Bangladesh Agro Products Sector abridged overview

Wpfreeware 6:49 AM Agro Products Sectors

Sector Profile

Bangladesh is primarily an agrarian economy. Agriculture is the single largest producing sector of economy since it comprises about 30% of the country's GDP and employing around 66% of the total labor force. The performance of this sector has an overwhelming impact on major macroeconomic objectives like employment generation, poverty alleviation, human resources development and food security.
Meeting the nation's food requirements remains the key objective of the government and in recent years there has been substantial increase in grain production. Rice, Jute, Sugarcane, Potato, Pulses, Wheat, Tea, Tobacco, Oilseed, Spices and Fruit are the principal crops. Few of the products of this sector are currently exported in different countries with immense global competition. The growth and diversification of Agro products largely depends on the policy support, public-private joint initiative for institutional and financial support, availability of technical and business information, innovation and sustainable development of technology and related products, capacity development of industries, research and development facilities and removal of other barriers relating to the agricultural sector.
In the present context of globalization, the ministry of commerce has taken initiative as part of the development and diversification strategy to increase industrial base and volume of foreign trade. The Agro sector also plays a vital role in the socio-economic development of the Bangladesh.

An abridged overview of Bangladesh Agro Products Sector:

Agriculture is the single largest producing sector of the economy since it comprises about 18.6% of the country's GDP and employs around 45% of the total labor force. The performance of this sector has an overwhelming impact on major macroeconomic objectives like employment generation, poverty alleviation, human recourses development, food security & export diversification.
A plurality of Bangladeshis earn their living from agriculture. Although rice and jute are the primary crops, wheat is assuming greater importance. Tea is grown in the northeast. Maize and vegetables are assuming greater importance. Other Bangladeshi food crops are potato and sweet potatoes with a combined record production of 1.9 million tons in FY 1984; oilseeds, with an annual overage production of 2,50,000 tons; and fruits such as bananas, jackfruits, mangoes and pineapples. Estimates of sugarcanes production put annual production at more than 7 million tons per year, most of it processed into a coarse, unrefined sugar known as gur; and sold domestically.
Bangladesh is the largest producer of world's best Jute, which also known as natural jute or raw jute. Rice being the staple food, its production is of major importance. Rice production stood at 20.3 million tons in 1996-97 fiscal years.
The infrastructure facilities (Such as electricity, gas, transportation and telecommunication) and labor cost are comparatively lesser than other countries as such the sector shows high potentiality of growth and development.
Business leaders, bankers, agronomists and researchers of Bangladesh are of the opinion that the northern region of the country has enormous potentials for sustainable agro-processing enterprises. The Multipurpose Jamuna Bridge contributed a lot in improving communication to and from the northern region, creating wider scopes for increased production of cereals, fruits, vegetables and livestock as well as their marketing both at home and abroad.
Soil conditions, topography and climate makes the area ideal for large scale and sustainable production of cereals, fruits and vegetables. Vegetables like potato, cauliflower, tomato, white gourd, bean, spinach, pea and baby corn are being produced in the region in larger quantities side by side with broccoli, carrot, celery, capsicum and strawberry. Most of these have huge earning prospects through exports. Potato flakes also have great international demand and its production technology is relatively simple and labour intensive. Such an industry should have great prospects in Bangladesh.

Comptitive Advantage

Growing Domestic Demand

Bangladesh’s domestic agro-processed product market stood at USD 2.8 billion in 2019. The market has been estimated to be growing at an average rate of 7.7% between 2005 till 2017, Growing purchasing power of the large and young domestic market with a median age of 27 combined with rapid urbanization, increase in women in the workforce and a resulting increase in nuclear families and busy lifestyles are expected to propel the expansion of entire market for processed food.

Increasing Export Potential

The agricultural exports from Bangladesh have been growing at a CAGR of 18% for the last five years, in particular the exports of processed snacks. The global demand for agricultural product is also expected to grow by 15% between 2019-2028 which provides a great opportunity to the Bangladesh processed food industry to expand its exports.

Access to plentiful agro-resources

Benefiting from a large number of farmers and fertile soil, Bangladesh is capable of producing a variety of crops, ranging from rice, sugarcane, fruits such as jackfruit (the world 2nd producer), mango (9th), guava (8th), and vegetables such as potato (6th), eggplant and tomato, to livestock (the world’s 12th largest cattle inventory) and fisheries.

Investment Potential

Processed Food and Vegetable

As one of the top tropical fruits and fresh vegetable producer in the world, Bangladesh offers immense opportunity to invest in the local processing of numerous fruits and vegetable and satisfy the growing and untapped demand of the domestic market with growing per capita income and expanding fast food chains, restaurants and hotels. There are only a few modernized aseptic processing plants in the country resulting in low rates of processing. With high domestic demand and increasing exports, the potential for local processing is enormous.

Dairy Products

In tandem with the growing purchasing power and increasing health awareness, consumption of milk and dairy products grew by 17% annually between 2009 to 2018. Despite an increase in the production capacity over the years, demand has persistently outpaced the supply generating a gap in the domestic market. With a low per-capita consumption of milk and dairy products in the country which is below the optimum level recommended by the WHO, the prospect for investment in the sector is huge.

Edible Oil

Edible Oil is one of the major packaged food products in Bangladesh, with an annual demand of around 3 million MT in 2018. Although, the demand has grown at an annual rate of 8 to 12% in recent years, currently over 90% of the demand is being met by import of palm and soybean oils. Domestic production (mustard and rice bran oils largely) is limited to 0.3 million MT, the government is keen on promoting investment in oil extraction process for rice bran, mustard and offers sector-specific incentive to the oil producers.

Processed Meat

Meat consumption in Bangladesh has been steadily increasing at an annual rate of 15% on average along with the development of poultry farming. Moreover, the growing number of restaurants and hotels has boosted demand for meat processing products across the country. The processed food market stood at USD 24 million in 2018 according to Euromonitor International and is expected to grow at an annual rate of over 13% till 2023. Besides, the global halal meat market provides an additional opportunity for the Bangladeshi industry to explore.

Frozen and Ready to cook food

The frozen and ready-to-cook food segment in Bangladesh has experienced rapid growth with an annual rate of 15% over the past five years. The market size was over USD 95 million in 2019 and is expected to reach around 355 million by 2024 (according to research by Financial Planning). With an increasing middle-income class coupled with changing lifestyles, demand for frozen or ready-to-cook food products is expected to increase in Bangladesh.

Beverage (Soft Drink)

Soft drink has been one of the fastest growing segments across the country. Mordor Intelligence estimated the soft drink market in Bangladesh at USD 610 million in 2018 and is expecting it to grow at an annual rate of 12.5% till 2025, generating a huge opportunity for investment.

Multi-purpose cold storage facility

The country has over 400 cold storage facilities with a capacity of 5.5 million MT majority of which is utilized for storing potatoes. Considering the large post-harvest losses of various fruits and vegetables, Bangladesh needs multi-purpose cold storage facilities to cater to various crops simultaneously in view of stabilizing the supply and price of these crops.

Incentives and Policy

Incentives related to Agro and Food processing

Reduced Corporate Income Tax (CIT) for 5 to 10 years depending on location, for industrial undertakings engaged in processing of locally produced fruits and vegetables.
Complete tax exemption on income from rice bran oil production up to 10 years.
20% special rebate on electricity consumption to agro processing units.
Tax exemption on royalties, technical knowhow/ assistance-related fees (and their repatriation).
Exemption of import duties on capital machineries.
Full repatriation of profits & initial investment amount.

For Exporters

50% tax exemption for income derived from export.
No VAT imposition on export goods.
20% export subsidy/ cash incentive for exporters of locally processed agricultural products and 100% halal meats.
Duty-free market access (preferential treatment) to 52 nations.

Partner Organizations

Regulatory Agencies

Bangladesh Food Safety Authority (BFSA): BFSA regulates and monitors the activities related to manufacture, import, processing, storage, distribution and sales of foods to ensure food safety. BFSA also facilitates and coordinates the activities of all institutions concerned with food safety management
Bangladesh Standard and Testing Institution (BSTI): BSTI is a national standards body, which formulates the national standards for quality of products and services, conducts laboratory test, and provides certification (both mandatory and voluntary).

Industry Associations

Bangladesh Agro Processing Association (BAPA)
Bangladesh Frozen Food Exporters Association (BFFEA)
Bangladesh Auto Biscuit Bread Manufacturers Association (BABBMA)
Bangladesh Fruits, Vegetables and allied products exporters association (BFVAPEA)
Bangladesh Dairy Farmers’ Association (BDFA)
Bangladesh Organic Products Manufacturers Association (BOPMA)
Bangladesh Cold Storage Association
Bangladesh Lozenge Manufacturing Association