Shrimp Industry in Bangladesh

1
Welcome to the PresentationGroup I

• Presented By
• Sk. Faijan Bin Halim (MSS 151510)
• Economics Discipline
• Khulna University
• Khulna

• Special Thanks To
• Nishad Nasrin
• Assistant Professor
• Economics Discipline
• Khulna University
• Khulna

2
Group I

• Shrimp Industry Study Problems, Prospects and
  Intervention Agenda
• A Paper By ATDP Research Team
• September 18, 2005

3
Acronyms and Abbreviations

• ATDP Agro-based Industries and Technology
  Development
• DANIDA Danish International Development Agency
• EC European Commission
• EU European Union
• Govt. Government
• ha Hectare
• mt Metric Ton
• PL Post Larvae
• RD Research and Development
• SPS Sanitary and Phyto-Sanitary
• SSOQ Shrimp Seal of Quality
• USAID U.S. Agency for International Development
• WTO World Trade Organization

4
Terminology

• Antibiotics Generally used for the treatment of
  a bacterial infection.
• Bio-security Bio-security is a set of measures
  designed to protect a property from the entry and
  spread of pests and diseases.
• Brackish Water Normally known as brack water. It
  is salt water and fresh water mixed together. It
  is saltier than fresh water but not salty as sea
  water.
• Brood Mother Brood mother is a specific pathogen
  free variety of shrimp for commercial aquaculture
  today. This ultimately helps the marginal farmers
  and increase export.
• Greater Noakhali Agriculture Extension Project
  (GNAEP) A fisheries management model developed
  and tested for fisheries, giving genuine
  fisherman access to fishing rights direct from
  the government and aiming at a sustainable
  utilization of resources. It was first started in
  July 1998, with a project duration of 7 years.
• Hatchery A place where the hatching of fish is
  artificially controlled for commercial purposes.

5
Terminology (cont)

• Hazard Analysis Critical Control Point (HACCPP)
  It is a systematic preventive approach for food
  safety from biological, chemical and physical
  hazards that can make the finished product to be
  unsafe, and designs measurement to reduce these
  risks to a safe level.
• Land Grabbing Land grabbing means buying or
  leasing of large pieces of land in developing
  countries by domestic and transnational
  companies, government and individual.
• Mortality Rate The number of deaths in a given
  area or period, or from a particular cause.
• Post Larvae Hatcheries sell two products. One is
  nauplii (tiny, newly hatched and first stage
  larvae) and post larvae means which have passed
  through three larval stage.
• Sanitary and Phyto-sanitary (SPS) SPS
  measurement enteed into force with the
  establishment of WTO in 1995. SPS measurement
  sets out the basis rule for food safety, and
  animal and plant health standard. It allows
  countries to set their own standard.

6
Terminology (cont)

• Shrimp Seal of Quality (SSOQ) SSOQ prepares
  certification standard pertaining to food safety,
  quality assurance, environmental sustainability
  and social responsibility in the Bangladesh
  shrimp sector. These standards apply to all
  operators in the shrimp sector.
• Tax Holiday It is a temporary reduction and
  elimination of tax. Government usually creates
  tax holidays as incentives for business
  investment.
• Value Chain A value chain is a set of activities
  that a firm operating in a specific industry
  performs in order to deliver a valuable product
  or service for the market.
• Wild Fry Wild fry is also known as wild post
  larvae. There are abundant supply of naturally
  occurring post larvae therefore there is no need
  to develop hatchery technology.

7
Summary of The Study

• Shrimp is one of the leading export items of
  Bangladesh and accounts for roughly 2.5 percent
  of global exports and fetches a fair amount of
  foreign exchange (250-330) million for last
  three years.
• It has ample demand in international market and
  Bangladesh is blessed with an environment
  congenial for shrimp production.
• A primary study was undertaken to detect the
  problems plaguing the different levels of the
  value chain of shrimp in the country.
• Motive of the Study
• This study aims to identify obstacles to the
  growth of the industry and develop some
  intervention strategies that would help eradicate
  these obstacles and begin to develop a strategic
  model to achieve an export target of 1 billion
  by 2010.

8
Problems of the Study

• Inefficient Management
• High Mortality Rates
• Low Quality Shrimp
• Negative Country Image Abroad
• Indiscriminate Catching Brood Mothers
• Lack of Integrated Agriculture Policy
• Inadequate Sanitary and Phyto-Sanitary Measures
• Lack of Standard
• Virtual Competition Among Different Actors
• Lack of Coordination among Donor Agencies
• Lack of Awareness
• Unfair Practice by Agents
• Non-existent RD endeavor

9
Intervention Strategies Towards Achieving Target

• The study strongly recommends an integrated model
  for both Golda and Bagda projects.
• Strategic business units can be cooperative
  based, where groups of farmers work together
  under a commercial umbrella and disseminate
  technical information and training to their
  farmer clients
• Dialogues and forums should be held regularly
  with exporters and importers to raise and address
  questionable trade practices and standards.
• The government must formulate an integrated
  agricultural policy to ensure sustainable
  development in this sector.
• Instead of working in isolation, the donors
  should address these problems collaboratively so
  that transfer of learning and experience is
  ensured.

10
Intervention Strategies Towards Achieving Target
(cont.)

• Donors should also formulate smooth exit
  strategies whereby projects are handed over to
  the private sector after completion.
• Ecological protection and gender equity issues
  can be controlled by working with the
  aforementioned strategic units to prohibit
  certain dangerous practices like land grabbing,
  indiscriminate catching, child labor and
  participation of women across the value chain,
  etc.
• Mass awareness can be generated on such issues as
  bio-security by again working through the
  established industry channels that will benefit
  from them. These again are the business units and
  association groups.
• The SSOQ and DANIDA models can be applied in this
  area. The positive aspects of both the models may
  be applied in the value chain.
• It is found that such intervention can be done
  quite possibly if all the stakeholders confront
  them jointly in an integrated fashion.

11
Shrimp Industry in Bangladesh

• Largest export commodity of the country.
• Bangladesh Produces 2.5 percent of the global
  production of shrimp generating more than US 300
  million annually.
• Main cultured species is the tiger shrimp (bagda
  shrimp) a marine shrimp and mainly cultivated in
  brackish water. Around 250 million contributed
  from Bagda alone.
• Next cultured species for export is the fresh
  water variety locally called golda.
• Shrimp industry provides direct employment to
  over 6,00,000 people who in turn support over 3.5
  million dependents.
• Suffers from lack of vision and strategic
  direction.

12
Shrimp Sector Contribution
Year Percentage Contribution to Total Export Export to EU (mt) Value (million taka)
2001-2002 4.76 19235 7925.70
2002-2003 5.10 21941 9392.60
2003-2004 5.71 25522 11775.00
2004-2005 5.90 27508 12628.95
2005-2006 4.56 29177 15230.00
2006-2007 4.90 36851 1660.00
Japan, EU and USA are the main importer of
Bangladeshi shrimp
13
Shrimp Culture

• Follow traditional method and annual yield is
  250-300 kg/ha
• Total Shrimp farming area-2,76,000 ha
• Marine Shrimp-195000 ha and Freshwater
  Shrimp-86,000 ha
• District involved-20, Upazila-52
• Bangladesh captured only 2-3 percent of world
  production of shrimp.
• Shrimp sector contributes 84 share of total
  fishery export in Bangladesh (2012-13).
• Country-wise Share
• USA-26, Belgium-21, UK-13, Netherland-5,
  Germany-8, Japan-4, Russia-3, Others-20

• Supply Chain of Shrimp

Culture
Supplier
Boat, Rickshaw
Agent
Boat, Truck
Depot
Commission Agent
Factory
14

• Objective of the Study
• The objective of this study is to identify the
  industry-embedded problems and then to layout
  intervention strategies at each step of the
  value-chain to address the same.
• Ultimate Goal of the Study
• The ultimate goal of the research is to assess
  the possibilities of developing a strategic
  business model that can help achieve an export
  target worth US1 billion by 2010.
• Methodology of the Study
• The methodology entailed both secondary and
  primary qualitative study. Secondary research
  included both local and international studies
  conducted on the subject. Primary study involving
  depth interviews of actors across the value
  chain.
• The findings of the first phase of the study was
  validated in a stakeholders workshop focusing on
  problems outlined by the members of the value
  chain and the intervention strategy developed
  based on the outcome of the study

15
Interviewed Representative Members of Value Chain

• Brood Agency
• Hatchery/Nursery
• Transport Agency
• Trade Agency
• Depot
• Farm-Shrimp/Nursery
• Processing Industry
• Financial Agency
• Laboratory
• Wholesale Market
• Department of Fisheries
• Facilitating Agency
• Shrimp Technologist
• Association
• Donor Agency

• Scope of the Study
• The scope of the study included the entire value
  chain and covered both bagda and galda.
  Geographical coverage was Coxs Bazaar,
  Chittagong, Noakhali, Dhaka, Bagerhat, and Khulna.

16
Sector Map of Bangladesh Shrimp Industry
17
Additional Problems of Shrimp Industry (General)

• Lack of integrated agricultural policy
• Wild fry collection
• Land grabbing
• Lack of standard at all level of value chain
• Hatcheries operating under capacity
• High demand but inadequate supply due to high
  mortality rates and farms are unable to supply to
  the processors despite of high international
  demand
• Change in price due to inconsistency in supply
  chain
• Farmers sometimes inject illegal material to
  shrimp for necessary weight requirement
• Lack of proper monitoring mechanism
• Government provided extension workers perform
  very poorly.

Post Larvae of Shrimp
18
Additional Problems of Shrimp Industry (Brood
Parent Collectors)

• According to experts indiscriminate catching of
  brood mothers may extinct from our country within
  two to three years
• In Bangladesh male and female shrimps are
  harvested together. There is no mechanism for
  harvesting brood mothers separately
• Inadequate policy measures regarding the time of
  catching, technology and human resource
• Lack of local expertise in the time of fry
  collection from the sea
• People involved in this business have no
  knowledge regarding wild life
• Lack of monitoring compliance affect the value
  chain as well

Brood Parents
19
Additional Problems of Shrimp Industry (Agents
and Hatchery)

• Hatchery/Nursery

• Agent

• Agents are mostly traders and most of them
  entered into business by force. Traders force the
  farmers to buy PL in stocks.
• Quality and price control mechanisms are
  compromised due to inadequate supply.
• Inadequate control and monitoring by law
  enforcing agencies is also a troubling issue.

• This portion complies too many players and all of
  them are engaged in marginal operation.
• Most investors are motivated to turn black money
  white. Production and sales figures are often
  exaggerated to override the low.
• Inadequate bio-security measures such as
  drainage, bacterial and viral control and use of
  medication lead to low quality of product.

20
Hatchery/Nursery (cont)

• In case of golda bio security related problems EU
  imposed a ban on Bangladeshi shrimp import due to
  failure to comply with EU regulation.
• Lack of trained human resources. Majority 70 are
  from outside country and of which 50 are from
  Indian nationals. Illegal application of
  technology and medication represents a potential
  threat to bio-security.
• Unethical business practice arises due to the
  direct result of govt. programmes directed in
  favor of the hatcheries.
• Cost of RD activities at the hatchery level is
  highly uneconomical.

21
Additional Problems of Shrimp Industry (Agent-PL,
Transport Agency)

• Transport Agency

• Agent-PL

• Lack of working capital and availability of
  special interest rate is the main constraint
• High mortality rate during transshipment from
  hatchery to farm especially in case of bagda
• These agents control both farm and hatchery. They
  purchase on credit from the hatchery owner and
  receive commission from farm
• In case of golda, a large number of PL imported
  from India which contains nitrofurine (a
  prohibited substance)

• Poor infrastructure makes hindrance incase of
  transporting bagda from Coxs bazar to Khulna.
• Lack of landing facility from air transport in
  Khulna, it increase time and transportation cost.
  Policy for licensing air transport is inadequate.
• Due to time heavy time consumption some
  hatcheries try to transport PL by road but the
  situation is still unimproved.
• Temperature and oxygen controlled vans for road
  transport are still at the experimental stage.

22
Additional Problems of Shrimp Industry
(Farmer/Nursery)

• Low awareness level resulting high mortality
  rate.
• Inadequate banking support and financial ability
  hinder progress of daily work.
• Processors of shrimp mostly get the benefit from
  export and pass some of benefit to agent from the
  higher price but other members do not absorb much
  of the benefit.
• Higher production cost due to inefficient
  management bodies and high mortality. Higher
  price for the product does not always ensures
  higher profit due to higher production cost as
  like in Bangladesh.
• Sale price is completely independent of cost.
• However due to low production cost, survival of
  this sector is quite easy than from the other
  shrimp producing countries.
• Cost of maintaining nurseries is too risky and
  expensive.

23
Additional Problems of Shrimp Industry (Agent
Shrimp, Processor)

• Processor

• Agent Shrimp

• Huge gap between demand for shrimp by processors
  and supply of the same by the farmers .
• Processors dictate price based on international
  market.
• Shrimps are injected with fluid and chemical
  substance to increase its weight.
• Monitoring of compliance are alarmingly
  inadequate.

• Quality of shrimp supplied to the processor is
  not of good quality due to adulteration.
• Processor engaged in their business during the
  tax holiday extension after that they shift their
  profession which rises financial default.
• Low marketing effort and low prices reduces the
  demand in the international market and it also
  creates a negative image in the outside market.

24
Processor (cont)

• Inadequate technology and knowledge transfer
  impact market operation.
• Hazard Analysis Critical Control Point (HACCP) is
  still inadequate.
• It is sometimes difficult to maintain the
  international standard of exported shrimp. For
  example EU regulation for using nitrofurans is
  very low to maintain health standard which is not
  highly maintained in our country and it may ban
  the export of shrimp to EU.
• What We have Learnt ????
• Have a Closer Look on the Marked Portion
• This is a perfect example of inappropriate
  grounds for rejection by the developed countries.
  International laws can therefore sometimes be
  questionable.

25
Business Development System
Some General Barriers

• Co-ordination Related Problems
• No coherent coordination and hatchery business is
  mainly set up for interest.
• Industry needs are not well communicated with
  donor activities.
• Donor activities also not well communicated among
  themselves.
• Non-existent government activities.

• Technological Problems
• Non-existent RD activity.
• Donor programmes are not well designed to develop
  appropriate technology.
• Inappropriate imported technology.
• Human resource development is not long term
  sustainable.
• Hatcheries seem to be interested in profit
  sharing not technology sharing.

26
Business Development System (cont)
Some General Barriers

• Feed
• Price of feed is beyond the quality of the poor
  farmer.
• Most available feed suppliers are substandard,
  therefore we often have poor quality of shrimp.
• Inefficient monitoring of feed and drug
  manufacturing system.

• Financial Problems
• Financial agencies found financial farm non
  profitable therefore are reluctant in extending
  loan.
• Inadequate knowledge of financial operator
  regarding the demand and supply status.
• Large extent loan is disbursed towards hatcheries
  and processors as they seem to be larger in the
  actor of the value chain.

27
Business Development System (cont)
Some General Barriers

• Bio-Security Problems
• As agents are commercially driven, therefore they
  tend to oversell medications such as antibiotics
  and hormones just to gain more profit.
• Inadequate laboratory facilities result in low
  RD advantage.
• Due to low level of knowledge regarding bacterial
  and fungal infestation lot of exports turn out to
  be infected.

Antibiotics of Shrimp
Bacterial disease of shrimp
28
Target Achievement

• It is evident that the target rate of US 1
  billion target is achievable provided that
  certain bottlenecks are removed.
• Here the main bottleneck is production level is
  unacceptably low.
• With the dissemination of technology through the
  programmes like SSOQ production in the farmers
  level may be increased 4-5 fold making it
  possible for the industry to reach its desired
  target.
• Concentration on increasing management efficiency
  ultimately reduce the high mortality rate and
  manifold the production level.

29
Intervention Strategy

• Strategies that were previously uncovered in the
  primary study illustrated below
• Agricultural Policy
• Ministry of agriculture and land should initiate
  an integrated policy to enhance land productivity
  while considering different sub-sectors like
  shrimp, jute, horticulture etc.
• Fisheries department should prepare different
  policies for bagda and golda as requirement for
  these two species are completely different.
• As 70 of the foreign exchequer from shrimp is
  contributed by bagda, therefore emphasis should
  be placed there.
• Hatcheries, farmers and processors should be
  considered as single unit rather than competitors
  while formulating any policies.
• Policy assessment and updating should be done on
  annual basis based on foreign technician and
  international market scenario.

30
Intervention Strategy (cont)

• 2. Policy on Brood and Hatcheries
• Brood parents catching for bagda and golda
  should be strongly monitored during some specific
  seasons whereas experts suggest that it should be
  banned in some specific areas specially in
  Sundarbans and Satkhira to enable a consistent
  flow of brood mothers.
• Brood mothers collecting method should be changed
  in our country observing from others developed
  countries. Training facilities will be helpful in
  this case.
• A 100 ban should be imposed on collecting PL for
  Bagda which makes industries non-existent.
  However such ban should not be imposed before
  making any alternative livelihood for the
  individuals whose main occupation rely on it.
• In Coxs Bazar govt. initiate tax holiday for
  bagda hatcheries, similar steps should be taken
  for golda.
• Restrictions should be imposed on using net and
  individuals without trade license should not be
  allowed in this trade.
• Private sector operation and support from the
  donor should be introduces.

31
Intervention Strategy (cont)

• 3. Policy on Bio-Security
• A free market mechanism across the value chain
  with biologically safe food force the farmers to
  adopt bio-security measures.
• Rather than depending on foreign technicians
  local manpower should be trained on testing
  measurement.
• Certification program like SSOQ plays a major
  role for creating value addition in the form of
  better quality and enhance image. SSOQ has
  laboratory in Coxs bazar which test the post
  larvae and then send it to the farmers.
• Bio-security policy should include viral,
  bacterial and fungal diseases. Policies must be
  adopted in the use of harmful chemical
  substances.
• Traceability is important which helps farmer to
  receive training on record keeping and
  certification procedure. It should be adopted at
  each and every stage of the value chain including
  importer. This proactive measurement helps to
  achieve larger export also.

32
Intervention Strategy (cont)

• 4. Financial Policy
• Restriction on number of hatcheries to control
  financial corruption which may eradicate
  unethical practices rampant in this sector.
• Government should undertake investigation before
  granting any hatcheries/processors to operate.
• Tax holiday should be directed towards the farmer
  in the form of low interest rate to ensure that
  traders do not take all the advantage.
• Incentives can be more effective that helps
  farmer to meet certain bio-security measures.
• 5. International Policy
• In the last few years consumers are more
  conscious about whether imported shrimp is
  produced maintaining international codes for food
  safety, produced in an environment friendly way.
  Therefore, international standard should be
  ensured.

33
International Policy (cont)

• Concerted effort on a global scale is necessary
  to assist LDCs in order to build capacity
  necessary to guarantee compliance.
• The SPS (Sanitary and Phyto-sanitary) provisions
  should be formulated in a transparent and
  accountable manner.
• If standards are to be harmonized, these should
  be take into consideration of regional condition.
  For example, though EU ban import shrimp but
  exporters are able to divert some a part of
  consignment to USA and Japan.
• Adequate preparatory measures should be ensured
  for exporting countries (SPS measure) prior to
  imposition of any penalty.
• Adequate financial and technical assistance
  should be provided to the LDCs to facilitate
  conformity with SPS requirement.
• Certification procedure should be clearly
  addressed to avoid any conflicting interpretation
  with respect to standard.

34
Intervention Strategy (cont)

• 6. Policy of Donor Agency
• Donor agencies should develop a joint country
  strategy to ensure smooth and effective
  functioning.
• Ensure greater transfer of knowledge which
  increases the effectiveness of the project by
  learning from other mistakes and implementing
  other success stories.
• Donor agencies should develop a plan based on
  long term exist strategy rather and transfer of
  ownership should follow a smooth and efficient
  process.
• Instead of acting only a financing source only
  donor agencies can also function as a broker and
  aid govt. to formulate an integrated agricultural
  policy.
• Emphasis should focus on the private sector as
  from 1986 to 1996 govt. established only a few
  hatcheries whereas private sectors established
  total of 55 hatcheries with less fund.
• Donors can aid in country image promotion and
  export diversification.

35
Intervention Strategy (cont)

• 7. Operational Strategy General
• A shrimp association should be formed taking one
  representative from each value chain group. There
  exist two hatcheries and one processor
  association but they work in isolation with each
  other but they should work under an umbrella
  organization.
• There are few agents who have control over
  farmers and hatchery supply. However they need to
  be enlisted to collect information from them and
  disseminated it to monitor of farm activities.
• SSOQ model could be used in ensuring increase in
  production.
• National target on exports as well as performance
  target should be directed towards the value chain
  to ensure efficient integration.
• Bagda and Golda are two different generic brand
  therefore, their promotional strategies also need
  to be different.
• In developing an operational strategy, grass root
  problems should be solved in the organization
  level.

36
Intervention Strategy (cont)

• 8. Operational Strategy Golda
• For Golda project regional integration model may
  be helpful where all the value chain actor
  performed regionally and whey it matured then
  attempt to form a limited company.
• GNAEP model is very much effective and have a
  goal of transition from project phase to private
  sector phase.
• Regional association may be considered fro
  financial support.
• All movement of good from hatcheries to processor
  recorded properly since a single entity is in
  operation.
• Golda can also be cultivated in a poly-culture
  system with Carp to boost production.

37
Intervention Strategy (cont)

• 9. Operational Strategy Bagda
• For the hatcheries to be stationed across the
  country, they have to consider the production of
  bagda as they are located near coastal belts and
  the strategies need to be different due to
  geological proximity.
• Hatcheries can jointly run the PL and use
  technology using road as a means of transport.
  Code number for hatcheries, certification system
  improved efficiency in transport, distribution
  and traceability.
• Farmers should be helped to form a group.
  Bargaining power of famers should be boosted for
  equitable distribution of benefit. Farmers of a
  specific geo-graphical region should be tagged
  for easy accessibility, supervision and
  traceability.
• Govt. agencies should monitor bio-security
  measures and provide financial support to the
  farmer to develop export oriented industry.
• Cooperatives have to be allowed freedom.

38
Intervention Strategy (cont)

• 10. Processor

• 11. RD

• Support can be sought from the govt. and the
  donor agencies to enhance country image.
• Strategies should also be generic for bagda and
  golda.
• Strategies should be directed towards brand which
  increase industry competition within the country.
• Maintain data banks of products.
• Maintain liaison with the market and transmit
  information down the chain.

• RD facilities can be mobilized through linkage
  with the various universities of the country.
• Research activities can be initiated by the
  regional integrated units or join effort by the
  hatcheries of bagda.
• Strong linkage with the SSOQ is needed at the
  initial stage.
• Internship program of the students in various
  universities can be developed at all level of
  value chain to ensure human resource development.

39
Intervention Strategy (cont)

• 12. Operational Strategy Donor
• Donor should continue with SSOQ model to ensure
  smooth transition and placement of technology
  transfer.
• Donor should develop a plan on milestone basis
  rather than time bound basis in the areas of
  technology, standardized operation and marketing
  strategies.
• An integrated model should be developed by taking
  representative of the private bodies for smooth
  transition from the very beginning of the
  project.
• A typical NGO driven model should be avoided
  since it lacks transition and partnership with
  public sector need also to be avoided because
  this may lead to ownership issue.

40
Conclusion

• Integration of activities both in terms of value
  chain and region may help to achieve US 1
  billion theoretically described in the above
  discussion.
• Working with existing PL supply agents who
  control a significant number of farmers and also
  ensure quick dissemination of information and
  provide technical training.
• Presence of donor in the absence of government
  guidance is very much essential for a planned
  time period as a facilitators only.
• Private sector participation is essential and
  project should be handed over only after the
  sustainable profitability has been ascertained.
• Fisheries department and donor should outline
  policy framework according to the need of the
  buyer and ask the govt. for implementation.
• If all of the strategies are met only then
  Bangladesh can increase its market share and
  become one of the leader in the global shrimp
  market.

41

• Thank You All
• From
• Any Questions????