International Business

Critical issues, government policies and business preparation of Shrimp export business of Bangladesh.

Chapter: 01INTRODUCTION 1.1. Introduction Bangladesh registered a 40 percent rise in exports earnings from frozen foods mainly shrimp to $625 million in fiscal 2010-11 from $445 million in the previous year, according to EPB. The EU is the largest market for the country's frozen fish, followed by theUSA1. Shrimp production and export in Bangladesh has undergone rapid expansion over the last two decades. Shrimp is a very valuable export commodity, generating substantial revenues and foreign exchange and creating employment opportunity. Bangladesh has a total of 145 shrimp export industries. Of these, 94 industries are situated in Khulna division. In Bangladesh, shrimp industry is the second largest foreign currency earner after the garment industry. About 1.3 million people are involved in forward and backward linkage activities like fry collection, hatching, nursing, production, harvesting, processing, export and other logistic support services. The shrimp industry envisions to increase export quantity and to earn 1.5 billion USD by 2010. Shrimp culture started in Bangladesh in the coastal district of Satkhira in 1960s. Gradually, its culture expanded to the coastal belts of Khulna, Bagerhat, Cox’s Bazar and Chittagong and now the area under shrimp culture has increased from 52,000 ha in 1982-83 to 270,000 ha in 2007-08(Bangladesh Frozen Food Exporters Association, BFFEA, 2009). About 90% shrimp land is located in the Khulna, Bagerhat, Satkhira and Cox’s Bazar districts in the south-eastern region of the country. Despite the rapid growth of Bangladeshi shrimp cultivation, the global frozen fish and seafood market continues to be dominated by Thailand, Indonesia, China, and Ecuador. Significant innovations in production and processing in these countries have increased the value added associated with their exports and the market share that they command. Unfortunately, the same is not true for Bangladesh. Production and processing innovations remain unrealized. Furthermore, stricter import requirements and compliance regulations in importing countries have meant that Bangladesh must invest in improving the safety and quality of their fish and seafood exports to avoid products being detained and rejected at point of entry into foreign markets. A recent IFPRI (2003) report notes that: “The only way Bangladesh can improve its export position in the shrimp market is to improve the safety and quality of its exports.” Bangladesh has the potential to increase production, raise productivity, upgrade processing facilities, and draw further land into shrimp cultivation. The shrimp/prawn producing unit in Bangladesh is locally known as “gher” farming. Gher farming is a combined form of aquaculture and agriculture. Shrimp/prawn gher farming system has significant impacts on agriculture and the economy of Bangladesh and has created many diversified local job opportunities like mud snail traders, prawn fingerlings traders, ice factory, depot owners, etc. A large number of male and female workers supply their labor in this sector. The basic components of one’s standard of living such as food consumption, medical care, education, housing, and clothing have improved after the introduction of the gher revolution. Now the people in this industry can have three meals a day which was not possible in the recent past. They can also afford to send their children to school for education.

1 Daily Star, Tuesday, August 16, 2011

of 64


1.2. Origin of the ReportWe are lucky to say that our honorable course teacher of International Imranul Islam, Lecturer, Department of Marketing, PSTU has assigned us a report on “Critical issues, government policies and business preparation of Shrimp export business of Bangladesh.”. This report is prepared on the basis of the data collected from 5 samples of Shrimp producers, 5 samples of Shrimp suppliers, 5 samples of Shrimp Exporters from Rupsha and Bagerhat under Khulna District. 1.3. Significance of the StudyThis study has a great significance like-

i) Can be used to have the idea about Shrimp exporting Business in Bangladesh.ii) Can be used for further research.iii) Can be used for academic purpose.iv) Can be kept as a statistical work

1.4. Objectives of the ReportOur targeted major objectives of this study are as follows:

i) To have the market knowledge of shrimp exporting Business in Bangladesh.ii) To know the production and exporting procedures of shrimp in Bangladesh.iii) To observe the Government policy regarding Shrimp exports Business.iv) To get idea about Business preparation of shrimp export.v) To examine the impacts of various factors on Shrimp exporting Business.

1.5. Limitation of the StudyWe have, as it is an analysis based report, faced many problems while preparing this report. The basic limitations that we have faced are as follows-

i) Shortage of time.ii) Lake of pre- experience.iii) Minimum number of respondents.iv) Lake of proper knowledge.

1.6. Methodology of the StudyIt is very essential to maintaining a proper methodology for achieving the target objectives of any research. The study will be conducted to maintaining the following steps:Selection of Study AreaRupsha and Bagerhat have been selected as the study area, considering the Shrimp production and Exporting and affecting factors.Sources of dataBoth primary data and secondary data have been used in this study. The primary data were collected from the survey. Secondary data collected from internet.

of 64


Size of Sample and Period of Data Collection In selecting samples for a study two factors need to be taken into consideration. The sample size should be as large as to allow for adequate degrees of freedom in the statistical analysis. It was not possible to include all the population in the area studied due to limitation of time, money and personnel. A total number of 15 (5 Shrimp producers, 5 Shrimp suppliers and 5 Shrimp exporters) have been selected from Rupsha and Bagerhat. Data has been collected during December-2nd week 2012 by interviewing the sampled respondents using interview schedules. Preparation of Interview ScheduleAnother crucial basis of the field level study is to prepare a correct interview schedule which help to achieve the ultimate objectives of the study. For this, primary interview schedule has been pre-tested comparing with many other standard one. After necessary correction and modification, the interview schedule has been finalized to collect data from the respondents.In our interview schedule we have used number leveling the degree of importance of the factors affecting the Shrimp exporting Business. The number leveling are-

No Importance 1Not Such Important 2Average Important 3Important 4Very much Important 5

Collection of DataObviously, both practical and theoretical data are needed in the relevant research. The researchers themselves have collected the data by interviewing the selected respondents. All possible efforts have been made to ensure the collection of reasonably accurate information from the field. At first, the objectives of the present study have been explained to the respondents and then they will be requested to provide correct information.Research InstrumentsThe survey was conducted with only one-structured questionnaire. In our questionnaire, we used two types of question pattern like, open questions, closed questions to design the questionnaire. Sampling planWe have selected the Rupsha and Bagerhat as the sample places for our convenience, sample size was 15 and information was collected from Rupsha and Bagerhat and the result has been considered for the overall Bangladesh. After this we have analyzed the finding, identified the problems and made recommendations.Processing of DataThe collected data has been carefully edited and coded. Then all the collected data will be summarized and scrutinized. Data entry has been made in computer and analyses have been done using the concerned software Microsoft Excel. Analytical TechniqueTo meet particular research objectives, several analytical methods have been employed in the present study. Tabular method has been used for a substantial part of data analysis. This technique has been intensively used for its inherent quality of purporting the true picture of the Shrimp producers, Suppliers and Exporters in the simplest form. Relatively simple statistical techniques such as percentage and arithmetic mean or average has been employed to analyze data.

of 64


Chapter: 02

MARKET KNOWLEDGE OF SHRIMP EXPORTING BUSINESS2.1. Importing countries of shrimpLast year’s export from Viet Nam of Bangladesh shrimp totaled 103.85 Million Lbs and this year the volume is likely to increase further. Despite difficulties faced by the aquaculture sector in 2009, Bangladesh managed to increase its shrimp exports by 10.65% in quantity and amounting to 437.40 million US$. Bangladesh exported shrimp to 82 destinations with the main markets being USA, Belgium, UK, Netherland, Germany, Russia, Saudia Arabia, Japan And Others. Black tiger shrimp contributed 75% of the total export value last year. USA & Belgium was the argest market taking around 35% of the Bangladesh total shrimp exports.

Source: Bangladesh Frozen Foods Exporters Association 2009

of 64

18%

17%

14%10%8%

3%

3%

3%

24%

Shrimp Exports From Bangladesh (2009-2010)USA Belgium UK Netherlands Germany Russia Saudia Arabia Japan Others


2.2. Global production and tradeThe total global production of farmed shrimp reached 2.5 million tonnes in 2005. This accounts for 42% of the total shrimp production that year (farming and wild catches combined). The largest single market for shrimp is the United States, importing between 500 – 600,000 tonnes of shrimp products yearly in the years 2003-2009. About 200,000 tonnes yearly are imported by Japan, while the European Union imported in 2006 another about 500,000 tonnes of tropical shrimps, with the largest importers being Spain and France. The EU also is a major importer of coldwater shrimp from catches, mainly common shrimp (Crangon crangon) and Pandalidae such as Pandalus borealis; in 2006, these imports accounted for about another 200,000 tonnes. The import prices for shrimp fluctuate wildly. In 2003, the import price per kilogram shrimp in the United States was US$ 8.80, slightly higher than in Japan at US$8.00. The average import price in the EU was only about US$5.00/kg; this much lower value is explained by the fact that the EU imports more coldwater shrimp (from catches) that are much smaller than the farmed warm water species, and thus attain lower prices. In addition, Mediterranean Europe prefers head-on shrimp, which weigh approximately 30% more, but have a lower unit price. About 75% of the world production of farmed shrimp comes from Asian countries; the two leading nations being China and Thailand, closely followed by Vietnam, Indonesia, and India. The other 25% are produced in the western hemisphere, where Latin American countries (Brazil, Ecuador, Mexico) dominate. In terms of export, Thailand is by far the leading nation, with a market share of more than 30%, followed by China, Indonesia, and India, accounting each for about 10%. Other major export nations are Vietnam, Bangladesh, and Ecuador. Thailand exports nearly all of its production, while China uses most of its shrimp in the domestic market. The only other major export nation that has a strong domestic market for farmed shrimp is Mexico.

Region Country Production in 1,000 tons per year, rounded

of 64

80%

20%

Shrimp and Fish From Bangladesh (2009-2010)

ShrimpFish


2000

2001

2002

2003

2004

2005

2006

2007

Asia China 192 267 337 687 814 892 1'080 1'265

Thailand 309 279 264 330 360 401 501 501Vietnam 90 150 181 232 276 327 349 377Indonesia 118 129 137 168 218 266 326 315India 97 103 115 113 118 131 132 108Bangladesh 59 55 56 56 58 63 65 64Philippines 41 42 37 37 37 39 40 42Myanmar 5 6 7 19 30 49 49 48Taiwan 6 8 10 13 13 13 11 11

Americas Brazil 25 40 60 90 76 63 65 65

Ecuador 50 45 63 77 90 119 150 150Mexico 33 48 46 46 62 90 112 114U.S. 2 3 4 5 5 4 3 2

Middle East Saudi Arabia 2 4 5 9 9 11 12 15

Iran 4 8 6 7 9 4 6 3

Oceania Australia 3 3 4 3 4 3 4 3

2.3. Market share of shrimp exporting business on total Frozen Shrimp & Fish exportFrozen Shrimp & Fish Exports from Bangladesh (2001-2002 to 2009-2010)

Year Item Qty (Million Lbs)

Value(Million $) Taka Crore

of 64


2001-2002 Shrimp & Fish 88.36 276.11 1585.252002-2003 Shrimp & Fish 75.57 321.81 1863.272003-2004 Shrimp & Fish 84.48 390.25 2300.922004-2005 Shrimp & Fish 96.11 420.74 2587.902005-2006 Shrimp & Fish 107.86 459.11 3200.002006-2007 Shrimp & Fish 112.15 515.32 3558.782007-2008 Shrimp & Fish 111.35 534.07 3663.702008-2009 Shrimp & Fish 117.31 454.53 3127.162009-2010 Shrimp & Fish 129.81 437.40 3025.93

2.4. Possible market of Shrimp exportIn the world there are still some markets where the shrimp can profitably exported they are

1. Egypt2. Morisus3. Vietnam4. Holland5. Finland6. Brazil7. Spain

Chapter: 03

PRODUCTION AND EXPORTING OF SHRIMP 3.1. Overview of Shrimp SectorExport oriented shrimp culture has undergone rapid expansion in Bangladesh since the mid-1980s. This sector has benefited

of 64


from a growing global demand for shrimp and a series of measures to increase Bangladesh exports and diversify the export base.7 Shrimp culture received critical support from the World Bank in 1985 when a credit of SDR20.6 million was extended to the Government of Bangladesh. The project was intended to intensify existing production, construct embankments and boundaries that would eliminate salt-water seepage, and promote efficient water exchange to flush out salts from soils for paddy cultivation (World Bank, 1985 cited in Bhattacharya, Rahman and Khatun, 2005). Unfortunately, the environmental costs were greater than had been optimistically predicted and a series of projects were subsequently implemented in an attempt to mitigate these costs. Bangladesh is a nation uniquely positioned to cultivate and harvest fish—situated at the confluence of numerous rivers and tributaries, and occupying the delta of three major trans boundary rivers, the Ganges, Jamuna, and Brahmaputra. Currently, Bangladesh is the worlds’ fourth largest producer of inland fish. The fisheries sector generates over US$ 390 million a year and contributes 5.0 percent of GDP at constant prices8 and about 5.6 percent of total exports. In addition to providing a valuable source of foreign exchange, fish and fish products are clearly critical for food security in Bangladesh, where about three quarters of the animal protein consumed comes from fish that are caught in the rivers and flood waters (CGIAR, 1998). According to Asaduzzaman and Toufique (1998) about 8 percent of the total population in Bangladesh depends on the fisheries sector for their livelihoods and almost three quarters of all households engage in subsistence fishing in the flood plains, or cultivate fish in ponds during the rainy season. Many households engage in both rice paddy cultivation and aquaculture in the same ponds over the course of the year. INFOFISH (2004) estimates that there are approximately 1.3 million rural household ponds where fish aquaculture is practiced. Although subsistence shrimp culture has been practiced for hundreds of years, increasingly, small farmers are adding shrimp and prawn cultivation for export to their crop rotations. The shrimp sector began to expand rapidly in the mid-1980s (Alauddin and Hamid, 1996). In the early 70s, the industry accounted for less than one percent of total exports. Initially, the majority of shrimp was caught at sea. By 1986, the sector accounted for a little over 10 percent of all exports and the proportion of marine caught shrimp had declined significantly. Currently, shrimp contribute about 4.7 percent of all exports, more than 80 percent of which is cultivated or caught in inland waterways. With the expansion of the sector, the number of fish and shrimp processing plants grew concomitantly. In the early 1970s there were 13 processing plants. By the mid 1980s there were 54 plants and currently there are 129 in operation (INFOFISH, 2004). Although shrimp production and cultivation in Bangladesh has proven to be dynamic and growth rates have been positive and sustained, fish and fisheries products are typically a high-risk food export, subject to careful inspection for pathogens, natural toxins, bacteria and other possible contaminants (INFOFISH, 2004). Additionally, shrimp are virus-prone and the exposure of Bangladeshi shrimp to the White Spot WSSV virus in 1995 introduced further risk that continues to compromise output and reduce yields.9 To address these concerns, the Government of Bangladesh established a Fish Inspection and Quality Control program in the early 1980s through the Department of Fisheries of the Ministry of Fisheries and Livestock. In 1996, the Food and Agricultural Organization developed a program to provide targeted support and technical assistance to the sector based on the Hazard Analysis Critical Control Point (HACCP) endorsed by the US Food and Drug Administration.10 Despite these measures, the European Union imposed a ban on shrimp imports from Bangladesh in 1997 in response to inspection failures in a number of processing plants. Between 1997 and the end of 1998, the volume of shrimp exported dropped by 20 percent (BSFF, 2005). By December 1998, shrimp exports had

of 64


fallen by almost a quarter. The ban deprived Bangladesh of their largest shrimp export market and set in motion a series of changes throughout the sector, spurring investment in technology, hygiene practices, and new processing techniques. Cato and Subasinge (2003) report that by 2003 the shrimp industry had invested US$17.6 million in processing plant upgrades. By 2002, of the 65 plants licensed for export, 45 had secured EU approval (ibid). Despite these investments, there is evidence that a number of processing plants and farms have failed to implement adequate changes and that the risk of contamination is significant.

3.2. Shrimp ProductionCurrently, 36 shrimp species are harvested and cultivated in Bangladesh. Two regions dominate shrimp production, accounting for approximately 95 percent of the total area dedicated to shrimp culture: Chittagong-Cox’s Bazaar and Khulna-Shatkira-Bagerat. Brackish water aquaculture is widespread throughout Satkhira, Khulna, Cox’s Bazaar, and Bagerhat. P. monodon and M. rosenbegii, the two major species of Bagda and Golda are cultivated in these areas. M. rosenbegii, the most popular freshwater prawn, is largely produced in southwest region of the country. The Bangladesh Frozen Food Exporters Association estimate that there are about 37,397shrimp farms in Bangladesh many of which are small. ATDP II estimate that the overwhelming majority of these farms is less than 2 hectares in size. Although production volumes vary enormously, average productivity is low. Most farms in Bangladesh follow traditional methods of cultivation in open ponds serviced by tidal waters. A few farmers, most notably those receiving technical assistance through donor-led projects,many are practicing modified traditional methods of cultivation scaling-up inputs and technology. Less than five percent of farmers apply semi-intensive methods which require aeration, pumping, water exchange, and intensive feeding. Most of the farmers who apply semi-intensive production techniques are located in Khulna. Traditional shrimp farming in Bangladesh is carried out in paddy fields during the dry season, when the salinity of the soil and water in the coastal region makes rice culture difficult. In the region surrounding Khulna, rice is grown during the rainy season for a period of up to 3-4 months. Few traditional farmers fertilize the ponds and as a result productivity is low, ranging from 250 to 350 kilograms per hectare. Despite the low levels of inputs, costs per hectare are not insignificant and include rent or imputed rent as well as labor costs. Traditional methods incur estimated costs of almost 60,500 BDT per hectare per year. Average returns range from between 14,500 and 44,500 BDT per hectare. Modified traditional practices incur higher costs for pond preparation, like construction, feeding, and limited aeration. Survival rates and productivity are higher, as are returns. A farmer cultivating one hectare of land using modified traditional practices could expect average returns of 87,460 BDT per year. Finally, semi-intensive production has higher stocking densities, higher costs and significantly higher yields. A farmer practicing semi-intensive methods of shrimp cultivation could expect an average profit per hectare of 282,000 BDT.

3.3. Fry CatchingFry catchers depend upon largely open access resources such as surf or estuaries and rivers for fry. Fry catching takes place widely throughout Bangladesh. There are 12 districts and about 40 thanas where shrimp fry catching takes place. We estimate that there are currently around 518,130 fry catchers involved in shrimp fry catching during the peak season. Most of the fry catchers reside along the

of 64


beaches or river and many have migrated from other parts of the country. Generally, both men and women work in fry catching with women comprising approximately 40 percent of the workforce. Children frequently accompany fry catchers and participate in catching and sorting activities. During the peak season women and girls participate more visible in fry catching. However, throughout the year women and girls sort the fry. Shrimp fry collectors sift the surf for fingerling. They transfer their catches to earthenware or metal bowls which are often carried back to the villages where the fry are sorted and counted by women and children using white enameled plates. The transporting and sorting process undoubtedly results in a very large wastage of fry of both penaeid shrimps and other commercially important species including fish. The shrimp fry then pass through a chain of middlemen before reaching the shrimp farmers. Survey data collected by the, estimate that fry collectors are mostly located in the Barisal region (about 48 percent) followed by a further 31 percent in the Khulna region and 21 percent in Cox’s Bazaar. Notwithstanding, the majority of the PL catch comes from the Cox’s Bazaar region (accounting for about 63 percent of the total catch). Despite much higher levels of fishing effort, yields of bagda PL in Khulna zone accounted for only 9% of all fry collected. The total catch was estimated to be 3,000 M PL of Bagda (Penaeus monodon) fries. No estimates were available for Golda (Macrobrachium Rosenbergii) fries. According to this field survey, about 90 percent of the wild shrimp fry caught in south-east zone (Chittagong Division) are transported to south-west zone (mainly in Khulna Division) since approximately 80 percent of the total Bagda farms are in Khulna. Similarly, about 80 percent of the hatchery produced fries are transported to Khulna Division. It is important to note, although we have no estimates of the volumes, that farmers and fry collectors report that fry also enters the Bangladeshi value chain from India and to a lesser degree Myanmar.

3.4. HatcheriesHatcheries produce fry from mother shrimp under controlled conditions. The hatchery obtains the mother shrimp from farmers and marine fishermen. Bagda hatcheries need pipes and infrastructure to bring seawater inside the hatchery and to return it for disposal. For breeding purposes, the mother shrimp is kept in a dark quarantined room at a controlled temperature. Cleanliness and quiet are emphasized as critical factors for successful breeding. Consequently, access to the main breeding room is limited and

of 64


only the key care-taker is allowed to get in this room to perform essential work. Number of shrimp hatcheries increased rapidly. Most of the Bagda hatcheries are located in the Cox’s Bazaar region and the fry are transported by air or road to the southeast regions. In Cox’s Bazaar, in close proximity to the hatcheries, shrimp-supply businesses have grown up, dealing fish feed and other inputs for the hatcheries. These sales outlets import and sell all the products necessary to establish and run hatcheries including shrimp feed. Hatchery bred fry has the potential to augment wild-fry and eventually displace wild fry in the value chain. Since there is an excess demand for fry for farming and capacity remains under-utilized in processing, there exists an opportunity to add value by enhancing and modernizing hatchery operations to supply more fry for farming.

3.5. Fry FariaShrimp fry faria is important in the shrimp sector. Fry faria buy fry either from fry catchers or from hatcheries. Fry faria buy fry throughout the year. The peak season for buying fry is five months long from “Baishakh” (April) to “Bhadra” (August). During this period the faria conduct business every day and buying and selling twice a day. During off season in the months of “Poush” (December) and “Magh” (January) they can face significant financial distress and frequently resort to loans from the fry Aratdar which locks them into a contract to sell all fry to the lender. If they try to sell to other Aratdar they frequently face verbal or physical abuse. Most of the fry faria prefer to buy wild fry as these fry are perceived to be stronger and more resilient than fry from the hatcheries. This preference is reflected in prices where wild fry are valued at comparatively higher prices. Because of the formalities and requirements, the fry faria could not get loans from government-run and private banking institutions. 3.6. Fry AratdarFry aratdar also purchase fry that comes from hatcheries or from natural sources. Many fry aratdar buy directly from fry faria, aggregating the volumes of fry. Fry are transported by the fry aratdar to the commission agents in other regions by air or road. Some fry aratdar are also farmers who own or manage ghers. Generally, fry is delivered in two types of containers the “Pateel” and “Drum”. There are on average 10,000 to 12,000 fry per “Pateel” and 20,000 fry per “Drum”. In Bagerhat, each day an aratdar sells approximately 120 “drums”. Usually, the aratdar do not feed the fry which means that they sell them quickly, often within three days. A fry aratdar trades fry twice a day. The market price varies, reflecting clients’ demand and the overall market conditions. Golda consistently fetch higher prices than Bagda in both seasons. Hatchery

fry typically earn lower prices. Normally, Golda fry price is higher than Bagda in both seasons in

Khulna and hatchery fry is lower than the wild fry. Sometimes, he also sells fry to the farmers

who have shrimp farm or ghers. Fry are also transported by wholesaler to the commission agents in other regions by air and roads.

3.7. Fry Commission AgentShrimp fry is collected from Cox’s Bazar, Chittagong, and Khulna and transported to Khulna where most of the gher (farms) are located. Typically, Commission Agents receive the fry and sell them to the farmers. The Commission Agents hold the fry for short periods of time. Large containers, usually plastic drums and aluminum pots, are used to carry and serve the fry. Shrimp fry are transported by air and road and no food is provided during either transportation, storage

of 64


and trading. The Commission Agents are generally medium to large-scale entrepreneurs. Commission rates vary between 10 and 60 BDT per 1000 fry with wild golda fry receiving the highest price. The commission agents filter the water in which the fry is kept to remove the shell residuals of the fry. The fry are sorted by male workers before trading. Usually the sorters are hired at a rate of 10 BDT per 1000 fry count. The buyers who purchase fry from the commission agents pay for sorting. Fry commission agents sell wild fry at higher price than hatchery fry. Buyers willingly pay this premium since they believe that the wild fry have higher survival rates. They claim that they lose 10 to 12 thousands of fry on an average per one lakh (100,000) fry. The mortality rate depends on both the quality of net used in catching the fry and the type of management during transportation.

3.8. NurseryNurseries are where the fry are adapted to the production environment. Technical expertise and infrastructure are required for the operation of a nursery. In the nursery, the fry is kept under controlled conditions and is nourished through regular feeding at three hour intervals. The fry gradually adapts to the temperature and pH level of the water where it will be grown. The fry arrives at the nursery at a temperature of 12 º centigrade. The water temperature is gradually increased to the temperature of the water available in the locality. The pH level is adjusted with lime to a level that matches the local environment. If necessary, the salinity of the water is gradually changed to ensure proper adaptation for the fry. In addition, an uninterrupted supply of oxygen is provided at every stage of nursing. Because of the reliance on electricity a generator is used to compensate for power outages. Typically there are only men working in the nursery. Fry stay in a nursery for about 3 days and are then sold at a higher price than fry that have not been acclimatized in this manner. Nurseries typically operate only during the shrimp production season. Workers at nurseries claim that their nourished fry have significantly higher survival rates (up to 100% in some cases) and a few nurseries offer a pay-back guarantee if fry die. Nursery culture is a new value addition option in the shrimp value chain that may help to improve survival rates of hatchery produced fry. Introducing nurseries has the potential to increase the total availability of shrimp fry and provide employment opportunities— although some technical expertise and limited capital investment are required.

3.9. Shrimp FarmingMost bagda shrimp are farmed in Khulna, Bagerhat, and Satkhira; golda is produced in the central districts of Bangladesh since they require fresh and not salty water for production. Farmers produce golda and different varieties of bagda: Black Tiger, Fresh water, White & Brown Horina, etc. It is unclear how farmers decide what type of shrimp to produce. It is most likely that the types cultivated are influence by the “dadon” system

of 64


where shrimp faria and aratdar impose their preferences about shrimp varieties responding to price signals and market demand. In a large gher (1000 Bigha or 135 hectares) approximately 2,000 fry are seeded per acre (approximately 5,000 per hectare) and no further feed is usually provided. In a small gher feed is provided as the stocking density is typically higher (10000 to 5000 fry per acre). Increasingly, farmers are cultivating “pocket ghers” using less land, higher stocking densities and adding feed. These “pocket ghers” are smaller ghers without any direct link to the sea. Although traditional shrimp production is monoculture, increasingly both bagda and golda are produced at the same time in the same gher and frequently other fish are cultivated suchas carp and milkfish. Mixed production is very popular since farmers can earn more and diversify reducing the risk of disease for any specific species. Other fish, such as Pangash, Belle, Ruhi, are the most attractive for mixed production as they command higher value and mix well with shrimp. Some farmers engage in limited post-harvest activities selling deheaded and de-veined shrimp to the Aratdar at a higher cost. Along the banks of the gher the farmers also produce vegetables for home consumption and occasional sale.Some important issues regarding Shrimp farming are depicted bellow-

o Golda and Bagda are farmed 400 kg per Bigha.o A Shrimp Farmer need on an average 1 lack per Bigha and one gets 70-80 thousand profit per

year.o Most of the Shrimp farmers manage their initial capital by their own fund. o The Shrimp farm duration in more or less 5 to 6 month twice a year. o Most of the Shrimp farmers produce Bagda and Golda 70% and 30% respectively in their farm

(Gher).o Shrimp farmer collects the shrimp fry directly from fry collector or from Hatcheries.o The purchasing cost of fry is 1 tk for Bagda and 5 tk for Golda.o Production volume per Bigha is 2000 and 10,000 piece for Golda and Bagda respectively.o The peak season for fry collection is April – September.o Shrimp farmer usually collect fry going to Hatcheries but sometimes the fry collector come to the

farmer for selling their fry.o Shrimp farmers usually incur 100 tk per cartoon as transportation cost for collecting fry to their

farm.o Farmers usually use private car and micro bas for collecting the fry.o Farmers Gher preparation cost about 50,000 per Bigha in every season. o They usually tie the Gher boundary; provide lime (Chun), fertilizer for preparing the Gher.o They have labor working in the Gher with about 4000 monthly salary.o Feeding cost is about 30 thousand per Bigha and medicine cost about 6000 per Bigha in every

season.o The Shrimp food is sprinkled into the firm.o They have some specific risk in their farm like virus, flood, and theft and so on.o They use net, provide medicine and employ Guard for safeguard.o They usually sell their shrimp directly the supplies (Depot)o Their grading system is on the basis of how many shrimp is in one kg. The cost per grade is-

Grading Bagda Golda400 piece per kg 45 tk/kg 48 tk/kg500 piece per kg 30 tk/kg 32 tk/kg600 piece per kg 20 tk/kg 23 tk/kg

o They usually don’t get significant government facilities.

of 64


3.10. Shrimp Faria (Sub-supplier)Shrimp faria conduct business throughout the year but the peak season for their business continues for five months. They offer conditional loan or “dadon” to the farmers and buy the shrimp from the farmers at a price that they determine. This price-fixing is ensured through the conditions imposed through the loan. Faria usually sell all the purchased shrimp to aratdar within the same day. Consequently, faria do not need to store or provide any food. If they are required to store the shrimp they use primitive refrigeration methods. The price is fixed based on the grades of shrimp produced and their number per unit of weight. Few accurate measuring devices are used to assess size and weight for grading. It is typically a “subjective grading process,” where the party who exerts greater power over the other reaps the benefits of monopsony. The shrimp faria seek to depress buying prices to maximize the rents earned when selling the product on to the shrimp aratdar.

3.11. Shrimp Aratdar (Depot)Shrimp aratdar buy shrimp from both faria and farmers. The faria or farmer brings the shrimp in ice in a tub or basket or plastic container for trading. Shrimp are traded in Khulna through a process referred to as “Chatal” where shrimp are sold through auction. All the shrimp sellers, the aratdar and those farmers who are free to sell in spot markets, sell through auction. Spot markets such as auctions ensure that sellers get better prices in comparison to those they receive by selling directly to Aratdar under contracts secured by loans. However, since mixed grade shrimp is sold in this process, the seller loses some of the potential price benefit for selling individual grades of shrimp that could be priced separately. When shrimp of mixed grade are pooled average prices prevail and the full producer surplus is not extracted. Shrimp aratdars who trade from depots are increasingly facing new challenges. These depots now have to meet compliance standards set by the industry in accordance with mandates from the EU and US. Yet, they have not received funding or training to meet these standards and will incur significant costs renovating and upgrading the depots.Some important issues regarding Shrimp farming are depicted bellow-

o Their yearly buying is about 17, 00,000 tk per month.o Purchasing price is Golda 600 per kg and Bagda 550 per kg.o Selling price is Golda 700 per kg and Bagda 600 per kg.o Their initial capital on an average 1 lack.o Monthly profit about 10-15 thousand.o They manage their fund by themselves.o Usually the shrimp farmers come to the Depot to sell their shrimp.o They need to issue license incurring about 7000 tk as fee.o Suppliers need to ice the shrimp that costing 200 tk per day.o The holding period of shrimp at this stage is 7-8 hours.o The have to face some risk like spoilage, Accident during transportation and theft.o They usually manage much icing against spoilage.o The suppliers directly sell their shrimp to the Commission Agent. o Their transportation vehicles are normally pick-up and mini truck.

of 64


o Transportation cost is 10,000 per month.

3.12. Shrimp Commission AgentShrimp commission agents trade shrimp with exporters. They are typically, medium to large sized entrepreneurs, who have access to, and provide, financing. The commission agents buy shrimp from the aratdar and sell to the exporter. The commission agents maximize their returns concealing the price at which they sell and depressing the price at which they buy. Sometimes they take bribes from the aratdar to sell their shrimp to a specific exporter. As a result, commission agents enjoy significant rents and side-payments.

Processors/ExporterThere are 130 shrimp processing plants currently in operation in Bangladesh. Of these, 65 are in operation, and only 57 have been approved by the EU. Of those plants that are operational, most operate at between 20-30% of their capacity party reflecting the insufficient and discontinuous shrimp supply. Most of the processors sell shrimp using their own brand name and they also pack and use the brand name of importers and buyers. Many processors prefer to maintain more than one brand name as these brands enjoy different level of popularity and image in different countries and/or markets. They also remain ready to pack under any of their buyer’s chosen brand names. In all cases, the package label includes the required information to meet the ‘traceability criteria’.

Processing Plant: The processing plant is an establishment with several facilities or processing rooms, two-layer shrimp warehousing, laboratory, bathrooms, first-aid room, and administrative offices. Usually the entrance to the plant consists of a pool with chlorinated water for disinfecting and the whole plant is kept wet with disinfectants to ensure a hygienic environment. All the individuals inside the plant are required to use plastic boots to reduce contamination. The two-layer warehouses are kept sealed and the whole plant is built with smooth floors and walls to facilitate cleaning. Generators are used to compensate for any loss of power supply.

Warehousing: Processors frequently adopt two-layer warehousing facilities in the factory. The first layer preserves semi or un-processed shrimp in 5-10 kg packs, to be processed at -5º centigrade. The second layer keeps fully processed shrimp that will be shipped to buyers after verification. The second layer is kept at a temperature of between –12 º to –20 º centigrade. Cooked shrimp that are boiled or semi-boiled and salted are increasingly in demand in the global market. To supply cooked shrimp, processors need to make a substantial capital investment and

of 64


seek skilled staff to maintain the equipment and processes required. The processors frequently hire foreign experts and technicians at high cost to ensure the integrity and function of the spiral freezing and cooking plants. Currently in Bangladesh, it is estimated that between four and six processors have added a fully functioning cooking plant, other processors are now interested in installing the cooking plant machinery to meet the growing global demand for processed and cooked shrimp.

Packaging: Processors and processors/exporters use locally manufactured carton and plastic packets and trays with customized labels. The packaging style varies according to requirements of the buyer and according to the price negotiated by the buyer. Higher prices usually command exclusive packaging; shrimp earning lower prices are frequently packed in single plastic packs or blocks and repackaged later by the importer or retailer. Usually buyers of block and unbranded products prefer simple packaging since disposal is expensive in developed countries. This preference for lower quality packaging for unbranded products, however, can conflict compliance standards. Ice is used in several stages of packaging and storing. Some processors are badly affected by the market for ice. Prices vary but usually hover at around 70 BDT per 100 kg; at times of scarcity the price can rise to as much as 700 BDT. As a result, some processors began producing ice in their own factories to meet their needs; in some cases they sell any excess ice produced.

Some important issues regarding Shrimp farming are depicted bellow-o There are usually 10 departments in a Shrimp exporting company like

1. Procurement2. Purchase3. Production4. Quality Control5. General Store6. Cold Storage7. Accounts8. General9. Machineries10. Security

o Monthly profit is about 80-90 thousand tk.o Usually partners provide the fund but some company take 25% fund from bank loan.o Government provide subsidy as cash payment amounting 4 crore per year.o Their yearly buying volume is 1400 ton that is about 60-70 crore tk.o They purchase the shrimp directly from commission Agent.o They provide 10-15 tk/kg commission to the commission Agent.o Plant set up cost is more than 15 crore.o Sectorial expense

Sector Expense (per month) tkElectricity 7,50,000Power generation 2,00,000Other maintaining 10,000

of 64


o Processing costSteps of processing Expense/kgHead-cutting 10Grading 5Freezing 25Packaging 15Exporting 7

o Processing Procedures1. Quality Check2. Head cutting3. Size grading4. Checking5. Freezing6. Leveling7. Packing8. Exporting

o Modern Technology used1. I.Q.F. freezing 2. RO treatment plant3. Computerized recording

o Freezing Procedures1. Block freezing2. I.Q.F freezing3. Unit freezing

o They usually find buyer by direct correspondence and or through buying house.o They use internet and e-mail for finding buyer also.o Ship is normally used for shipping the shrimp in foreign market.o Transportation cost is 20/kg to the European market.o Their main exporting counties are European countries. The other countries are Egypt,

China, Morisus, Vietnam etc.o Packaging procedures

1. By 3 fly master cartoon.2. By 5 fly master cartoon with inner boxes.

o Selling price:

Shrimp type Selling price (per pound)Golda 12$Bagda 7$

o Government frequently provides training to the shrimp exporters for better quality.o Problems faced by the shrimp exporters

1. Shortage of shrimp supply

of 64


2. Interrupted power supply3. Bureaucracy 4. Shipping delaying5. Lack of modern technology

o Shrimp exporters provide 6% source Tax to Government for every Bill.

3.13. Process Chain of shrimp

Shrimp fries are carrying within Oxygen bag by air cargo. Then those bags are carried by pick up vans to the farm area immediately. Nursing area. closer. to the culture farm is used to acclimatize fries with the local water environment & water chemistry like salinity. Then those are released in the farm.Almost 100°0 of Black tiger farmers follow natural & extensive aquaculture method without putting any supplementary feed in the farm. A little portion of farmers follows supplementary feeding inside their farms. Black tiger rearing period is average 90 days. But 100% of Fresh water shrimps farmers follow supplementary feeding. Major portion of farmers, prepare shrimp feed themselves procuring components like wheat polish, rice polish, maize powder. fish meal or bone meal, vitamin, pre-mix, 2nd grade rice or wheat etc. While some of farmer purchase ready feed from market. Fresh water shrimp rearing period is variable depending on the farmers, minimum 6 months to 1 year. Sometimes, farmers keep the juvenile shrimps for next season. Usually farmers harvest the shrimp after rearing of 90 days in average and sizes comes from U/16 to 31/ 40. Main harvesting system is followed during full moon & black moon high tide using natural water current. Some casting & pulling net is used for harvesting. Immediately after harvesting farmers put their shrimp into ice. Then these shrimps are carried into processing plants through local service center or agents depot of plants. Covered or refrigerated van is used to carry raw materials from farm area to the plant.

3.14. Process Line In PlantReceiving Raw Materials:

of 64


Raw shrimp arrival monitoring Ice sorting & QC Receiving raw materials from farmers' to plant after checking of traceability documents and physical quality (organoleptic), ice condition, temperature, ice separation. grading & finally lot weighing. A pressure wash is practiced after ice sorting of shrimp with super chilled water for physical cleaning & microbiological load reduction Monitoring Activities

Visual checking of shrimp quality Ice condition, shrimp body temperature & water temperature Sorting out & rejection of off-quality shrimp Sample collection for chemical & microbiological tests Personnel hygiene & general cleaning activities Size-grading & weight of received shrimp Overall supervision

Record Keeping Basket tag & suppliers' certificate Raw materials & CCP monitoring records Shrimp body, water & room temperature records Size-grading & weighing records Hygiene & cleanliness

Beheading & Peeling:

Shrimp beheading activities

Be-heading. & other pre-process activities for finished products like peeling, deveining. skewering. etc are done after receiving shrimp. An instant pressure wash is followed after beheading for maintaining product cleanliness and quality. Utensil cleaning in separate washing and keeping room is an important work of this section Monitoring Activities

Ice condition & shrimp body temp Time & temperature control Quality checking & rejection of off-quality shrimp Pressure wash water pressure & temperature Personnel hygiene & general cleaning activities Overall supervision

Record Keeping Shrimp body, water & room temperature records

of 64


Water supply-monitoring record Hygiene & cleaning records

Chill Room standby: If arrival of raw materials is too much, extra shrimps are kept in chill room for stand by up to next shift. All shrimp is processed within the same shift or same day. Chill room temperature is maintained +5°C

Shrimp keeping in chill roomMonitoring Activities

Chill room temperature Ice condition of shrimp in the basket Room & utensil cleaning activities Pressure wash water pressure & temperature Over all supervision

Record Keeping Temp record Cleaning record

Grading : Export grading of products for IQF & Block frozen is furnished in this section. A stage of pressure wash is also practiced immediately after grading Monitoring Activities

Time & temperature control for shrimp & room Ice condition of shrimp on the table & in the basket Workers hygiene & utensil cleaning. activities Over all supervision

Record Keeping Time & Temp record Grading & sizing Cleaning record

Weighing & Dressing:

of 64


Shrimp dressing Shrimp weighingUnit weighing is performed by digital scale. It is a pre-freezing activity. After weighing_ shrimps are furnished dressing into pan, which are used to freeze by contact plate freezer. After dressing, super chilled potable water is given into the pan as block glazing.Monitoring Activities

Time & temperature control for shrimp & room Panning water quality & temperature Product visual inspection & sampling also for laboratory test Workers hygiene & utensil cleaning activities Overall supervision

Record Keeping Time & temp record Product inspection report Workers hygiene & room & utensil cleaning record

Freezing: Freezing activities are performed according to work design with highest level of quality for finished products finished products. Block products are frozen in plate freezer and IQF products are produced in spiral freezer. There are various kinds or freezers like plate freezer, spiral freezer or blast freezer used in this plant. Monitoring Activities

Time & temperature control for freezer & room Core temperature at regular frequency Workers hygiene & utensil cleaning activities Good manufacturing practices (GMP) & over all supervision Equipment calibration

Record Keeping Time & Temp record Freezer monitoring Workers hygiene & room & utensil cleaning record

of 64


Cooking:

Raw shrimp loading on conveyer of steam cooker Cooked shrimp on chill conveyer beltShrimp cooking is furnished under auto Conveyer Steam Cooking machine. Highest level of quality, product specification and cleanliness is maintained in this section Monitoring Activities

Time & temperature control Core temperature at regular distant frequency Workers hygiene & utensil cleaning activities GMP & overall supervision Equipment calibration

Record Keeping Time & temp record Freezer monitoring Workers hygiene & room & utensil cleaning record

De-panning or Glazing: De-panning is the process of frozen block opening from pan after freezing with super chilled running water. Then a process of glazing of block or IQF with super chilled water is followed. Glazing of IQF products is designed with fine spray system from up and down side. All water is supplied from UV treatment and auto chilling system Monitoring Activities

Time & temperature control Product temperature & Anti-room temperature Overall supervision

Record Keeping Time & temp record

Packing, Labeling & Metal Check:

of 64


This is the step of packing & labeling of finished products into the cartons before storing. Packing material is checked before accepting in 'plant. Packing material suppliers are always contracted & under mandatory chemical report submission to us. A mandatory metal check process is done after packing of all cartons

Cold Storage : Storing of finished products at temperature —20°C or lower. The company has 800 MT Cold Storage capacity in 4 chambers Monitoring Activities

Store management & air circulation in the store Store temperature Overall supervision

Record Keeping Store management monitoring Temperature records Laboratory analysis report

Shipment & Distribution :

Refrigerated container van used for shipmentFinished products are carried from plants to the seaport by refrigerated van container at proper temperature. Products loading from plant premises and stuffing into the refrigerated container at port area is done usually at night Monitoring Activities

Container loading Product temperature & van temperature Overall supervision

Record Keeping Shipment records Temperature records

3.15. Quality Practice

of 64


General Hygiene Practices

General hygiene practices are mandatory for all workers in the plant. Practices are monitored by quality control section people: All aprons and company clothes are washed

and cleaned by own laundry section inside the plant. All bath rooms and toilets are maintained at highest level of cleanliness. Water tank and supply line is also maintained at highest level of cleanliness

Using company aprons & gum-boot only for working areas inside plant Following filtering process during each time entrance into the process hall Following all mandatory instructions for workers hang on the wall of process hall Weekly & monthly mandatory medical checkup for all workers Yearly medical test & fitness certificate for all workers

24 hours monitoring

This section is validated for all concern of quality assurance program of product, monitoring of GMP, SSOP, SOP, Plant and all cleaning activities as well as to comply all documentary works and keeping of records

Raw material receiving organoleptic check Whole process line monitoring Personnel hygiene practices monitoring Plant cleanliness monitoring Record & documents keeping Workers training & development HACCP implementation in the plant Farm visit & aquaculture residue monitoring & source control program On-site verification & equipment calibration

Water Supply & ChillerThe plant is equipped with Reverse Osmosis Water Treatment & instant Auto Water Chiller beside other modern machinery. All water treatment system is equipped with UV treatment system. All process line activities are supplied with treated chilled water only. Other general water supply and amenities lines are from general water supply line.

a. Company has arrangement for sufficient flake ice production

of 64


b. Auto water chiller equipped with UVc. Reverse osmosis water treatment system equipped with ozone treatmentd. Instant water chillerLaboratory

Laboratory is the main section under quality assurance department. This laboratory is equipped with all necessary equipment like incubator, autoclave, sterilizer, bag blender. etc. Good Laboratory Practices (GLP) are practiced under trained & experienced people. Samples are drawn from raw material receiving section, process line and finished product, according to analysis schedule. All laboratory works are performed under Fish Inspection and Quality Control (FIQC) department of Govt. of Bangladesh

Microbiological analysis of raw shrimp & finished product, ice, water & swab Physical & chemical analysis of water Organoleptic analysis of finished products Equipment calibration

a & b. Sample preparation and inoculation for microbiological analysis of shrimp in company's own laboratoryc. Modern equipment used in microbiological laboratoryd. Incubation & colony count of shrimp analysis

Chapter: 04

of 64


GOVERNMENT POLICY REGARDING SHRIMP EXPORTING BUSINESSA shrimp farm is an aquaculture business for the cultivation of marine shrimp or prawns for human consumption. Commercial shrimp farming began in the 1970s, and production grew steeply, particularly to match the market demands of the United States, Japan and Western Europe. The total global production of farmed shrimp reached more than 1.6 million tones in 2003, representing a value of nearly 9 billion U.S. dollars. About 75% of farmed shrimp is produced in Asia, in particular in China and Thailand. The other 25% is produced mainly in Latin America, where Brazil, Ecuador, and Mexico are the largest producers. The largest exporting nation is Thailand.

Shrimp culture is of central importance to the fisheries sector in Bangladesh. It grew from next to nothing in the early 1970s to contribute about 11% of total exports in the mid-1990s (DOF 1995). No other primary commodity enjoyed such spectacular growth impost-independence Bangladesh. Although shrimp farming has had a significant impact on the economy of Bangladesh, it has had high environmental costs, including destruction of mangrove forests, and reduction in crop production (especially rice) and green vegetation. It has also set in motion socioeconomic changes. All these changes may have serious implications for the sustainability of shrimp farming.Export policy of shrimp

Shrimp are grown primarily for the international market and, although Bangladesh is a small player in terms of its share of the international market (i.e.4.2% of world production of farmed shrimp), it is the seventh largest cultured shrimp producer in the world. The United States of America (USA), Japan and the European Union (EU) are the major destinations of exports. Foreign exchange earnings from

Bangladesh’s fisheries sector depend, in the main, on shrimp .In 1993–94, shrimp accounted for 57% of exports in the primary goods category (EPBB 1995) and had overtaken raw jute, which was previously the dominant primary export commodity.Shrimp shipments to USA are subject to automatic examination by the United States Food and Drug Administration because of the previous export of unhygienic shrimp (Market Asia 1995). EU also expressed their concern over Bangladesh’s shrimp crop and a visit by an EU team to Bangladesh in February 1995 found that the hygiene level of the processing plants was not up to standard and the water used therein was not chlorine-free (Economics News 1995). It is important that the Bangladesh Frozen Foods Exporters Association immediately took measures to address these problems.

4.1. Government policy

of 64

http://en.wikipedia.org/wiki/Mexico

http://en.wikipedia.org/wiki/Ecuador

http://en.wikipedia.org/wiki/Brazil

http://en.wikipedia.org/wiki/Latin_America

http://en.wikipedia.org/wiki/Thailand

http://en.wikipedia.org/wiki/People's_Republic_of_China

http://en.wikipedia.org/wiki/Asia

http://en.wikipedia.org/wiki/United_States_dollar

http://en.wikipedia.org/wiki/Tonne

http://en.wikipedia.org/wiki/Europe

http://en.wikipedia.org/wiki/Japan

http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Shrimp

http://en.wikipedia.org/wiki/Aquaculture


3. Export Law, Rules and PoliciesThe Export and Import Control Act 1950 (Annexure-1) provide the Government power to administer the import and export of Bangladesh under which a three yearly Export Policy is published. The Export Policy (Export Policy 2009-12, Annexure-2) generally guide the overall export of Bangladesh and help facilitate the exporters. The salient features of the Export Policy 2009-12 are as follows:3.1 Products which cannot be exported and which can be freely exportable3.1.1 Export Prohibited Products: Some Products cannot be exported. The list of such prohibited products can be found in Annex -1 of the Export Policy 2009-12.3.1.2 Products under Conditional Export: Products which are exportable under some conditions can be exported only after fulfilling those conditions. Such products have been listed in Annex-2 of Export Policy 2009-12.3.1.3 Exportable Products: All other products except the products enlisted in Annex-1 and Annex-2 of the Export Policy 2009-12 i.e. export prohibited products and the products under conditional export shall be freely exportable. 3.1.4 Export of Samples which don't have commercial values: Samples of exportable can be exported freely but with some conditions outlined in para 2.2.1.2 of Export Policy 2009-2012.3.1.5 Nothing in this policy shall be applicable to the following: 3.1.6 Store, equipment or spare parts of ships, vehicles or aircrafts bound for going abroad, and

products declared as their kitchen items, or the baggage accompanied by the sailors or the crews and passengers of those ships, vehicles or aircrafts.

3.1.7 Export of samples subject to fulfillment of the following conditions: a) The product is not export prohibited; b) A maximum of US$ 5,000 worth of products (except medicine) based on FOB price (free on board) per exporter per year; c) Products sent as samples free of cost; provided that in case of medicine the maximum shall be (1) US$ 30,000 if there is no export L/C (letter of credit), or (2) 5% of the total value of the L/C or US$ 5000, whichever is less. Bangladesh Bank can increase these limits examining each case, if necessary. d) For 100% export-oriented garment industries, a maximum of US$ 7,500 worth of samples of ready made garments per year; e) The diamond processing farms having bond licenses issued from the Customs bond Commissioner ate or diamond producing/ diamond-studded jewelery processing farms registered as producers with VAT Commissioner ate, under National Board of Revenue can send abroad cut and polished diamond/diamond-studded jewelery worth of US$ 50,000 annually with a view to participating in international trade fair or showcasing for export market development. In this case the samples must be brought back to the country after the show. However, if the samples are sold, all sale proceeds must be repatriated through legal banking channel and the amount of the proceeds shall not be less than the value of the samples; f) Promotional materials (brochure, poster, leaflet, banner etc.) of any price or weight; g) Gift parcel worth of US$ 1,000 or equivalent in Bangladeshi Taka; h) Bonafide baggage of travelers traveling outside Bangladesh; and i) Relief materials exported by the Government.

3.1.8 “Sample” means limited amount of goods which are easily identifiable and which do not have any commercial value.

of 64


3.1.9 “Gift parcel” means gift materials sent through courier service. 3.2. Authority to relax export control:- The Government showing appropriate reasons can

authorize the export of prohibited goods listed in Annex-1. Moreover, the Government can authorize, under special considerations, export, export-cum- import or re-export of certain products.

3.3. Entre-pôt and Re-export Trade: Entre-pôt trade and re-export shall have to be conducted under the procedures stipulated in the Public Notice No. 42 (2003-2006)/import dated June 28, 2005 (14 Ashar 1412 Bangla) (Annexure-3) issued by the Office of the Chief Controller of Import and Export. 3.3.1 Entre-pôt trade means the export of an imported product at a price at least 5% higher than the import price. No change whatsoever in the quality, quantity, shape or any other aspect is necessary in this respect. Products under entre-pôt trade shall not come out of the port boundary. However, the products can be brought out of the port boundary under special authorization.3.3.2 “Import price” under entre-pôt trade shall refer to the C&F price of the imported product as declared at the port of Bangladesh.3.3.3 “Re-export” means the export of an imported product within a specific period of time with a value addition of at least 10% to the imported price by changing the quality or shape or both of the products by means of local reprocessing.3.3.4 Import price in this case shall refer to the C&F price of the imported product as declared at the port of Bangladesh.3.4 Export opportunities without L/C:- Exports without L/C can be done through buying contract, agreement, purchase order or advance payment subject to the submission of EXP Form and Shipping Bill. In case of Advance Cash Payment, export without L/C will be allowed on consignment basis. 3.4.1 “Buying Contract” means a signed agreement between an exporter and an importer for the purpose of exporting a product. 3.5 Export-cum-Import 3.5.1 Cylinder and ISO tanks can be exported on a temporary basis only for the purpose of repairing, replacement or refilling of the imported products. However, an Indemnity Bond shall have to be submitted to the Customs Authorities at the time of export stating that the products will be imported back after completion of the necessary works. 3.5.2 Bangladeshi exporters will be authorized to export replacement products in case the exported product is found faulty as per the sales agreement. However, the exporter shall have to submit the following papers to the Customs Authorities: a) Copy of the Sales Agreement;

b) Letter from the buyer with details of the faulty products; and c) Any other condition to be met according to the Customs Law.

3.5.3 A person traveling to a foreign country can bring his or her vehicle along with himself or herself if authorized under the carnet de passage by the Customs Authorities or any other appropriate authority, or authorized against the indemnity bond submitted to the Customs Authorities with the condition to re-import. 3.5.4 Re-exportation of Frustrated Cargo:- A frustrated cargo can be re-exported in compliance with the rules and regulations of the Customs Act 1969. 3.5.5 The construction, engineering and electrical company shall be allowed temporarily to export-cum-import machinery for doing work as per contract under the following conditions:

a) Relevant copies of agreement and award have to be submitted to the Customs Authorities; and

of 64


b) An indemnity bond has to be submitted stating that the machinery shall be returned after the completion of the task.

3.6 Pre-shipment Obligations:- Unless other conditions apply, pre-shipment certificate is not obligatory for export of any product.

3.7 Quality Control Certificate:- In case of export of products for which quality control certificate is obligatory, the exporter shall have to submit, to the Customs Authorities, a quality control certificate issued by the appropriate authority.

3. Formation of Product and Service specific Business Promotion Councils: 3.1.1 Ministry of Commerce has formed Several sector/ product and service specific Business Promotion Councils as a joint initiative of the government and the private sector withinthe scope of the Company Act 1994 for diversifying export, improving and ensuring the quality of products, acquiring appropriate technologies, fulfilling compliance requirements, marketing of products etc. Necessary initiatives will be taken under the Export Policy 2009-12 to strengthen and organize the activities of these Councils as well as to encourage the formation of more such Councils. Development projects will be initiated in cooperation with the development partners, if necessary, to accelerate product/service/sector-based development activities. Such initiatives of the Ministry of Commerce will complement the export promotion and export diversification activities of the Export Promotion Bureau. 3.2 Classification of Product and Service Sectors 3.2.1 Some products sectors will be identified as “highest priority sectors” while some others

will be identified as “special development sectors” depending on the level of production and supply, potential contribution to the export sector, demand in the international market and above all the capacity to contribute to the socio-economic development. The government will regularly modify this list, and provide special privileges to encourage the export of these products.

3.3 Highest Priority Sectors 3.3.1 Highest priority sectors will refer to those product-sectors which have special export potentials, but such potentials could not be utilized properly due to certain constraints, and more success is attainable if adequate support is rendered to them. These are:

1) Agro-products and agro-processed products; 2) Light engineering products (including auto-parts and bicycles); 3) Footwear and leather products; 4) Pharmaceutical products; 5) Software and ICT products; 6) Home textile; 7) The Sea-bound Ship Building Industries; and 8) Toiletries Products.

3.4 Benefits and Facilities to be provided to the Highest Priority Sectors 3.4.1 Project loans at reduced interest rates on a priority basis; 3.4.2 Income Tax exemptions; 3.4.3 Possible financial benefits or subsidies consistent with WTO Agreement on Agriculture, and Agreement on Subsidies and Countervailing Measures, including concessionary rates for utility services such as electricity, water and gas; 3.4.4 Export loans with soft terms and at reduced interest rates; 3.4.5 Air transport facilities at concessionary rates ; 3.4.6 Duty draw-back/ bond facilities;

of 64


3.4.7 Facilities for setting up of backward linkage industries including infrastructural development so as to reduce cost of production ; 3.4.8 Expansion of institutional and technical facilities to improve and control quality of products; 3.4.9 Assistance in production and marketing; 3.4.10 Assistance in searching for foreign market; and 3.4.11 Necessary initiatives to attract foreign investments. 3.5 Special Development Sectors 3.5.1 Product sectors which have export potentials but whose production, supply and export base

are not consolidated will be included in special development sectors to strengthen their export base. The following product sectors will be included in the special development sectors:

a. crushed and finished leather production; b. frozen fish production and processing; c. handicrafts; d. electric and electronic products; e. fresh flower and foliage; f. jute and jute products; g. hand-woven textiles from hilly areas (pahari taat bostro); h. uncut diamond; i. producing herbal plants, medicine and medicinal products; j. ceramic products and melamine; k. plastic products; and l. furniture industries.

3.6 Benefits and Facilities to be Rendered to the Special Priority Sectors 3.6.1 Project loans at normal interest rates on a priority basis; 3.6.2 Consideration for export loans with soft terms and at reduced interest rates; 3.6.3 Subsidies consistent with WTO Agreement on Agriculture, and Agreement on Subsidies and Countervailing Measures; 3.6.4 Shipment of products at reduced air fare; 3.6.5 Duty draw-back/ bond facilities; 3.6.6 Facilities for setting up of backward linkage industries including infrastructural development so as to reduce production cost; 3.6.7 Expansion of technical facilities to improve the quality of products; 3.6.8 Assistance in marketing of product; 3.6.9 Assistance in searching for foreign markets; 3.6.10 Possible financial benefits for utility services such as electricity, water and gas; and 3.6.11 Necessary initiatives to attract foreign investments (FDI). 3.7 Inter-Sector Project for Product Diversification 3.7.1 Inter-sector projects will be initiated with an objective to facilitate diversification of products. Under the projects, issues such as bond system, duty draw-back, subsidies etc. will be reviewed to keep export price at a competitive level. Similarly, the project will assess and take necessary steps regarding issues such as product development and market expansion, trade cooperation and infrastructural constraints hindering export trade. A project will also be initiated to acquire modern technology promoting expansion of export trade. 4. General Export Facilities

of 64


4.1 Use of Foreign Exchange Earned from Export 4.1.1 Exporters can retain a certain amount of their export earning in their foreign currency account under retention quota, the amount of the retention to be fixed by Bangladesh Bank from time to time. Exporters can use this foreign currency for real business purposes such as business-related foreign trips, participation in export fairs and seminars abroad, importing raw materials, equipment or spare parts, and setting up offices abroad. 4.2 Export Promotion Fund - There shall be an Export Promotion Fund (EPF) with EPB. The following facilities will be available from this fund: 4.2.1 Providing venture capital at lower interest rates and with soft terms for production of goods; 4.2.2 Assisting the producers/ exporters to receive foreign technical assistance, service and technology for development and diversification of products; 4.2.3 Supporting exporters to send marketing missions abroad and participate in international trade fairs; 4.2.4 Assisting exporters ,if possible , to set up sales and display centers as well as warehouse facilities abroad; 4.2.5 Supporting exporters to participate in training programs abroad on product development and marketing, so as to enable them to improve their technical and marketing skills; and 4.2.6 Providing assistance in other activities related to development and expansion of products and services. 4.3 Other Financial Facilities 4.3.1 The possibility of providing tax exemption and subsidy in service sectors such as electricity, water and gas, instead of cash benefits, will be examined; 4.3.2 Initiatives will be taken to develop necessary infrastructure to ensure uninterrupted supply of electricity, gas and water for all export-oriented industries on priority basis; 4.3.3 Measures will be taken to fix the electricity, water and gas charges for industrial use at a reasonable level; and 4.3.4 In accordance with the provisions of WTO, cash incentives may be provided to potential export-oriented emerging sectors (i.e. the sectors which are capable of making products having demand in international market). 4.4 Funding for Export 4.4.1 Arrangements will be made for import of raw materials and related inputs under the Export Promotion Fund (EPF); 4.4.2 Possibility to provide facilities for back-to-back Letter of Credit for other export items besides readymade garments will be reviewed; 4.4.3 Loans at lower interest rates and with soft terms will be made available for import of capital machinery and raw materials to promote export. 4.5 Export Credit 4.5.1 Commercial banks will consider, on a priority basis, providing the exporters credit of 90

percent of the amount mentioned in the irrevocable letter of credit or in the confirmed contract;

4.5.2 Initiatives will be taken to introduce online banking system to ensure prompt disposal of export related matters and promote transparency in the banking sector;

4.5.3 Bangladesh Bank will take necessary steps to ensure unremitting flow of normal credit for the export sector;

of 64


4.5.4 Banks will fix the exporters’ cash credit limit based on the achievements of export earning of previous years; 4.5.5 Commercial banks will not impose overdue interest in case of the products exported on the basis of site-payment under irrevocable letter of credit provided that the exporter submits necessary export documents; 4.5.6 Bangladesh Bank may open up an “Export Credit Cell” for export financing for the development of this sector. Similarly, commercial banks will set up “Special Credit Unit” for export financing; 4.5.7 There shall be a highly empowered “Export Credit Monitoring Committee” under the leadership of Bangladesh Bank to fix the demand of export credit, and review and monitor the flow of credit ; 4.5.8 Banks will take necessary steps to fix service charges at a reasonable level; 4.5.9 Initiatives will be taken , if necessary, to establish/ strengthen banking facilities in order to expand trade relations with Russia, other CIS countries, Myanmar and north-eastern states of India; 4.5.10 Under the Export Credit Guarantee Scheme (ECGS), initiatives will be taken to compensate those exporters who have incurred losses for reasons beyond their control; 4.5.11 Authorized dealers will be able to open internal back-to-back L/C in favor of local raw materials suppliers under the master letter of credit; and 4.5.12 In case of export, rate of interest, LC commission, miscellaneous service charges, bank guarantee commission etc will be kept as minimum as to be directed by Bangladesh Bank. 4.6 Exemption from Insurance Premium 4.6.1 Provisions will be made available for fire and shipping insurance premiums at exempted rates for export-oriented industries in the non-traditional sectors. Under this system, the exporter may be exempted from paying premium after shipment is made. 4.7 Incentives for Export of Non-traditional Industrial Products: 4.7.1 Incentives will be given to the export of non-traditional and new industrial products having at least 40% value addition during the first two years, and at least 50% value addition thenceforth; 4.7.2 Fire and shipping insurance will be fixed at a concessionary rate for export-oriented industries. 4.8 Bond Facilities for Export Oriented Industries: 4.8.1 The National Board of Revenue will consider the possibility of providing bonded warehouse facilities to import-dependent export industries. Especially, the Board will examine whether bonded warehouse facilities can be extended to all export-oriented industries. Besides, providing of additional bonded warehouse facilities to trading houses and export houses under certain conditions will be examined. 4.9 Initiating brand names to fetch higher price will be encouraged. 4.10 Providing alternative incentives, instead of duty bond or duty draw-back to export-oriented local textiles and readymade garment industries. 4.10.1 Government may provide subsidies (cash incentives) as alternative incentives instead of duty bond or duty draw-back to export-oriented local textiles and readymade garment industries the rate of incentive to be decided by the government. This incentive may be extended to other sectors too. 4.11 Easing VAT return on Export-facilitating Services

of 64


4.11.1 Simplified procedures will be put in place for the withdrawal of paid VAT on export facilitating services such as C&F services, telephone, telex, fax, electricity, insurance premium and shipping agent commission/ bill. 4.12 General Facilities for Export-Oriented Industries: 4.12.1 Industries exporting at least 80% of their production will be considered as export-oriented industries and they will be entitled to receive bank loans and other financial benefits; and 4.12.2 Industries exporting at least 80% of their production will be permitted to sell their remaining 20% products in the domestic market subject to due payment of duties and taxes; 4.12.3 Exporters will be assisted in order to be more compliant; 4.12.4 Assistance will be provided for establishing Effluent Treatment Plants( ETP); 4.12.5 Duty free import of spare parts up to10 % of total capital machinery will be allowed every two years for export oriented industries; 4.12.6 Connection of utility services including electricity and gas will be provided on priority basis in export-oriented industries. 4.13 Reduced Air fare for the export of specially privileged products including Fruits and Vegetables: 4.13.1 Biman Bangladesh Airlines will consider measures for reduced air fare for the export of fruits and vegetables, ornamental plants etc. 4.14 Withdrawal of Royalty for the Expansion of Cargo Facilities of Foreign Airlines for Export Purposes: 4.14.1 No royalty is applied for transporting vegetables. Initiatives will be taken to provide similar incentives for specially privileged products including fruits; and 4.14.2 Initiatives will be taken for enhancing the space in foreign airlines’ cargo services, and transporting fruits, vegetables etc. at a reasonable fare. 4.15 Venture Capital Facilities for Small and Medium Enterprises: 4.15.1 Agricultural farms with at least five acre size will be provided with venture capital facilities to encourage production and export of vegetables, fruits, fresh flowers, orchids etc.; 4.15.2 Establishment of cool chains will be encouraged to prevent quick putrefaction of the products. In this regard, import of reefer vans and reefer containers will be encouraged; 4.15.3 Initiatives will be taken to introduce SME credit Guarantee Scheme for increasing export in export-oriented industries. 4.16 Research and Development 4.16.1 The National Board of Revenue will consider the possibility of permitting duty-free import of machinery and equipment by the exporting institutions for research and development purposes . Research institutes may be provided this facility based on recommendations from the Export Promotion Bureau. 4.17 Encouragement and Facilities for Exports Based on Sub-Contracting: 4.17.1 An institution can spend, before acquiring the actual work order, a maximum of US$ 10,000 for communication, sending representatives, traveling abroad, purchase of tender documents etc. An authorization from Bangladesh Bank will be required if more foreign currency expenditure is needed; 4.17.2 Permission will be given for establishing offices and recruiting officials abroad; and 4.17.3 Individual professional guarantee/ insurance will be provided by Sadharan Bima Corporation in favour of project specialists.

4.18 Issue of Multiple Entry Visa

of 64


4.18.1 Investors and importers of Bangladeshi products will be issued multiple entry visas. For this purpose, Ministry of Commerce may send recommendations to the commercial officials of Bangladesh Missions abroad and to the Ministry of Foreign Affairs. 4.19 Foreign Trade Related Training 4.19.1 Bangladesh Foreign Trade Institute has been established for providing training on foreign trade. Adequate numbers of workshops and seminars will be arranged on different trade related issues, especially on WTO issues through this Institute. 4.20 Arrangement of International Trade Fairs and Single Country Exhibitions, and Participation in other Market Promotion Activities Abroad: 4.20.1 Encouraging facilities will be provided for participating in international trade fairs, single

country exhibitions and other market promotion activities in different countries, and organizing single trade fairs abroad under joint initiatives of the government and the private sector.

4.21 Strengthening Export Related Training: 4.21.1 The Export Promotion Bureau will organize trainings, seminars and workshops in different parts of the country to inform the exporters of the rules and regulations regarding exports. 4.22 Setting up of Permanent Fair Complex and World Trade Center: 4.22.1 In order to expand export trade, initiatives have already been taken to establish Permanent Fair Complexes and World Trade Centers in Dhaka and Chittagong. The process will be accelerated; and 4.22.2 Assistance will be provided from the World Trade Centers to expand and integrate export trade through market investigation and development of marketing skills. 4.23 Both regular and product-specific trade fairs of international standard will be organized in Bangladesh in order to invite foreign buyers, familiarise export products among them and thus connect buyers and sellers. 4.24 Shipment of Products: 4.24.1 Initiatives will be taken to simplify shipment/ transportation of products. Government will provide necessary support if any exporter wants to charter an aircraft; 4.24.2 The best use of modern technology and automation system including one stop service will be ensured in order to expedite customs related services for releasing imports and exports. 4.25 Direct Air-Booking System: 4.25.1 To ensure that fresh vegetables and other perishable items from the northern part of the country reach their destinations easily without losing their quality, direct air booking facilities for these products from Rajshahi and Syedpur airports will continue . 4.26 Encouragement of Increased Use of Local Raw Materials: 4.26.1 Bonded warehouse facilities will be gradually reduced in order to encourage the increased use of local raw materials by composite knit/ hosiery textiles and clothing manufacturing units. 4.27 Establishment of Management Information System (MIS): 4.27.1 An MIS will be installed in the Ministry of Commerce. All officials of the Ministry have already been provided with computers and internet facilities. The Ministry of Commerce has taken initiatives to put in place a National Trade Portal to be connected to all business and trade related websites.

4.28 Facilities for Deemed Exports:

of 64


4.28.1 Deemed exporters, like direct exporters, will enjoy all export facilities including duty-draw-back. Local raw materials used for producing exports and local raw materials used in industries/ projects funded by foreign investments will be considered as "deemed export”; and 4.28.2 Initiatives will be taken to consider direct sales in foreign currency without tender as “deemed export”, and augment their facilities. 4.29 Miscellaneous matters 4.29.1 A Trade Facilitation Center will be instituted in Dhaka; 4.29.2 Establishment of special types of warehouse, trading house, export house and trade center will be encouraged; 4.29.3 Initiatives will be taken to enhance the capacity and efficiency of Export Promotion Bureau in order to expedite settlement of export related trade disputes; 4.29.4 Product and Service specific Development Institutes will be established; 4.29.5 Initiatives will be taken to allow exporters to recruit foreign agencies without prior authorization from Bangladesh Bank; 4.29.6 Steps will be will be taken to identify the benefits for the least developed countries as provided by the WTO, and make the stakeholders aware of the benefits; 4.29.7 Exporting institutions will be encouraged to acquire ISO 9000 as well as environmental regulations-related ISO 14000 for quality assurance; 4.29.8 Codes with details of exportable products will be prepared in order to use the Harmonised Code being followed by WTO for L/C forms related to import and export; 4.29.9 Financial and revenue related incentives and facilities will be reviewed from time to time and updated when needed; and 4.29.10Special transportation by railways, roads, and water ways will be arranged for internal movements in order to export the agro products and agro-processed products. 5. Product-Specific Export Facilities5.1 Frozen Fish Industry 5.1.1 Cultivation of shrimp for increasing the production of shrimp maintaining ecological balance will be encouraged; 5.1.2 Venture capital will be provided for producing, processing and exporting value added products in the frozen food sector; 5.1.3 Initiatives will be taken to establish “Seal of quality organization” or similar organizations under public-private partnership to ensure the quality of shrimp and shrimp products; 5.1.4 Necessary steps will be taken to establish Accredited Testing Laboratory of high quality under public and private or joint initiatives to ensure high quality of products and SPS (Sanitary and phyto-sanitary) related standards; 5.1.5 Setting up of laboratories in the private sector will be allowed and steps will be taken for research and remedial measures to improve the quality of shrimps and protect them from diseases. 5.1.6 Import of indispensable machinery for quality control will be encouraged so as to strengthen the efforts for controlling the quality of frozen food. Department of Fisheries and BCSIR will take initiatives to improve their accredited testing laboratories; 5.1.7 In order to reduce the risk of exporting contaminated frozen food, a special supervision or traceability system will be developed for all the steps from hatching to production of fish, processing and packaging;

of 64


5.1.8 Steps will be taken to send marketing missions abroad, organize single country frozen food fairs, arrange and participate in international trade fairs at home and abroad so as to expand and consolidate the markets for frozen food; 5.1.9 All possible steps will be taken to implement the “Vision-2015” formulated by Bangladesh Frozen Food and Exporters Association (BFFEA); 5.1.10 A monitoring cell will be formed to control the quality of exportable shrimps; 5.1.11 Assistance will be provided to diversify fish and frozen fish products; and 5.1.12 Customs Authorities will ensure, before the release of the goods, whether the imported fish-feed is usable or whether there is any contaminated or prohibited substance in it. The Department for Fisheries or the Ministry of Fisheries and Livestock will send the updated list of prohibited substances to the Customs Authorities from time to time. 6. Other Steps towards Export Promotion6.1.1 Freight forwarders shall be guided by Freight Forwarders (Licensing activity conduct) regulations, 2008 issued under SRO No 18/Law/2008/2174/duty dated 13 January, 2008 regarding control of freight forwarding; 6.1.2 Steps will be taken to develop infrastructure, modernise Bangladesh Bank, Customs, Chittagong and Mongla sea ports to ensure institutional assistance, and bring about dynamism in land port authorities; 6.1.3 Initiatives will be taken to develop necessary physical infrastructure including construction of Express Line to ensure uninterrupted supply of electricity, gas and water to export oriented industries on priority basis. Steps will be taken to fix the charge of electricity, gas and water to be used in the industries at a reasonable rate including subsidy; 6.1.4 Measures will be taken for capital dredging to facilitate movement of container ships in Mongla Port; 7.1.5 To fecilitate export of agricultural products, additional space in the aircrafts will be allotted alongside arranging separate cargo aircrafts. Both air and sea fare for transport of agricultural products will be reduced to a reasonable rate; 6.1.6 Biman Bangladesh Airlines will take initiatives to introduce regular “Cargo Freighter Service” to Europe; 6.1.7 To promote region-specific exports, emphasis will be given on infrastructure development of different regions; 6.1.8 Bangladesh Railway will review the possibility of offering attractive and competitive rates of fare to encourage the use of rail service for transportation of goods; 6.1.9 To encourage female entrepreneurs in the export sector, female CIP’s will be selected and the best female entrepreneurs will be awarded Export Trophy annually; 6.1.10 Steps will be taken to enhance the ICT capacity of Bangladesh Missions abroad in order to promote export; 6.1.11 To encourage product-specific exports, every year one product will be declared the “Product of the Year”; 6.1.12 Rationalizing the rate of Value Addition 6.12.1 A standing committee will fix, from time to time, the rate of value addition for different products including readymade garments; 6.12.2 Foreign currency earned from reparing foreign vessels will be considered as export earnings from services only if the foreign currency has been repatriated through Bangladesh Bank.

of 64


7. Export facilities and incentives The government formulates the Export Policy principally with a view to facilitate the exporters so as to develop and promote export of Bangladesh. Chapter 3-7 of the Export Policy detail the techniques of export development and of providing facilities to the exporters. The policy details the lists of export facilities. Chapter-1 of the Export Policy 2009-12 introduces the title of the policy, its scope and strategy, Chapter-2 describes the general rules of export, Chapter-3 explain export diversification mechanism, Chapter-4 lists the general facilities of export, Chapter-5 describes about sector based facility, Chapter-6 presents about service export and Chapter-7 highlights some special facilities and incentives.7.1 Cash incentives: As listed in Annexure-4, for 17 exportable, the government is providing 5-20% cash incentives against FOB price of exported items. The exporter can directly claim for cash incentive in his merchant bank.7.2 Duty Drawback: Duties which are paid at customs authority is refundable in case of re-export business or imported materials which after making finished products will be exported.7.3 Bonded Facilities: For bonded ware house with a view to 100% export materials can be imported without any duties.7.4 Assistance in searching for foreign market: For exploring foreign market Export Promotion bureau (EPB) organize/help the exporters participate about 30-35 international trade fair every year. EPB generally bear the costs of stalls including other incidental costs. Normally the exporters will have to bear only traveling and their accommodation cost. Besides, EPB and Ministry of Commerce often organize Marketing Mission abroad for searching new export market. The Mission comprises representatives from business leaders and exporters. 7.5 Export Loan at lower rate of interest: At only 7% rate of interest export loans are being provided. Besides, there is a fund named Export Promotion Fund (EPF) in Export Promotion Bureau (EPB) which provide export loan for ICT and handicrafts exportable at only 4.5% rate of interest without any co-lateral. There is an Export Development Fund (EDF) in Bangladesh Bank to provide export loans up to USD 400 million(Annexure-5).7.6 Awarding CIP status and National Export Trophy: Every year CIP status (Annexure-6) and National Export Trophy (Annexure-7) are awarded to the best exporters of different sectors in recognition of producing new products, diversifying of products, enhancing exports, etc. 7.7 Export Preferences to (trade relations with) Foreign CountriesBangladesh maintains excellent trade relations with foreign countries. Bangladesh became a member of World Trade Organization (WTO) from its inception. Bangladesh is also the member of South Asian Free Trade Area (SAFTA), Asia Pacific Trade Agreement (APTA), BIMSTEC and, Organization of Islamic Conference (OIC). Through those organizations and some times bilaterally Bangladesh enjoy preferential treatment on export trade. Of all those preferential treatments the most important one is Generalized System of Preference (GSP). In this system as an LDC, we get some preferential advantages including duty free or concession and quota free access. We are getting GSP in 37 Countries including 27 EU countries and 10 others like USA, Canada, Japan, Norway, Switzerland etc.

of 64


Annex 1List of Export-Prohibited Products 8.1 (a) All petroleum and petroleum products except those produced from natural gas (such as naphtha, furnace oil, lubricant oil, bitumen, condensate, MTT and MS). However, this prohibition shall not apply to the export of petroleum and LNG as shares of the foreign investment companies under the Product Sharing Contracts. (b) Any passenger going abroad shall be allowed to carry as accompanied baggage , in excess of his or her personal goods, US$ 200 worth of goods, which are neither export-prohibited nor including to the list of conditional exports. In this case, no facilities/incentives like duty draw back adjustment, subsidy etc. shall be awarded. 8.2 Jute and `Shan’ seeds 8.3 Wheat 8.4 Any kind of live animals, animal organs or hide/ skin of wild animals as mentioned in the Wildlife (Protection) Ordinance 1973 (President’s Ordinance No. 23, 1973, Revised in 1974), except the species mentioned in the first list of the Ordinance. 8.5 Fire arms, ammunition and related materials. 8.6 Radioactive materials. 8.7 Archeological relics. 8.8 Human skeleton, blood plasma, or anything produced from human beings or human blood. 8.9 All types of pulses( except processed ones) 8.10 All shrimps except chilled, frozen and processed ones (SRO No. 60-L/76 date 14- 2-76). 8.11 Onion (SRO No. 250-L/77, date 13-8-77). 8.12 Seawater shrimps of 71/90 count or smaller, except the species Harin/ harina and Chaka including sea species PUD, Cooked shrimp (SRO No. 345-L/83, date 20-10-83) 8.13 Cane, wood, wood logs/ thick pieces of wood (except handicrafts made from these materials). 8.14 All types of frogs (alive or dead) and frog legs. 8.15 Raw and wet blue leather. Annex- 2List of Conditional Export Products 9.1 Urea Fertilizer:- Urea fertilizer produced in all factories except KAFCO can be exported with the prior approval of the Ministry of Industries 9.2 Entertainment programs, music, drama, films, documentary films etc can be exported in the form of audio cassettes, video cassettes, CDs, DVDs etc subject to ‘no objection’ from the Ministry of Information. 9.3 Petroleum and petroleum products produced from natural gas (such as naphtha, furnace oil, lubricant oil, bitumen, condensate, MTT and MS) can be exported under ‘no objection’ from the Energy and Mineral Resources Division, 9.4 Chemical products enlisted in schedules 1, 2, 3 of Chemical Weapons (Control) Act-2006 will be controlled (exported or prohibited to export) by section-9 of the ACT. 4.2. Government to put shrimp policy in placeThe government is likely to approve the much-discussed shrimp policy soon to ensure disciplined and environment-friendly growth of the export sector worth nearly $350 million. If passed by the cabinet, the policy will boost demand for local shrimps, as it will address quality control issues from farms to processing plants, said Fisheries and Livestock Minister Abdul Latif Biswas yesterday.

of 64


“We finalized the draft of the shrimp policy and hope to place it at the cabinet soon,” said Biswas at a press meet that was at the Department of Fisheries (DoF) on the eve of the National Fisheries Week 2010.DoF organized the event to create awareness on conservation and accelerate fish production to ensure a supply of protein for the growing population.The sector now supplies nearly 60 percent of the country's protein requirement and contributes to nearly 3 percent of export earnings. Shrimp accounts for three-fourths of total export earnings from the frozen fish sector, which employs nearly 10 lakh people. However, in the past couple of years, shrimp exports have faced issues, such as quality control and traceability from buyers in the wake of a detection of hazardous elements in shipped consignments.Last year, Bangladesh imposed a six-month voluntary ban on prawn exports after more than 50 consignments to the EU zone were cancelled due to the detection of nitrofuran, a health hazardous antibiotic.Industry stakeholders blamed the unregulated growth of shrimp and prawn farming, which has also raised concerns over environmental degradation and bio-diversity sustainability.Now, shrimp farms cover 1.70 lakh hectares of land on the coastal belt and prawn farms cover 0.47 lakh hectares to meet export demands. Two decades ago, shrimp was cultivated on 1.08 lakh hectares.To accelerate exports by ensuring standard practices in all stages of production, the government aims to frame the policy, said the minister.Biswas said the government aims to frame an eco-friendly shrimp policy, which will also focus on disease and antibiotic-free cultivation and processing.The move to frame a policy for the shrimp sector was initiated a couple of years ago. But the policy is yet to be passed.The minister declined to mention any timeframe to pass the policy but said: “We will approve it as soon as possible.”4.3. Bangladesh shrimp export requirementsBANGLADESH - Earnings from shrimp export has increased over the years. The quality of exported shrimp and the food value thereof should be maintained. The production of shrimps and other fishes has to be increased with necessary official support to maintain the trend.The quality of shrimp and frozen fish of desirable food standards has to be ensured with necessary measures. The major countries in the European Union, which import shrimp from Bangladesh and the companies involved therein, have, however, noted some problems.One of such problems is the use of nitrofurazone and other antibiotics by exporters of shrimp. The consumers in those countries noted the use of such chemicals and reacted. They have complained that consumption of contaminated shrimp may cause consumers to suffer from cancer.

The concern expressed by consumers in the European Union countries has been noted by some exporting companies. They have submitted proposals for the purchase of machines and installation thereof in the shrimp processing zones. Exporters of fresh water shrimp, second biggest foreign currency earner, to the European Union face a suspension for the next six monthsThe Department of Fisheries has already imported and installed one machine in its office premises. Unless more allocation is made for purchase of few more machines, the objective of testing shrimps in port areas before export may not be attained.

of 64


4.4. Promoting Environment-Friendly Export-Oriented Shrimp:Policy Framework for Sustainable Shrimp Culture: The Underlying Premises Environmental problems precipitated by export-oriented shrimp cultivation in Bangladesh, as with other types of environmental problems, arise due to market failures, policy failures and institutional failures. Overcoming the market, policy and institutional failures in shrimp cultivation calls for a judicious mix of market-based and non-market-based measures. Market-based instruments are easier to implement as they often provide fiscal and financial incentives. However, given the limited efficiency of the incentives in certain cases, command-and-control instruments also need to be deployed to effectively address the environmental problems associated with the industry. The policy instruments suggested below for promoting an environmentally sound export-oriented shrimp culture industry includes only price- and technology-related instruments, and exclude quantity-related instruments (eg., tradable permits) as they do not seem to be appropriate in case of shrimp cultivation in Bangladesh. As the direction of changes in resource use will depend to a large extent on the nature of intervening institutional factors, the roles of the institutions in policy implementation are discussed separately.4.5. Economic Instruments and Regulations for Sustainable Shrimp CultivationBangladesh has traditionally used restrictions and regulations to contain environmental damage resulting from an economic activity. This command-and-control approach gave rise to standards driven environmental policies that espoused quantitative limitations on levels of pollutants and on levels of resource exploitation. However, the experience of developed countries suggests that mandated environmental standards and technologies may act as a drag on economic growth and costs may be excessive for a low-income economy like Bangladesh. Thus, the challenge of integrating environmental and economic (sectoral) policies in the con- text of sustainable shrimp culture may be largely addressed by economic instruments for environmental management. Such instruments motivate behavioral change, inducing differential response by economic agents and allowing them to adjust flexibly to evolving circumstances. Use of economic instruments may also generate financial resources. This is not say that command-and-control regulations have to be abandoned and replaced by economic instruments altogether, as this is neither desirable nor possible. Accordingly, what has been suggested below entails improving the efficiency and flexibility of existing regulations through selective introduction of economic instruments.4.6. Market-Based Instruments or Economic InstrumentsEconomic Instruments Based on Price Related Measures and Fiscal IncentivesThe first group of market-based instruments examined here is price related measures and fiscal incentives. If used properly, price related measures and fiscal incentives can be mutually beneficial to entrepreneurs, workers and the community at large. Three specific instruments, viz. a land use tax, an effluent charge on water pollutants and a Soil Conservation Fund are discussed below.• Land Use Tax. Since there is no tax on agricultural land, it is considered as a free good and, therefore, tends to be misused. This can be reduced through a tax imposed on the users of land for shrimp cultivation. This would make certain land unprofitable for shrimp culture.This measure has relatively low monitoring and enforcement cost and may raise substantial revenue. The revenue earned can be used to finance technological improvements that would reduce shrimp cultivation induced natural resource degradation.

of 64


• Effluent Charge on Pollutants of Water. The shrimp farms should pay for polluting the water through effluent charges on pollutants containing BOD (biochemical oxygen demand) and COD (chemical oxygen demand) materials. This charge may vary according to the size of the farms in order to account for their varying pollution intensity. Apart from the positive revenue effect, this will provide the entrepreneurs with an incentive to employ more environmentally sound production practices. The revenue raised may be used to construct water treatment plants. The charge rate can be increased gradually over time until prices are corrected.• Sail Conservation Fund. The shrimp farms can be encouraged to conserve lands by providing loans. Loans may be given on flexible terms to shrimp farms for employing environmentally sound technologies to reduce salinity and water logging. However, one needs to take into account that (subsidized) soil conservation loan to finance environmentally sound technologies is not a dynamically efficient instrument, since it might make shrimp culture activities more profitable and induce additional entrants in the industry, thereby giving rise to increased environmental damage.4.7. Economic Instruments that Promote Appropriate TechnologiesThe second group of market-based instruments is designed to promote environmentally sound technologies in shrimp cultivation. The technology requirements in shrimp cultivation are mostly indigenous by nature. Two specific, but complementary, means can be mentioned in this regard. These two means are rice-shrimp mix farming and semi-intensive shrimp farming.Rice-Shrimp Mix Farming. A pilot (model) project may be designed to closely examine the scheme which employs semi-intensive shrimp culture during the first half of the year, and then, during the second half of the year, employs marine/brackish water fin fish culture, sweet water fish culture or rice cultivation, depending on the land type. By encouraging this traditional practice, the long-term gains will be maximised in terms of both productivity and land quality. There may be shared leasing between the crop farmers and the shrimp farmers for the shrimp-rice cultivation cycle. In this practice, since the rice farmers have to maintain the quality of their land to produce rice, they will therefore have to take measures to stop land degradation. Furthermore, the shrimp farmers will have to allow the monsoon sweet water to wash away salinity in the shrimp cultivating lands. It may serve the dual interests of land owning small farmers and landless poor people ofthe area. It would also support protection of environment. Semi-Intensive Shrimp Forming: As a principle, semi-intensive shrimp cultivation should be encouraged with necessary safeguards. A pilot project could seek to understand hydro- morphological land changes associated with this practice, and examine technologies to overcome related problems,

of 64


Chapter: 05

PREPARATION OF SHRIMP EXOTNING BUSINESS5.1. Introduction5.1.1 The word export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an “exporter” who is based in the country of export whereas the overseas based is referred to as an “importer” (foreign buyer). In international trade “exports” refers to selling goods and services produced in home country to other foreign markets.5.1.2 Bangladesh exports about 168 different products and services to almost 186 countries. The main exportable are Readymade Garments, Knitwear, Home Textile, Frozen Food, Leather & Leather goods, Jute and goods which contribute near about 89% of our total export. On the other hand the main export destination of Bangladesh are USA, Canada, EU Countries including U.K, Germany, France, Italy, Sweeten etc contributing almost 93% of total export. The export statistics reveals that Bangladesh is proceeding with positive export growth since 1974-75 . Anexxure-17 presents the export trend from the year1974-75 to 2010-11 as well as the export performance in July-June, 2011. 5.2. Procedure of Export 2.1 A company or individual businessmen with trade license is capable of doing export business. But before that he/the company has to obtain export registration certificate (ERC) from the office of Chief Controller of Import and Export (CCI&E), 111-113 Motijheel Commercial Area, Dhaka. Generally Trade License, Bank Balance Certificate, Membership from respective trade associations are required for obtaining ERC.2.2 For starting a business in Bangladesh, it starts with registering the company name at the Office of the Registrar of Joint Stock Companies & Firms. The office is located at 24-25 Dilkusha, Commercial Area, Dhaka. This Office accords registration of Companies, Associations and Partnership Firms under the Companies Act, other related acts, rules, orders and ensures lawful administration of them. 2.3 The new entities should also obtain trade license from the city corporation where it is located. Depending on the type of the business it may also have to obtain license or certificate from BSTI, BRTA, etc.2.3 For some products the exporters have obtain quality assurance certificate from BSTI/ Department of Fisheries (DOF)/ Respective Trade Associations etc. 2.4 The exporter can export with or without Letter of Credit (LC). The Contract/ Agreement with foreign buyer or CAD or Advance TT methods etc. are also allowed for export. The exporters then submit EXP form to bank and prepare bill of export. With all these documents exporters then approach at the customs authority of the port through which they want to ship his exportable. After examining all the papers the customs authority allows them to export and after boarding the products the authority gives them a bill of lading. After shipment the customs authority assures them stamping a seal in the back of bill of lading and provide Export General Manifest (EGM).

of 64


Doing Business measures the time and cost (excluding tariffs) associated with exporting and importing a standardized cargo of goods by ocean transport. The time and cost necessary to complete every official procedure for exporting and importing the goods—from the contractual agreement between the 2 parties to the delivery of goods—are recorded. All documents needed by the trader to export or import the goods across the border are also recorded. For exporting goods, procedures range from packing the goods into the container at the warehouse to their departure from the port of exit. For importing goods, procedures range from the vessel’s arrival at the port of entry to the cargo’s delivery at the warehouse. The time and cost for ocean transport are not included. Payment is made by letter of credit, and the time, cost and documents required for the issuance or advising of a letter of credit are taken into account.

5.3. Documentation

All documents required per shipment to export and import the goods are recorded (table A.1). It is assumed that the contract has already been agreed upon and signed by both parties. Documents required for clearance by government ministries, customs authorities, port and container terminal authorities, health and technical control agencies, and banks are taken into account. Since payment is by letter of credit, all documents required by banks for the issuance or securing of a letter of credit are also taken into account. Documents that are renewed annually and that do not require renewal per shipment (for example, an annual tax clearance certificate) are not included.

5.4. Brief methods of Exporting Business1. Receiving order2. Acceptance of order3. Opening letter of credit4. Booking of exchange rate5. Procuring export permit6. Procurement of goods7. Contract of affreightment8. Insuring of goods9. Processing of custom and export formalities10. Shipment of goods11. Sending shipping advices12. Preparation and sending of export documents13. Receiving payment14. Closing of transaction

of 64


5.5. Major Shrimp Exporting Companies in Bangladesh:

Serial no.

Name of the comany

Address Contact no.

01. Southfield Fisheries Ltd.

Rosella Villa ,Ismailpur , Shyamnagar, Satkhira +880472644225

02. Nirala Sea Foods Ltd.

148, Katpatty RoadPatuakhaliPatuakhaliBangladesh0441

0441 62648

03. Shahnewaz Sea Foods (Pvt.) Ltd.

Bagmara, RupshaKhulnaKhulnaBangladesh 041 800334

04. Sea Food Corporation Ltd.

37, Rupsha Strand RoadKhulnaKhulnaBangladesh 041 725502

05. Saint Martin Sea Food Ltd.

Bagadi Road, ChandpurComillaComillaBangladesh

0841 63372

06. Noakhali Gold Foods Limited

House #11/B, (5th Floor) Rood #30, Gulshan-1Dhaka

029862923

07. Mofa Fish Processing (Pvt.) Ltd.

B.S.C.I.C. Industrial Estate, JhumjhumpurJessoreJessoreBangladesh0421

0421 74016

08. Mashud Fish Processing & Ice Complex

267, West Barandipara RoadJessoreJessoreBangladesh

0421 684540421

09. Kwality Shrimps Export (Pvt.) Ltd.

278/A/274, Goltaz Market, KhatungoniChittagong 031 633556

10. Kuliarchar Sea Foods Ltd.

3, K.D.A. Avenue, Probaho Bhaban (2nd Floor)Khulna

041 813775

11. Jalalabad Frozen Foods Ltd

102, Shahid Tajuddin Ahmed Sarani, Tejgaon 02 8824614

12. IBCO 16, Haji Mohsin RoadKhulnaKhulna 041 2830076

of 64


Food Industries

13. Harbour Sea Foods Ltd.

C.D.A. Plot #50, Sagarika Road, Fauzderhat I/E 031 752300

14. Cox's Bazar Sea Foods

Elahipur East, RupshaKhulnaKhulna 041 800164

15. Ark Sea Foods Ltd.

Plot #68/W-P, Sagarika Road, PahartaliChittagong 0312770099

of 64


Chapter: 06 FACTOR AFFECTING SHRIMP EXPORTING BUSINESSWe have considered various factors those have significant impact on Shrimp exporting business in Bangladesh. Factors may have some positive and negative impact. Some factors have some importance on the shrimp exporting business but their degree of importance is not same. We have leveled the number 1-5 indicating their degree of importance as mentioned in our methodology section. Following is the Tabular distribution of the respondents regarding their consideration about the factors we have developed and their degree of importance:

Serial N

um

ber

FactorsR

espon

den

t 1

Resp

ond

ent 2

Resp

ond

ent 3

Resp

ond

ent 4

Resp

ond

ent 5

Average

Percen

tage (%

)

01 Specific size of Shrimp 5 2 3 4 3 3.4 6802 Excellent testy Shrimp 5 3 4 3 3 3.6 7203 Perfect Processing of Shrimp 5 4 2 5 5 4.2 8404 High quality Packaging 5 3 1 5 4 3.6 7205 Government patronization and loan facilities 3 2 3 1 1 2 4006 Subsidy and cash receipt from Government 3 1 2 1 2 1.8 3607 Place/location of Shrimp farming 2 2 2 1 1 1.6 3208 Availability of Capital and Bank loan 3 3 3 2 2 2.6 5209 Availability of fry and raw materials 5 4 4 4 4 4.2 8410 Less defective Shrimp 3 3 2 3 5 3.2 6411 Use of modern Technology in Shrimp Production 5 3 3 4 3 3.6 7212 Trained Fisherman and Processor 5 2 2 2 4 3 6013 Export friendly Government policy 3 4 4 3 3 3.4 6814 Having Knowledge and preparation of Export related

Documents5 1 2 2 2 2.4 48

15 Test and certificate of shrimp to export 2 3 3 4 2 2.8 5616 Availability of Electricity and fuel 5 4 4 2 3 3.6 7217 Transportation and Communication system 3 3 3 3 3 3 6018 Availability of frozen mill and warehouse 6 2 2 2 3 3 6019 Demand of Bangladeshi Shrimp in foreign market 5 4 2 4 4 3.8 7620 International trade policy of Importing Country 4 3 4 3 2 3.2 6421 Competition created by other competing goods and

organization4 5 4 5 5 4.6 92

22 Marketing system of Shrimp 4 4 3 4 3 3.6 7223 Export Duty and VAT 4 2 2 2 4 2.8 5624 Expense of Shrimp Production and Fry collection 4 3 2 3 2 2.8 5625 Sale on account and advance payment 3 2 2 1 3 2.2 4426 Targeted volume of shrimp export 1 3 2 3 4 2.6 5227 Demand of your Shrimp in foreign market 5 4 3 4 5 4.2 8428 Personal relationship with importing company 4 2 3 5 4 3.6 7229 Competitive price of shrimp 3 5 4 5 5 4.4 8830 Brand image of shrimp exporting company 5 2 4 5 5 4.2 8431 Importers’ inspection of child and woman employment 5 3 2 2 3 3 60

32 EPZ location 1 2 1 1 2 1.4 28

of 64


33 LC and other documentation 5 2 3 2 3 3 6034 Business ethics of exporting company 5 2 3 2 3 3 6035 Performing corporate social responsibility 5 2 2 3 2 2.8 5636 Relationship with Buying house 5 4 4 5 5 4.6 9237 Quality control system applied by the exporting

company5 5 5 5 5 5 100

38 Quality Ensured by ISO or other agency 5 4 4 4 4 4.2 8439 Size or volume of Business 4 3 2 2 2 2.6 5240 Goodwill in better quality 5 3 4 4 5 4.2 8441 Management and supervising system of exporting

country3 3 3 3 4 3.2 64

42 Political issues 4 2 2 1 1 2 4043 Inspection by importing company regarding Tax

payment1 2 2 2 2 1.8 36

44 Infrastructure of shrimp exporting Business 5 3 3 3 3 3.4 6845 Internet and computer facilities 4 4 3 4 4 3.8 7646 Subscription and other commission to third party 3 2 2 2 3 2.4 4847 Seasonal demand fluctuation 5 3 1 4 4 3.4 6848 National relationship between importing and exporting

countries5 3 1 2 3 2.8 56

49 Quota in exporting shrimp 1 3 2 3 3 2.4 4850 Cultural and religion factors 3 2 1 1 1 1.6 3251 Exchange rate fluctuation 5 4 4 1 4 3.6 7252 Lengthy and complex process of getting access to

foreign market1 3 4 3 2 2.6 52

53 Cheap labor cost 3 3 4 2 4 3.2 6454 Trade discount 1 4 2 4 3 2.8 5655 Irregular supply from shrimp farmer 3 2 3 4 4 3.2 64

From the above table we can observe that not all factors are equally significant in Shrimp exporting Business. If we rank them according to their performance then we can overlook the top 10 factors those have great impact on the Shrimp Exporting Business they are listed again bellow for extra consideration according to their ranking

1. Quality control system applied by the exporting company (100)2. Competition created by other competing goods and organization (92)3. Relationship with Buying house (92)4. Competitive price of shrimp (88)5. Perfect Processing of Shrimp (84)6. Availability of fry and raw materials (84)7. Demand of your Shrimp in foreign market (84)8. Brand image of shrimp exporting company (84)9. Quality Ensured by ISO or other agency (84)10. Goodwill in better quality (84)

It can be inferred that the above 10 factors have a great impact on the Shrimp exporting business. So a new Businessman needs to consider these factors very carefully in order to be successful in Competitive market.

of 64


Chapter: 07 PROBLEMS AND PROSPECTS OF SHRIMP EXPORING BUSINESSThe problems described below were pointed out by the participants in the primary study. The workshop also shed light on some additional problems. The problems prevalent at different levels of the value chain are enumerated below:7.1. General

An integrated agricultural policy is a prerequisite for the development of any primary market. However, the present agricultural policy can at best be described as disjointed and non-functional.There also exist serious shortcomings in the government regulation and control of the following environmentally important issues:

Wild Fry Collection Standards maintenance Land grabbing Inadequate Sanitary and Phyto-sanitary measures (SPS)

Lack of standards at all levels of the value chain.The members in the value chain also seem to be involved in vertical competition. There are quite a large number of hatcheries operating within the country under capacity. The farms are running at capacity (although with high mortality rates) as a result the farms have abundant demand for their supply. Thus a captive market results in manipulation by the agents.The processors are faced with huge demand from the international markets. But they aren’t able to meet this demand because of failure of the part of the farms to supply them with adequate shrimp. Inconsistency in the supply chain results in substantial and rapidly changing price structure. As a result unethical practices are prevalent in the value chain. In order to meet the necessary weight requirements, farmers sometimes inject the shrimp with illegal material.The various donor bodies at the field level are working in isolation as opposed to creating partnerships. As a result transfer of learning and experience is sporadic and uncoordinated. Endeavors by BRAC, DANIDA and ATDP-II have yielded positive results in their respective fields. However, very little effort has so far been taken to share the knowledge gathered which could have resulted in even better results.Lack of a proper monitoring mechanism plagues every level of the value chain.There also exists no formal exit strategy on the part of the donors. Moreover the exit strategy lacks transfer to the private sector. The present practice is geared towards either the government or creation of NGO based private sector which seriously affects free market principles.The extension workers provided by the government have so far performed very poorly and failed to facilitate the farmers properly.

7. 2. Brood Parent CollectorsIndiscriminate catching of brood mothers has emerged as a serious threat. In fact, experts forecast that brood mothers may become extinct in two to three years from Bangladesh waters if this present practice persists.

of 64


In Bangladesh the male and female shrimp are harvested together. There is no mechanism to harvest the brood mother separately. In the case of galda cultivation however, the mechanism for collecting brood mothers only has been developed.Inadequate policy measures regarding the time of catching, technology, human resources, etc. also presents a great threat to the brood parent collection. There exists no legal mechanism for licensing the nets and vessels used for this purpose.Lack of appropriate technology is also a big problem. Fry collection from the sea, called baish dhora in Cox’s Bazaar and baccha dhora in Satkhira/Khulna, is skilled work that requires hard physical labour and local expertise is inadequate which results in the death of a large number of fries.A large number of the poor — men, women and children (child labor) — do such work in these areas. Child labour seems to be more rampant in golda cultivation. In case of bagda farming children are mainly employed for catching fry. The sector however, ensures gender equality. In fact the majority of the workers involved in this sector are female especially in the processors and hatcheries.People involved in this business as well as those who live in the shrimp habitats have no knowledge regarding wild life.Lack of monitoring of compliance afflicts this level of the value chain as well.

7.3. Agents (brood)These agents are mostly traders with local influence in the society and thus have entered the business not due to need in business but by force. The traders also force the farmers to buy shrimp of PL in stocks. It is often found that only 5% of this stock contains brood mothers.Quality and price control measures are compromised due to inadequate supply. This level of the chain is also characterized by too much dependence on catchers and they eventually dictate prices.Inadequate monitoring and control by law enforcing and monitoring agencies is also a troubling issue in this phase of the chain.

7.4. Hatchery/NurseryUnlike the other levels in the value chain, this level is characterized by too many players. However, almost all of them are engaged in marginal operations. No extensive studies have been undertaken so far to ascertain the required number of hatcheries.Most investors are motivated to turn black money white. Production and sales figures are often exaggerated to override the law. That is why frequent changing of hands (of facilities) is quite a common practice in this field.Inadequate bio-security measures such as drainage, bacterial control, viral control, use of medication, etc. due to inadequate technology base also results in high mortality rate and low quality of the product. The disease called White Spot Syndrome Virus (WSSV) effects the bagda species specifically and is the sole contributor behind falling productivity of bagda. In the case of golda bio security related problems mainly involve bacterial infections and contaminated medicine and feed. The EU imposed a ban on Bangladesh shrimp imports in 1997 because of a failure to comply with EU quality regulations. These events have resulted in a bad image of Bangladeshi shrimp in foreign markets. As a result Bangladesh cannot demand the same price as its competitors in the international market.

of 64


Lack of trained human resources in this field necessitates the influx of foreign technicians. In fact 70% of technicians are from outside the country. The majority (50%) of them are Indian nationals. These foreign experts at times enter the country illegally and apply their technology, medication, and at times even strains without any pre-testing measures. This quite clearly represents a potential threat to bio-security.Weak association among the different hatcheries exist since a large number are involved in unethical business practices and are least concerned about business development.Although businesses change hand regularly, they do not close indicating that unethical practices rather than business itself promotes sales. Most of these unethical practices are a direct result of government incentive programs directed in favour of the hatcheries.The cost of undertaking R&D activities at the hatchery level is clearly uneconomical for private industry and other stakeholders to undertake at the present capacity utilization rates.

7.5. Agents (Post Larvae – PL)These agents constitute the major profit making actor in the chain with the least risk. These agents are very influential in the value chain and determine prices. Lack of working capital and availability of special interest rates are outlined as major constraints faced by the group.High mortality rates during transhipment from hatchery to farms especially in the case of bagda are also observed.These agents control both farmers as well as hatchery owners. On one hand, they purchase on credit from the hatchery owners and on the other they derive commission from the farmers. In the case of galda, a large amount of the PL is imported from neighbouring India. Some PL imported from India contains excess amounts of nitrofurine which is a prohibited substance.

7. 6. Transport AgencyThe poor transportation infrastructure of the country further cripples the industry. This problem is even more acute in the case of bagda as in this case the shrimp have to be transported from Cox’s bazaar to Khulna.Lack of landing facility for air transporters in Khulna results in high carrying and time costs which ultimately results in the farmers paying higher prices. Idle capacity for air transport during off-season makes it difficult for them to sustain their operations.Inadequate aircraft parking facility in Cox’s bazaar airport during peak season contributes to even more delay in shipment. It takes a total of thirty hours to reach the farms from Cox Bazar to Khulna by road. Some hatcheries have taken it upon themselves to transport the PL by road; however, this has not yet improved the situation. Policy regarding licensing for air transport is inadequate – the status of both leased aircraft and owned aircraft are regarded as same. Temperature and oxygen controlled vans for road transport are still at the experimental stage.

7.7. Farmer/NurseryLow awareness level regarding proper farming practices results in high mortality rates and diseases in the farms.

of 64


The weak financial capability of the farmers is also a great barrier towards development. Inadequate banking support makes it impossible for the farmers to obtain the funding they require.High mortality of Post Larvae of both bagda and golda result primarily from the previously mentioned shortcomings.Although export benefits are extended to this sector, the processors are the ones who mostly get to enjoy the same. They pass some of the benefit to the agents in the form of higher prices. However, the other members of the value chain are not able to absorb much of this benefit. The farmers in Bangladesh get higher prices for their products compared to farmers in countries like Thailand primarily due to higher production cost resulting from low management capability, inefficient quantity management and high mortality. This on the other hand affects the market share in the international market. This aspect can be summarized in the illustration from group discussion presented below.

High prices do not necessarily mean high profits as the cost of operation are also high in these farms. After covering all the overheads a very meagre profit is left. On an average, 20% of the overheads fall under labour.

The sales price is completely independent of costs. The price is dictated by competition alone. Management inefficiency and lack of technology are considered the main

contributing forces behind these rising costs of production. Primary production cost is quite low in Bangladesh compared to other countries

as 90% of the Bagda larvae are traditionally produced and therefore entail no spending at all. In fact some regard this as the sole reason behind the survival of this sector in Bangladesh.

The start-up capital and input cost is much lower in Bangladesh. However, it is important to properly define sustainability in this aspect.

Although some shrimp farms are sustaining, the owners are doing so by engaging themselves in side businesses.

A study conducted under the ATDP surveyed about 600 such farmers and found that average production was less than 100 kg per hectare even though it was required to produce 148kg per hectare to break even considering the price of land.

The government has also failed to play a constructive role, evidenced by the lack of support from government extension workers.The cost of maintaining nurseries and undertaking experiments is at times too risky and expensive.

7.8. Agents (shrimp)No special interest rates for working capital are available.As mentioned before, there exists a huge gap between the demand for shrimp by processors and the supply of the same provided by the farmers.Processors dictate prices based on international market rates.Too many depots are engaged in this stage and a large number of these depots and sub-depots are either owned or controlled by agents. All adulteration is performed in the depots or sub-depots. Here shrimp are injected with fluids and other substances or immersed in water to increase their weight.

of 64


Again, the measures taken by the government in monitoring of compliance are alarmingly inadequate.

7.9. ProcessorThe quality of raw material (shrimp/prawn) supplied to the processors is not satisfactory because of adulteration, cool chain maintenance, size variation etc. Processors should reject these shipments but do not due to their desperate need for raw material to fulfil orders.It has also been observed that, some processors engage in this business only for the period for which the tax holiday has been extended. After expiry they simply get a new registration. This practice results in financial default.Lack of marketing efforts and a negative country image are also great obstacles. The negative country image is solely responsible for the low prices Bangladeshi shrimp commands in the international markets and its failure to increase its market share and acquire new markets.Inadequate technology and knowledge transfer also impact operations.Although in recent times, there have been efforts to comply; compliance with HACCP (Hazard Analysis Critical Control Point) is still not adequate.Non-tariff barriers from the developed world at times are considered inappropriate by local producers. For instance, although EU regulations prohibit child labour, in Bangladesh complete abolition of the practice is impossible as the children are forced to work for their very sustenance mostly at the lowest ladder of the value chain. EU regulations also necessitate the availability of proper sanitary conditions which most of the farms simply cannot afford. In fact some requirements of the SPS don’t even fall under the standard regulations of health and sanitation. For example in case of golda, the acceptable level for nitrofurans required by the EU is substantially and impractically lower than that approved by general health and sanitation standards. This is a perfect example of inappropriate grounds for rejection by the developed countries. International laws can therefore sometimes be questionable.

7.10. Business Development System (BDS)The general barriers prohibiting the establishment of a healthy Business Development System (BDS) in this sector are listed below:1. Coordination among industry participants

There is virtually no coherent coordination among participants in the value-chain; hatchery operations are set up for reasons other than the interest of the industry. Export incentives accrue directly to processors leaving out the rest of the chain.Industry needs are not well communicated and coordinated with donor activities and programs. Donor activities are not well coordinated amongst themselves.Government activities are largely non-existent.

2. TechnologyR&D activity is almost non-existent in this industry.Donor programs are not designed to take the long term planning needed to help develop appropriate technologies.Imported technology has proven to be not appropriate for our environment or else too expensive.

of 64


Human resource development for long-term sustainability is not satisfactory, especially in the hatcheries.The hatcheries seem to be interested only in profit sharing but not technology sharing.

2. FeedPrice of quality feed is beyond the reach of the poor farmers under their current farming methods.The only reliable source of quality feed in the country is the multi-national CP.Most available feed suppliers/manufacturers are substandard which result in low quality shrimp and prawn.Monitoring of feed and drug manufacturing system and products is inefficient.

3. FinanceFinancial agencies consider financing farms non profitable and high risk and therefore are reluctant in extending loans.The knowledge base of financial operators regarding the industry is not adequate. Although they are willing to grant loans to hatcheries, they have very little idea of the demand supply status in the industry.Loan disbursement to a large extent is either directed towards hatcheries or processors as they seem to be the larger compared to the rest of the actors in the value chain.

4. Bio-securityAgents are commercially driven and therefore engage in overselling certain medications such as antibiotics and hormones just to gain profits.Inadequate laboratory facilities result in low R&D endeavors.Low level of knowledge base regarding bacterial and fungal infestation prohibit them from taking proper measures in preventing and curing such diseases which is why a lot of exports turn out to be infected.

7.11. Prospects of Shrimp Exporting Business in Bangladesh

Frozen food has the potential of overtaking readymade garment as the number one export item, says a leading entrepreneur in the food processing sector."It (frozen food) can earn export revenue several times higher than what garments do. People need at best two new shirts a month, but they take either meat or fish every day," says Iqbal

Ahmed, chairman and chief executive of Seamark (BD) Ltd.In the frozen food sector, the company clinched National Export Trophy (Gold) for fiscal 2006-2007 and National Export Trophy (Silver) for 2005-2006 from Chittagong."If the government supports are there, earnings from frozen food export may cross billions," Ahmed says.Seamark (BD) Ltd is a subsidiary of the UK-based Seamark Group. Seamark Plc, the first company of Seamark Group, was the recipient of the Queen's Award for export in 1998 and the first European Business Award in 1999.At that time Seamark Plc that comprises three production units -- IBCO Building, Seamark 1 and Seamark 2 located in Manchester -- contributed 80 percent of the export of frozen shrimp and fisheries from the UK.

of 64


Ahmed says most of the Bangladeshi restaurants in Europe import fish, shrimp, frozen vegetables and frozen pastry products from Bangladesh.Shrimp comprises only one percent of frozen foods, while the demand for chicken is higher. The European countries import raw materials of poultry products from Brazil under joint venture and meat from Australia and New Zealand, Ahmed says."Monitoring measures should be taken to step in the world market of chicken to make sure that the food item doesn't contain any chemical element harmful to human health.”Europe still does not allow meat from Bangladesh since the country is yet to develop cattle farming infrastructure and factories of international standard.There is certain mechanism in Bangladesh to facilitate shrimp export, and poultry or cattle also needs such a mechanism, says the Seamark (BD) chairman. He also emphasizes increasing productivity and ensuring facilities to boost the export of frozen fishes, particularly shrimp.“Our farmers produce some 300kg to 500kg of shrimps per hectare as against 5,000kg produced in other countries like Vietnam, China and Thailand," he says.“It depends on farming skill and technique.” To increase productivity, he stresses providing the farmers and workers with training under government initiatives and involving them in entrepreneurship.Also, leasing out water bodies can help farming through cooperatives, and training under private initiative can increase production.He also underscores the need for enhancing research activities to produce good spawns and improve the method of shrimp farming that involves rural people in farm level.Ahmed says the lone laboratory in Dhaka is not enough to test shrimps produced in Chittagong, Khulna and Cox's Bazar.“Issuance of certificates after conducting antibiotic test through this single lab takes 25 to 30 days, whereas it takes only three to five days in neighboring India. Within 30 days an order can be cancelled or price may fall,” he says.“We need at least four labs. It has been our demand for years.”“It doesn't require a lot of fund either,” he says. Many non-resident Bangladeshis will invest in the sector if good infrastructure and environment is there.“We work within a system. If we get that system easily, we will surely flock here to set up different industries that would help us reduce production cost with cheaper labour and benefit the country through job creation and technology transfer,” he says.Ahmed says Seamark (BD) together with its two other sister concerns -- IBCO Foods and Seamark (Holding) -- has an annual turnover of $60 million, while the turnover of the three companies under Seamark UK chapter stands at $325 million.“Frozen food sector has a huge prospect here and if congenial investment atmosphere prevails, the NRBs in the UK may make a remarkable contribution to the economy of Bangladesh,” says Ahmed, also the chairman of Bangladesh-British Chamber of Commerce.It is not miracle !! business and economy of Bangladesh is in good opportunity position when global economic structure is shaping restructured!! For the new shape of economy the silent war of economy (Recession) has seen. The difference between world economy and Bangladesh come closer than ever.

of 64


Now in new opportunity: US raps on Asian shrimpers’ doors after oil spill According to Infofish, an Asia-Pacific trade group, wholesale shrimp prices have risen by about 15 percent to 20 percent since the Gulf spill. Largely unaffected by a virus that has crippled stocks in Bangladesh and Indonesia.US raps on Bangladesh shrimpers’ doors after oil spill.As the Gulf Coast oil spill continues to gush, U.S. seafood suppliers are turning to Asia to ensure Americans have enough shrimp for their gumbos, Creoles and cocktails this summer, but some of those overseas cupboards are low themselves.Several countries in the world’s top shrimp-producing region are struggling to satisfy their own appetites for shrimp because of disease, drought and the economic crisis. The oil spill is one more factor driving prices skyward, sending a worldwide ripple through an already tight shrimp market.The price of plump black tiger shrimp is at a 10-year high in Vietnam, selling for around $13.50 per kilogram ($6.14 per pound), said Bui Dung, a manager at Minh Phu, Vietnam’s biggest shrimp exporter in the southern Mekong delta province of Ca Mau. He said heat waves along with disease outbreaks have led to smaller yields on farms. Domestic consumption has remained high, nibbling away at cold stocks normally available for export prior to August harvests.“The demand, particularly from the U.S., is huge,” Dung said. “We receive order requests from U.S. importers almost every day, but we cannot meet all their demands.”Americans have an insatiable craving for shrimp, eating about 4 pounds (1.8 kilograms) a year. And while wild Gulf shrimp provides only about 7 to 9 per cent of that supply, the oil spill will likely send some U.S. restaurants and super markets into a short-term frenzy, said Fatima Ferdouse, chief of trade promotion at Infofish, an intergovernmental organization for the Asia-Pacific fishery industry based in Malaysia.“It backfired because in the American market, they planned to sell … this much domestic shrimp from the Gulf for summer, which they’re not getting now,” she said by phone. “So they have to fill in the gap. They panic and then the easy way to get it is to go through import ? they don’t have any other choice.”According to Infofish, wholesale shrimp prices have risen by about 15 to 20 per cent since a BP-operated oil rig exploded 10 weeks ago, causing an undersea blowout that has spewed millions of gallons of oil into the Gulf.Gavin Gibbons, a spokesman for the U.S.-based National Fisheries Institute, a trade group, said Americans might see a price increase on their plates in the short term, but he’s hopeful Asian production will pick back up to keep consumers from feeling a prolonged pinch.“It’s the No. 1 most consumed seafood in America,” he said. “People eat more shrimp than they do canned tuna.”Ecuador is the only country among the top five U.S. importers located outside of Asia. More than a third of the nearly 550,000 tons of shrimp imported by the U.S. last year came from Thailand, the top shipper, according to Infofish.Thailand has remained a stable supplier, largely unaffected by a virus that has crippled stocks in Bangladesh and Indonesia, the second top supplier to the U.S. last year. For the January-April period before the Gulf oil spill, U.S. imports of Indonesia shrimp were down 30 per cent from a year earlier. Imports from Thailand were up about 17 per cent over the same period, Infofish data reported.Last year was the first time the U.N. Food and Agriculture Organization estimated a drop in worldwide shrimp aquaculture production, following the global economic crisis which forced

of 64


many farmers out of business. But now, prior to the peak summer shrimp-eating season, it’s a sellers’ market.Larger shrimp are in short supply, pushing prices to the highest level in two years, according to Infofish. Demand for the black tiger shrimp, which is very popular in Japan, has been particularly high, with prices increasing $1 a pound ($ 0.50 a kilogram) since early June.“The demand worldwide is quite strong. The economic crisis seems to be over, especially the U.S. and Japanese markets are really demanding a lot of shrimp,” said Helga Josupeit, a fishery industry officer at GLOBEFISH, an FAO program in Rome that tracks international fish trade and publishes price reports. “If anyone wants to invest in a shrimp farm, they probably will make some money.”Some farmers say it’s ironic that the U.S. is now forced to lean more on overseas suppliers to help meet demand. In 2004, the same Gulf Coast shrimpers affected by the oil spill successfully lobbied Washington to slap antidumping tariffs on Vietnam, Thailand, India, Ecuador, Brazil and China, accusing them of flooding the U.S. market with artificially low priced shrimp.

Chapter: 08RECOMMENDATIONS TO BUSINESSMAN AND GOVERNMENT TO ACCELERATE SHRIMP BUSINESS

Based on the figures associated with production of PL, shrimps/prawn capacity utilization and processing capacity utilization it is evident that US$1 billion target is achievable provided certain bottlenecks are removed. The main bottleneck therefore remains with the farmers where the production is unacceptably low. With the dissemination of technology through programs like SSOQ production in the farmer’s level may be increased 4-5 fold making it possible for the industry to reach the desired target.The intervention strategy therefore needs to be concentrated on these bottlenecks without putting too much emphasis on increasing capacity across the chain. The strategy need only concentrate on increasing operating and management efficiency and decreasing the high mortality rate.8.1 Intervention Strategy The intervention strategies that were uncovered by the primary study in addition to the workshop are illustrated below. Order of illustration does not reflect importance:1. Policy: Agriculture

Both agricultural policy and land policy are important in this regard. An integrated agricultural policy should be the objective. This policy can be applied when calculating land productivity and allocations for various sub-sectors such as shrimp, grains, horticulture, jute, etc. The ministry of agriculture and the ministry of land should work jointly to come up with such policies.Separate policies should be developed for bagda and golda as the requirements for these two species are completely different and it is also important that the fisheries department and other relevant ministries such as land, commerce, and environment acknowledge these differences. Some integration in policies has already been done especially in the case of golda cultivation and some of these principles can be applied to bagda. However, as 70% of the foreign exchequer from shrimp is contributed by bagda, emphasis should be placed there.

of 64


In addition, the shrimp industry policy should also be integrated rather than kept it in isolation. Hatcheries, Farmers and Processors should be considered as a single unit rather than competitors when such policy is developed.Policies should also be formulated to address the issue of the lack of transparency on the part of the foreign technicians. Policy assessment and updating should be done on an annual basis based on international market scenario.

2. Policy Issues: Brood & HatcheriesBrood parent catching for both bagda and golda should be closely monitored. The local producers suggest that for bagda ban should be imposed during certain months of the year to enable a consistent flow of brood mothers. However, some experts suggest that instead of imposing bans on some ascertained period, bans should be put to effect on certain areas which are essential for the larvae to grow. This is more applicable in the case of golda as bans on some strategically important areas in the Sundarbans and Shatkhira can produce effective results.Brood mother collecting methods in Bangladesh must be changed immediately to prevent the extinction of brood mothers with learning from other countries.A 100% ban should be imposed on natural PL catching for bagda. In the case of golda however, only 10% of the PL requirement is met through hatcheries and therefore natural PL collection cannot be prohibited. Banning natural fry collection in this area will therefore render the industry non-existent. However, these bans should not go into effect before alternative sources of livelihood have been ensured for those who will be affected by the restrictions.In the 1990s the government took steps and allowed establishment of bagda hatcheries in Cox’s Bazaar under tax holiday environment. Similar steps should also be taken for golda.Restrictions should also be imposed on the type of nets used, boats in operation and the technology used. Individuals without proper trade license should not be allowed in this trade. The coast guard, with help from environment and fisheries division, must be given the responsibility to monitor the activity.Training programs on proper brood mother rearing techniques could also be launched. BRAC has attained huge success in this field.As golda requires less investment and does not need a marine environment, establishment of cottage industries throughout the country can be encouraged. These are also easily manageable. However, the position of these ventures should be ecologically justifiable. Since it is much easier to transport brine than PL of fries, these can be very profitable undertakings.The government machinery is well aware of the fact and thus it is believed that a little push from the private sector operators and support from the donors should be initiated.

3. Policy: Bio-securityBio-security measures must be undertaken across the chain, rather than being introduced at different stages of the value chain. If a proper free market mechanism can be established, the demand for biologically safe food will automatically force the farmers to adopt bio-security measures.At present the industry relies heavily on foreign technicians. Locals should be extensively trained in this field so that proper testing measures can be undertaken.

of 64


A policy for transparency on the part of the foreign technicians should also be devised. Certification programs like the SSOQ can also play a major role in this respect as it helps create value addition in the form of higher quality and better product image in the minds of the consumers. SSOQ has a laboratory in Cox’s Bazaar, which tests fries for any sign of infection; the larvae are then supplied to SSOQ farmers. This also increases productivity substantially as the mortality rate is reduced greatly.Bio-security policy should include viral, bacterial and fungal issues. Policies concerning use of feed, antibiotic or any other form of chemical should be outlined in detail and strict adherence must be enforced. The type of activity across the chain will vary and thus awareness drive through leaflets can be a good method. The environment activists along with the mass media can use this proactive approach. In order to create mass awareness, education programs can be undertaken where the participants are imparted knowledge pertaining to importance of bio-security measures.Traceability is another important issue. In order to ensure the same farmers need to form organizations. They should be given the necessary training on record keeping and certification procedures. Cooperatives can play a vital role in that respect. The SSOQ-GNAEP model can be considered as the standard and implementation as such can ensure traceability. Traceability has to be guaranteed at each and every stage in the value chain including the importer. However, traceability needs to be formally defined at first and it should be ascertained as to which level traceability should be pursued. Bangladesh should enter dialogues with the importing countries to jointly come up with a specific definition for traceability and enlighten them on the problems involved in maintaining traceability in case of small farms. This proactive approach can lead to larger exports.

4. Policy: Financial MonitoringRestriction on number of hatcheries to control financial corruption may be considered. These restrictions can put an end to the unethical practices currently rampant in the sector.A managed market approach rather than a free for all strategy should be followed. The government should undertake investigation before granting new hatcheries/processors permission to operate.Tax holiday benefits may be directed to the farmers in the form of low interest loans to ensure that traders do not take all the advantage. Most experts agree that subsidies are not advisable in this regard as it fails to render the farmers any real financial assistance. Furthermore, importing countries like the US has imposed antidumping measures towards subsidized goods. On the other hand tax holidays on imports is encouraged.Incentives can be made more effective if farmers are required to meet certain bio-security measures to be eligible for the incentive.The overall financial infrastructure of the country needs to be improved for these incentives to function properly and yield the desired results.

5. Policy: InternationalIn the last few years the international market has experienced quite a revolution. The consumers have grown much more aware about food safety and environmental and human rights issues. They want to know whether the imported shrimp is produced maintaining international codes of conduct for food safety, whether it is produced in an environmental friendly way, whether the human rights and labour rights requirements are

of 64


followed while producing shrimp. The inclusion of international market scenario while formulating international standards therefore should be ensured.In order for all WTO members to benefit equally from the Agreement on SPS, and to ensure that such measures are not used as a market access barrier, and in order to assist LDCs build the capacities necessary to guarantee compliance, it is important to undertake concerted effort, on a global scale, to address some of the relevant issues.The SPS provisions should be formulated in a transparent and accountable manner where LDCs also have equal opportunities to participate in a fair standard setting process; although EC was sending signals for sometime before the ban was actually imposed, there was considerable lack of awareness about the HACCP regulations both at GOB, as well as plant, levels.If standards are to be harmonised, these should take into consideration regional conditions; interestingly, at the time of the EU ban, exporters were able to divert a part of the consignments to USA and Japan, markets which are not particularly known for any lack of vigilance in terms of quality and hygiene standards.Full implementation of SPS measures should be sensitive to trade disruptive and trade restrictive nature of such measures for exports from the LDCs; adequate preparatory measures must be ensured in the exporting countries prior to imposition of any penalty on their exports.Adequate financial and technical assistance should be given to the LDCs to facilitate conformity with SPS requirements; the nexus between trade and aid should be strengthened; programmes under the Integrated Framework Initiative, which envisages technical assistance for trade related capacity building in the LDCs, should be adequately funded and supported.Mutual recognition of conformity assessment and certification procedures should be pursued to avoid conflicting interpretations with respect to standards.

6. Policy: Donor AgenciesThe donor agencies should develop a joint country strategy to ensure smooth and effective functioning. Implementation maybe divided on a functional basis. Regional divide may cause political insatiability. The donor agencies need to hold regular dialogues in order to ensure greater transfer of knowledge and expertise. This will increase the effectiveness of the respective projects as they can learn from the other’s mistakes and implement the other’s success stories.The donor agencies should develop a plan based on a long term exit strategy rather than on a time elapsed basis. The transfer of ownership should follow a smooth and efficient process with focus on sustainability.The intervention by the donor agencies should be light-touched. Instead of acting as a source of financing only, donors can also function as brokers and thus ensure local coordination in agriculture. They can also aid the government in formulating an integrated agricultural policy and an action plan.Focus should however be put on the private sector as it has been substantially more successful than the government in this sector. From the period of 1986 to 1996, the government was able to establish only a couple of hatcheries. In the same period, the private sector was able to set up 55 and with much less funds.The donors can also aid in export diversification and country image promotion design.

of 64


7. Operational Strategy: GeneralThe operational strategy must be designed as an integrated unit. A national shrimp/prawn association should be formed with representatives from all actors across the value chain. It can take the form of a cluster based Strategic Business Unit with representation from rural producer groups, farmers and community-based organizations. In Bangladesh two hatchery associations and one processor association already exist. They currently work mainly in isolation of each other. They should all be encouraged to work under an umbrella organization. There are a few existing agents who control a significant number of farmers and hatchery supply. These agents can be enlisted to help in the information gathering from and dissemination to as well as monitoring of farm activities.The SSOQ model could be used in ensuring increase in production. The model can also help in documentation and traceability. It has already yielded in positive response from the buyers. The inputs from the buyers must be taken into consideration in developing the quality seal. Such organizing efforts can also generate creative ideas.National target on exports (for a certain period) may be directed at the national association with performance targets for all levels of the value chain. To ensure efficiency integration and mergers should be encouraged at the association level.Bagda and Golda are two different generic brands with different target markets. Thus they should have separate promotional strategies to ensure larger international market shares.The government should not sanction any new hatcheries or processors prior to achieving satisfactory capacity utilization data. Furthermore, restrictions on further expansion of shrimp/prawn farms should also be imposed and stress be given on low mortality and higher productivity. Government (fisheries department) should strengthen the shrimp liaison cell to ensure smooth functioning of the industry.In developing an operational strategy, the grass root problems have to be addressed at the organization level. It has been often observed that, as the organization expands, inefficiencies creep in as the focus strays away from the micro-level issues. It seems that the relevant issues often get ignored.

8. Operational Strategy: Integration - goldaFor golda projects regional integration models can work very effectively where all the actors (including local government representative as advisor) in the value chain can operate regionally as part of the same association. Once they are matured they may attempt to form a limited company.The GNAEP model can be a very good starting point with technical support from ATDP-SSOQ model. In this field the GNAEP model has so far yielded the best results. The model should have an ultimate goal of transition from project phase to private sector phase.The regional association maybe considered for financial support and a single unit for receiving export incentives.All movement of goods from hatcheries to the processor can easily be recorded since a single entity concept is in operation. Again, the GNAEP model can be explored for necessary guidelines.

of 64


In addition, golda can also be cultivated in a poly-culture system with other species, such as Carp, to boost production.

9. Operational Strategy: Integration – bagdaUnlike golda, hatcheries cannot be stationed across the country in this case as the hatcheries need to be located near the coastal areas. Therefore, for bagda the strategy needs to be different due to geographical proximity of hatcheries and the rest of the actors in the value chain. Hatcheries can also operate as separate units and look for export options.Hatcheries can jointly run the transport of PL and may start working on technology using road as a means of transport. Transportation should be based on batch numbers against each farm. Batches shipped must be catalogued during shipment and transferred to the farmers on delivery. Code numbers for hatcheries and farms can help efficiency in transport, distribution, and traceability. Catalogue should be maintained and the data should be transferred to the processors on delivery. In this way, they can set up a certification system and then link themselves with the next stages of the value chain.To support the hatcheries a standard testing unit with recognized international standardization should be in operation (strengthening of SSOQ model).The farmers should be helped to form groups (strategic business units) based on minimum order quantity from the processors end. In addition, the bargaining power of the farmers has to be boosted so that equitable distribution of benefits is guaranteed. The farmer group representatives will act as agents to ensure both traceability as well as ensuring higher profit margins and lower costs. Farmers of a specific geographical region should be tagged with regional processors to ensure easy accessibility, supervision, and traceability.Government agencies with international certification should enforce quality and monitor bio security measures through sample testing procedure at the farm gate point. Farmers should be provided financial support on group basis and should also be considered as export oriented industry.The technology and production efficient support model of ATDP-SSOQ has been excellent (environmental and social friendly) and they may learn from the group model used by GNAEP and BRAC. An integration of these three models can ensure the benefits arising from both the integrated system (GNAEP), the quality control and production efficiency measures (SSOQ), and group formation mechanism (BRAC).The cooperative (strategic business unit) approach discussed so far holds excellent prospects. However, the cooperatives have to be allowed freedom. They are business entities and not charities and the role of donor agencies should be that of facilitators and sponsors.

10. Operational Strategy: Integration – ProcessorsThe following three promotional strategies are suggested.

The strategy should be focused on country image in which support can be sought from the government and the donor agencies.

The strategy should also be generic – Bagda or Golda and thus may be undertaken by the two different integrated forums representing all the actors. This will ensure enhancement of market share through two different positioning strategies.

of 64


The strategy should also be unit based directed towards brands. This will ensure industrial competition within the country.

The processors should also Maintain data bank of products purchased based on the catalogue supplied by the

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

changes modification or complaint handling. Act as the spokesperson for the Bagda and Golda integrated units.

11. Operational Strategy: Integration – R & DResearch and development facility can be mobilized through linkages with the various universities of the country.R&D should not be undertaken at the expense of the farmers or hatcheries as the case may be. The universities can be helped to develop field based R&D centres.Research activities can be initiated either by the regional integrated units or joint effort by the hatcheries of bagda.Strong linkage with the SSOQ units will be required during the initial stages to transmit field experience.Internship programs for the students of universities can be developed at all levels of value chain to ensure adequate human resources development in the future.

12. Operational Strategy: Integration – DonorsThe donor agencies should develop an integrated intervention strategy.The donors should continue with the SSOQ model to ensure smooth transition and placement of technology transfer.The donors should play a role for a period based on a plan developed on a mile stone basis rather than a time bound basis in the areas of technology, standardized operations, and developing marketing strategies.On the completion of a project, it should designed to ensure smooth transition to the private sector. An integrated model should be developed where the private sector representatives will work from the very beginning of the project as members of the group.A typical NGO driven model should be avoided since it lacks transition. Partnership with public sector may lead to ownership issues and thus should be avoided.

of 64


Chapter: 09CONCLUSIONS

It is known to us that the country's second highest foreign currency earner is the shrimp industry. Through this industry the government earns a huge amount of money each year. This sector not only earns money but also employs 12 lakh people in ten thousands shrimp farms. But now there exists a pathetic condition in this sector due to attack of virus. Corruption in quality control, price reduction, and many other local problems are making this sector commercially untenable. In recent times due to intrusion of salinity to the rice fields, farmers do not agree to cultivate shrimp any more, the sector is going to lose its position. We hope the government will pay more importance to this sector. Shrimp is a cash crop which creates employment opportunities and improves the livelihood of shrimp farmers as well as related intermediaries. Therefore, shrimp industry is an important and potential sector for economic development in Bangladesh. This sector is helping improve the livelihood of the poor people such as fry catcher, fry farias, small farmers, different type of intermediaries (shrimp farias, suppliers, agents) and exporters. However, the benefits generated from shrimp exports are not broadly shared throughout the marketing channel. It is clear that the most vulnerable actors in the channel hold the temporary employment, depend on the open access resources and have limited opportunities to upgrade their production and income. Shrimp/prawn is the second largest exportable industry in Bangladesh and has significant impacts on the national economy of Bangladesh. Both exportable Shrimp and Prawn are being produced in the Gher farming system. The shrimp farming system has negative impact on the environment, ecology; land degradation, livestock and water quality whereas the rice-prawn Gher farming system is friendlier to the environment, ecology, and water quality. The rice-prawn Gher farming system has significant impacts on land fertile for MV paddy production. The yield of MV paddy farming under rice-prawn Gher farming system is almost same as the yield in other parts of Bangladesh where the farmers usually produce only year-round MV paddy. While the rice-prawn gher farming system is providing a sufficient amount of rice that helps meet the local demand for food, it also earns foreign currency that helps to contribute to the gross domestic Product (GDP). The policy makers should thus necessary steps. Shrimp exports face a new challenge as European Union has recently imposed rules making it mandatory for at least 20 percent of consignments from Bangladesh to go through a check. The EU tightened the rules on the ground of a 'lack of appropriate laboratory capacity for the testing of certain residues' risky for human health, according to the Official Journal of European Union. The latest sanction came into effect on July 15 with exporters fearing that it would hurt their competitiveness by increasing the costs of exports. The government has moved to cushion exports from the fallout of the EU measure, and now plans to send a delegation to EU headquarters in Brussels by mid-August. It is a graduation from mere suppliers of shrimps to high-end processors, inspired by best practices in other countries. Continuous efforts have given the Bangladeshi shrimp exporters a new identity. They are now known as the processors of value-added shrimps. They are no longer mere suppliers of raw materials for buyers. Today, a large volume of shrimps and frozen fish, the country's third biggest export earner, are exported in ready-to-cook or ready-to-eat forms, thanks to steps taken two decades ago.

of 64


REFERENCES

Ahmed, N. 2008. “Freshwater prawn hatcheries in Bangladesh: concern of brood stock.”Aquaculture Asia Magazine. Vol. 13 (3) pp. 22-26.

Ahmed N., Demaine H., Muir J.F. 2008. “Freshwater prawn farming in Bangladesh: history,present status and future prospects.” Journal of Aquaculture Research. Vol. 39. pp. 806-819.

Akhand A.M., Hasan MR. 1992. “Status of freshwater prawn (Macrobrachium spp.) culture inBangladesh.” In: Silas EG (ed) freshwater prawns. Kerala Agricultural University, Thrissur,India, pp 32-41.

Ali, A M.S. 2006. “Rice to shrimp: Land use/land cover changes and soil degradation insouthwester Bangladesh.” Land Use Policy. Vol 23(4) pp. 421-435.

Azad, A.K., Chowdhury, W.N., Keus, E.H.J., Haque, MM. 2005. “Integrated Rice-Prawn(Macrobrachium rosenbergii) Farming: Moving from southwest to mid coast ofBangladesh.” Bangladesh Journal of Extension Education. Vol. 17(1&2) pp. 33-44.

Azad, A.K., Lin, C.K., Jensen, K.R. 2007. “Wild Shrimp Larvae Harvesting in the Coastal Zoneof Bangladesh: Socio-Economic Perspectives.” Asian Fisheries Science. Vol. 20(4) pp.339-357.

Azam, K., Nazmul, A.S.M., Naher, S.S. 2010. “Quality assessment of farmed black tiger shrimp(Penaeus Monodon) in supply chain: Organoleptic evaluation.” Journal of Food Processingand Preservation. Vol. 34 pp. 164-175.

Bangladesh Export Promotion Bureau 2007. “Export Statistics 2007-08.” Ministry of commerce,Government of Bangladesh, TCB Bhaban 1, Kawran Bazar, Dhaka, Bangladesh.Banks, R. 2003. “Brackish and Marine Water Aquaculture. Report on fisheries sector review andfuture development.” Dapartment of Fisheries(DoF), Matshya Bhaban, Ramna, Dhaka 1000,Bangladesh, pp. 2-17.

BFFEA, 2009: Bangladesh Frozen Foods Exporters Association. http://www.bffea.net/Chanda, A.C. 1997. “Shrimp Farming in Bangladesh: Economic Prospect and Environmental

Disaster. Fish Fortnight Supplement, (IN Bengali).” Department of Fisheries (DoF), MatshyaBhaban, Dhaka 1000, Bangladesh. Pp. 68-72.

Deb, A.K. 1998. “Fake blue revolution, environmental and socio-economic impacts of shrimpculture in the coastal areas of Bangladesh.” Ocean and Coastal Management. Vol.4 pp.63-88.

Department of Fisheries (DoF), 2001. “Management options for the shrimp fry fishery. A regionalstakeholder workshop in Cox’s Bazar.” A workshop hosted by the DoF and founded throughfourth fisheries project by department for international development as part of the shrimpaction plan.

Fisheries Global Information System (FIGIS), 2007. Food and Agricultural Organization (FAO)databases.

http://www.bfri.gov.bdhttp://www.epb.gov.bdhttp://www.mincom.gov.bdhttp://www.shrimpfoundation.org/Daily Star BangladeshField survey

of 64

http://www.shrimpfoundation.org/

http://www.mincom.gov.bd/

http://www.epb.gov.bd/

http://www.bfri.gov.bd/

International Business

Documents

Transcript of International Business