The Bangladeshi Seafood Sector: A Value Chain Analysis

Within the Asian region CBI is currently studying the possibilities of developing integrated programmes for the seafood sector for specific countries. For the development of these programmes, a good understanding of the current situation in the supply and demand side of the industry is essential.

Currently, the fisheries sector in Bangladesh already contributes 60% of the total national demand for animal protein. The policy aims of the Government of Bangladesh are to enhance fishery resources and production, to alleviate poverty through self-employment, to improve the socio-economic position of fishermen, to meet the country's huge demand for animal protein, and to contribute to foreign exchange. At present the Ministry of Fisheries and Livestock focuses on increasing the availability of animal protein from fish and other seafood products. The policy lays emphasis on meeting local demand while also complying with international standards. The priority of the Ministry of Fisheries and Livestock is to enhance food safety conditions in the fisheries sector. Important to note is that currently all seafood exports are receiving a 10% export subsidy from the government of Bangladesh. This subsidy has a positive impact on the competitiveness of Bangladesh seafood products in the international market.

Based on the results of the desk study that has been conducted in the first phase of this study and CBI experience, the following subsectors in Bangladesh were selected for value chain analysis:

• Shrimp
• Frozen fish

Shrimp Subsector

About 40% of wild shrimp and 95% of cultured shrimp produced in Bangladesh are exported. The two main exported cultured species are Black Tiger shrimp or Giant Tiger Prawn (Penaeus monodon) and Giant River Prawn (Macrobrachium rosenbergii). The two main exported wild species are Speckled shrimp (Metapenaeus. monoceros) and Indian White shrimp (Penaeus indicus). The total value of Bangladeshi shrimp exports in 2011 was almost USD430m. The EU was the most important market, accounting for 75% of the total export value. For cultured shrimp, which represents the largest part of shrimp exports, Black Tiger shrimp contributes the largest share of production. Five main bottlenecks for the export potential of the Bangladeshi shrimp subsector have been identified. These are presented in Table 1.

The highest potential for shrimp exports relate to the cultured species (Black Tiger shrimp and Giant River Prawn) and not to the wild captured species (Speckled and Indian White shrimp). In contrast to other shrimp exporting countries in the region, Bangladesh is traditionally oriented towards the EU market and less towards other markets in the US and Japan. This would suggest that Bangladesh has a good position in the EU market and that additional assistance by CBI is not needed. However, it seems that the main reason that Bangladesh is so popular among EU buyers is the comparatively low price of cultured shrimp - which is mainly caused by the 10% export subsidy from the Government of Bangladesh - and the limited supply from other countries.

The stagnation of the growth in the volume and value of shrimp exports in the Bangladeshi shrimp subsector can be improved by increasing the production volume and/or area and/or by increasing the value of shrimp products. To increase the production volume two strategies have been suggested: (1) reducing post-harvest losses and (2) increasing the productivity of shrimp farms. Post-harvest losses can be reduced by increasing the efficiency in the supply chain. This includes strengthening the bargaining position of farmers with middlemen and exporters, improving the infrastructure in the supply chain (including cold storage facilities), proper ice factories and transport, and by training middlemen and traders. The productivity of shrimp farms can be increased by improving the quality of inputs and training farmers in applying Best Aquaculture Practices (BAP). International support for these issues is already present but it is unknown if the support is successful. Both strategies will result in an increased production as well as an improved quality of the shrimp that reach the processing establishments.

Three strategies that can contribute to an increased value of shrimp products have been highlighted: (1) increasing the share of value-added products in the export basket, (2) improving the image of Bangladeshi shrimp abroad and (3) investing in food safety and sustainable certification initiatives. To increase the share of value-added products there is a need for more skilled workers in processing establishments. Workers can be hired from India or Thailand or trained domestically. To improve the quality image of Bangladeshi shrimp in the international market it is required to increase the willingness of buyers to pay more for Bangladeshi shrimp products. Suggestions to improve the quality image of Bangladeshi shrimp are to professionalise management staff in processing establishments, to introduce a Bangladeshi quality label that is recognised internationally and/or to improve the presentation of Bangladeshi shrimp exporters at international seafood trade shows. Investment in certification schemes such as the Aquaculture Certification Council or Naturland are noted as a strategy to increase the value of shrimp products. The characteristics of shrimp farms in Bangladesh are suitable for certification and a number of NGOs are already working on certification initiatives with Bangladeshi producers and exporters.

One of the most important challenges for Bangladesh is to become known for the shrimp quality instead of low prices that result from the export subsidies. International support for the shrimp sector has been focused on productivity, EU food safety compliance and improving the productivity of small-scale farmers, while support in export promotion and branding has been limited.

Frozen Fish Subsector

Less than 3% of total fish production in Bangladesh is exported. Exported species are a variety of captured fish of which the most well known is the hilsha shad (Hilsha ilisha). The cultured species with the highest export potential are pangasius (Pangasius Hypophthalmus) and tilapia (Oreochromis spp.). In 2010 the total value of fish exports was USD80m, of which frozen fish contributed almost USD35m. The most important markets for frozen fish are the UK, Saudi Arabia, the US and to some extent Italy and China. Most products are exported as block frozen and an almost negligible part as fillets. Five main bottlenecks for the export potential of the Bangladeshi frozen fish subsector have been identified. These are presented in Table 2.

Although exports of whole frozen captured fishes still have a good potential in the countries that have Bangladeshi expat communities, this study focused on the export potential of cultured fish because aquaculture species have the highest development potential. The cultured species with the highest export potential are pangasius and tilapia. However, pangasius and tilapia are also consumed locally and therefore yield high prices in the domestic market. As a result most pangasius and tilapia are consumed locally and exports are limited. At this moment it is not expected that export promotion activities would immediately increase the export volume or value of Bangladeshi frozen fish because the problems the subsector is confronted with at the level of primary production and other levels of the supply chain are too large.

The lack of supply is mainly caused by low productivity of fish farms, post-harvest losses and a strong local demand for fish. There are three strategies suggested to deal with the lack of supply: (1) increase the productivity of fish farms, (2) reduce post-harvest losses and (3) encourage exporters to invest in integrated fish farms. Strategy one should include training programmes for farmers that support them to reduce mortality rates and increase the productivity of the ponds. Strategy two should include investments in the infrastructure including cold storage facilities and proper transport. Strategy three should enable exporters to generate a constant supply of fish that does not reduce the availability of fish on the local market and of which the quality is ensured because the exporter can control all the inputs and invest in more intensive and better managed production systems. This would also make the exporters less dependent on the middlemen who dominate the supply chain and often are not quality minded.

Low quality of the fish partly is due to a lack of proper inputs and poor farm management but also due to a lack of cold storage facilities along the supply chain. Low-quality inputs and poor farm management result in fish that have no white but a yellowish or reddish colour of the fillet. These fillets are not suitable for many export markets. A lack of cold storage facilities threatens the freshness of the products that reach the processing establishments. To deal with the low quality of the fish that reaches the exporters, strategies should focus on (1) improving the quality of inputs (feed and seed) and (2) improving the infrastructure along the supply chain. The second strategy includes increasing the availability of cold storage facilities (the fourth bottleneck).

The final bottleneck, the lack of skilled labour force, limits the processing capacity of exporters. Currently, most frozen fish is exported as block frozen items while the highest market value and demand are for fillets. One explanation is that fish exports are often regarded as a sideline and an option to use the processing capacity more efficiently when there is a low supply of shrimp, which is mostly the main export item. Consequently, fish processing techniques receive insufficient attention from managers and factory owners. A strategy that focuses on creating a force of skilled factory workers who have the skills to properly handle fish fillets would contribute to the potential of Bangladeshi fish fillets in the international market.

It is expected that improved productivity, quality, and increased processing skills have a positive impact on the price and competitiveness of Bangladeshi frozen fish in the international market. However, the important question remains to what extent the promotion of export of frozen fish conflicts with the provision of local Bangladeshi food security because for Bangladeshi consumers fish is the most important source of animal protein.

Further Reading You can view the full report by clicking here.

January 2013