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Indian Economy

Notes Investing in Safety
Some upgrades were in progress at the time of the EU ban. By 1997, the Bangladesh shrimp
processing industry had invested $17.6 million in plant upgrades, the government had
invested $382,000 in laboratory and personnel upgrades, and outside partners had invested
$72,000 in training programs in Bangladesh. Unfortunately, these improvements were not
in placing early enough to prevent the ban. The total fixed investment cost of $18 million
was only slightly more than the nearly $15 million in lost revenue from the ban over a
period of five months. These improvements would have almost been paid for had they
been implemented in time to make the ban unnecessary. Research has also determined
that the annual recurring costs to maintain HACCP programs and meet international
standards would be $2.2 million for industry and $225,000 for government. Subsequent
inspections by the EU determined that some plant improvements now met EU standards.
Subject to certain provisions, the EU ban was lifted for six approved establishments for
products prepared and processed after December 31, 1997. By July 1998, a total of 11 plants
had been approved for export to the EU. Collective efforts by the industry, the Bangladesh
Department of Fisheries, and the Bangladesh Frozen Food Exporters Association have
continued to strengthen the export-processing sector. By 2002, out of 65 plants licensed for
export by the government, 48 plants had EU approval.
The Challenges Ahead
As the industry faces new challenges, ensuring safety and quality continue to be important
elements in industry development. One concern is the sustainability of shrimp production.
The revamped factories, having greater capacity, are mostly operating at about 20 per cent
of capacity due to limited supplies of shrimp. This has resulted in a growing focus on
sustainability in the production sector with increased emphasis on hatchery production of
shrimp post larvae for seeding the ponds, rather than harvesting from natural stocks. As
hatchery production expands, Bangladesh has also placed increased emphasis on good
aquaculture practices as well as certification of aquaculture facilities.

A second challenge is the need to become more diversified in terms of both products and
markets. A large number of export processors are now producing increasing amounts of
value-added products such as individually quick-frozen, peeled and deveined, and butterfly
cut shrimp, as well as cooked products. In 2001 these value-added exports made up almost
25 per cent of the total exports of 32,500 metric tons, valued at $363 million. Technical
assistance from FAO and INFOFISH continues to play a role in industry development by
transferring simple, low-cost technologies for adding value and by matching buyers and
sellers to facilitate market diversification. Industry and the government also continue to
upgrade the export sector as a whole. Improvements are making a difference because the
unit price of exports has risen steadily over recent years, in contrast to the sharp decline in
1997.
Some exporters are now recording an average unit price of more than $15 per kilogram, a
price comparable to that received by major exporters from the region. The average volume
of exports has also increased from about 24,000 metric tons in 1990–92 to about 30,200
metric tons in 1999–2001. Improvements in food safety have thus set the stage for Bangladesh
to become more competitive in the global market for seafood. Moreover, improvements
in the shrimp sector have undoubtedly impacted the seafood and food-processing sectors
as a whole, due to the intertwined nature of the food-processing industries in the country.
Even in 2002, however, Bangladeshi shrimp exporters did experience some safety problems,
and more testing laboratories were established.
Developing countries can often compete in world food commodity markets because export
products can be produced at a lower cost than in developed countries, provided the product
Contd...

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