Why agri exports failing to tap full potential
When Bangladesh’s LDC graduation will be in effect after 2026, the sector will lose cash incentives from the government and export benefits from various countries, warns the report
Lack of quality testing and poor packaging are among the reasons that hold back Bangladesh's agricultural export potential, despite cash incentives and policy priorities attached to the sector, says a commerce ministry report.
When Bangladesh's LDC graduation will be in effect after 2026, the sector will lose cash incentives from the government and export benefits from various countries, warns the report.
The country now needs an adequate number of cold storage facilities and wider access to advanced technologies to reduce post-harvest losses. Additionally, it requires strict regulations and skilled workers to maintain global food standards and compete in the global market with quality products, it reads.
Export data shows Bangladesh's exports of farm products slipped to $843 million in the last fiscal year, from over $1 billion in the previous two consecutive years.
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The country's vegetables exports to the top importers -- the US, Germany, the UK, France, and Canada -- accounted for 0.0%, 0.01%, 0.54%, 0.02%, and 0.02% respectively in 2021. The five countries sourced vegetables worth $3.34 billion from the global market that year.
Similarly, for fruits and dry food, with top five countries' imports totalling $6.8 billion and $3.3 billion respectively in 2021, Bangladesh's export share remained nominal.
The European Union, the US, Netherlands, Brazil, Germany, and China are the top exporters of agricultural products. Asian countries such as India, Thailand, Malaysia, and Vietnam are also included in this list of top 22 exporters.
If issues of deficiencies in modern testing labs, specialised cold storage and packaging facilities are not addressed, Bangladesh's agriculture exports would face further setbacks once cash incentives and policy supports cease after the country's graduation from the least developed country (LDC) status.
The commerce ministry's WTO wing came up with these assessments in the report, titled "Identification of trade-related graduation challenges and preparation of sector-specific trade roadmaps for overcoming the challenges", prepared in May.
Bangladesh's export policy 2021-24 identified agro and agro-food processing sector as one of the highest priority sectors. It has been listed as an export diversification sector in the industrial policy 2022.
In addition, the government in its 8th five-year plan 2021-2025, has emphasised on the production of diversified agro products and processed food.
Currently, despite receiving various forms of government policy support such as a 20% cash incentive, and tax exemptions for local investments, there is no evident progress in market expansion.
Stakeholders say despite policy and cash support, the slow pace of adopting good agricultural practices obstructs the access of Bangladesh's vegetables and fresh fruits to developed countries' chain shops. Presently, the country's exports of agricultural products cater mainly to the expatriate Bangladeshi community, they said.
Major obstacles
The commerce ministry report identifies some significant obstacles to agriculture exports, including the lack of post-harvest and processing infrastructure and modern equipment.
Insufficient specialised cold storage and a cool chain also present major challenges in this regard.
The country faces up to 40% post-harvest losses in agricultural produce due to weak storage systems, leaving the country to still depend on imports though it produces more than it needs. Only a few cold storages are there for certain quantities of vegetables, mainly potatoes, as per the report.
Expensive air transportation, the absence of duty drawback, overutilisation of groundwater, limited financial institution support for the food processing sector, and the lack of mutual recognition agreements with and certifications from partner countries are also among the obstacles identified in the report.
In order to effectively export agricultural products to foreign chain shops, including in the European Union, it is imperative to ensure that vegetables and fruits undergo safety testing in laboratories, stakeholders say.
Additionally, to enhance the shelf life of agricultural products, several crucial measures must be implemented, such as the installation of automatic washing and drying plants, hot water treatment facilities, and cold rooms for cool shock, they add.
While other exporting countries in Asia have improved their packaging, testing and storage facilities, Bangladesh's first packaging house in Dhaka's Shyampur is yet to incorporate a modern laboratory.
During a recent event, Secretary of the Ministry of Agriculture Wahida Akhtar said that the number of such packing houses in India is more than 500 and in Thailand it is innumerable.
"We're just getting started. For this, the private sector has to come forward and invest," she said.
According to the Bangladesh Fruits, Vegetables & Allied Products Exporters' Association, the airport has only two scanners for exporting vegetables and fruits, which often get damaged and take a long time to repair.
Additionally, there is a concerning issue with high air cargo fare, making the cost of exporting agricultural products from Bangladesh significantly higher compared to India, Thailand, and Indonesia.
Monjurul Islam, advisor of the association, said, "China, Vietnam, and Thailand have superior packaging, leading to high demand for their products worldwide. We must enhance our packaging standards in these areas."
Imran Hossain, a young agricultural products exporter and export market analyst, said introducing automatic packaging and labelling would be a game-changer for vegetable and fruit exports.
Agro processed products
The government offers two certifications for agro-processed products: Halal product certification from the Bangladesh Standards and Testing Institution (BSTI) and product safety certification from the Bangladesh Safe Food Authority.
However, local industry insiders highlight significant deficiencies in raw materials, modern technology, supply chain management, and laboratories for agro-processed product production.
Kamruzzaman Kamal, director (marketing) at Pran-RFL Group, told TBS, 'We still have to send a product to a lab in Singapore or India for quality testing as per the requirements of different countries. This is our biggest weakness."
He also said, "We are significantly unprepared to tackle the challenges of post-LDC graduation, given the deficiencies in infrastructure, modern equipment, and subpar raw materials. Limited access to modern laboratories compounds the problem. Investment in these sectors is crucial, but becoming export-ready before LDC graduation remains a daunting task."
As per the Export Promotion Bureau, the agricultural product export target for the financial year 2022-23 was set at $1,394 million. However, actual exports amounted to $843 million, which is 39.53% less than the target.
In comparison to the previous fiscal year's exports of $1162.25 million, the export figures for specific categories in FY23 experienced significant declines: vegetables decreased by 39%, cut flower & foliage by 37.50%, fruits by 81%, and dry food by 19.84%.
Additionally, frozen food exports decreased by 11% and shrimp exports by 26.27% in FY23, compared to the previous fiscal year.
