Tax break, incentives boost agro exports to billion dollars

Agro products exports have registered strong growth in recent times, hitting the $1 billion mark in FY21, buoyed by an increased consumption of processed food as consumers holed up at homes globally during the pandemic.

The sector is now striding towards gaining a strong foothold in the world of exports, riding on tax breaks and cash incentives and improved quality of products.

The sector enjoys tax holidays and a flat 20% cash incentive on exports of agro products and processed food. 

Industry insiders say the attractive cash incentive has contributed significantly to a big boost in agro-product exports. 

The government is offering a tax break for the agriculture industry from the very beginning as per the Industrial Policy 2005 and 2010. Every year such a facility gets extended to facilitate diversification of products and bring new investment, an official at the National Board of Revenue (NBR) told The Business Standard, seeking anonymity.

The industry has got another 10-year tax holiday from the current fiscal year, the NBR official added. 

Md Shafiqur Rahman Bhuiyan, president of the Bangladesh Auto Biscuits & Bread Manufacturers Association, told TBS that the government is also formulating a policy for the agro-processing industry. There will be significant investment in the sector when it comes into effect and the industry will also gain momentum.  

There will be a bunch of incentives to the industry shortly. According to the draft agro-food processing industry policy 2021, the government will provide capital assistance at nominal interest rates, interest subsidies, tax exemption on imports of capital machinery, research incentives, laboratory grants, waiver of income tax, and skilled workers to attract investments in the agro-food processing sector.

The draft policy calls for ensuring $5 billion foreign investment over the next five years. It is expected to create new employment opportunities for one lakh people.

Market leaders say Bangladeshi entrepreneurs are now sending agro products to about 144 countries despite disruptions in production and supply chain caused by the pandemic.

The export of dry food such as biscuits, chanachur, cakes, noodles, potato crackers and nuts clocked almost a 10 time growth in as many years. In FY21, exports of this category bagged $283.38 million, while it was only $29.37 million ten years ago, according to the Export Promotion Bureau of Bangladesh (EPB) data.

The major export destinations for Bangladeshi agro products are the European Union, the United States, the Middle East and Gulf countries. Bangladeshi and South Asian migrants are the main consumers of such products in those countries.

Shafiqur of the manufacturers association said, "We have been working for a long time to improve our skills and are now able to produce quality products. As a result, both domestic and foreign markets are expanding."

Exports of spices have also increased to $43.29 million in FY21, which was only $9 million 10 years ago. There is now no doubt about the quality of Bangladeshi spices, leading to a gradual expansion of the market globally.

Besides, exports of various other products such as tea, juice, jam, jelly and fruits have seen growth. 

According to the Bangladesh Agro-processors Association (Bapa), processed food exports alone have reached $514 million this year from $400 million the previous year.

Syed Mohammad Shoaib Hassan, vice-president of Bapa, told TBS, "Despite many developments in the agro-processing sector, few entrepreneurs from the SMEs group made any notable progress in the last five to seven years lacking easy access to loans. Those who invest in this sector should be given incentives," he added.

According to Bapa sources, India is the largest export destination for processed food. There is a huge demand for Bangladeshi products in the neighbouring country. Although there are some problems in the supply chain due to the pandemic, exports have increased. Besides, exports to different countries of the Middle East, Europe and Africa are also on the rise.

Pran Group alone exported products worth $341 million, out of $1 billion earnings from this sector in the previous fiscal year.

Ahsan Khan Chowdhury, chairman and chief executive officer of Pran, said, "It is great to see that we are crossing the $1 billion mark in exports of agricultural and processed agro-products for the first time."

"The sector-wise benefits we are getting will help us move forward gradually by further increasing the supply of our products in various markets across the globe. The government is offering various incentives on exports to encourage diversifying our products," he added.

He also mentioned that Pran Group exports a lot of confectionery products. "We will export tomato based products such as tomato ketchup. We have sent products worth $2 lakh to Somalia, and we are trying to increase that to $2 million."

Ahsan said, "There are opportunities for product diversification in the agro-processing sector. Earlier, we used to export only juice. At present, we are trying to export spices, blended spices, raw chillies, dried chillies, and turmeric. We are constantly trying to enter new markets with new products."

Fresh vegetable export experienced a blip

Meanwhile, exports of vegetables have come down from $164 million to $116 million in FY21. 

Industry insiders say the disruption in the global supply chain during Covid-19 has hurt exports of vegetables. However, the sector has recovered and a lot of vegetables are now being exported to different countries.

Fruit export has also increased a lot this year. Mango is at the top of that list. Most fruits are being exported to the Middle East and Europe.

Agriculturist Manjurul Islam, an adviser to the Bangladesh Fruits, Vegetables and Allied Products Exporters Association, said, "Exports went down due to supply chain disruption during the pandemic. Demand also declined. But it is recovering. That is why exports are also increasing."

According to Bapa, the agricultural sector contributes 13.6% to the country's GDP, while 40.62% of the country's total workforce is employed in the sector. A large part of the sector is the agro-processing industry that is currently contributing 8% to the manufacturing sector.

As per Bapa data, the contribution of the agro-food processing industry to Bangladesh's GDP is more than 1.7%.

The size of the global food and agricultural industry in 2018 was about $8.7 trillion, according to Plunkett Research estimates, which is about 10% of the world's GDP. Global food exports totalled $1.47 trillion in 2017, according to the World Trade Organisation.