Agro Update 2006

A Sketch of the AGRO Sector in Bangladesh

Updated July 2006

Agricultural Sector: Bangladesh has an agrarian economy (23% share of GDP) with most of its population still heavily dependent on the agricultural sector in terms of its substantial contribution to the gross domestic product (GDP) and employment. Agro sector has always remained in the focus but recently Bangladesh Government and the business community has jointly emphasized the need to promote this sector without which emancipation of poverty and achievement of pro-poor growth cannot be attained. Agriculture in Bangladesh is mainly categorized into Crop & Vegetables, Fishery, Livestock & Poultry, and Forestry. This sector is the source of production for domestic consumption and source of raw-materials for processing/manufacturing for the local market and export. It is a vital source of foreign exchange earning. 

Basic Economic Indicators:

• Share in GDP: 22.8 %

• Growth rate of agriculture is 2.7 (p) %

• Employment Share: 60% of labor force

• Foreign Exchange Earnings from Agro-Processing Sub-sector: US$ 52 million

• Agro Processing Sub-Sector Growth Rate: 10 – 15%

Agriculture Share in GDP and Sectoral GDP Growth Rate in 2004

(Source:National Accounts Statistics, Bangladesh Bureau of Statistics (BBS), July 2004, p = provisional

            Annual Report, Bangladesh Bank, 2003-04

Bangladesh Agro Processors Association (BAPA) 2005

This sector has the potential to foster economic growth in the near to medium term by commercialization and expansion of economic activities associated with this sector as it is a vital source of raw materials and can still claim to have productive agricultural land. Despite natural calamities, like flood, the agriculture sector as a whole has performed well in Bangladesh during the last few decades. Domestic as well as international market potential, development and value addition in agriculture have created favorable prospects for agribusiness development in the country. Agro-climatic conditions are suitable for production of a wide variety of crops, livestock, fish and forest products. In addition, the large population provides a sizeable supply of low cost labor, which also favors agribusiness development.

Activities under this sector: Agri business encompasses:

• Commercial production of agricultural commodities

• Transformation of agricultural commodities into products

• Provision of inputs to the production

• The marketing and distribution of agri commodities

• Agri business is commercially oriented with organized linkages among different sectors. It excludes agro based activities that are conducted at a subsistence level. Agri business system consists of suppliers of production inputs and services, commercial producers, market intermediaries, agro-processors and other agribusiness-related entities. Agribusiness systems differ according to the commodities involved and their particular economic, political, social and physical environment.

Potential:

• Stressed in Government of Bangladesh (GOB) Policies including New Agricultural Policy, The Export Policy and the Agricultural Marketing Policy.

• It is in the GOB’s Thrust Sector List.

• Budget 2006/07 continues and reinforces focuses on this sector

Budget for Agriculture: Total budget expenditure in Budget 2006/07 is Tk 69740 crore (Tk 694.70 billion). Agriculture accounts for 7.5% of the use of budget resources.

Tk. 5802 crore constitutes in:

Ministry of agriculture – Tk 3149 crore (42% higher than revised FY 2005/06)

Ministry of Fisheries and Livestock Tk. 578 crore (36% higher than revised FY 2005/06)

Ministry of Environment and Forest Tk. 242 crore

Ministry of Land Tk 371 crore

Ministry of Water Resources Tk 1466 crore (22% higher than revised FY 2005/06)

Government Policy & Incentives:

• In Budget 2006/07 once again it was mentioned that with the increase of budgetary allocation for expansion and development of agriculture and agro-based industries, the Government is also increasing the quantum of agricultural credit and subsidies.

• Agricultural subsidy of Tk 1200 crore is allocated in FY2006/07.

• Tk. 244 crore for agricultural research is allocated in FY2006/07

• Tk. 6000 crore target for agricultural credit distribution in FY2006/07. Up to March 2006 the total agricultural credit disbursed stands to Tk 4000 crore.

• For the development of agro-product processing and software industries, allocation for Equity Development fund has been raised to Tk 200 crore from TK. 100 in previous year.

• To build agro-based farm and industries, an allocation of Tk. 150 crore has been made under the Agro-based Industries Assistance Program in this budget (raised from Tk. 100 crore from previous).

• Tk. 50 crore has been allocated in FY 2006/07 to create a fund called Fund for Assistance to Small Farmers Affected by Natural Disasters.

• Agro based industry enjoys tax holiday. Any investment in this sector will enjoy similar tax amnesty.

• Government provides 30% cash incentive on export of ago-based industrial products through Export Processing Zones (EPZs) (decision taken on 5 Sept 04) at the Prime Minister’s Office. Earlier this incentive was available to export of the agro-based industrial products outside the EPZs. It is expected that Foreign Investors would be encouraged to set up joint ventures with Bangladeshi companies. Such interest has been already received from Sri Lanka.

• Prime Minister on 23 Nov 2003 has declared that a special EPZ will be set up at Ishwardi for a agri-processing industries.

• Government has reduced the rate of interest against bank loan for investment in agriculture from 14% to 10%

• Bangladesh Bank has opened an opportunity for Equity & Entrepreneur Fund mostly for establishing agricultural products processing industries.

• Duty rebate facility for export of agricultural products has been announced

• Electricity charges for agro-processing enterprises has been reduced.

• Investment Promotion Campaign Abroad: The Executive Chairman of Bangladesh Export Processing Zones Authority (BEPZA) undertook aggressive investment promotional campaign in Sri Lanka and Malaysia to attract more investment in the agro based sector, both in backward & forward linkage sectors.

Economic and Business Factors:

• This sector unfolds lot of scope for growth potential for foreign investment. The growth of Agri-business will accelerate employment and income of the rural population and stimulate farm and non-farm activities such as production, agro-processing, marketing, and business services. The potentials seem to be promising because of prevailing comparative advantages in the production of a range of agricultural commodities, and growing demand for high quality products in the rapidly expanding local and international markets.

• The fragmented small land holdings of rural areas provide good opportunity through contract farming to raise income via business development through value addition. For steady growth of agribusiness, strong linkages (value chain linkage) between farmers, traders, processors, and service providers are key essential elements. These linkages require specific strategies and an enabling environment. With the growing urbanization, with growing urban middle class the need for value added diversified food products, which meet the requirements of the urban population are increasing. Opportunity lies in packaged food for easier preparation, higher food quality, and longer storability. In major cities, the emergence of modern agricultural food distribution systems, including superstores/markets and stop-and-shop outlets, has started in recent years indicating higher demand for such commodities. Obviously, the local products have to face tough competition vis-à-vis the imported products.

• Agribusiness has achieved limited success in a few areas, including poultry, shrimp, fruits, dairy products, vegetables, wheat and bakery products, medicinal plants, animal feed, flowers and orchids. Other commodities and products including rice, tea, sugar, jute and tobacco have been part of the commercial system of production, but have not shown yet the required dynamism for agribusiness. The largest agricultural sub-sector namely rice is still mainly dominated by a large number of farmers producing for household food security or producing for a small marketable surplus. One example is the aromatic rice. PRAN, a local company is producing aromatic rice. However, scope remains to improve the milling, packaging and distribution capacity.

Scope of Interventions can be at the following levels:

• Commercialization of production through new products and commodities, such as high value crops, livestock, poultry and fisheries

• Development of forward linkages through improved services, packaging, processing, storage, transport, removal of marketing constraints and opening up of new markets

• Backward linkages through the provision of inputs (seeds, fertilizers, animal feed and agriculture machinery)

 Potential Areas for Exploring Business Opportunity:

This sector that has been emphasized in PSOM, signed Memorandum of Understanding (MOU) between Royal Netherlands Embassy (RNE) and External Resource Division (ERD), Ministry of Finance (MOF), the Government of Bangladesh (GOB) on 7 May 2005. The following areas hold business opportunities.

Crop:

Rubber Roller Rice Milling: 3% of rice milling is done by rubber roller which ensures lower breakage and also bran is gotten for oil extraction. (95% of rice milling is done by traditional means of dheki and huller which does not produce bran for oil extraction and has 35% breakage).

Processing of Potato flakes, daal (pulses) and spices.

Post harvest storage, processing and packaging of fruits and vegetables.

Production of organic fertilizer and mixed fertilizer: Only Tk. 50 lac is required for such plants. Currently chemical fertilizers like TSP (Triple Super phosphate), Urea, Nitrogen Phosphate (NP), Murete of Potash (MP) is used. However, organic fertilizer is much emphasized now. In Khulna, one such organic fertilizer plant has been set up which produces 14 tons of organic fertilizer from wastes.

Poultry:

Production of vaccines from poultry.

Dairy Feed Manufacturing using Dutch hardware/technology

Artificial insemination of breed: Currently on GOB does this and BRAC (an NGO) has the license.

Modern Slaughter House: Current slaughter houses are unhygienic and also wastes valuable raw materials like leather, hoofs, horns, etc which are raw-materials to leather and leather goods industry and also the garments industry. 

Fishery:

Processing and Freezing of Prawn in the Coastal Belt: Currently Bagerhaat, Chakaria, and Shatkhira are the prawn belt. Lot of scope remains to establish modern freezing and processing of prawn.

Quality Control Institution: Bangladesh Standard Testing Institute (BSTI) is not internationally recognized. Therefore, Bangladeshi producers/exporters need to get their certificate from Malaysia and Singapore.

Risks/Constraints:

Specific to this sector

• High incidence of land-lessness and small size firms: In terms of the commercialization of production, land resources are limited in both size and suitability. Many land-holdings are too small to consider a high degree of diversification and many areas are subject to seasonal flooding.

• Lack of access to credit: Furthermore many potential producers do not have access to the capital or credit needed to diversify their production and do not have the capacity to face the risk that investing in new crops and commodities might entail. The limited amount of credit that is available for small to medium producers tends to be lent to non-agricultural ventures that are perceived by lenders as less risky.

• Lack of market information, technology: Constraints to the development of forward linkages include undeveloped markets and inefficient marketing chains. There is little market information. Moreover, access to alternative crops and commodities and knowledge about alternative crops and commodities are limited and markets for many potential crops or commodities are undeveloped, as is the marketing chain. Middlemen reduce profit margins between the buyer and the end user and there is little access to credit for potential processors, packagers, transporters or exporters.

• Lack of Efficient Infrastructure: Infrastructure is not that developed (cold storage facility, port and air cargo facilities are inefficient) in Bangladesh. However, this problem is being addressed for exporters of agro products with the Ministry of Civil Aviation and Tourism and the Foreign Airlines in Dhaka, Bangladeshi owned private Airlines, Ministry of Commerce, Export Promotion Bureau (EPB), Bangladesh Biman and Bangladesh Fruits vegetables and Allied Products Exporters Association. The solution partly lies in lifting more vegetables and fruits of Bangladesh by the foreign Airlines to different destinations in the middle East and UK particularly, and reduction in the handling charge of equipment and storage charges etc. at ZIA for encouraging private and foreign airlines to bring more cargo planes here.

• Inadequate Quality Control Mechanism: There are a limited number of institutes for quality and grading standards. Bangladesh does not have any testing laboratory that is of international standard and as such does not have international recognition of its certification.

Useful Contacts for further Information

MINISTRY OF AGRICULTURE

Bangladesh Secretariat

Building No 4 (4th Floor)

PABX: 8613639-43, 9613645-49

FAX: 880-02-8617040, 8613080, 8613799

Minister: 7169277

PS To Minister: 7160778

Sr. Information Officer: 7167590

Bangladesh Agro Processors Association (BAPA)

Contact: Maj. Gen. (Retd.) Amjad Khan Chowdhury, Chief Executive,

and Mr. Mozammel Huq, Advisor

Address: Mohananda, House 39, Flat 1D, Road 11 new,

Dhanmondi R/A

Dhaka 1209

Ph: 8156353/0175098909

Fax: 880 2 9110055

Email: mohananda_pro@yahoo.com

BANGLADESH AGRICULTURAL DEVELOPMENT CORPORATION (BADC)

BANGLADESH AGRICULTURAL RESEARCH COUNCIL (BARC)
FARMGATE, DHAKA
 

BANGLADSH AGRICULTURAL RESEARCH INSTITUTE (BART)
GAZIPUR
FAX :0088-02-481678
 

BANGLADESH RICE RESEARCH INSTITUTE (BRRI)

GAZIPUR

BANGLADESH INSTITUTE OF NUCLEAR AGRICULTURE (BINA)
 

BANGLADESH JUTE RESEARCH INSTITUTE

BANGLADESH JUTE RESEARCH INSTITUTE

DEPARTMENT OF AGRICULTURAL EXTENSION (DAE)
 

AGRICULTURAL INFORMATION SERVICE (AIS)

DEPARTMENT OF AGRICULTURAL MARKETING (DAM)

COTTON DEVELOPMENT BOARD (CDB)

SOIL RESOURCES DEVELOPMENT INSTITUTE (SRDI)

FARMGATE, DHAKA

SEED CERTIFICATION AGENCY (SCA)

SUGARCANE RESEARCH INSTITUTE (BSRI)

Board of Investment (BOI)

Address: Prime Minister’s Office, Government of Bangladesh,

Jiban Bima Tower, (19 flr), 10 Dilkusha C/A, Dhaka 1000

Bangladesh

Ph: 880-2-9561430-1

Fax: 880-2-9562312

Website: www.boibd.org

Bangladesh Export Processing Zones Association (BEPZA)

BEPZA Complex

House No 19/D, Road 6, Dhanmondi, Dhaka 1205

Ph: 88-2-9670530, 8650058, PABX 8650059

Fax 880-2-6850060

Website: www.epzbangladesh.org.bd

Export Promotion Bureau (EPB)

1 Kawran Bazar,

Dhaka 1215

Tel PABX: 880-2-9144821

Fax 8802-9119531

Website: www.epbbd.com

Bangladesh Poultry Industrial Association

Address: 115/120 Adamjee Court, Ground Flr.

Motijheel, Dhaka 1000

Ph: 880-2-9555403, 956413

Fax: 880-2-716

The Embassy of the Kingdom of the Netherlands

Contact person: Riffat Zaman, PhD,

Advisor, Economic & Commercial Affairs

House 49, Road 90, Gulshan 2

Dhaka, Bangladesh

Tel: (880-2) 882-2715/8

Fax: (880-2) 882-3326

Email: dha-ea@minbuza.nl

Update Telecom 2006

A Sketch of the Telecommunication Sector in Bangladesh,

Updated July 2006

Telecom Sector Organizational set up: The telephone sector was strictly under Bangladesh Telephone and Telegraph Board (BTTB) mainly operating in the field of landline connections.

Currently there are six cell phone operators and 15 private land phone operators.

The first private operator licenses was issued in 1989 to a company operating as a monopoly till 1997 when telecom market was opened up to three 15 year GSM mobile license operators.

These are namely Citycell, Aktel, and Grameen Phone. Later on joined in Sheba telecom, which sold out to Orascom operating as Banglalink.

WorldTel Ltd. was the lone license holder to provide land phone in Dhaka and were supposed to start operation in March 2006. However, Bangladesh Telecom Regulatory Corporation (BTRC) cancelled its exclusive right terming it anti-competitive and volatile of the Bangladesh Telecommunication Act 2001. WorldTel went to court. The Appellate Division of the Supreme Court on August 23, 2005 dismissed WorldTel’s petition for retaining its four-year co-exclusive right with BTTB to provide land phone in Dhaka. This paved the way for private companies to compete for land phone license. There are now fifteen private companies which obtained license for land phone operation.

Very recently Teletalk is providing mobile phone service under BTTB. Warid Telecom International of Dhabi Group is likely to start operation this year, 2006.

Teledensity: 0.6% landline phone and 10% mobile phone connection with 12 million covered by cell phone.

Chronology of Events:

Services Available:

1. Fixed Phone Service: Fixed phone or PSTN is provided by BTTB. There are four types of telephone exchanges operating: digital, analogue, central battery (CB), and magneto with the transformation of these to digital in near future. BTTB operated through four satellites in Betbunia, Mohakhali, Sylhet, and Kaliapur-Gazipur. Currently there are 15 private companies which received license for land phone operation. List in Annex.

2. Cellular Mobile Telephone Service: Three are currently four private operators: PBTL, Grameen Phone (GP), Telekom Malaysia (Aktel), and Sheba Telecom (Banglalink), Teletalk, Warid telecom. PTBL initially used AMPS and CDMA system to provide service while the other three operators are using GSM system. Among these GP has the most coverage. Details of cell phone companies are provided separately. 

3. Nation Wide Dialing (NWD): BTTB provided this service all over the country through different transmission links and TAX (Transit Automatic Exchange) and Sub-tax system. More modern and sophisticated systems with extended capacity like SDH Optical Fiber, SDH Microwave and PDH Microwave System have replaced older versions. Currently there are 16 TAX and Sub-TAX and 3 TAX cum Local Switch (TLS) are providing NWD service. Private mobile operators are establishing their own transmission network. GP has taken lease from Railway Optical Fiber System to establish transmission network through- out the country. It also leases out to other operators.

4. International Dialing Service (ISD): BTTB is the only operator, which provides this service through two international trunk exchanges (ITX), by Intermediate Data Rate System. BTTB will hold monopoly over ITX till 2010. Bangladesh has been linked to global network through submarine cable SEA ME WE–4. Even though international voice service is provided by BTTB alone, since 1998 it has been opened up to the private operators through data service VSAT.

5. Telex Service: The sole provider of this service is BTTB and this is losing its market to fax and internet service.

6. Paging Service: In 1989 a private operator has obtained a license to provide this service which has almost been wiped out with the introduction of cellular mobile service.

7. Radio Trunk Service: BTL got the license to provide this service in 1989. However, it is being almost wiped out for inefficient technical quality and service.

8. Data Service: BTTB provides this service locally and internationally. But some private operators are being given license for point two data circuit for corporate users inside the country.

9. Internet Service Provider (ISP): 168 companies have been issues license in the private sector to provide internet service through using BTTB telephone lines and international connection through VSAT. BTTB started internet service since 1999.

10. Pay-phone service: It is in operation since 1994 though BTTB. There are 1550 card phone booths in the country but the quality of the magnetic cards are sometimes not up to the standard. BTTB launched pre-paid land phone card in mid July 2006.

Bangladesh Telecom Regulatory Commission: The BTRC, a licensing and regulatory body set up under the provision of Bangladesh Telecom Act 2001, came into effective operation in 2002. From the start, BTRC had a job on its hand to impose its authority on a sector long dominated by BTTB, both as regulator and sole operator.

BTRC has made regulatory interventions as and when appropriate. Mobile phone users and operators were charged for calls made from a mobile phone to a BTTB fixed line; but the BTTB subscriber was not similarly charged for calls made from BTTB to mobile. BTRC introduced new legislation enabling all operators to deal with each other on terms of parity. The private operators are currently renegotiating their original inter connectivity agreements with BTTB. The issuance of fixed-line licenses to new operators goes to BTRC’s credit.

Tele-density: Tele-density in Bangladesh is very low. The country's telecommunications services are inadequate.  Bangladesh devotes a mere 0.7% of its GDP to the telecom sector as compared to the regional average of about 2.0%.  The government-run telephone service has approximately 9 telephone lines for every 1,000 people, giving it one of the lowest penetration rates in the world.  However, this rate is improving fast with the introduction of private sector involvement.  Approximately, a little over 900,000 telephone landlines are located in Dhaka, a city of over 12 million people.  Bangladesh's call completion rate remains under 50% and its landline network barely supports modern telecom accessories such as call waiting, call forwarding, and voice mail.

Tele-density of cellular phones has been growing and with 12 million mobile phone clients’ cellular tele-density is now 10% and landline density is 0.6%. The demand for fixed phones in the capital is estimated to be around 10 lakh while the registered demand with the state-run BTTB is about two lacks only. BTTB does not have the infrastructure to meet the growing demand for land phones. Therefore, land phone operation has been opened for private operators to provide service through competitive bidding in the Central Zone – Dhaka Multi Exchange Area – consisting of Dhaka city, Zinzira, Savar, Narayanganj, Gazipur and Tongi. This area comprises of 60% demand of the country’s fixed phones.

Comparative status in South Asia:

India’s low rates owe much to its strong growth of mobile phone services. Mobile phone calls cost US$ 0.03-0.04 per minute in India against US$ 0.084 per minute in Pakistan, US$ 0.11 per minute in Sri Lanka and over US$ 0.014 in Maldives. In Nepal and Bangladesh mobile phone calls cost US$ 0.065 per minute.

Mobile phone tariff in India is one of the lowest in the world and around 50% cheaper than tariffs in neighboring countries such as Sri Lanka, Pakistan and Bangladesh, according to Telecom Regulatory Authority of India (Trai). The tax of handset is $25 per set. Duty on imported handset is substantially higher than neighboring countries except Myanmar.

Government of Bangladesh (GOB) took some good initiatives in this budget of FY2006/07. It reduced tax on SIM (Subscriber identity module) card or cell phone connection from Tk 900 to Tk. 800. Customs duty on imported telephone sets, both mobile and fixed phones, has been cut to Tk. 200 per set from Tk 300. This year’s budget allocation is Tk. 1574 for this sector, which is 10% higher than last year’s.

Cell Phone Service:

The cell phone is working very well here. Bangladesh is an attractive market for mobile phone services due to its large population of around 140 million but still the mobile phone penetration rate here is very low, 4%. The potential of adding new subscribers in Bangladesh is enormous. It is estimated that the number of mobile phone subscribers in Bangladesh will reach around 15 million by the end of 2007 (10%). There will be scope to tap the untapped market!

Present Scenario of Mobile Phone Sector in Bangladesh

As of June 2006