Saving the frozen food sector
Friday, 10 October 2008
THE country's exports are mostly dependent on the markets of European Union (EU) and North America, especially the US market. This dependency is true of all the export-oriented sectors including the largest one, the Readymade Garments (RMG) and the second largest, the frozen foods. Though the RMG has otherwise been faring well in spite of the reverses in the overseas markets since the 9/11 tragedy in the USA, the stars of the frozen food sector have not been that favourable. In fact, it has been passing through troubled times since that watershed in the USA. The result has been disastrous for this highly potential sector of the economy.
The factors militating against the frozen food industry include, inter alia, fall in the prices of its products in the international market, the increased cost of transport due to oil price-hike, the added cost of maintaining safety standards as required by the European and US buyers, the rise in the cost of packaging and so on. The destruction of shrimp farms in the coastal belt by the cyclone Sidr has also factored into the overall plight of the frozen food sector. As a consequence, the frozen food industry, which got its major raw material from the shrimp farmers, has been pushed into a double jeopardy. To make things worse, its main source of material is now in dire straits. In this time of adversity, the farmers were naturally expecting some support from their major buyers. But the latter, as noted before, are themselves in severe liquidity crisis to the tune of Tk 6.50 billion and as such are not in a position to bail the shrimp farmers out.
What is the way out, more so at a time when fresh uncertainties loom large over the country's major export markets in view of the potential adverse fall-outs from the turbulence in global financial markets? The government needs to step in to save the frozen food industry, which has already fallen short of its export target by 10 per cent last year. The other day just on the eve of this week's global financial jitters on a large scale, the leaders of the apex body of this sector, the Bangladesh Frozen Food Exporters' Association (BFFEA), met with the commerce adviser and sought government support to tide over the crisis. The help they sought from the government was provision of interest-free loan from the banks amounting up to 40 per cent of their stock value with the promise that they would repay the loan in quarterly instalments over a period of five years. It is worthwhile to note that the government had taken a similar move to help out the frozen food industry in the wake of the nine-eleven calamity. The BFFEA leaders also requested the government to increase the cash incentive they receive to US$4.25 from its previous rate at US$3.79 per unit Free on Board (FOB) value.
It is heartening to note that the commerce adviser has been prompt to assure the frozen food exporters to the effect that he would send letters to the government-owned commercial banks seeking their recommendations on the cash incentives to the industry. The government's response is commendable. But what is important here is that the action to materialise the assurance has to be prompter, for the time for the shrimp farmers is fast running out as the season to produce black shrimp will be over this month. It is to further note that the black shrimp constitutes 70 per cent of the export covered by the frozen food industry. Against this backdrop, the government will have to be all-out to take swift action to save shrimp farmers as well as the industry that they serve. For any delay or foot-dragging in this respect will only cause further damage to the shrimp farmers and the frozen food industry.
The factors militating against the frozen food industry include, inter alia, fall in the prices of its products in the international market, the increased cost of transport due to oil price-hike, the added cost of maintaining safety standards as required by the European and US buyers, the rise in the cost of packaging and so on. The destruction of shrimp farms in the coastal belt by the cyclone Sidr has also factored into the overall plight of the frozen food sector. As a consequence, the frozen food industry, which got its major raw material from the shrimp farmers, has been pushed into a double jeopardy. To make things worse, its main source of material is now in dire straits. In this time of adversity, the farmers were naturally expecting some support from their major buyers. But the latter, as noted before, are themselves in severe liquidity crisis to the tune of Tk 6.50 billion and as such are not in a position to bail the shrimp farmers out.
What is the way out, more so at a time when fresh uncertainties loom large over the country's major export markets in view of the potential adverse fall-outs from the turbulence in global financial markets? The government needs to step in to save the frozen food industry, which has already fallen short of its export target by 10 per cent last year. The other day just on the eve of this week's global financial jitters on a large scale, the leaders of the apex body of this sector, the Bangladesh Frozen Food Exporters' Association (BFFEA), met with the commerce adviser and sought government support to tide over the crisis. The help they sought from the government was provision of interest-free loan from the banks amounting up to 40 per cent of their stock value with the promise that they would repay the loan in quarterly instalments over a period of five years. It is worthwhile to note that the government had taken a similar move to help out the frozen food industry in the wake of the nine-eleven calamity. The BFFEA leaders also requested the government to increase the cash incentive they receive to US$4.25 from its previous rate at US$3.79 per unit Free on Board (FOB) value.
It is heartening to note that the commerce adviser has been prompt to assure the frozen food exporters to the effect that he would send letters to the government-owned commercial banks seeking their recommendations on the cash incentives to the industry. The government's response is commendable. But what is important here is that the action to materialise the assurance has to be prompter, for the time for the shrimp farmers is fast running out as the season to produce black shrimp will be over this month. It is to further note that the black shrimp constitutes 70 per cent of the export covered by the frozen food industry. Against this backdrop, the government will have to be all-out to take swift action to save shrimp farmers as well as the industry that they serve. For any delay or foot-dragging in this respect will only cause further damage to the shrimp farmers and the frozen food industry.