Spurring growth of agribusiness sector

The fact that agriculture plays a critical role in Bangladesh's employment backbone is no news to anyone. Agricultural activities, both at the field, where crops are grown, and at plants where the produce is processed, packaged and then shipped constitute the single-most important supply chain of economic activity of the country. The agribusiness sector supports livelihoods across the country, contributes to national income, creates employment opportunities, provides food and raw materials for industries, contributes to international trade and earns foreign exchange, and ensures food security. It has been considered the hallmark of the first stage of development --- a proper strategy for growth can be conceived for gradual shift from agriculture to industry, to enable higher incomes and living standards, with the onus on primary industries to finance the shift in the first stage.
Bangladesh's shift from an agrarian economy to an industrialised one has brought a significant task for policy managers. It is they who must frame a time-bound strategy to attract and facilitate agro-investment, aligning it to mainstream national targets. In 1973, the contribution of agriculture to GDP (Gross Domestic Product) was 49 per cent which now, 40 years later, stands at only 16.33 per cent (2014), against the contribution of industry to gross GDP at 29.61 per cent, which was only 9.0 per cent in 1973. Although GDP contribution to agriculture has reduced, contribution to employment is still about 48 per cent, while industry contributes only 17.64 per cent, leaving a significant share of about 35 per cent to the service sector. Commercialisation of agriculture and investment in agro-processing sector to generate more value towards increasing export and generating income is central in the present context of Bangladesh economy, especially because a lot of natural output is wasted every year due to the lack of processing facilities and international forward linkages.
According to International Finance Corporation (IFC), the agribusiness sector of Bangladesh is growing at 5.2 per cent annually. Its research shows an investment potential of USD 850 million, which is not being materialised due to the absence of an enabling environment. This investment could potentially create about 6.3 million jobs. In the light of the tremendous potential of the sector, in January 2014, key organisations of the public and the private sector joined hands and formed an Agribusiness Advisory Committee (AAC) with the Board of Investment (BoI) at the helm to facilitate and promote an investment-friendly environment in Bangladesh.  The committee has already met twice, and is expecting to meet for the third time in August 2014.
The committee is co-chaired by the Executive Member of BoI (Board of Investment) and a business leader, with 16 members in the committee from key public sector and private sector agencies. BUILD (Business Initiative Leading Development) is extending research and analytical support to the committee for policy reforms cases. In addition, BUILD shall also facilitate the approval of the recommendations made by appropriate authorities such as through the AAC itself, through BUILD's own working committees, or through the PSD Policy Coordination Committee at the Prime Minister's Office (PMO). Following approval, BUILD shall track the implementation progress of reforms, undertake M&E activities to measure the impact of reforms and undertake necessary communications campaigns.
Several key issues like incentives, quality standardisation, processing, export development, preferred financing, seed variety release process etc. were raised by both the public and private sector representatives at the last two meetings of the AAC held at the Board of Investment. The committee will be taking specific issues and has proposed recommendations from the private sector, on which BUILD will initiate research for potential reforms. Once every three months, the committee will review the proposals and will submit recommendations to the government for desired improvements.
During the discussion in the last two meetings, it was revealed that, post-harvest loss has been one of the significant problems in the agro-sector, which is about 40 per cent. Because of absence of required storage facilities, farmers have to count a significant amount of loss. The current capacity of 393 cold storages is 2.4 million MT; Bangladesh needs at least 6.5 million MT or 1,244 cold storages to strive to reach 10 per cent cold storage infrastructure by 2022.
In order to reduce post-harvest losses worth USD 430 million, mostly borne by the farmers, simplification of approval processes and amelioration of unnecessary hassles are key steps in encouraging entrepreneurs to establish more cold storages. Presently, setting up a cold storage involves about 13 licences, permissions and no objection certificates (NOCs) which is time consuming and complex.
There is a need for re-classification of cold storages from 'Orange' to 'Green' category for Environmental Clearance Certificate issued by the Department of Environment (DoE).The Bangladesh Cold Storage Association (BCSA) has communicated this issue and requested AAC to the effect that the policy constraints are addressed to expand their business. It is of course heartening to know that DoE has already started working on these issues so that reclassification of cold storages can be implemented soon.
In so far as policy issues are concerned, cold storages are identified as an agro-based industry by Bangladesh Bank and the Industrial Policy, but they are not provided with any input subsidy. In order to ensure the benefits for all agro-processing sectors, potato starch and flakes can be identified as agro products and incentives provided by the government should be applicable to them.
Entrepreneurship Equity Fund (EEF) is also not available for the multipurpose cold storages. At AAC meetings, private sector stakeholders also requested the government to consider offering EEF funding to potato processing units. As per EEF Consumption Policy, food processing units like Potato Flakes, Dairy Processing and Meat Processing are able to avail EEF funds, but potato processing units are not given access to EEF, as they feel the sector is too risky to qualify for EEF funding. They only have access to commercial funding with high interest rates, leading to high cost of doing business.
Potato varieties used in Bangladesh are not suitable for industrial production and faster release of the industrial variety has been recommended, along with incentives in seed processing and export. Chlorpropham (CIPC) is a chemical that is used in some countries to inhibit the sprouting of potatoes when kept in cold storages, thus lengthening their shelf lives.
This chemical also allows cold storage operators to keep their cold storages at 10-11 degrees Celsius instead of 2-3 degrees, thereby enabling them to save almost 40 per cent on electricity costs. International Finance Corporation (IFC) is currently working with the Ministry of Agriculture (MoA) on the revised/new Seed Policy and the BCSA has been requested to coordinate with the IFC to list potato as a non-notified crop for faster release of the industrial potato variety.
Farmers depend on imported seeds without knowing their quality. Indigenous entrepreneurs are involved both in importing and producing seeds, and the quality of harvest is dependent on the quality of the seeds. Stakeholders present at the meeting suggested that seeds itself could be considered as an industry, so that the sector can be upgraded in a planned manner. BUILD will coordinate with the Ministry of Industries (MoI) and forward this recommendation through its SME Development Working Committee, which is co-chaired by the Secretary of the MoI.
Bangladesh imports a substantial amount of agricultural and food products, which, in 2012-13, was about 5.8 per cent of total imports. The production and marketing of 64 food and agricultural products has been identified by the government which would require compliance with Bangladesh Standard (BDS) set by BSTI.
But in the Import Policy, only 18 food and agricultural products are included for mandatory Bangladesh Standards and Testing Institution (BSTI) testing and certification while importing. There is a need for rationalising these regulations surrounding imported and domestic food and agricultural products. Obtaining health certificates is a serious obstacle to this sector, a process which needs to be simplified.
BUILD will undertake key informant interviews with Ministry of Fisheries and Livestock (MoFL) and the private sector and map the process currently in use in order to identify barriers/ challenges.
Meat and meat processing is another promising sector which is suffering due to regulatory constraints. In order to ensure that output is of standard quality and to compete in international markets, there is quite a lot that needs to be done in order to facilitate the growth of these sub-sectors. There is a need for a competent authority for veterinary certification in the MoFL. The Department of Livestock should be properly empowered, structured and resourced to implement effective inspection and credible certification of veterinary and general hygiene conditions.
Animal health standards should be maintained as per the World Organization for Animal Health (OIE). Bangladesh needs to establish "FMD-Free Zone" and "PPR-Free Zone" in designated area(s) in the country under the supervision of OIE and WTO.  The MoFL may start the process of area selection and assign Regulatory Authority as per guidelines of OIE.
Meat processing also needs an umbrella legislation, which outlines Export Control Orders, Export Meat Orders and Prescribed Goods Orders to ensure hygiene and public health requirements of exporters. This legislation also needs supporting manuals and essential references, such as Bangladesh Export Meat Manual, Bangladesh Meat Standards Guide, Bangladesh Halal Standards, Animal Welfare Manual, Hormonal Growth Promotant System, Quality Assurance Handbook, Operational Manual and Requirements for Importing Countries, etc. These provisions are aimed at ensuring high standards and at preventing any contamination of the product during processing. The MoFL, the MoC, the Ministry of Religious Affairs and the Ministry of Local Government could work together in order to prepare the manuals.
Ensuring Animal Production as per OIE compliances, modern technology-based animal production, high meat-yielding breeding stock, traceability of animals, drug use for growth promotion and a supportive tariff policy for high-quality of raw materials for meat processing units are some of the critical issues which emerged from the private sector. An integrated policy strategy and a collaborative approach bringing the public and private sector together in determining how to formulate the right policies and regulations is key to the growth of the sector, creation of value and employment.
The writer is CEO, Business Initiative Leading Development (BUILD).