Page 144 - DECO303_INDIAN_ECONOMY_ENGLISH

Unit 8: Foreign Trade of India

This was only the beginning of the export market problems arising from substandard Notes
product safety and quality that Bangladesh’s shrimp industry faced over the next two
decades. This case study illustrates the actions taken by Bangladesh, with the aid of external
partners, to overcome substantial obstacles to participation in world shrimp markets.
The Need to Build a Safe Industry

Recognising both the potential for Bangladesh’s exports and the problems with safety and
quality of the product, the Food and Agriculture Organisation of the United Nations
(FAO) helped Bangladesh develop product standards, regulations, and fish inspection
schemes in the early 1980s. In 1983, the Bangladesh government created a Fish and Fish
Product Ordinance (Inspection and Quality Control) and in 1985 upgraded the inspection
laboratory and its personnel. FAO initiated a 1996 project to assist in the preparation of a
fish safety and quality control program for the shrimp and fish plants in Bangladesh,
based on the Hazard Analysis Critical Control Point (HACCP) approach. The program
provided training in HAACP procedures to both the public and private sectors. It also
informed the government about new requirements of major importing countries. A
parallel Common Fund for Commodities/FAO project carried out by the
Intergovernmental Organization for Marketing Information and Technical Advisory
Services for Fishery Products in the Asia Pacific Region (INFOFISH) focused on the export
promotion of value-added products and their sustainable development. Activities ranged
from industry training to the development of export opportunities. Despite these efforts
to upgrade product quality and safety, Bangladeshi shrimp exporters continued to suffer
from real problems and those that importers perceived as real. In 1997, the fourth leading
export item in Bangladesh was frozen shrimp and fish, with a 7.3 per cent share of the total
export market. The major importers at the time were the European Union (EU), accounting
for 34–50 per cent of Bangladesh’s exports, the United States at 23–38 per cent, and Japan at
15–26 per cent, depending on the year. At that time, the value per kilogram of Bangladesh’s
frozen shrimp was lower than average for the Asian region. Furthermore, Bangladesh had
a reputation for producing seafood that sometimes did not meet minimum international
standards as specified by the Codex Alimentarius Commission. With a low percentage of
the world market, a lower-valued product, and a negative reputation in quality, Bangladesh
has been a price taker, rather than a price-setter.
The EU BAN

On July 30, 1997, the EU banned imports of fishery products from Bangladesh as a result of
EU inspections of Bangladesh’s seafood processing plants. Inspections found serious
deficiencies in the infrastructure and hygiene in processing establishments and insufficient
guarantees of quality control by Bangladeshi government inspectors. The ban was estimated
to cost the Bangladesh shrimp-processing sector nearly US$15 million in lost revenues
from August to December 1997. (In this brief all dollars are US dollars.) The impact on
both the industry and the economy of Bangladesh was substantial. The only way Bangladesh
can improve its export position in the shrimp market is to improve the safety and quality
of its exports. Safety improvements over the last two decades, with a major effort in the
late 1990s, have been made by the industry and government, and by bilateral and
multilateral agencies providing technical assistance. While the short-term loss in foreign
currency from the EU ban was high for a developing country, the ban did increase the
commitment by industry and government to raise product quality to meet international
standards. Both exporters and government made major investments in plant infrastructure
and personnel training in order to achieve international technical and sanitary standards.
This included new employee acquisition and employee training, sanitation audits, plant
repair and modification, new equipment, new laboratories, and other costs.
Contd...

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