Bangladesh is lagging behind in exporting food and agricultural products due to not having a business model focused on the marketing, selling, processing, handling and storing of perishable goods. Often Bangladeshi companies are less aware of the rules of destination countries regarding food items destined for export. Michael J Parr, project director of the US Department of Agriculture funded Bangladesh Trade Facilitation Project which is implemented by Land O'Lakes Venture37, has been working with the country's agriculture sector for one-and-a-half years. He made the remarks in an interview with the Business Standard where he also shared his experiences.
Why is agriculture export not improving to the expected level?
The export of agricultural products is not increasing as expected though there are a number of market opportunities and examples to learn from both the garment and shrimp industries. Food processing companies have been more successful in selling to ethnic Bangladeshi communities across the world, however tapping into the broader foreign consumer food market has remained elusive.
While targeting Bangladeshi diaspora with traditional items and tastes is a solid business approach, it limits the export potential to that niche market and small volume shipments. Moreover, food tastes will likely continue to change for second and third generation Bangladeshis living abroad, meaning that even niche products need to be updated and repackaged to keep consumers' interest. Accordingly, Bangladeshi companies should be aware of the changing consumer patterns of this segment, yet companies also need to be aware that compliance requirements of the particular import destinations may also change.
So, two big points are missing – one is having a competitive strategy for the selling and marketing chain in each targeted country, and the other is about understanding the legal and procedural requirements of importing countries.
The challenges for the exporters are to know the different food tastes of consumers from different countries, along with different food standards. For instance, the European Union has different requirements than Canada or the United States. Besides, competing countries are also better at marketing their products.
Bangladeshi companies need to comprehend and adapt to the import rules of those countries, plus the managers and marketers need to deeply understand the consumer markets and identify growth opportunities for their products. Next, the goods and products need to be branded and marketed directly to reach the right consumer.
If you don't understand the requirements, then you cannot sell the products. For instance, the US often wants certain products to be certified free from various chemicals and attested as "safe for human consumption".
Likewise, for some products, the EU wants to not only know about the supplier, but on which piece of land the crop was raised? Who produced the crop? Where did the seeds come from? What nutrients or inputs did the farmers put on the field, and were any banned chemicals used? How and for how long was the produce cleaned, packed, stored, or transported? And even, at what temperature were the perishable goods kept during warehousing or shipment?
Basically, to reach some key markets for fresh produce or sensitive (and competitive) products, farmers and exporting businesses need to maintain complete traceability information and report it to the buyer or regulator in the importing country.
Think of the success of exporting garments and fisheries products because the investors and stakeholders in both these sectors study and listen to their customers' demands and requirements and then adapt the business model to capture the targeted market. The export-oriented agricultural sector needs to apply a similar market-oriented business model.
Yet, farmers, traders, or exporting companies are not aware of these requirements. The government has a role to play here, building awareness, encouraging the use of technology, and facilitating supply chain systems.
What are the infrastructural weaknesses of Bangladesh?
The Bangladesh Government has invested a lot in developing roads, improving canals and rivers, and building bridges and other infrastructure that benefit traders and ease the movement of goods and people. The results of these initiatives will be visible in the coming days, months, and years.
But there remains a pressing need to improve logistics systems to seamlessly transport agricultural products from different corners of the country to the ports. Traders need to move perishable goods using temperature-controlled logistics that maintain a particular temperature as much as possible from harvest at the field to shipment from Chattogram Seaport or HSIA.
This is important to preserve freshness and ensure the quality of the products. Different types of products require different temperatures (think about frozen vegetable versus a freshly picked item), and this can be a problem for small companies that do not have adequate cold storage systems.
Bigger companies can better maintain the cold chain because they have resources to manage all the way to the port or marketplace, but small companies cannot afford these facilities. Currently, there are few to no companies offering complete cold chain services to the food and agriculture industries. Moreover, there are very limited cold chain facilities at the air, sea, and land ports. These challenges present a business and investment opportunity.
What should be the government's role to facilitate exports in the agriculture sector?
Government should enable trade, by creating a business environment friendly to traders and continuing to ease the movement of agricultural goods across the country and across borders. Beyond transportation and an unbroken cold chain, other enablers of agricultural trade include best-in-class certified and accredited testing laboratories; paperless reports, forms, certificates; e-payment systems; and up-to-date science-based regulations.
The application of ICT is essential to reduce the time and cost to trade; Government agencies need to issue export-import-related certificates, licences, and permits through the online system because this can reduce the time that it takes a product to reach the customer. Investing in these systems could give the country a competitive advantage.
Bangladesh needs to maintain the quality of the products considering the regulatory terms of import destinations and the diversified consumer choices. The country also requires strengthening the coordination among the cross-border trade-related agencies to simplify the clearance process in line with the requirements of the WTO Trade Facilitation Agreement (TFA). In fact, the TFA, which Bangladesh signed in 2016, provides the roadmap for the areas where the Government of Bangladesh can invest, improve, and facilitate export trade.
What prospects do you see in agriculture export for Bangladesh?
The quality of many agricultural products is fantastic in Bangladesh. For instance, coriander is abundant and very good here, but as a fresh herb, it is also highly perishable. So, if Bangladeshi companies can develop a processed and preserved coriander product or focus on the seed/spice market, it seems to be an example of strong potential.
Moreover, local farmers produce different varieties of tasty mangoes, which have known export potential and are examples of success accessing markets. Still many countries around the world produce various varieties of mangoes, so Bangladeshi companies will have to brand and market our variety as a distinct, high-quality product and create the demand. Japanese often gift each other a single, specially packaged apple; it is all about marketing.
Bangladesh has many good quality products, but traders and exporters and the government need to create demand in targeted countries through marketing.
Current export scenario of agriculture sector:
Exports in the agriculture sector saw 26% year-on-year growth in July-April of the 2021-2022 fiscal year, according to the Export Promotion Bureau of Bangladesh.
Agriculture exports crossed $1 billion for the first time in this period. However, the export income from exported perishable items is still very low. For instance, vegetable exports were $99 million in the July-April period while fruit exports were nearly $5 million.