Action plan on card for agro-processing uptick

Food processing in Bangladesh remains far below its potential, prompting the commerce ministry to step in and identify its strengths and supports it needs for a forward leap.

Despite the positive growth trends, the contribution of the food manufacturing or food processing industry in Bangladesh has remained mostly static at around 2% of GDP since 2004-2005, the ministry said in its field survey report, `Diagnostic Studies about Export Promotion of Agro-Processing Sector in Bangladesh.' 

"The growth achieved in agro-food processing is not at par with the economic growth of Bangladesh and the sector is currently under performing," said the report prepared in June.

The report will now be presented before officials of relevant ministries and private stakeholders to devise future action plans, a senior commerce ministry official said.

The study, carried out by Development Technical Consultant Ltd for the ministry, revealed huge potentials of the agro-processing sector both in domestic and export markets and identified factors that are holding it back from growing further.

The latest drive by the commerce ministry appears to be part of the government's growing focus on the sector that now contributes about 8% to manufacturing output (1.7% of GDP) of the country and is currently valued at $2.2 billion.

Its share of total exports now stands at around 1.5%.

The industry now employs about 2.2% of the total workforce of the country, of which close to 70% are unskilled labour. 

Bangladesh's agro-processing market has been growing at a rate of 15% for the last five years. It is currently valued at approximately $4.81 billion, including both domestic and export markets. 

According to the Bangladesh Comprehensive Private Sector Assessment report by USAID in 2019, it was estimated that the food processing sector in Bangladesh is poised to reach $8.23 billion by 2023.

Though it started to expand, the food processing industry is still in its infancy in Bangladesh, with the number of agri-food processors being quite a few and focus on higher product standards still limited.

The commerce ministry report reveals that Bangladesh performs better among the South Asian countries in value addition, but performs poorly in the processing rate in Asia.

According to the global insight study, as quoted in the ministry's report, the food processing industry's value-added transformation rate is low in some Asian countries, including Bangladesh, ranging between 4 and 31% against the peer average of 14.

However, the situation of Bangladesh is comparatively better (9%) than that of Pakistan, Egypt and India, while China ranks third.

The higher rates of value-added agro-products are seen in the Philippines and Vietnam.

The commerce ministry report says a good number of processed products are produced in Bangladesh. But quality finished products have higher demand in urban areas, with international markets seen as "quite insignificant" — jam only 3%, jelly 2% and juice 1% of total finished products.

In the value-added ratio to GDP, Bangladesh's food processing industry stands much lower than that of South Eastern Asian countries mainly because of the low processing ratio for agricultural products.

Processing rates of mangoes, tomatoes, potatoes and chilli are between 2% and 6% in Bangladesh compared to 25% to 90% in Japan, the USA and the Philippines, it said, quoting a Katalyst study.

The Philippines achieved the highest processing rate in Asia (15.3%) while Bangladesh had the lowest 2.7% in 2018.

For export promotion, the study recommends strengthening Hortex Foundation by restructuring it as a Nodal Agency, setting the standards and specifications of the products, registration of exporters and improving packaging.

Crop zoning, contract farming and public-private partnership in building adequate infrastructures like cold storage facilities and transportation facilities are among other recommendations made in the report.

Incentives such as capital investment subsidy, establishment of National Quarantine Authority and upgradation of testing laboratories for international accreditation have also been stressed.

This diagnostic study has proposed an action plan for export promotion of the agro-processing sector and has stressed coordinated efforts of both public and private agencies to implement the plan.

The study was conducted by the WTO cell of the Ministry of Commerce. 

Hafizur Rahman, director general of the cell, told The Business Standard that the Ministry of Commerce is also implementing several projects for the development of the agro-processing industry and production and export of agricultural and agro-products.

The report contains a number of other recommendations, the implementation of which is the responsibility of the Ministry of Agriculture, the Ministry of Industries and various government agencies. 

"We will be holding a workshop with the stakeholders very soon to ensure that the relevant departments implement the recommendations of the report properly. Which government agencies will implement which recommendations are work that will be distributed," he said.

Industry players appeared to be aware of the prospects of the sector, but they are equally concerned about the limitations in product diversification.

Kamruzzaman Kamal, director (Marketing), at Pran-RFL Group, said, "The main reason we are lagging behind in value addition of agricultural products is the lack of commercial farming." 

He said the needed raw materials for industrial production were not available and this was also a reason behind the less importance given to value addition. 

Entrepreneurs do not want to take too much risk with new products, he said, because there is also the issue of making it popular among consumers. Even then, entrepreneurs should bring new products to gauge the purchasing power and eating habits of consumers.

He said some government policy support was also needed to increase product diversification and exports.

Bangladesh Agro-Processors Association (BAPA) General Secretary Md Iqtadul Hoque said the two reasons Bangladesh was lagging behind were technology and the variety of agricultural products.

He said that due to technology, Australian grapes look very fresh when they are sold in the country market even after one-and-a-half months. 

"But we can't keep the mangoes ripe for even two days. Mangoes are produced throughout the year in Thailand. They do not rot easily when ripe," he said. 

It is not possible to process the products as we do not have high quality varieties. When one or two entrepreneurs went to process jackfruits and bananas, they could not sell it in the market, he added. 

In spotlight

As exports of agricultural products have crossed $1billion annually, the government is now attaching more importance to the sector.

At a press conference in October, Prime Minister Sheikh Hasina announced her government's plan to set up a temperature-controlled system and build a cargo village with storage chambers for storage and transportation to ensure quality of agro-products for the export market.   

Under-construction economic zones will have arrangements for modern agro-processing and export processing zones welcoming joint ventures in this sector.

Earlier, Commerce Minister Tipu Munshi urged Spanish investors to invest in the agro-processing industry. Meanwhile, Canada has offered technical assistance in mechanising agro-based industries.

Agriculture Minister DrAbdurRazzaque, during his recent visit to the UK , took the initiative to boost the export of farm products meeting quality standards.

In a recent analysis, the Planning Commission's general economics division said the agro-processing is evolving, but exports are moving at a very slow pace.

Potentials unexplored

There are 47 agro-based enterprises mainly engaged in the production of agro-processed foods like juice and drinks, mineral water, mango bars, fried snacks, candies, jam-jelly, sauce-ketchup, fresh milk, spices, aromatic rice, puffed rice and carbonated beverages.

The manufacturers process mainly mangoes, pineapples, oranges, and some other exotic fruit commodities. Although there are bright prospects of processing other indigenous fruits and vegetables into various types of products, these commodities often remain unutilised. 

Increasing demand for packaged and processed food items leaves open substantial market opportunities for value-added food products both in local and export markets.

As farmers are shifting from producing cereals to spices, fruits, and vegetables, it is now crucial to improve postharvest management and the processing of agro-commodities into semi-finished and finished products.

The report identified tariff and non-tariff barriers, non-compliance of GAP, GMP, certification of quality and standards as among the barriers that hinder further export growth of agro-food commodities to the international markets.

Non-adoption of modern technologies of production, inadequate transportation facilities, low-quality packaging and insufficient quality storage facilities are hampering the export of fresh and agro-processing foods, it added.

Due to the absence of Vapour Heat Treatment facilities, mango export is banned to several countries, including Japan, it said, stressing "from farm to fork" safety issue in the export of food products.

Bangladesh has about 100 types of agro-processed products in the export basket. 

The major destinations are largely EU countries, the Middle East, South East, Africa and the USA, where a large Bangladeshi migrant base is present.

Some enterprises came out with their own brand of products and exporting to upstream markets with very limited products.

"The country could not succeed in making an entry into processed products due to less competitiveness in respect of both quality and standards. The situation calls for immediate action to tap the potentials of export promotion," the study said.

"Large food processing companies have laboratories, but they rely on outside organisations, such as BSTI or private external organisations for advanced analysis. Some samples are sent overseas for analysis, meaning that time and funding are required.

Considering food safety, modern processing facilities need to be established to replace traditional processing facilities, it recommended.

Providing loans for the equipment or facilities that produce or develop seeds, refrigeration and freezing facilities, and refrigeration, freezing, and insulated vans can solve the aforementioned issues.