Developing Agribusiness Strategies for

Bangladesh - An Analysis

Muhammad Mahboob Ali and Anisul M. Islam



Office of Research and Publications (ORP)
American International University-Bangladesh (AIUB)






Working Paper No. AIUB-BUS-ECON-2011-01






Citation
Muhammad Mahboob Ali and Anisul M. Islam (2011). Developing Agribusiness Strategies for
Bangladesh - An Analysis. AIUB Bus Econ Working Paper Series, No 2011-01,
http://orp.aiub.edu/




April 2011


Copyright 2011 American International University-Bangladesh (AIUB)


1
DEVELOPING AGRIBUSINESS STRATEGIES FOR
BANGLADESH - AN ANALYSIS




Abstract



Agribusiness is one of the most challenging businesses today. Bangladesh depends largely on
agribusiness because agriculture still plays a dominant role in the economy. Given the high importance
of this topic, this study has been undertaken in the context of ecological imbalances and global
warming that is creating serious food insecurity. The authors argue that agrarian reform is required
for increasing productivity in agricultural, strengthening agribusiness, efficient utilization of natural
resources, and improved code of conduct for the organizations involved in the business processes.
Agricultural products need financing as well as proper marketing strategies and better value chain
needs to be created. Bangladesh can sustain long run macroeconomic stabilization by reducing deficit
between demand and supply and achieving economic progress, and reducing unemployment and mass
poverty through proper development and implementation of agro-business strategies. The growth of
this business may also help improve the balance of trade position of the country.

Keywords: Agribusiness, Bangladesh, Natural resources, Global warming, Economic Development

JEL Classifications: N50, 013, Q17, Q54

2
1.0 Introduction
Bangladesh is basically an agriculture based country and a large proportion of the population formally
and informally depends on this sector. Besides official unemployment, disguised unemployment
creates real problem for the country. Under the global village, food is becoming scarce and prospects of
agribusiness are increasing gradually. Agribusiness can be defined as the business activities related to
the agricultural product which will add value, create synergy in the production process, import-export
of agricultural products and redistribution of the product starting from the wholesaler to retailers and
ultimately consumers can be able to get the products. As such strategic management of agribusiness is
required so that core competencies can be created and proper supply chain management along with
vertical and horizontal coordination is being required.

Agribusiness includes seed production and product processing, drying paddy, dairy, fish farming,
poultry, vegetables, floriculture, fruits ,jute, livestock, tea, gingers, potatoes, oilseeds, pulses, sugarcane
etc. is to legally transferred to the customers. According to Beierlein and Woolverton (1991) the
term agribusiness is important to visualize following three sectors: the agricultural input sector, the
production sector and the processing-manufacturing sectors are interrelated part of a system in which
the success of each part depends heavily on the proper functioning of the other two. However, Kohls
and Uhl (2002) comment that markets join together the various component of the food industry, the
farm supply sector, the farm sector, the food marketing system, and national economies. The input
supply and farm markets are often referred to as agribusiness. Customer need based products for the
agricultural sector is being required to produce. This agribusiness can reduce deficit in balance of trade
position and can contribute in national income and in turn economic development can be occurred.

Agribusiness may have brighter future in Bangladesh if the country can avail the opportunity and
overcome the shortcomings. Natural resources especially in the agriculture sector may be properly
handled. Global warming and ecological imbalances created need for agribusiness more vital business.
Orr (1993) opined that past gains in agricultural productivity have contributed significantly to the
problem of global warming. Actually Bangladesh has also been facing global warming problem which
may cause danger in agribusiness. Salinity problems, coastal areas problems, flood problems, water
logged, river erosion, river basin surface runoff, drought etc. are creating problems for production of
agricultural products as a whole. This has been accompanied by high growth rate of population. As
such proper techniques, innovations, adoptability, mechanization, and policy framework and
implementation of the policies are required for agribusiness management of Bangladesh.

By definition business must have three core elements: legal entity, social obligations and profit
maximizing. As such in the twenty first century business especially agribusiness has been growing in
importance. According to Yunnus (2009), industrial style agriculture is practiced in United states has
been very effective in raising crop yields. But in the long run it is not sustainable. Actually Yunnus
comments for social business is in built in the traditional system otherwise if business which doesnt
fulfill aforesaid three core elements they can never remain in the business process from the context of

3
the social welfare of the human being. However, profit should not be super normal one rather it should
be normal profit. When the firm earns normal profit then it will create distinct competencies and long
run sustainability.

Rahman (2004) argued that poultry inputs like chick, feed and medicine markets are oligopolistic in
nature, in which prices are determined individually considering probable reaction of others.
Agribusiness requires and market entrepreneurship effort through combining different attributes of
productivity, experimentation, innovation, risk-taking, efficiency, effectiveness and synergy.
Diversification of the agribusiness process into agricultural product segmentation is required. Due to
Global warming situation, importance of agribusiness has been raised after the end of the first decade
of twenty-first century. Bangladesh is currently trying to cope with the global warming situation but it
wont be feasible without global and regional cooperation.

2.0 Literature Review
Dinar et al. (1989) find that climate affects technology development and diffusion; conversely,
technology development and diffusion affects the impacts of climate on productivity in India.
Technology development and diffusion, as well as climate, also affect net revenue in agriculture in
India.
Khan and Hossain (1989) argue that due to high pressure of population and limited opportunities for
non-agricultural occupations, land is cultivated in very small business.
Sadhu and Singh (1989) opine that agricultural prices, unlike manufactured goods prices, fluctuate
more volatility as the agriculture sector is highly influenced by the vagaries of nature. Meeakshi and
Poleman (1994) find that only with the dramatic rates of growth in agriculture combined with excellent
infrastructural facilities have an increased in employment and was ,a decrease in seasonality and a
diversification into rural nonagricultural employment resulted.

Erickson et al. (2002) comment that the successful agribusiness manager must understand what the
firm did (or did not) that led to bottom line, and the successful manager uses this understanding to
improve the bottom line in the future.
Vylder (2002) depicts that Bangladesh faced various interdependent distortions and constraints which
originate from the economic, political and social structure and concomitant choice of policies.
Islam and Sarker (2003) find that in Bangladesh livestock sector composed of cow-buffalo and goat
sheep registered very slow growth rate while the poultry sector made of fowl and duck grew an
appreciable rate though this is still inadequate to meet their demand.
Drummond and Goodwin (2004) depict that in the contemporary agricultural system of the United
States ,most of these functions are performed by extremely sophisticated business firms that specialize
in performing certain functions or in the marketing specific products. These specialized firms have
become known as collectively as agribusiness. The study of the management, marketing, financing, and
marketing decisions of agribusinesses is a specialized branch of agricultural economics that deals with
the economics of Galbraiths corporate sector.

4

Rahman et al.(2004) argue that the factors which help increase production of Boro rice are extension
service, human labor, seed, fertilizer , age and experience .Area and bullock power have positive effect
on the Aus output. Similarly, extension service, area and bullock power have positive effect on the
Aman output. Dobson and Quader (2005) observe that when the value of the services provided by
middlemen is not readily apparent to others in a supply chain, the middlemen is invariably criticized,
and distributors in Bangladeshs shrimp business receive the same criticism leveled at middlemen in
other industries around the world. Junaid (2005) opined that a proper management of different
functions of agricultural marketing will give incentive to presents to get better price during off seasons.
Ahmed (2008) proposed that for saving the cultivable land the country would have to be habituated to
community living. He also advised that at this moment, if it is not possible to construct multi-storied
building in rural areas we can opt for making two storey mud-built houses by applying indigenous
technologies, which in turn will save a good extent of lands.

According to Quasem (2008) crop productivity of land is low, as new technologies are not widely
spread specially in non-rice crops. To thrive in the competitive business environment, the plan should
be properly done so that competitive advantage and economies of scale in producing those agricultural
products should get priority. Speculative motive in the agriculture sector still works. As such farmers
sometimes deprived from getting their due share for their valuable contribution towards production.
Mellor (2008) commented that when food prices decline that tends to reduce the real price of labour
and thereby increases employment and conversely when food prices rise. Thus, the poor benefit from
lower food prices either directly in their cost of living or indirectly through increased employment and
conversely they lose from rising food prices.

Ali and Nupur (2009) suggested that create awareness among the producers and the consumers about
organic farming by improving the level and quality of information through materials ranging from
simple field training, media programs, leaflets, cell phone up to web sites and comprehensive
campaigns.

Jahangir (2009) observed that the existing poor marketing supports and lack of adequate cold storage
facilities have long been depriving the growers of perishable products like vegetables and fruits.

Lokman and Majumder (2011) argued that Bangladesh is seriously vulnerable to climate induced
hazard although there are so many controversies about the scale of climate change impact.



3.0 Study Objectives and Methodology
The study has been undertaken with following objectives:
i) to assess current situation of agribusiness in Bangladesh;

5
ii) to evaluate what sort of strategies are required to sustain in agribusiness of the country;
ii) to provide some policy implications for proper strategic management to develop agri-business.

The study is done mainly on the basis of secondary sources. The study is explanatory nature. Exact
sources will be mentioned.

3.1 Present Situation
Bangladesh possesses deficit balance in global business in the context of the global arena. In the
twenty-first century, there is a wide scope to mitigate deficit in the global business. Although
Bangladesh is still an undeveloped country, the primitive characteristics of LDCs do not exist here. But
the country is still lagging behind to take any sort of appropriate measures for the agriculture sector,
which should be complementary with WTO. Bangladesh Economic Review-2008 described that the
overall contribution of the broad agriculture sector at constant price is projected at 20.87 percent of
GDP in 2007-08.In 2007,the government granted Tk. 2.54 crore to help the flood affected small and
marginal farmers to recover the losses due to seedless Boro rice,Tk.106.46 crore for 2 times flood and
Tk.36.28 crore to regain the sever damages of Sidr and government also granted Tk. 22.68 crore for
agricultural rehabilitation (Source: BBS, 2009).

Below we shall see Agricultures share of GDP in comparison to International standard in Figure 1.

Figure 1: Agricultures share of GDP in comparison to International standard

Source: World Development Indicators, World Bank, Washington DC, USA, www.worldbank.org
Now we shall show below in Figure 2 share of rural and urban population in Bangladesh.

6
Figure 2: Rural and urban population in Bangladesh


Source: World Development Indicators, World Bank, Washington DC, USA, www.worldbank.org
Green revolution was initiated during the sixties to maximize the benefit of agricultural output. After
independence, BADC (Bangladesh Agricultural Development Corporation) worked hard to develop
agricultural sector. But it became crippled to mitigate personal gain of the policy makers during
eighties in the name of privatization. Now we have emphasis on private and public partnership.
Optimum scale of plants has already been produced. Decreasing returns to scale is prevailing in the
agriculture sector of Bangladesh. Land, canal and labor is essential for production of agricultural
product. Without raising the production, supply cannot be raised and demand cannot be fulfilled. As
such in the latter part of the first decade of the twenty-first century agriculture related business will not
rise at a faster rate.
Sector wise share of GDP in Bangladesh has been shown below in Figure 3.
Figure 3: Sectoral Share of GDP: Bangladesh

Source: World Development Indicators, World Bank, Washington DC, USA, www.worldbank.org

7
Deb and Zaman (2007) argued that during the last 35 years, agricultural production in Bangladesh has
substantially increased. Production of crops, livestock and fisheries has increased significantly. Rice
production has increased from 9.90 million metric tonnes in 1972/73 to 26.53 million metric tonnes in
2005/06. Crop GDP has increased from Tk 19.76 billion (US$ 2714.69 million) in 1972/73 to Tk
622.324 billion (US$ 9277.34 million) in 2005/06. Production of potato, maize, fruits, vegetables and
other crops has also increased. However, production of wheat and sugarcane has decreased. Area under
jute has declined though production increased slightly due to increased yield. Poultry production has
increased from 76.88 million birds in 1972/73 to 232.99 million birds in 2005/06. Meat production is
more than five times than that in 1972/73. On the other hand, milk production is about five times while
fish production is about 2.9 times of the production in 1972/73. Shrimp production has increased to 110
million tonnes in 2004/05. Thus, agricultural production system in Bangladesh has been transformed
from a subsistence oriented system to a commercially driven production system which is very much
responsive to prices, policies and trade liberalization.

Below in Figure 4, we have shown share employment in different sectors of Bangladesh.
Figure 4:Sectoral Share of Employment: Bangladesh


Source: World Development Indicators, World Bank, Washington DC, USA, www.worldbank.org

Notes: AESBGD: Agricultural Employment as share (%) of total employment in Bangladesh;
MESBGD: Manufacturing Employment as share (%) of total employment in Bangladesh; Service
sector Employment as share (%) of total employment in Bangladesh;

8
Aquaculture is still a small sub sector accounting for only 5% of GDP. Much of the potential of the sub
sector remains unfulfilled. The water area under aquaculture can be increased two to three-fold with
some initiative from the government and a workable lease policy of government khas waters. The yield
rate of aquaculture, which is one of the lowest in the world, could be increased several fold through
appropriate actions and policies of both the government agencies and the private stakeholders.
Development partners can play a supporting role. With an enabling policy environment, the share of
fishery in GDP could easily rise to more than 10%. Employment could also increase two or three-fold.
Deb (2008) suggests that Bangladesh agriculture has potential for further diversifications. However, in
order to materialize this project, Bangladesh must invest in road infrastructure, strength SPS
compliance facilities, improve poor-harvest technology, expand storage facilities for vegetable and
fruits and negotiate further trade liberalization at the global level.
According to Board of Investment (accessed on 24 October, 2010) over 90 varieties of vegetables are
grown in Bangladesh, yet for such a fertile land, there are huge gaps in local resources and under-
utilization of the countrys agricultural capacity. This presents many opportunities for investors seeking
to export agricultural products, or to meet the rapidly growing local demand. Here are just some of the
investment opportunities: Cold storage facilities to serve all stages of the supply chain, and especially
for fresh produce for export.; Fresh produce production for local and export markets Production of
fertilizers and cultivation of seeds; Eco-friendly jute production, with the support of several jute
industry technology development institutes; Shrimp farming; Halal foods; Milk and dairy products;
High value added foods for export, including herbs, spices, nuts and pulses (Sources:
http://www.boi.gov.bd/about-bangladesh/costs-of-doing-business/overview-of-costs-taxation/8).
According to Bangladesh Agribusiness Report Q3 2009, the Bangladesh agribusiness service provides
proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar,
cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading
agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and
essential industry context on Bangladesh's agribusiness service (source:
http://www.researchandmarkets.com/reports/1080797)

Zhu and Sur (2008) argued that the demand for food in Bangladesh and around the world is changing
rapidly. Driven by economic growth, rising incomes, and urbanization, demand is shifting away from
traditional staples toward high-value food commodities. High value agricultural commodities include
fruits, vegetables, spices, fish, and livestock products, many of them processed before reaching the
market. In Bangladesh, additional demand for these commodities is projected to be worth about $8
billion by 2020 (in 2005 prices). However a gloomy report on food deficit in Bangladesh has been
published in The Daily Star on 16th October 2010.In the report, Palma (16th October, 2010) described
that a rising population amid declining agricultural land has put the country's future food security at
risk, especially when salinity in the coastal belt, and droughts and depleting underground water level in
the north have become constant realities. According to a projection of the Bangladesh Bureau of
Statistics (BBS), the country's population will be 16.69 crore by 2020, while unofficial estimates
suggest that the current population is already approaching 16 crore. The National Population Council of

9
Bangladesh says the number will reach 17 crore by 2020.Bangladesh had to import nearly 20 lakh
tonnes of food grains in the last fiscal year on top of around 3 crore tonnes of rice and wheat produced
domestically, while BBS's projected food security requirement was for 2.49 crore tonnes.

At the second Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation
(BIMSTEC) summit in New Delhi, which held during mid November 2008, the chief advisor of
Bangladesh proposed for a food bank. In the context of the recent global food crisis that has created a
sense of food insecurity among the peoples in the developing as well as low-income countries, regional
cooperation for food security has emerged out as an important issue. For this matter, the proposals for
setting up of a BIMSTEC poverty alleviation centre in Bangladesh and a food security reserve among
BIMSTEC members should merit attention. The idea behind such proposals is good. But unless the
same are endorsed by all the member-countries of this regional cooperation body with a strong
commitment to operationally the same at the earliest, no meaningful results in the desired direction are
likely to come.

Reduction of the subsidies on fertilizer and also consent to private trade in fertilizer, small irrigation
equipment and seed sectors etc were done during different phases of the economy. Structural
adjustments started with the liberalization processes and openness of the economy through diverse
agricultural input delivery systems from public sector to the private sector. Social enterprise business
system tried to develop. But it creates disparity between have and have-nots. As private disbursement
system of agricultural inputs works as a monopolistic nature so it creates small and marginal farmers
on an awkward situation.

Bangladesh is now exporting vegetables and other sorts of crops in the European markets, Middle
East, and Asian countries. This process opens new avenues to private sector investment in the areas of
agricultural production of high value of crops and production of seeds. However, according to the
Export Promotion Bureau, during the year 2005-06, the highest earnings of the export of agricultural
products come from the Jute sector, which was BDT 9965.37 million while second earnings comes
form vegetable BDT 2212.42 million and third one was tea sector which was BDT 799.28 million
during the same time period. Recently the country started exporting meat also.
Labor Forces Survey has not been conducted after 1999-2000. From the BBS: Labor Force Survey
Bangladesh 1999-2000 as of August 2002, it revealed that 62.91% of the total labor force are working
in the agricultural sector. However, labor productivity in the agricultural sector is also low. High tech
agriculture based on labor-intensive technique is required. Small and medium farmers should get inputs
at an affordable price. For developing the agriculture sector, agricultural staff and media should play
vital role. They must motivate farmers how to produce in the accurate moment and to arrange direct
selling process starting from the production to the marketing strategies, they may work as a
supplementary factor.


10
Agricultural sector takes over Bangladesh economy in terms of contribution to national income as well
as employment. According to Bangladesh Economic Review-2007, in 2006-07, the overall contribution
of the broad agriculture sector at constant prices is projected 21.11 percent of GDP. With the broad
agriculture sector, the contribution of agriculture and forestry and fisheries are estimated at 16.38
percent and 4.73 percent respectively in 2006-07. According to Bangladesh Bureau of Statistics, during
the year 2004-05, percentage of net cultivable land in terms of total land was 56.87% while cropping
intensity was 176.91%. Actually cultivable land is decreasing at an alarming rate. In this aspects
Ahmeds proposal is more practical oriented. Below is given the agribusiness related products export
performance for the month of June-November 2010-11 are given in the Table 1:

Table 1: Agribusiness Related Products: Export performance for the Month of July-November 2010-2011: Overall
position (Million US $)

Products
Export
performan
ce for
July-June.
2009-
2010
Export
Target for
2010-
2011
Strategi
c Target
for July-
Nov.
2010 -
11
Export
Performa
nce
July-
Nov.
2010-11

% Change
of export
performan
ce over
export
target
Export
Perform
ance for
July-
Nov.
2009-
2010
%
Change
of
export
perform
ance
July-
Nov.
2010-11
Over
July-
Nov.
2009-10
1 2 3 4 5 6 7 8
All products 16204.65 18500.00 7142.85 8275.29 15.85 6093.85 35.80
(1) Frozen Food 445.18 450.00 173.75 266.21 53.21 189.74 40.30
a) Frozen Fish
(0300, 0302, 0303,
0307)
89.12 90.00 34.75 44.51 28.09 35.60 25.03
b) Shrimps (0306) 348.28 351.58 135.75 215.99 59.11 149.59 44.39
c) Others 7.78 8.42 3.25 5.71 75.69 4.55 25.49
2) Agriculture
Products
242.35 266.00 102.70 161.45 57.21 133.94 20.54
a) Tea (0902) 5.65 6.00 2.32 0.83 -64.22 2.73 -69.60
b) Vegetables (07) 46.84 49.18 18.99 23.89 25.80 18.66 28.03
c) Tobacco (24) 52.26 55.90 21.58 48.62 125.30 28.00 73.64
d) Cut Flower (06) 39.84 47.81 18.46 17.04 -7.69 15.89 7.24

11
e) Fruits (08) 17.37 19.98 7.71 15.44 100.26 6.72 129.76
f) Spices (0910) 6.94 7.98 3.08 3.14 1.95 2.63 19.39
g) Dry Food (19) 20.95 24.09 9.30 10.17 9.35 7.73 31.57
h) Others 52.50 55.12 21.28 42.32 98.87 51.58 -17.95
3) Rubber 9.69 10.27 3.97 4.63 16.62 2.13 117.37
4) Leather 226.10 293.94 113.49 109.83 -3.22 84.50 29.98
5) Leather Product 29.06 34.87 13.46 20.90 55.27 7.65 173.20
6) Wood & Wood
Products
2.18 2.35 0.91 0.52 -42.86 0.70 -25.71
7) Pulp 0.03 0.03 0.01 -100.00 0.02 -100.00
8) Paper & Paper
Products
18.88 20.77 8.02 9.60 19.70 7.29 31.69
9) Cotton & Cotton
Product (Yarn,
Waste, Fabrics etc
95.23 100.00 38.61 46.58 20.64 35.31 31.92
10)) Jute & Jute
goods
787.99 1115.38 430.65 434.64 0.93 302.06 43.89
a) Raw Jute (5303) 196.27 255.15 98.51 145.06 47.25 86.01 68.65
b) Jute Yarn &
Twine (5307)
397.69 596.54 230.32 199.79 -13.26 126.80 57.56
c) Jute Sacks &
Bags (6305)
136.79 177.83 68.66 72.45 5.52 66.19 9.46
d) Others 57.24 85.86 33.15 17.34 -47.69 23.06 -24.80
11)carpet (Jute &
Others -57)
8.06 12.09 4.67 3.62 -22.48 3.16 14.56

(Source: Export Promotion Bureau, Bangladesh.)


From aforesaid table, we observe that agribusiness related products exports overall rises for the month
of July-November 2010-2011.However, tea export performance, pulp etc. have declined during the
time period. Meanwhile, the Independent published a report on 14th December,2010 found that milk
production declines in Pabna of Bangladesh as cattle owners cannot feed their cows sufficiently due to
acute scarcity and high price of fodder.

In Figure 5, we have shown agricultural raw materials and food exports from Bangladesh.

12
Figure 5: Share of Total Exports: Bangladesh


Source: World Development Indicators, World Bank, Washington DC, USA, www.worldbank.org

Hossain and Bayes (2009) found that business activities in rural areas are mostly financed by own
sources, and the role of the credit institutions-be it formal or informal is minimal. Households own
savings meet about three-fourths each for the required initial and investment capital. Commercial banks
supply only 10 percent of the initial capital and nine percent of investment capital. The role of NGOs in
this case has not been mentionable either only three and four percent, respectively. This could rightly
be so as micro-credit from NGOs is mostly used for non-crop activities e.g. livestock, goat, poultry,
processing etc. On the other hand, moneylenders and friends/relatives are supplying one-tenths of the
total credit needs in business. Before the crop is ready for harvesting/cutting, the farmer may not have
any money to survive. Farmers are also heavily depended on informal sector financing. Moreover, huge
amount of disguised unemployment are prevailing in the agricultural sector Due to natural disaster,
each year farmers faces problem as crop may be destroyed and they do not have any crop insurance.

Bangladesh is lacking efficient and effective agribusiness managers. They do not have the
farsightedness how to develop future capacity building. Managerial skills are lacking. Women who are
involved in the agribusiness are mostly neglected in the Gross domestic product accounting procedure.
Middlemen in the process of production to sell have varieties of stages. As such producers are not

13
getting fair price and consumer has to purchase the product at much higher prices. They suck the profit.
Actually lacking of distribution channel i.e. supply chain management in the agriculture sector of
Bangladesh is very weak. The country is yet to properly utilized agriculture based natural resources.

Agribusiness can be used to develop the economy. But it needs proper financing as well as marketing
strategies. However, no strategy will be successful unless and until it can be properly implemented.
This can be feasible only when both public and private sector will give proper importance on
agribusiness. In turn it will reduce huge deficit in balance of trade which is currently BDT. 32588.8
(Source: Bangladesh bank, Economic Trends ,2010 ,May) and raise the purchasing power capability
and income level will rise and consumption and investment will rise. This will lead to raise
employment opportunity and purchasing power capability will be enhanced and ultimately economic
development of the country will occur.


4.0 Some Recent Export Successes
According to the Board of Investment (accessed on 24 October, 2010) over 90 varieties of
vegetables are grown in Bangladesh, yet for such a fertile land, there are huge gaps in local
resources and under-utilization of the countrys agricultural capacity.
This presents many opportunities for investors seeking to export agricultural products and/or
to meet the rapidly growing local demand.
Bangladesh is now exporting vegetables and other agricultural products in European markets,
Middle East, and Asian countries. This process opens new avenues to private sector
investment in the areas of agricultural production of high value of crops and production of
seeds.
Recently the country started exporting meat also.

5.0 Need for Agribusiness in Bangladesh
Agricultures share of GDP and employment is still very large in the country
As income and population rises in the country, there is a growing need for more food and
agricultural products in the country
Further, Bangladesh possesses deficit in trade balance in the context of its global business. In
the twenty-first century, there is a wide scope to mitigate this deficit though improved and
expanded agribusiness operations.
In response, some commercially oriented agribusiness is taking hold in the country over the
years to meet the growing home demand for agricultural products.
Although Bangladesh is still a low-income developing country, but fortunately, the primitive
characteristics of LDCs do not exist here.
However, agricultural productivity is still very low and there is ample room for technology
improvements that can boost productivity in this sector

14
Besides, the country is still lagging behind to undertake appropriate measures for the
agricultural sector, which should be complementary with WTO and other international
standards and requirements.
As Such Strategic management of agribusiness is required so that core competencies can be
created and proper supply chain management along with vertical and horizontal integration is
improved.
Agribusiness may have brighter future in Bangladesh if the country can avail the opportunity
and overcome the shortcomings.
Diversification of the agribusiness is required.
Further, global warming and ecological imbalances created need for environment-friendly
management of agribusiness.
Green revolution was initiated during the sixties to maximize the benefit of agricultural
output. The impact of that revolution has now faded and now new agribusiness revolution
needs to be ushered in.
BADC (Bangladesh Agricultural Development Corporation) worked hard to develop the
agricultural sector. But it became crippled due to poor governance, lack of political will and
rampant corruption
Now there is realization and more emphasis on private and public partnership to improve this
sector.
It is critical to take steps to improve technology and increase productivity. Without raising the
productivity, supply cannot be increased and rising demand cannot be fulfilled.
Reduction of the subsidies on fertilizer and also approval of private trade in fertilizers, small
irrigation equipments and seed sectors were done during different phases of the economy.
These may help improve efficiency in distribution of these key agricultural inputs
But as these private initiatives develop, there is concern for creating disparity between have
and have-nots. As private disbursement system of agricultural inputs is monopolistic in nature,
so it puts small and marginal farmers in a disadvantageous situation.
Structural adjustments started with the liberalization processes and openness of the economy
may also help improve this sector.

6.0 Concluding Remarks and Policy Implications
Definition of agribusiness should be used in a broader aspects as defined by Kohls and Uhl
(2002).Transformation of the agriculture sector from the subsistence level to commercial orientation is
required so that surplus can be generated for the industrial sector and for exports.On the other hand,
industrial sector can properly provide supports to the agricultural sector. The agriculture sector needs
mechanization following the Japanese mode of agricultural production system. Strategic leadership in
the agricultural sector should be developed. Food habit of the country should also be changed as well
as population growth rate ought to be controlled further. Moreover, disguised unemployed in the
agriculture sector will get employment in the industrial sector. Non-farm activities should get priorities.
Strategic leadership in doing agribusiness along with strategic formulation and implementation is being

15
required. Bangladesh is also in a very odd situation due to global warming condition. To overcome
these problems, there are no other alternatives but to implement proper strategies. Unfortunately still in
the country proper producer-retailer and wholesaler relationship has not yet been developed. This is
also a problem for exporting products to foreign markets.

Agribusiness should work as a social business since it will fulfill the three core elements of business
i.e. legality, social obligation and profit maximization. However, this profit should be normal one but
not super normal level. It will help to get distinct competencies and long run sustainability in the
business process. Yunnus (2009) comments that long run sustainability is important one. Dobson and
Quader (2005) observation that the role of middlemen in the agribusiness should be reduced so that
both producers and consumers can gain. Hossain and Bayes (2009) examination should be seriously
considered by the policymakers so that agribusiness can be developed and create employment
opportunities. As such financing for agribusiness must be arranged both from private and public sectors
but it ought to be from the formal sector. There is no other alternative but to utilize agribusiness
properly so that it can act to contribute to economic development of the country. Natural resources in
the agricultural sector should be properly used as cultivable land is scare and given the high growth rate
of population of the country.

Women who are involved in the production of the agricultural sector directly or indirectly should be
counted in the process of GDP accounting system. Drainage of crop especially starting from production
to the marketing stages should be avoided. Agriculture should not be ignored as it will be the
international business and within ten years it will be able to prove that trends of terms of trade of
agricultural product will be higher. Deb and Zaman (2007) has commented that agricultural production
has raised but we should be more cautious so that dependency syndrome on foreign companies for
seeds, pesticides, fertilizers etc. can be reduced. In the jute sector, we must be more enthusiastic to
export finished products.

Agribusiness needs financing. As scheduled bank's credit program are of high cost and anti rural
biased, unwillingness of the bank staffs to work in the rural areas, a new system may be taken to meet
the credit needs of small and marginal farmers, distressed woman, landless laborers etc. For proper
agricultural development, branches of rural banks may create special cells for dissemination of
knowledge and technology. This will help in developing small-scale projects with greater employment
potentialities. Priority for the development of agro-based small and medium industries should be taken.
The rural branches and their subsidiary institutions may be established in each village of the country
through creation of a syndicate of specialized banks, participatory commercial banks, cooperatives and
various NGOs. Interest rate should be charged at a lower rate and hidden costs should not be there.

More emphasis should be given on continuous research and development so that agribusiness can be
properly handled for which supply chain management i.e. starting from producers of agricultural
products to get incentive to produce not only for domestic market but for the global market but also

16
other facilities Transportation facilities within the domestic and international arena should be arranged.
Strategic alliances should be created with foreign agribusiness companies for collaborative business
environment. Agribusiness process should be interlinked with the environment, considering the actions
of competitors, long-term sustainability in the business process. But still agricultural marketing
strategies are very weak in this country which needs to be improved.

Improved public- private partnership in developing various agricultural inputs i.e. seeds, fertilizers,
agro-machineries and also improving environment of agribusiness are required. The Poverty Reduction
Strategy Paper-II (PRSP-II) also emphasizes agriculture and rural development as one of the key
sectors for poverty reduction and pro-poor economic growth. However, PRSP-I did not bring much
fruitful result for poverty reduction especially in the rural areas and reducing disguised employees'
dependence on the agricultural sector. As such it won't be wise to think that under PRSP-II agriculture
sector should be much benefited. However, Sixth five year planning of the country should give more
priority for commercialization of agricultural sector and creation of permanent income of those people
who are depending on agriculture sector for their employment opportunities with a strong
determination to implement the planning.

Agrarian reform is required for increasing productivity of the agricultural output, strengthening
agribusiness and to mitigate huge deficit in the global business of Bangladesh. Environmental
management in the agriculture sector must cope up with global warming trend. Diversified exportable
commodities should be produced and need of agricultural product as per the export market should be
produced. New exportable market should be searched by both govt. and private sectors. Non-resident
Bangladeshis may work as a connecting hub to import agricultural products from Bangladesh to their
resident county. Dinar et al. (1989) as found that climate affects technology development and diffusion
in India which is also applicable for Bangladesh. As such Bangladesh should give more emphasis on
technological development and diffusion based on climate change.

More emphasis should be given to develop managerial skills as well as to improve marketing skills in
Bangladesh. In this regard, Erickson et al. (2002) and also Junaid (2004) comment should be
considered by the policymakers. For encouraging creativity, innovativeness and readiness to face the
challenges of agribusiness, managers ought to be given effective training. Without proper strategy
formulation and implementation, the agriculture sector can not be transformed to commercialization
and peasants wont get their due share.
Vylder (2002) comment is still applicable in Bangladesh. Holistic approach is needed backed by strong
political desire and implementation of the plans. Creation of employment opportunities for surplus
labors in the agriculture sector to non farm activities is required and which can be feasible by the Govt.
and private initiatives. Agricultural scientist should be posted in each village level and they should get
good training so that they can guide the farmers to produce what product at what time. Information
symmetry should be arranged so that agricultural producers get the right prices for their products.
Transportation system from the rural areas to urban areas and to sell products at international markets

17
should be well designed under the Ministry of Agriculture and that plan must be properly implemented.
Different stages for transportation of products may be minimized and rent seeking should be
eradicated. Distinct competencies should be created and operations management in the agriculture
sector should be improved.

BADC should be activated and public-private partnership of the agribusiness programs should be
taken. As per World Banks report, inefficiency of the government in public service delivery, the non-
governmental sector becoming one of the main actors in development efforts, these should be
superseded by BADC through transforming and restructuring the organization of Business Process
reengineering. Proper agribusiness model must be developed with the combination of competitive
attitude, value chain, productivity, transportation and marketing strategies. However, agribusiness
expansion should be carefully monitored so that business motive doesn't conflict with the social
obligations and conglomeration of the wealth at the hands of the few. Ali and Nupurs (2009) comment
should be considered by the policy makers for quality assurance of agro-products in Bangladesh.

Bangladesh should follow the comment of Drummond and Goodwin (2004) that the management,
financing, and marketing decisions of agribusinesses is a specialized branch of agricultural economics
that deals with the economics of Galbraiths corporate sector. Still the country is lagging behind. In the
agricultural sector, we need to create corporate environment and as such strategic leadership should be
developed. Business in the agriculture sector depends on diversity of demand and supply of agriculture
oriented products. As scarcity of food rises, so agriculture oriented products become more demandable.
In the business process no longer agriculture products can be viewed as a primary product. Rather in
the global market, agriculture products especially food is turning to become core competitive products.
Bangladesh bank should come forward with a special finance schemes to give poor and distress farmers
loans at critical times in the production and distribution process. Farmers can repay the loan amount
after the crop is being sold. Crop insurance may be arranged by the Govt. for small and marginal
farmers.

Benchmarking in the agribusiness should be set up to maintain international standards. Both efficiency
and effectiveness in the agribusiness is also low. The country lacks strategic planning for disbursement
of agricultural credit and marketing of agricultural products. Commercialization in the agricultural
sector is required. Brand image of the products should be raised at the domestic and global levels.
Agricultural products marketing strategy should be innovative one and commercialization in his sector
should be recognized. Agribusiness should add value in the agricultural sector and in turn helps to
contribute to the growth rate of gross domestic product. Weakness in the agricultural sector should be
removed. Code of conduct of the agribusiness firms must be improved. To meet the demand and at the
same time, to minimize impact of global warming, environment friendly products should be produced.

Supply chain management of the agricultural sector should be improved so that distributional channel
of the product within the country and outside the country can be effectively developed. Both Govt. and

18
Private sector should work side by side with long term vision, mission, goals, objectives and tactics and
develop code of conducts for the business organizations. As such in the agribusiness firms, strategic
leaders are required who will work as a mentors and their leadership strategies will be formulated and
these strategies will be implemented effectively and efficiently.

Virtually agribusiness is going to dominate all over the world as a potential business sector for which
proper strategic management is required to be developed in the country and the supply chain
management of the country ought to be improved. Agribusiness should be properly handled to raise
national income, creation of employment opportunities, raising purchasing power, and ultimately
decreeing balance of trade deficit and causing economic development of the country and to fulfillment
of basic needs of the people of the country.
Bangladesh agribusiness is beginning to take roots, and it has great potentials both at home and abroad.
This sector can contribute to increase GDP, employment creation, improve food security, increase
exports and reduce trade imbalances, poverty reduction, and overall improvement in the standard of
living of the people. But this sector faces serious challenges going forward. These challenges involve
weaknesses in:

Institutional developments
Policy frameworks
Infrastructure developments


7.0 Institutional Development
Public institutions dealing with agribusiness is still very weak with poor governance, lack of
accountability, lack of political will, and mired in corruption and graft
Private sector is still very shy to invest in this sector. There is ample room for private sector
involvement in this sector provided government provides a clear and consistent policy
environment (discussed below)
Need to develop benchmarking and standards consistent with WTO rules and international
health, product quality, and environmental standards. These will help improve confidence in
Bangladeshi products and thereby promote exports.
There should be special agencies to enforce these standards and bring compliance

8.0 Policy Frameworks
Internal Policies Dealing with Agriculture to encourage agribusiness
External Policies to explore overseas markets for Bangladeshi agribusiness products.
Internal Policies Dealing with Agribusiness
Land reform and land distribution policies
Agricultural pricing and procurement policies
Tax and subsidy policies

19
Water management and flood control policies
Food security policies
External Policies to Explore Overseas Markets
Greater openness to foreign trade and investments
Trade policies dealing with imports and exports of agricultural inputs and agricultural
products
Encourage alliances and partnerships with overseas foreign investors
Encourage alliances and partnerships with overseas expatriate Bangladeshis
These will help inflow of funds and expedite technology transfers
Develop and enforce Product Standards to satisfy WTO requirements and international
standards

9.0 Infrastructure Developments

Agriculture sector still suffers from uncertainty due to vagaries of nature such as flooding,
hurricanes, etc. There is need for public support for improved weather forecasts and building
embankments and storm shelters to protect people and crops from these disasters.
Production method and technology development need strong public support and appropriate
incentives to achieve improvement. R&D should be encouraged and funded
Publicly funded construction of large scale irrigation and drainage facilities need to be
developed for increased production and productivity. Scarcity of water for irrigation during
dry season in the recent years created serious problems. Water management system should be
improved.
Further, chronic electricity failures seriously disrupt irrigation facilities. Paddy agriculture of
Bangladesh relies heavily on irrigation. Major efforts need to be directed to increase electricity
production to mitigate this serious problem in agriculture
Agricultural production and distribution chains and networks need significant improvement.
This can be facilitated by better roads and highways, improved waterways, and better
managed shipping channels, docks, and sea-ports
Need to develop improved low-cost agricultural financing infrastructure to make loans and
credit available to farmers, particularly small and marginal farmers
Since public funds have scarcity, private funds form home and foreign investors can be
encouraged and promoted in the area of infrastructure development
Strategic alliances and partnerships with foreign companies and Bangladeshi expatriate
communities need to be developed and encouraged and supported


20
References
Ahmed, Moeen U. (2008). Food security of Bangladesh, The Daily Star, September
13, Dhaka, Bangladesh

Ali,Muhammad Mahboob and Nupur, Jannatul Mawa (2009). Consumers
perceptions and Quality assurance of agro-products of Bangladesh :Focus on
Organic foods specially Vegetables, fruits and crops, Journal of Business and
Technology (Dhaka),Vol.4, Issue:2, July-December

Battles, Ralph W., Robert C., Jr. and Thompson, Robert C., Jr. (2000).
Fundamentals of Agribusiness Finance, Blackwell Publishing

BBS (2008). Bangladesh Economic Review-2007, Bangladesh Bureau of Statistics,
Dhaka, Bangladesh

BBS (2009). Bangladesh Economic Review-2008, Bangladesh Bureau of Statistics,
Dhaka, Bangladesh

Beierlein, James G. and Woolverton, Michael W.(1991). Agribusiness Marketing-The
Management Perspective, Prentice Hall, NJ,USA

Deb, Uttam(2008). Agricultural Diversification in Bangladesh: Progress, constraints
and Policy issues, Emerging Issues in Bangladesh Economy, Rehman Sobhan
(series Editor) and S.R..Osmani (Volume editor), Centre for Policy Dialogue
and The University Press Limited, Dhaka, Bangladesh

Deb, Uttam and Zaman , Zaki-Uz (2007). Agribusiness in Bangladesh: Current
Situation and Challenges, Trading Up, Samar Verma (Editor), April-June

Dinar, Ariel et al.(1998). Measuring the impact of climate change in Indian
Agriculture, The World Bank,World bank Technical paper No.402

Dobson, William D. and Quader, Syeda Masarrat(2005).Doing business in an
industry with difficult economics: The experience of advanced technology
hatchery in Bangladeshs Shrimp Industry, The AIUB Journal of Business
and Economics, Vol.4, Special Issue, July

Drummond,H.Evan and Goodwin,John W.(2004).Agricultural Economics, Pearson
education,NJ,USA,2nd Edition

Erickson, S. P. et al.(2002). Agribusiness Management, McGraw hill,3rd edition.
Hossain, Mahabub and Bayes, Abdul (2009).Rural Economy and Livelihoods, A.H.
Development Publishing House , Dhaka, Bangladesh

http://pid.adb.org/pid/LoanView.htm?projNo=33224&seqNo=01&typeCd=3
http://www.boi.gov.bd/about-bangladesh/costs-of-doing-business/overview-of-costs-
taxation/8

http://www.researchandmarkets.com/reports/1080797

21
Islam,Tariq Saiful and Sarker, Md.Abdur Rashid (2003).A study of Livestock and
poultry population and production in North-Western Bangladesh, Bangladesh
Journal of Political Economy,Vol.18,No.1,June

Jahangir, S.M.(209). An Overview of Bangladesh Agriculture, Journalists views
State of Agriculture in Bangladesh-Secured Food, Secured Future, Kawser
Rahman and Reaz Ahmad (Editor), Palok Publishers,Dhaka, Bangladesh

Junaid, Zukhruf Binth (2005).Problems encountered by the peasants of Bangladesh in
Practicing agriculture and green marketing, The AIUB Journal of Business
and Economics,Vol.4,No.2, August

Karim, Muhammad et al. (2006). Dynamic Agribusiness-focused Aquaculture for
Poverty Reduction and Economic Growth in Bangladesh, Ministry of Fisheries
and Livestock Bangladesh shrimp and Fish Foundation Policy Working Paper,
World Fish Center, Malaysia

Khan, Azizur Rahman and Hossain, Mahabub (1989).The Strategy of Development in
Bangladesh, Macmillan, London

Kohls, R.L. and Uhl, J.N.(2002). Marketing of Agricultural products,Prentice-Hall,9th
edition

Lokman,Mohammad and Mazumder,Hossain (2011). Adapting agriculture to climate
change, The Daily Star, January 1

Meeakshi,J.V. and Poleman, Thomas T.(1994). Agricultural prices, Technology, and
Rural Employment in Andhra Pradesh and Maharashtra, The Indian Economic
Review,VolXXIX,No.2,July-December

Mellor , John W.(2008). Agricultural Development and Food Security, The Pakistan
Development Review, Vol.47, Issue:4, Part 1,Winter

Orr,David W. (1993). Agriculture and global warming in Agriculture and the
Environment, C.A.Edwards and M.K.Wali, D.L.Horn and F.Miller (Editors),
Elsevier, London

Palma , Porimol (2010): Food security faces stiff challenge-Climate change badly
affecting harvest, making it difficult to feed rising population, The Daily
Star,16 October, Dhaka, Bangladesh

Quasem, Dr. Md.Abul (2008). Development Strategies and Challenges ahead of
Bangladesh, Palok Publishers, Dhaka, Bangladesh

Rahman, K. Md. M. et. al.: Far, specific and farm size specific efficiency
measurements and related policies for Bangladesh Rice Crop, Bangladesh
Journal of Political Economy,Vol.21, N0.2

Sabur,S.A. and Rahman, M.H . (2004). Agribusiness of Poultry and Poultry Products
in Bangladesh, Bangladesh Journal of Political Economy,Vol.20,No.1,June

22
Sadhu,A.N. and Singh,A. (1989). .Fundamentals of Agricultural Economics,
Himalaya Publishing House,3rd Edition

The Independent (2010).Milk production declines in Pabna, Correspondent,
December 14

Vyler, Stefen De (1982). Agriculture in Chain, Zed Press, India

World Development Indicators, World Bank, Washington DC, USA,
www.worldbank.org

Yunus, Muhammad (2009). Creating a World without Poverty Social Business and
the future of Capitalism, Subarna, Dhaka, Bangladesh

Zhu , Xian and Sur, Mona (2008). High-value agriculture and agri-business in
Bangladesh, The Daily Star,18 February, Dhaka, Bangladesh