencies to enhance country image.

Strategies should also be generic for bagda and golda.

Strategies should be directed towards brand which increase industry competition within the country.

Maintain data banks of products.

Maintain liaison with the market and transmit information down the chain.

11. R&D R&D facilities can be mobilized

through linkage with the various universities of the country.

Research activities can be initiated by the regional integrated units or join effort by the hatcheries of bagda.

Strong linkage with the SSOQ is needed at the initial stage.

Internship program of the students in various universities can be developed at all level of value chain to ensure human resource development.

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Intervention Strategy (cont…)12. Operational Strategy: Donor Donor should continue with SSOQ model to ensure smooth transition

and placement of technology transfer. Donor should develop a plan on milestone basis rather than time

bound basis in the areas of technology, standardized operation and marketing strategies.

An integrated model should be developed by taking representative of the private bodies for smooth transition from the very beginning of the project.

A typical NGO driven model should be avoided since it lacks transition and partnership with public sector need also to be avoided because this may lead to ownership issue.

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Conclusion Integration of activities both in terms of value chain and region may help

to achieve US $1 billion theoretically described in the above discussion. Working with existing PL supply agents who control a significant

number of farmers and also ensure quick dissemination of information and provide technical training.

Presence of donor in the absence of government guidance is very much essential for a planned time period as a facilitators only.

Private sector participation is essential and project should be handed over only after the sustainable profitability has been ascertained.

Fisheries department and donor should outline policy framework according to the need of the buyer and ask the govt. for implementation.

If all of the strategies are met only then Bangladesh can increase its market share and become one of the leader in the global shrimp market.

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Thank You AllFrom

Any Questions????