HISTORY 2 PAGES

Brief history of the export based agricultural industry of Bangladesh:

Before the inception of the country, agriculture has been a critical sector to overall
productivity, accounting for more than 50% of GDP during 1960-1979. In 2016, 70.63% and
59.6% of the total land was agricultural and arable respectively, indicating that around 10%
of the land was unsuitable for growing crops. In 1991, the sector employed 69.61% of the
employed which has whittled down today to 39.07% in 2017, i.e. every 2 of 5 employed
work in agriculture. Bangladesh has come forward a long way from the past, with the RMG
sector taking over as a major contributor to GDP. However, agriculture continues to play a
critical role in the country and the world, with the promotion of sustainable agriculture stated
in SDG 2 (No Hunger).

Figure: GDP Share of Agriculture / Source: The Global Economy

For a country in which an estimated every 2 of 5 people work in agriculture, which is a

significant contributor to the country’s GDP, agro-processing is an industry that hold
tremendous value which has yet to achieve its full potential. One of the reasons behind this
is that the majority of raw materials required for production can be sourced locally such as
grains, vegetables, and meat. According to sector insiders, post harvesting losses of
annually stand at $2.38 bn per year (Tk 30,000 crores), a loss that can be salvaged through
agro-processing.
Agriculture remains the most important sector of Bangladeshi economy, contributing 19.6
percent to the national GDP and providing employment for 63 percent of the population.
According to the World Bank, the total arable land in Bangladesh is 61.2 percent of the total
land area (down from 68.3 percent in 1980).
In 2016, the agro-processing sector in Bangladesh stood at $2.2 bn, averaging a
growth rate of 7.7% from FY05 to FY11. Exports in FY18 were around $371 mn,
40.72% higher than the previous year. Despite this high growth, the food processing
industry in Bangladesh has remained stagnant at ~2% of GDP since 2004.

Figure: Share of Food Beverages and Tobacco Exports in Agro-processing /

Agriculture in Bangladesh is heavily dependent on the weather, and the entire harvest can
be wiped out in a matter of hours when cyclones hit the country. Farms are usually very
small due to heavily increasing population, unwieldy land ownership, and inheritance
regulations. The 3 main crops—rice, jute, and tea—have dominated agricultural exports for
decades, although the rice is grown almost entirely for domestic consumption, while jute
and tea are the main export earners. In addition to these products, Bangladeshi farmers
produce sugarcane, tobacco, cotton, and various fruits and vegetables (sweet potatoes,
bananas, pineapples, etc.) for the domestic market.

Name of Product2008-2009 (July-June)2009-2010 (July-June)2010-2011 (July-June) 2011-2012 (July-Nov.)

Jute 417.42 787.99 1114.93 410.30
Tea 12.29 5.65 3.20 1.25
Vegetables 44.67 46.84 71.73 28.83
Tobacco 40.50 52.26 70.88 51.59
Cut Flower 32.49 39.84 42.89 20.46
Fruits 6.04 17.37 37.68 26.25
Spices 4.53 6.94 9.24 5.43
Dry Food 19.11 20.95 29.37 11.31
Others 107.78 52.50 68.95 33.42
 Table: Export Scenario of Agro Product Sector

Agro-processing can be divided into two stages, primary processing and secondary
processing, with the former dealing in processing of agricultural products in their
basic form and the latter involving the conversion to final forms such as juice, jams,
concentrates etc. The industry covers domains including crops, poultry, livestock,
fisheries, and forestry.

FIGURE: Agro-processing Value Chain

Export earnings from agro-processed food grew 97.31% to $291.82 mn during July-
September, up from $147.90 mn last year, with majority of growth from dry foods,
tea, fruit juice, biscuits, and rice. Due to limited road infrastructure and electricity
supply, the majority of processors are situated in the North region of the country to
avoid high costs of logistics and energy, as the majority of raw materials are procured
from nearby. There is a lack of trust between farmers and processors, as procurement
is usually seasonal and opportunistic i.e. when there is surplus production and a large
price drop. As a result, weak supply chain relationships, farmers face considerable
discouragement in undertaking large-scale cultivation, thus making procurement
limited to availability of goods in the market. Furthering complexity of the industry is
added with various middle men and agents who act to ‘facilitate procurement’ due to
the absence of weak supply chain relationships between producers and processors,
significantly increasing the prices of raw materials and wastage during transportation.
There are currently 479 members in Bangladesh Agro-Processing Association
(BAPA) of which 241 are exporters and 235 manufacturers of agro-processing
products. Collectively, members of the association export around $500 mn annually to
144 countries [3]. Besides local manufacturers, large companies such as Pran, Akij,
Square, Ahmed, ACI, BD Foods, and Bombay Sweets are also operating in the
industry. Foreign players have also shown considerable interests in entering the
market through FDIs.

Figure: Bangladesh Agro-Processing Export Earnings / Source: BAPA

1. IMPORT EXPORT SITUATION OF AGRICULTURAL FRESH

AND PROCESSED PRODUCTS IN BANGLADESH DURING
THE PERIOD FROM 1972 TO 2011

Agriculture remains the most important sector of Bangladeshi economy,

contributing 19.6 percent to the national GDP and providing employment for 63
percent of the population. Agriculture in Bangladesh is heavily dependent on the
weather, and the entire harvest can be wiped out in a matter of hours when
cyclones hit the country. According to the World Bank, the total arable land in
Bangladesh is 61.2 percent of the total land area (down from 68.3 percent in 1980).
Farms are usually very small due to heavily increasing population, unwieldy land
ownership, and inheritance regulations. The 3 main crops—rice, jute, and tea—
have dominated agricultural exports for decades, although the rice is grown almost
entirely for domestic consumption, while jute and tea are the main export earners.
In addition to these products, Bangladeshi farmers produce sugarcane, tobacco,
cotton, and various fruits and vegetables (sweet potatoes, bananas, pineapples, etc.)
for the domestic market.

Rice is the staple food in the everyday diet of Bangladeshis. The production of
rice, which can be harvested 2 or even 3 times a year, reached 19.9 million metric
tons in 1998-99. The production of wheat reached about 2 million metric tons in
1998-99. Both crops play an important role in achieving self-sufficiency in food
production. However, due to weather conditions the production of rice and wheat
fluctuate greatly, forcing Bangladesh to import food from the international market
or turn to international aid. Bangladesh imported 1.6 million tons of wheat (mainly
from the United States) in 2000 in order to meet the demand in the local market.

Jute, often called the "golden fiber" of Bengal, is the main export-earner for
Bangladeshi agriculture, as Bangladesh remains the world's second-largest
producer of jute (after India) and the world's largest exporter of fiber. Jute is
traditionally used for the fiber of carpet backing, burlap bags, cheap paper, and
various other purposes. Its importance for the Bangladeshi economy comes from
the fact that almost 3 million farms are involved in jute production. In 1999
Bangladeshi export earnings from jute amounted to US$55 million, with the
country producing 720,000 metric tons of jute, although this is about one-third of
the jute production of the middle of the 1980s. The decline in jute production is
attributed to declining world prices for this crop and to farmers switching to other
crops.

Bangladesh also produces tea leaves, mainly for export, although the export of this
product contributes only 1 percent of the country's hard currency earnings. In
1998-99 the country produced 56,000 metric tons of tea leaves, but it could
produce twice that amount. The main obstacle to increasing production is in falling
prices for tea in the international market and in management and regulation
problems in the industry in the country.

Tropical rainforest is important for maintaining the ecological balance in

Bangladesh, and forestry contributes 1.9 percent to the GDP (1999-2000). The
forest covers around 17 percent of the country's territory, or 2.5 million hectares
(6.18 million acres). The timber is used by the construction industry as a source of
building materials, by the printing industry as a source of materials to produce
paper, and in the agricultural sector as a source of firewood. Commercial logging is
limited to around 6.1 million cubic feet, and the government plans to plant more
trees within the next 15 years.

Fishing is another important activity in the country, contributing 4.9 percent to the
GDP (1999-2000) and providing 6 percent of the total export income. The overall
fish production was around 1.6 million metric tons (1999-2000). Bangladesh
mainly exports its shrimp to the international market.

 Growth of Exports:

Bangladesh’s total exports got a significant boost with an annual trend

growth rate of 14.24 percent during 1985/86 to 1999/00, compared to an
annual trend growth rate of below 10 percent (in nominal US dollar terms)
over the earlier period of 1972/73 through 1984/85. Such a pattern of
export growth over time largely reflects the effects of progress in
Bangladesh’s policy reforms over the period. Export products during the
earlier period (e.g. jute and jute goods) did have a significant effect in
limiting the overall export growth, especially starting with themid-1980s.
The export upturn in the latter period also reflects the fact that the export
setback in jute and jute goods was more than recouped by remarkable
growth in the export of a new product group, ready-made garments.

 As of 2017, around 48 percent of the workforce in Bangladesh is employed in the agricultural

sector.
 Between 2000 and 2005, growth in farm income contributed around 21 percent to poverty
reduction. Between 2005 and 2010, farm income growth accounted for over 90 percent of poverty
reduction in the country, emphasizing the role of agriculture in Bangladesh poverty reduction.
 Agricultural growth has considerably improved from 2 percent in 1990 to around 5 percent in the
late 2000s.
This growth trend has become less volatile. This is partially due to fewer natural disasters hitting the
country since 2000, compared to the past decades. In addition, increased resilience in the sector through
irrigation and other technology also played a role in that grow

The agricultural sector in Bangladesh has been performing extremely well, despite its
vulnerability to climate shocks. The rural economy has been a remarkable source of economic
growth. This further proves the strong role of agriculture in Bangladesh poverty reduction.
However, this notable transformation mostly remains underappreciated and unexplored.