Edited by Edited by Xiaobo Zhang
Shahidur Rashid Rashid Shahidur
and for Aquaculture for Enablers, Impacts, and the Path Ahead Ahead Path and the in Bangladesh The Making of a of Making The
The Making of a in Bangladesh Enablers, Impacts, and the Rashid Blue Revolution Path Ahead for Aquaculture & Zhang About IFPRI The International Food Policy Research Institute (IFPRI), established in 1975, provides research-based policy solutions to sustainably reduce pov- erty and end hunger and malnutrition. IFPRI’s strategic research aims to fos- ter a climate-resilient and sustainable food supply; promote healthy diets and nutrition for all; build inclusive and efficient markets, trade systems, and food industries; transform agricultural and rural economies; and strengthen institutions and governance. Gender is integrated in all the Institute’s work. Partnerships, communications, capacity strengthening, and data and knowl- edge management are essential components to translate IFPRI’s research from action to impact. The Institute’s regional and country programs play a critical role in responding to demand for food policy research and in delivering holis- tic support for country-led development. IFPRI collaborates with partners around the world.
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The Making of a Blue Revolution in Bangladesh Enablers, Impacts, and the Path Ahead for Aquaculture
Edited by Shahidur Rashid and Xiaobo Zhang
A Peer-Reviewed Publication
International Food Policy Research Institute Washington, DC Copyright © 2019 International Food Policy Research Institute (IFPRI).
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Recommended citation: Rashid, S., and X. Zhang, eds. 2019. The Making of a Blue Revolution in Bangladesh: Enablers, Impacts, and the Path Ahead for Aquaculture. Washington, DC: International Food Policy Research Institute. https://doi.org/10.2499/9780896293618.
This is a peer-reviewed publication. Any opinions expressed herein are those of the authors and are not necessarily representative of or endorsed by the International Food Policy Research Institute (IFPRI). The boundaries and names shown and the designations used on the maps do not imply official endorsement or acceptance by IFPRI.
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ISBN: 978-0-89629-361-8 DOI: https://doi.org/10.2499/9780896293618
Library of Congress Cataloging-in-Publication Data may be found on page vi. CONTENTS
Tables and Figures vii Abbreviations and Acronyms xi Foreword xiii Acknowledgments xv
Chapter 1 Introduction 1 Shahidur Rashid
Chapter 2 Sector Overview and Study Design 19 Shahidur Rashid, Kaikaus Ahmad, and Gracie Rosenbach
Chapter 3 Value Chain Transformation 31 Ricardo Hernandez, Ben Belton, Thomas Reardon, Chaoran Hu, Xiaobo Zhang, and Akhter Ahmed
Chapter 4 Cluster-Based Aquaculture Growth 57 Xiaobo Zhang, Qingqing Chen, and Peixun Fang
Chapter 5 Welfare and Poverty Impacts of Aquaculture Growth 77 Shahidur Rashid, Nicholas Minot, and Solomon Lemma
Chapter 6 Future Scenarios (Projections to 2050) 103 Paul Dorosh and Andrew Comstock
Chapter 7 Summary and Implications 143 Shahidur Rashid and Xiaobo Zhang
Authors 153 Index 155 Library of Congress Cataloging-in-Publication Data Names: Rashid, Shahidur, editor. | Zhang, Xiaobo, 1966– editor. Title: The making of a blue revolution in Bangladesh : enablers, impacts, and the path ahead for aquaculture / edited by Shahidur Rashid and Xiaobo Zhang. Description: Washington, DC : International Food Policy Research Institute, 2019. | Includes bibliographical references and index. Identifiers: LCCN 2019019949 (print) | LCCN 2019981222 (ebook) | ISBN 9780896293618 (paperback) | ISBN 9780896293625 (ebook other) Subjects: LCSH: Sustainable aquaculture—Bangladesh. | Aquaculture— Environmental aspects—Bangladesh. | Aquaculture—Social aspects— Bangladesh. | Sustainable fisheries—Bangladesh. Classification: LCC SH136.S88 M35 2019 (print) | LCC SH136.S88 (ebook) | DDC 639.8028/6095492—dc23 LC record available at https://lccn.loc.gov/2019019949 LC ebook record available at https://lccn.loc.gov/2019981222
Cover Design: Jason Chow Project Manager: John Whitehead, IFPRI Book Layout: BookMatters TABLES AND FIGURES
Tables 1.1 Bangladesh: Historical production trends (thousand metric tons) 8 1.2 Bangladesh: Historical fish consumption trends 9 1.3 Bangladesh: Historical fish price trends 10 1.A1 Local, common English, and scientific fish names of selected varieties 17 2.1 Area and production of fish in Bangladesh, 2014–2015 21 2.2 Zones and sampled districts 27 3.1 Definitions of actor size, by actor type 33 3.2 Zone characteristics 34 3.3 Structural change in hatchery clusters over 10 years 37 3.4 Structural change in feed mill clusters over 10 years 38 3.5 Structural change in feed dealer clusters over 10 years 39 3.6 Structural change in fish farmer clusters over 10 years 40 3.7 Landholdings and tenancy by year and zone 41 3.8 Factor productivity in 2013 42 3.9 Structural change in rural fish trader clusters over 10 years 42 3.10 Disposal of fish farm harvest by final user type, 2013 46 3.11 Disposal of fish farm harvest by final user location, 2013 47 3.12 Aquaculture production by fish category, 2008 and 2013 50 3.13 Fish farm capital-to-labor ratio by year and zone 53 4.1 The spatial linkage of the fish supply chain 62
vii viii Tables and Figures
4.2 Principal component analysis 63 4.3 Clustering measures at the district level, 2003, 2008, and 2013 63 4.4 Fish farmers’ specialization in output and adoption of modern inputs, 2008 and 2013 66 4.5 OLS estimates on the relationship between clustering and output specialization 68 4.6 Regressions on the relationship between clustering and adoption of modern inputs 69 4.7 Horizontal cooperation among fish traders and feed dealers, 2013 70 4.8 Probit regressions on the relationship between clustering and cooperation 72 4.9 Probit regressions on the relationship between clustering and different types of cooperative behaviors 74 5.1 Trends in fish production in Bangladesh, 1983/1984– 2012/2013 80 5.2 Changes in annual per capita fish consumption (kilograms per person per year) in Bangladesh, 2000–2010 82 5.3 Net positions of households in aquaculture fish in Bangladesh 92 5.4 Impacts of aquaculture growth on household income 94 5.5 Impacts of aquaculture growth on poverty reduction 96 6.1 Bangladesh: Expenditure elasticities by fish production system (QUAIDS model estimates) 109 6.2 Bangladesh: Econometric estimates of price elasticities of demand for fish, 2000, 2005, and 2010 110 6.3 Model variables and parameters 113 6.4 Model simulation assumptions for fish productivity growth 115 6.5 Model simulation assumptions for population and income growth 116 6.6 Bangladesh fish production and prices: Simulation results 116 6.7 Bangladesh fish consumption: Simulation results (per capita consumption) 118 6.A1 Demographic variables used in the econometric estimation of household demand parameters, 2000, 2005, and 2010 126 Tables and Figures ix
6.A2 Share and price variables: Descriptive statistics, 2000, 2005, and 2010 128 6.A3 Bangladesh fish exports, 2000–2014 (thousand metric tons) 130 6.A4 Scientific names for all fish by category 130 6.A5 Own-price elasticity estimates using the Linear Expenditure System (LES) 131 6.A6 Cross-price elasticity estimates using the Linear Expenditure System (LES) 132 6.A6a Alternative specifications of expenditure elasticity parameters, 2000, 2005, and 2010 133 6.A6b Alternative specifications of price elasticity parameters, 2000, 2005, and 2010 134 6.A7 Model calibration 140 6.A8 Bangladesh fish production and prices: Simulation results (alternative parameters) 140 6.A9 Bangladesh fish consumption: Simulation results (alternative parameters) 141 6.A10 Bangladesh fish production projections to 2015 142
Figures 3.1 Average weekly consumption per capita of the 10 most consumed fish species in rural Bangladesh 49 4.1 Twenty sample districts in fish-clustering areas 59 4.2 Distributions of number of actors per 1,000 rural people in 2013, by districts 60 4.3 Degree of fish clustering of sample districts, 2013 65 4.4 Clustering versus cooperation among input dealers and traders 71 4.5 Clustering and accessibility to truck rental companies 75 5.1 Real prices (2010 = 100) of selected fish varieties in Bangladesh, 1986–2014 84 6.1 Simulation results: Bangladesh fish production (thousand metric tons) 119 6.A1 Model validation: Production by fish system (million metric tons) 125
ABBREVIATIONS AND ACRONYMS
ADB Asian Development Bank BBS Bangladesh Bureau of Statistics BDT Bangladeshi taka BFDC Bangladesh Fisheries Development Corporation BFRI Bangladesh Fisheries Research Institute BIHS Bangladesh Integrated Household Survey CAPI computer assisted personal interviews CPI Consumer Price Index DID difference in differences DoF Department of Fisheries EA enumeration area EU European Union FAO Food and Agriculture Organization of the United Nations GAP good aquaculture practices GDP gross domestic product gm grams GMP good manufacturing practices GoB Government of Bangladesh ha hectare HES Household Expenditure Survey HH household HHI Hirschman–Herfindahl Index HIES Household Income and Expenditure Survey ICLARM International Center for Living Aquatic Resources Management (WorldFish)
xi xii abbreviations and Acronyms
IFPRI International Food Policy Research Institute IMPS integrated multipurpose sample kg kilogram km kilometer LES Linear Expenditure System MoFL Ministry of Fisheries and Livestock MPC marginal propensity to consume MT metric ton MT/ha metric tons per hectare NBR net benefit ratio NFP National Fisheries Policy NFS National Fisheries Strategy NGO nongovernmental organization OLS ordinary least squares PCA principle component analysis PPS probability proportion to size PRSSP Policy Research and Strategy Support Program PSU primary sampling unit QUAIDS Quadratic Almost Ideal Demand System RNI recommended nutritional intake SIS small indigenous species SMA significant metropolitan area US$ US dollar USAID United States Agency for International Development VC value chain FOREWORD
Fisheries and aquaculture are becoming increasingly important subsectors within the national food system in many developing countries. This broad trend has important implications for food and nutrition security, global trade, and overall livelihoods. Thus, it is no surprise that fisheries feature promi- nently in many of the United Nations Sustainable Development Goals (SDGs) and have a very direct relationship to SDG 14 (Life Below Water). Given this context, IFPRI initiated several country case studies to better understand the fish value chain’s transformation in certain developing coun- tries. Bangladesh has been one of the first developing countries to undergo such a transformation. In the past two decades, production of culture fish in the country has quadrupled, real prices of most common fish varieties have declined, and fish consumption has increased from about 13 kg in 2000 to over 20 kg in 2016. More importantly, as this book highlights, the consump- tion growth has occurred across the lines of gender, region, and income quin- tile, with poorer households benefiting more than other groups. Since fish is the single largest animal-sourced food item in the Bangladeshi diet, the growth in aquaculture and fisheries has played an important role in improving nutritional outcomes. The success of Bangladesh’s aquaculture sector is so remarkable that it is commonly dubbed a “Blue Revolution.” Drawing on modeling exercises and primary surveys, as well as analysis of secondary data, this book presents evi- dence on the drivers, impacts, and prospects for promoting aquaculture in Bangladesh. Results from the primary fish value chain suggest that the aquaculture sector has indeed experienced a dramatic transformation. There are clear
xiii xiv Foreword
indications of disintermediation (that is, fewer actors per unit of output in the value chain), which has reduced transaction costs; fish production has become increasingly clustered to take advantage of agglomeration effects; and the rate of adoption of modern fish varieties and improved farming practices has increased. Given increased investment, the projection analysis indicates that the country has prospects for further growth in fish production, with supply outpacing demand, which in turn is likely to benefit the poor. However, as the authors point out, more data collection and analysis need to be carried out to adequately account for factors such as sustainability and habitat degradation. At a broader level, making a Blue Revolution in Bangladesh through aqua- culture is consistent with the country’s comparative advantage—that is, numerous ponds and abundant laborers. Just as the availability of cheap labor fueled the garment export boom, the more efficient use of water and people has triggered the boom in the aquaculture sector. This book provides a sys- tematic assessment of the Blue Revolution, highlighting opportunities and challenges, which will shed light on many issues of economic transformation in developing countries. I believe that the book’s analytical framework and survey results will be valuable for policymakers and future researchers.
Shenggen Fan Director General ACKNOWLEDGMENTS
The conceptualization of this book’s research was initiated under IFPRI’s Policy Research and Strategy Support Program in Bangladesh, funded by the United States Agency for International Development. The initial idea was to produce a value chain report, but early field visits and stakeholders’ consulta- tions indicated that additional research was needed to better understand the unprecedented transformation in the sector. Thus, IFPRI supported addi- tional work through the CGIAR Research Programs on Policies, Institutions, and Markets (PIM) and Agriculture for Nutrition and Health (A4NH), the European Commission, and the Swiss Development Corporation. We are thankful to these agencies for their financial support. The editors are indebted to many colleagues for their intellectual insights and analytical support. We have benefited from discussions with Akhter Ahmed, Paul Dorosh, Nurul Islam, and Shahidur R. Khandker. Their insights have contributed greatly to improving the content and structure of this book. Our special thanks go to Maximo Torero, who was at the time a division director at IFPRI, for generously supporting the additional work. We express our gratitude to Syed Mahmudul Hoque, chairman of the Bangladesh Shrimp and Fish Foundation, for sharing his deep understanding of the fish- eries sector in Bangladesh. Mr. Hoque’s insights on emerging challenges in the sector continue to inspire us to undertake future research on sustainable fish- eries development. Key messages from the book have been presented in sev- eral conferences—notably the 30th International Conference of Agricultural Economists of the International Association of Agricultural Economists, held in Vancouver in 2018, and the Regional Strategic Analysis and Knowledge Support System for Asia (ReSAKSS-Asia) conference, held in Bangkok in
xv xvi Acknowledgments
December 2017. The editors have benefited from the comments of the partici- pants in those conferences. We owe a great deal to a talented pool of survey experts, research analysts, and copy editors for their support. The stacked value chain survey was admin- istered by IFPRI’s longtime survey partner in Bangladesh, Data Analysis and Technical Assistance Limited (DATA). We are grateful to Zahidul Hasan, Mohammed Zobair, and other DATA staff members for successfully imple- menting the survey and conducting initial analysis. Solomon Lemma, Sarah McMullen, Qingqing Chen, and Redwan Rokon provided analytical sup- port to the researchers in Washington; and Nusrat Hossain, Latiful Haque, and Arifeen Akter from IFPRI-Dhaka helped administer surveys and con- duct analysis in Bangladesh. We are thankful to Gracie Rosenbach and Jenny Smart for their invaluable support in preparing the manuscript; and John Whitehead for overseeing the book’s production process. Finally, we are grateful to IFPRI’s Communications and Public Affairs Division and the Publications Review Committee (PRC) for efficiently man- aging the book’s production and peer review process. Two rounds of com- ments by three anonymous reviewers have greatly improved the quality of the manuscript. We would like to thank the PRC chair, Professor Gerald Shively, for efficiently managing the review and adding his own comments and sug- gestions on the manuscript. We are also grateful for the editorial help from Gracie Rosenbach and Jenny Smart during proofing. Any errors are of course the authors’ own. Chapter 1
INTRODUCTION
Shahidur Rashid
The Blue Revolution in the Food Security Debate In the last half of the 20th century, food policy in most Asian countries meant ensuring availability of cereals, mainly rice and wheat.1 The rationale for this cereal-centric policy is well understood. Agricultural productivity was low, the world market was volatile, and the national food security depended on, apart from Mother Nature, the relationship with the donor countries, which was not smooth because of ideological differences. By the early 1960s, feed- ing a rapidly growing population became a daunting challenge for the region’s countries. Many experts viewed these challenges as too big to handle. “Famine 1975” (Paddock and Paddock 1967), “lifeboat ethics” (Hardin 1974), and “triage” (Ehrlich 1971) were the labels commonly applied to these countries. Thanks to Green Revolution technology and concerted policy actions, none of the dire predictions turned out to be true. By the 1980s, countries in the region ensured cereal availability and began to enjoy overall economic growth (Rashid, Cummings, and Gulati 2007). However, just when the countries began to celebrate the success of the Green Revolution, a different kind of food security challenge surfaced. Several studies demonstrated that human nutrition, in terms of the consumption of various nutrients, was not responsive to the income growth that the countries were enjoying. One of the first powerful studies on the issue, Behrman and Deolalikar (1987), demonstrated that a 10 percent increase in income leads to only a 1.7 percent increase in total calorie consumption in India. For some nutrients, such as iron and calcium, the estimates were negative, implying that consumption of these nutrients declined with increases in income. Similar evi- dence began to emerge from other countries in Asia, including Bangladesh (Pitt 1983) and the Philippines (Bouis and Haddad 1992; Bouis 1994), and more studies on India (Behrman and Deolalikar 1990). The literature grew
1 It is believed that the term “Blue Revolution” was first coined in a 2003 article of the Economist magazine.
1 2 chapter 1
rapidly, and studies have appeared from more diverse countries such as Fiji (Gibson and Rozelle 2010) and Tanzania (Abdulai and Aubert 2004). While a more detailed discussion on the literature is beyond the scope of this chap- ter, the evidence of the low responsiveness of nutrition to income growth has been influential. It challenged the conventional wisdom—as well as the widely accepted policy prescription—that poverty was the root cause of malnutrition and hence income growth would solve the problems of both poverty and mal- nutrition.2 Thus, despite the success of the Green Revolution, this strand of literature called for rethinking development strategies in Asia. This was particularly true for Bangladesh. Haunted by the memories of famine and food price–related political instabilities, Bangladesh had histori- cally placed more emphasis on increasing rice production than any other coun- try in the region. By the late 1980s, these policies began to pay off—the Green Revolution started taking root, rice prices began falling in real terms, and the country enjoyed overall economic growth. However, all these successes did not translate into improvement in a key aspect of food security: nutri- tional well-being. One of the first studies presenting such evidence, Pitt (1983) demonstrated that the expenditure elasticity of demand for nutrients was < 1 for all nutrients for the poor households, and for seven out of nine nutrients among richer households. Subsequent studies examined the causes behind the nonresponsiveness of nutrients to income. Bouis and Novenario-Reese (1997) reported that the primary reason for micronutrient deficiencies was low- quality diets that resulted from (1) unaffordability of richer sources of nutri- ents, such as fish; (2) lack of nutritional knowledge; and (3) discrimination in intrahousehold food allocation.3 Fish is the single largest animal-sourced food item in Bangladeshi diets, accounting for more than 60 percent of the animal-sourced protein (FAO 2005) in an average daily diet.4 However, fish prices continued to rise from the mid-1980s through early 2000 (Chapter 5). Concerns about rising fish prices, in particular among policymakers, were widespread, as many studies expressed doubts whether this price trend could be reversed. In presenting his research on commercial vegetable and polyculture fish in Bangladesh, Bouis (2000,
2 For detail, see World Bank 1981, 59. 3 Of these three factors, only the first one can be addressed by improving market fundamentals. The latter two are related to information asymmetry and sociocultural factors, which require a different set of policies than addressing rising prices. 4 These estimates are most likely from the 1990s reflected in the HIES 2000 round. Since then, per capita annual consumption of fish has increased from 13 kilograms in 2000 to over 23 kilo- grams in 2016. Therefore the share of animal-sourced protein from fish in Bangladeshi diets is presumed to have gone up further. Introduction 3
486) contended that “although inflation-adjusted cereal prices in Bangladesh have fallen by 40% over the last 25 years (a remarkable achievement), real prices of lentils, vegetables, and animal products have increased by 25% to 50%. Real fish prices have perhaps doubled. Dietary quality for the poor may be declining over time due to these price effects.” The literature expressing concerns about the rising prices was centered around three core themes. First, there were concerns about promoting aqua- culture, as experts predicted that such a policy would have negative conse- quences on the environment and the open water system (Minkin and Boyce 1994), which has historically been the source of fish for the poor. The second theme was that, even if modern aquaculture was promoted, it was unlikely to benefit the poor. The argument was that, since aquaculture requires land and capital, the poor would be left out, resulting in greater inequality. One of the CGIAR centers, the International Center for Living Aquatic Resources Management (ICLARM), expressed similar concerns.5 Using survey data from two upazilas (subdistricts) in the early 1990s, the study reported that, even though a large portion of the households in the survey sites were land- less, all pond owners or operators owned land (Ahmed and Lorica 2002). Finally, the third theme of the earlier literature, experts were skeptical about the capacity of the smallholders in promoting modern aquaculture. In gen- eral, nonshrimp aquaculture was believed to be backward with little chance of meeting the growing demand. For instance, Lewis (1997) concluded that, despite all the attention and centrality of fish in Bangladeshi culture, exist- ing aquaculture practices were inadequate to deal with the shortfall in fish demand. The central part of the earlier predictions—that is, rising fish prices—did not come true. Sectoral statistics and readily available secondary data demon- strate this. The key trends in the fisheries sector began to reverse in the early 2000s. Production of cultured fish more than doubled between 2000 and 2010, from about half a million metric tons to 1.3 million metric tons, with much of the growth coming from pond fisheries.6 The corresponding changes in the real prices and consumption have been unprecedented: the real price of common aquaculture fish, such as carp, declined by about 45 percent; and per capita annual fish consumption jumped from only 7.7 kilograms in 1980
5 “CGIAR” was originally the acronym for the Consultative Group on International Agricultural Research. In 2008, CGIAR redefined itself as a global partnership. To reflect this transforma- tion and yet retain its roots, “CGIAR” was retained as a name. CGIAR is now a global research partnership for a food secure future. 6 Chapter 5 presents a detailed analysis of production and price trends. 4 chapter 1
(FAO 2014) to 13 kilograms in 2000, and to more than 18 kilograms in 2010.7 Other studies show even higher estimates. For instance, in a recently published report on the Household Income and Expenditure Survey (HIES), the Bangladesh Bureau of Statistics (BBS) estimated per capita annual con- sumption to be even higher, at 23 kilograms (BBS 2017). Similarly, based on the Bangladesh Integrated Household Survey (BIHS) of 2011–2012, Ahmed et al. (2013) reported fish consumption by rural households to be 23.50 kilo- grams per person per year.8 Since the volume of aquaculture fish export is small, growth in aquacul- ture benefited the country in many ways. In addition to economic value addi- tion and employment generation, this has contributed to improving food and nutritional security in the country. For instance, estimates from the Bangladesh HIES suggest that fish consumption by the bottom quintile of the population increased by 57 percent between 2000 and 2010. Fish is the most important source of high-quality protein and essential fatty acids (Roos et al. 2007); it is the most frequently consumed animal-source food across all social strata in Bangladesh (Toufique and Belton 2014). Therefore the growth in consumption has far-reaching implications for the economic and nutritional well-being of the country’s overall population. Aquaculture in Bangladesh can thus serve as an excellent case study to help in understanding the role of fisheries in the food security debate. The cen- tral argument has been that nutrient-rich food will continue to be expensive and out of the reach of the poor. This implies that the aquaculture sector will remain traditional and nonresponsive to broader economic changes. However, quite contrary to this assumption, the recent growth in Bangladeshi aquacul- ture appears to have been triggered by supply responses to increased consumer demand for fish. There have been massive aggregate investments by the value chain actors, including farmers, feed millers, hatcheries, nurseries, input deal- ers, and all types of traders. The fish value chain in Bangladesh today is much different from what it was only a couple of decades ago (Chapter 3 details this value chain transformation). The next section discusses why a systematic assessment of this transformation, which has hitherto been lacking, is impor tant for a better understanding of its contribution to employment, income, and poverty reduction.
7 The statistic for 1980 is per capita supply, used to infer per capita consumption. 8 This is the sum of small and large fish consumption estimates presented in Table 6.5 in Ahmed et al. 2013. Introduction 5
Fish Production Systems There are three primary systems of fish production in Bangladesh: aquacul- ture, inland capture, and marine capture.9 Each system has its own unique trend and faces unique constraints. To provide context for the analysis throughout this book, we detail each system below.
Aquaculture There are a variety of aquaculture methods practiced in Bangladesh—from cage production to the use of floodplains. However, the dominant method by far is that of pond culture, accounting for nearly 86 percent of total aqua- culture. The two main pond culture methods are “homestead pond culture” and “entrepreneurial pond culture.” Homestead farm culture developed from small ponds used by individual households to supplement consumption and sometimes income. Often not the primary source of income for a household, these homestead farms have accounted for increasingly large shares of income over the past few years. A major constraint for these types of ponds is low pro- ductivity, although opportunities to raise productivity through improved practices exist. Numerous development projects have been implemented in recent years, but to date the results have been mixed, with slow uptake of new technology, leading to relatively small productivity gains (Belton et al. 2011; Bloomer 2012). Entrepreneurial ponds have been started with the expressed intent of being a primary source of income. These ponds produce at much larger scales, requiring greater access to input markets and labor (Belton et al. 2011). Entrepreneurial ponds face constraints as well. Access to finance is one of these, as farmers find it difficult to reliably access loans and other sources of capital (Bloomer 2012). Although improvements in seed and input markets have contributed to recent growth in aquaculture, low access to inputs still represents a key constraint in further improvements. Competition for space and resources with agriculture is also a concern (FAO 2014).
Inland Capture Inland capture production covers the more traditional fishing systems involv- ing the capture of wild fish from streams, rivers, and lakes. Inland fisheries often either do not use boats, or only use small, nonmotorized boats, or are
9 The material in this section has been generously provided by Dorosh and Comstock (see Chapter 6). 6 chapter 1
small-scale. The types of various freshwater fish (including barbs, tilapia, koi, and medium catfish) produced from inland capture have long been a staple in the Bangladeshi diet and are often preferred by the local population to fish produced via aquaculture (FAO 2014). However, production in this sector has clearly begun to lag that of aquaculture ponds. The main constraints facing inland capture are habitat loss (due to urban- ization and agricultural intensification), pollution leading to environmen- tal stress, and overexploitation of resources (Belton et al. 2011). Recurring floods and natural disasters have also led to major losses of habitats. In par- ticular, intense floods have recently degraded portions of traditional inland capture fisheries. These disasters are only expected to become more frequent due to climate change, to which Bangladesh is particularly vulnerable (Ghose 2014).
Marine Capture Finally, marine capture refers to all fish production coming out of marine fisheries. As with inland capture, marine capture is mostly dominated by small-scale fisheries (in this case, using boats). However, a semi-industrialized fishery sector and a small industrial sector (FAO 2014) also exist. A signifi- cant constraint facing marine fishing is that of overfishing. Exploitive fishing practices have hindered long- and short-term prospects, as have challenges in establishing co-management areas (Ghose 2014). Another constraint facing marine fishing, according to Belton et al. (2011), is the difficulty of meeting international standards for the products. Marine fish (especially shrimp) pro- ducers have struggled to maintain the quality standards demanded by most large importers of shrimp, including the United States. Maintaining these standards would provide a significant boon to the viability of marine produc- tion exports. In July 1997 the European Union (EU) banned imports of fish produced in Bangladesh (most Bangladesh fish exports are from marine fisheries). The ban was initiated as a result of EU inspections of Bangladeshi fish processing plants. The plants were found to be in serious violation of EU standards for seafood products and lacking in quality controls. Overall, the ban is estimated to have cost Bangladesh US$15 million in just five months. In the subsequent years, Bangladesh addressed the issues that led to the ban, and exports to the EU began to open up again. However, with ever-changing quality standards, it will continue to be an issue that must be consistently re-evaluated (Cato and Subasinge 2003). Introduction 7
Historical Trends Aquaculture has become increasingly prominent in the fish production mix of Bangladesh over the past 15 years. According to BBS data, aquaculture’s share of fish production increased from 30 percent to 47 percent from 2000 to 2015. In addition, the BBS HIES data shows a kilogram per capita increase of 3.3 to 7.2 from 2000 to 2010. Table 1.1 shows production levels for 2010, which are estimated from the shares of consumption of various types of freshwater fish from the 2010 HIES multiplied by the 2010 total freshwater fish produc- tion figures from BBS. Since BBS disaggregates production into only two cat- egories (aquaculture and inland capture), growth rates for the three categories shown (aquaculture, mixed, and inland capture) differ from the BBS produc- tion figure growth rates. (Definitions of marine fish are consistent across both the BBS and the HIES.) Estimates of production for aquaculture and inland capture for 2000 were constructed using Dorosh and Comstock’s 2010 production estimates and the 2005–2010 BBS production growth rates for these categories; mixed system production was estimated as the residual. Figures for production of aquacul- ture and inland capture for 2000 to 2015 are estimated using the calculated figures for levels of production in 2000 and the historical growth rate of these categories from 2010 to 2015 as calculated from BBS production data. The table shows just how rapid aquaculture growth has been as compared with the three other fish categories. The fourth type of fish production system (called “mixed”) contains the fish consumed in the HIES data that we could not accurately account for being produced via aquaculture or inland capture because of the heterogeneous systems used to produce some types of fish.10 Aquaculture production has grown from 498,000 metric tons to over 1,700,000 metric tons in the 15 years shown in the table. Inland capture only grew from 369,000 metric tons to 414,000 metric tons. Mixed and marine categories grew more than did inland capture, but both did not achieve nearly the same levels of growth as that of aquaculture. These levels of growth are mirrored by the annual growth rates shown below them in the table. Aquaculture had an annual growth rate of nearly 9 percent for the 15-year period in question, while growth in inland capture was less than 1 percent.
10 The categorization of the fish was taken from Toufique and Belton 2014. The full breakdown is pro- vided in Table 6.A4. Dorosh and Comstock’s categorization classifies shrimp as inland capture rather than marine. 8 chapter 1
Table 1.1 Bangladesh: Historical production trends (thousand metric tons)
Inland Year Aquaculture capture Mixed Marine Total 2000 498 369 460 334 1,661 2001 541 372 395 379 1,688 2002 588 375 512 415 1,890 2003 638 378 550 432 1,998 2004 693 381 573 455 2,102 2005 753 384 605 475 2,216 2006 818 387 645 480 2,329 2007 888 389 675 487 2,440 2008 964 392 709 498 2,563 2009 1,047 395 744 515 2,701 2010 1,138 398 846 517 2,899 2011 1,235 401 832 546 3,015 2012 1,342 404 987 579 3,312 2013 1,457 408 956 589 3,410 2014 1,583 411 945 595 3,534 2015 1,719 414 934 600 3,667 Annual percentage growth rates 2000–2005 8.6 0.8 5.6 7.3 5.9 2005–2010 8.6 0.8 6.9 1.7 5.5 2010–2015 8.6 0.8 2.0 3.0 4.8 2000–2015 8.6 0.8 4.8 4.0 5.4
Source: BBS (2000, 2005, and 2010) and Dorosh and Comstock’s calculations (Chapter 6). Note: Historical production trends were calculated by estimating the “mixed” category proportion based on HIES 2010 data, adjusting backward to 2000 using the 2005–2010 growth rate, and then projecting forward using the 2010–2015 growth rate.
Growth in marine fish production has likewise been slow, although growth accelerated slightly after 2010. The consumption data from the HIES (Table 1.2) mirrors this pattern of the increasing importance of aquaculture and the decreasing importance of inland capture. In both rural and urban areas, aquaculture fish consump- tion increased faster than fish consumption from other production systems, from 3.76 kilograms per capita in 2000 to 7.41 kilograms per capita in 2010 in urban areas. Meanwhile, per capita consumption of inland capture system Introduction 9
Table 1.2 Bangladesh: Historical fish consumption trends
2000 2005 2010 Rural Urban Rural Urban Rural Urban Kilograms per capita Aquaculture 3.21 3.76 5.12 5.79 7.10 7.41 Mixed 4.38 3.82 4.95 4.57 5.07 6.27 Inland capture 3.58 3.47 2.64 3.31 2.33 3.15 Marine 1.76 3.41 1.42 3.91 1.51 4.36 Total fish 12.92 14.46 14.14 17.57 16.01 21.19 Consumption value shares (%) Aquaculture 3.1 3.7 4.0 4.5 5.4 5.2 Mixed 4.0 3.6 3.9 3.8 4.2 4.8 Inland capture 3.5 3.5 2.4 3.0 2.0 2.6 Marine 2.1 3.5 1.8 3.6 2.0 4.4 Total fish 12.7 14.3 12.2 14.9 13.6 16.9
Source: Dorosh and Comstock’s calculations (Chapter 6) from BBS 2000, 2005, and 2010. Note: Per capita kilograms are per year. fish declined, from 3.47 to 3.15 kilograms per capita in urban areas over the same time period. In the other two categories, mixed sees some increase (to be expected as this category contains some aquaculture) and marine slightly declines in rural areas and slightly increases in urban areas (again, expected since it is somewhat of a luxury item). The shares of fish in total expenditures, turning to value shares, in 2000, for urban areas consumed a larger share of aquaculture relative to total con- sumption than did the rural areas. However, by 2010 the rural areas were con- suming a larger share of aquaculture. This is most likely due to the expanding production and lower prices (Table 1.3). Urban areas also see much higher rates of consumption for marine fish, which, per the HIES data, are the most expensive of the fish produced in Bangladesh. Finally, price indexes for the four types of fish production from 2000 to 2010 are presented in Table 1.3. These price indexes were calculated using weights based on household expenditure shares in the 2010 HIES. Dorosh and Comstock use the consumer price index (CPI) as a price deflator to con- vert all prices to real 2010 prices. For purposes of presentation, however, we rescale the indexes such that 2000 = 100. As shown, prices of fish from most of the production systems have increased over time, with real prices 10 chapter 1
Table 1.3 Bangladesh: Historical fish price trends
2010 Price indexes %Δ %Δ %Δ value 2000– 2005– 2000– Major group Fish name weights (%) 2000 2005 2010 2005 2010 2010 Aquaculture Rui/Katla/Mrigel/ 35 0.960 0.812 1.000 −19 23 4 Kalibaus Silver carp/Grass 30 0.954 0.777 1.000 −22 29 5 carp/Minor carp Pangas/Boaal/ 34 1.484 0.909 1.000 −9 10 −33 Bagair Total primarily agriculture 1.138 0.835 1.000 −17 20 −12 Mixed Magur/shing/Shin- 5 0.758 0.681 1.000 −32 47 32 gi/Lal Kholisha Koi 8 0.481 0.688 1.000 −31 45 108 Mala-kachi/Chala- 26 0.855 0.769 1.000 −23 30 17 chapila Bhadi Puti/ 60 0.851 0.765 1.000 −24 31 17 Tilapia/Nilotica Total mixed 0.816 0.755 1.000 −24 32 23 Inland capture Shol/Gojar/Taki 25 0.803 0.745 1.000 −25 34 25 Tengra/Pakal 12 0.695 0.694 1.000 −31 44 44 Nuna baila/Tepa 3 0.808 0.781 1.000 −22 28 24 Shrimp 40 0.649 0.669 1.000 −33 50 54 Other 19 0.748 0.725 1.000 −27 38 34 Total inland capture 0.718 0.706 1.000 −29 42 39 Marine Ilish 35 0.623 0.652 1.000 −35 53 61 Dried fish 51 0.693 0.693 1.000 −31 44 44 Sea fish 14 0.873 0.714 1.000 −29 40 15 Total marine 0.693 0.682 1.000 −32 47 44
Source: Dorosh and Comstock’s calculations (Chapter 6) from BBS 2000, 2005, and 2010. Fish names by type extracted from Toufique and Belton 2014. Note: Price indexes are in real terms where 2010 = 100. Scientific names for all fish are listed inTable 6.A4. of fish from mixed, inland capture, and marine systems rising by 23, 39, and 44 percent, respectively. Prices of fish produced in aquaculture systems declined by 12 percent, reflecting an increase in supply relative to demand.
The Blue Revolution, Its Drivers, and Implications Declining trends in the real price of fish, in the face of a growing population and increasing demand for fish, implies that there has been a transformation Introduction 11
in the aquaculture sector in Bangladesh. The factors behind the process of transformation can be broadly grouped into (1) improved technology, (2) reduced transactions costs, and (3) innovation in the value chain. Improved technology includes the introduction of modern fish varieties, improved farm- ing practices (for example, use of modern inputs), as well as postproduction marketing practices. Until the early 1990s, there were practically no com- mercial pond fisheries in the country. For instance, although Bangladeshis have historically produced and consumed pangas catfish, commercial pro- duction of non-native pangas began only in 1993 and expanded rapidly, with total production reaching 300,000 metric tons by 2008.11 This rapid com- mercialization has a value proposition in that net returns per unit of land are much higher for new varieties of aquaculture fish than other commodities. Total production per hectare currently averages 40 metric tons of some high- yielding varieties (Belton et al. 2011), which is worth about US$52,000 at cur- rent prices, several times more than the revenue generated from 3 metric tons of rice produced in the same amount of land. Reduction in transaction costs has come through improved infrastruc- ture, better access to information, and reduced marketing risks. Roads, access to telecommunication, and rural electrification have improved dramatically. The following statistics from the World Bank (2017) illustrate the improve- ment: Between 2000 and 2010, the decade in which aquaculture experienced the most growth, there was a large increase in total road length, rural house- holds with electricity went from 20 to 50 percent, and cell phone ownership soared from 0.2 percent to about 75 percent. This has contributed to lowering the costs of fish trade. Just a couple of decades ago, both production and trad- ing of fish embodied great risks. Farmers relied mostly on their luck when they took their catch to market, as they neither knew the price nor had the options to store their fish. There have been remarkable changes in the value chain as well. There are clear indications of disintermediation—that is, fewer actors per unit of output in the value chain. For instance, our survey shows that the number of traders has increased from 14,800 in 2000 to 31,300 in 2014 (Chapter 6), while cul- ture fish production has increased from about 500,000 metric tons to almost 2 million metric tons. Instead of farmers selling to local retailers, markets have moved closer to the farmers, where agents of the processors and large whole- salers compete to buy fish in rural markets. Also, there is now more direct
11 Local English names of fish are used throughout this book. Table 1.A1 provides the local name, com- mon English name, and scientific name of all fish mentioned in this chapter. 12 chapter 1
marketing from the production areas to the terminal markets. This process has both efficiency and equity implications. Disintermediation makes value chains more efficient because it decreases marketing costs and hence sup- plies the commodity at a lower price to the consumers. However, it has equity implications as small-scale traders are eliminated from the value chain. From a policy standpoint, it is important to understand the winners, losers, and net gains from the transformation. A robust analysis of these changes is important on several grounds. The Government of Bangladesh can benefit from such analysis in revising or refor- mulating fisheries policies. The country’s national fisheries policies are dated. Although new subsector policies have recently been adopted—related to shrimp culture (2014), the leasing of shrimp culture plots (2013), and the reg- ulation regarding the use of government-owned water bodies (2009)—the government still relies on a set of national fisheries policies that was adopted in 1998 (Bangladesh, DoF 2017). Development partners have invested quite heavily in the aquaculture in Bangladesh. Citing other studies, Toufique and Belton (2014) report that, in addition to large-scale sectoral investments, 10 donors invested roughly US$275 million during 1990–2003 on fisheries proj- ects in Bangladesh. However, while there are ex post evaluations of these proj- ects, the donors’ investments should be guided by the broad understanding of the sector’s transformation.
Research Questions and Analytical Approach This book focuses exclusively on the nonshrimp part of aquaculture in Bangladesh. The rationale for such a focus is twofold: (1) it is nearly all domes- tically consumed; and (2) it has important implications for poverty and food security. For decades, the word “aquaculture” was associated with shrimp, as shrimp had become an important export item in the 1980s and made fre- quent news headlines when importing countries put bans on it for food safety reasons. In fact, both the donors and the national institutes have paid more attention to shrimp than fish, even though the latter has far greater implica- tions for food security and poverty. Consequently, this book does not address export-related issues of standards, food safety, and international trade. Instead the book focuses on the three broad aspects of nonshrimp aquaculture: (1) determinants of the value chain transformation; (2) poverty and food security impacts of the transformation; and (3) the medium-term prospects of aquacul- ture in Bangladesh. The following questions are at the core of the analysis pre- sented throughout this book: Introduction 13
1. Has the aquaculture value chain been transforming? If yes, what are the enabling factors behind the transformation? 2. What explains the specialization and formation of fish clusters at var- ious geographic locations of the country, and what are the resulting impacts? 3. What implications does the transformation have in terms of income distribution, poverty, and food security? What is the magnitude of the impacts in terms of poverty reduction? 4. What is the future growth potential of the subsector given the struc- tural and technological changes on the horizon? Specially designed stacked value chain surveys were conducted to address the first two sets of questions (detail provided in Chapter 2). The frame- work used in Reardon et al. (2012) is followed to analyze the changes and transformation in the value chain. Both descriptive and econometric meth- ods have been used for analyzing the determinants of fish cluster formations and their impacts on efficiency gains. The poverty and food security impacts are assessed by carrying out microsimulations, with parameter estimates gen- erated from several rounds of nationally representative household surveys. Another piece of analysis presented in the book is a medium-term projection of demand and supply of fish in Bangladesh. A multimarket model is set up based on the parameters estimated from the nationally representative surveys, the Bangladesh HIES.
Organization of the Book Following the book’s introduction, Chapter 2 presents the sector overview and study design. Chapter 3 focuses on the value chain transformation by ana- lyzing both mesolevel and microlevel data. Chapter 4 takes a unique approach in analyzing determinants and impacts of cluster formation, which is a rel- atively new trend in aquaculture. These two chapters address core research questions on enablers of the Blue Revolution. Chapter 5 evaluates the impacts of aquaculture growth on income distribution and poverty. Chapter 6 shows the midterm projection of demand and supply. The book ends with Chapter 7, which highlights summaries and policy implications. 14 chapter 1
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—. 2005. Household Income and Expenditure Survey 2005. Dhaka. —. 2010. Household Income and Expenditure Survey 2010. Dhaka. —. 2017. Preliminary Report on the Household Income and Expenditure Survey of 2016. Dhaka: Ministry of Planning, People’s Republic of Bangladesh. Behrman, J. R., and A. B. Deolalikar. 1987. “Will Developing Country Nutrition Improve with Income? A Case Study for Rural India.” Journal of Political Economy 95 (3): 492–507. —. 1990. “The Intra-Household Demand for Nutrients in Rural South India: Individual Estimates, Fixed Effects, and Permanent Income.” Journal of Human Resources 25 (4): 665–696. Belton, B., M. Karim, S. Thilsted, K. Murshed-E-Jahan, W. Collis, and M. Phillips. 2011. “Review of Aquaculture and Fish Consumption in Bangladesh.” In Studies and Reviews 2011- 53. Penang, Malaysia: The WorldFish Center. Bloomer, J. 2012. Homestead Aquaculture in Bangladesh: Current Status and Future Directions. London: King’s College London. Bouis, H. E. 1994. “The Effect of Income on Demand for Food in Poor Countries: Are Our Food Consumption Databases Giving Us Reliable Estimates?” Journal of Development Economics 44 (1): 199–226. —. 2000. “Commercial Vegetable and Polyculture Fish Production in Bangladesh: Their Impacts on Household Income and Dietary Quality.” Food and Nutrition Bulletin 21 (4): 482–487. Bouis, H. E., and L. J. Haddad. 1992. “Are Estimates of Calorie-Income Elasticities Too High? A Recalibration of the Plausible Range.” Journal of Development Economics 39: 333–364. Introduction 15
Bouis, H. E., and M. J. G. Novenario-Reese. 1997. The Determinants of Demand for Micronutrients: An Analysis of Rural Households in Bangladesh. FCND Discussion Paper 32. Washington, DC: International Food Policy Research Institute. Cato, J. C., and S. Subasinge. 2003. “Case Study: The Shrimp Export Industry in Bangladesh.” Food Safety in Food Security and Food Trade, Focus 10, Brief 9. Washington, DC: International Food Policy Research Institute.
Economist. 2003. “Fish Farming: The Promise of a Blue Revolution.” Accessed December 1, 2017. www.economist.com/node/1974103.
Ehrlich, P. R. 1971. The Population Bomb. New York: Ballantine Books. FAO (Food and Agriculture Organization of the United Nations). 2005. “Bangladesh National Aquaculture Sector Overview.” Accessed December 11, 2017. www.fao.org/fishery/country sector/naso_bangladesh/en. —. 2014. “Fishery and Aquaculture Country Profiles: Bangladesh.” Country Profile Fact Sheets. Rome.
Ghose, B. 2014. “Fisheries and Aquaculture in Bangladesh: Challenges and Opportunities.” Annals of Aquaculture and Research 1 (1): 1–5. Gibson, J., and S. Rozelle. 2010. “How Elastic Is Calorie Demand? Parametric, Nonparametric, and Semiparametric Results for Urban Papua New Guinea.” Journal of Development Studies 38 (6): 23–46.
Hardin, G. 1974. “Living on a Lifeboat.” Bioscience 24 (10): 561–568. Lewis, D. 1997. “Rethinking Aquaculture for Resource-Poor Farmers: Perspectives from Bangladesh.” Food Policy 22 (6): 533–546. Minkin, S. F., and J. K. Boyce. 1994. “Net Losses: ‘Development’ Drains the Fisheries of Bangladesh.” Amicus Journal 16 (3): 36–40. Paddock, P., and W. Paddock. 1967. Famine 1975! America’s Decision: Who Will Survive? Boston: Little, Brown and Company. Pitt, M. M. 1983. “Food Preferences and Nutrition in Rural Bangladesh.” Review of Economics and Statistics 65 (1): 105–114. Rashid, S., R. Cummings, and A. Gulati. 2007. “Grain Marketing Parastatals in Asia: Results from Six Case Studies.” World Development 35 (11): 1872–1888. Reardon, T., K. Chen, B. Minten, and L. Adriano. 2012. The Quiet Revolution in Staple Food Value Chains: Enter the Dragon, the Elephant, and the Tiger. Manila: Asian Development Bank; Washington, DC: International Food Policy Research Institute. 16 chapter 1
Roos, N., M. A. Wahab, C. Chamnan, and S. H. Thilsted. 2007. “The Role of Fish in Food-Based Strategies to Combat Vitamin A and Mineral Deficiencies in Developing Countries.” Journal of Nutrition 137 (4): 1106–1109. Toufique, K. A., and B. Belton. 2014. “Is Aquaculture Pro-Poor? Empirical Evidence of Impacts on Fish Consumption.” World Development 64: 600–620. Wikipedia. 2018. “List of Fishes in Bangladesh.” Accessed September 17, 2018. https://en.wikipedia .org/w/index.php?title=List_of_fishes_in_Bangladesh&oldid=848562826.
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Annex
Table 1.A1 Local, common English, and scientific fish names of selected varieties
Local name Common English name Scientific name Bagair Dwarf goonch Bagarius bagarius Bhadi puti Pool barb Puntius sophore Boaal Wallago Wallago attu Gojar Great snakehead Channa marulius Grass carp Grass carp Ctenopharyngodon Idella Ilish Hilsa Tenualosa ilisha Kalibaus Orange-fin labeo Labeo calbasu Katla Indian carp/Indian katla Catla catla Koi Climbing perch Anabas testudineus Lal kholisha Dwarf gourami Colisa lalia Magur/shing Magur/shing Gagata youssoufi Mala-kachi/ Ganges River gizzard shad/ Gonialosa manmina/gudusia chala-chapila Indian River shad chapra Minor carp Minor carp Crossocheilus latius Mrigel Mrigal Cirrhinus cirrhosis Nilotica Nile tilapia Oreochromis niloticus niloticus Nuna bailla Nuna bailla Brachygobius nunus Pakal Eel Anguilliformes Pangas Yellowtail catfish Pangasius pangasius Rui Indian rui/Rohu Labeo rohita Shingi Stinging catfish Heteropneustes fossilis Shol Snakehead murrel Channa striata Silver carp Silver carp Hypophthalmichthys molitrix Taki Spotted snakehead Channa punctate Tilapia Indian tilapia Oreochromis mossambicus Tengra Tyangra Macrones vittalus Tepa Ocellated pufferfish Tetraodon cutcutia
Source: Wikipedia (2018).
Chapter 2
SECTOR OVERVIEW AND STUDY DESIGN
Shahidur Rashid, Kaikaus Ahmad, and Gracie Rosenbach
Sector Overview
Importance of the Sector The fisheries sector in Bangladesh is important in terms of both economic and food security perspectives. The sector accounts for about 4 percent of national gross domestic product (GDP), 23 percent of the agricultural GDP, and about 3 percent of total foreign exchange earnings (Bangladesh, DoF 2015). In terms of employment, the sector’s role in the economy is even larger. About 17.8 million Bangladeshis, including 1.4 million women, find jobs (full time and part time) in the sector (FAO 2016), which translates to about 11 percent of the total population and more than 23 percent of the working popula- tion.1 Fish also occupies an important place in Bangladeshi diets and cul- ture—so much so that there is a Bengali (both Bangladesh and Indian West Bengal) adage that says mache bhate bangali (meaning “fish and rice is what makes a Bengali”). The role of fish in improving food security of the poor is even greater. Fishing is an important source of livelihood for the poor, and it is often their only source of protein. It is estimated that about 70 percent of the rural population engaged in fishing for subsistence at some point in the year (FAO 2014). The sector is also the second largest export earner, next to readymade gar- ments, equaling about 18 percent of GDP (Taslim and Haque 2011). More important, although the sector grew by about 6 percent over the past 10 years, there is still large potential for future growth in production and exports. The country’s Seventh Five Year Plan (2016–2020) has set five goals to this end— namely, increased production and export, increased conservation of aquatic diversity, enhanced coastal and marine fisheries, equitable income generation, and improved safety (Bangladesh, Ministry of Planning 2015). The first and
1 According to World Bank (2017), the dependency ratio is 51.4, which means the working population is 48.6 percent.
19 20 chapter 2
the fifth goals appear to have been particularly designed for export promotion objectives. These goals set the targets of increasing aquaculture production by 45 percent, increasing fish farmers income by 20 percent, and increasing export earnings to US$1.25 billion by 2020. In addition, the plan aspires to achieve good aquaculture practices (GAP) and good manufacturing practices (GMP) at all stages of the value chain to comply with the standards of inter- national markets. These are ambitious targets that might not be met by 2020, but as discussed below, the country certainly has the potential to achieve them.
Opportunities and Challenges The fisheries sector in Bangladesh consists of three main subsectors—inland capture, inland culture (aquaculture), and marine. Historically, inland cap- ture and marine used to be the dominant subsectors. In fact, aquaculture was the smallest subsector until the 1980s, accounting for only about 16 percent of total fish production. Things started changing rapidly by the turn of the century, and aquaculture became the largest among the three subsectors. In terms of volume, the average annual production of culture fish averaged only 178 thousand metric tons from 1983–1984 to 1992–1993, but jumped to more than 2 million metric tons by 2014, representing about 69 percent of total fish production in the country (Table 2.1).2 Disaggregated estimates of water area and production of fish provide important insights into the recent trend as well as future opportunities and challenges. The numbers in Table 2.1 clearly suggest that the main driver of growth in culture fisheries has been cultivation in ponds. In 2015, produc- tion from ponds accounted for more than 70 percent of inland culture and 40 percent of total fish production. Historically ponds have been an impor tant part of Bengali culture—they have served as both private and common property for bathing as well as production and consumption of fish. Three general styles of fish production exist: (1) extensive (traditional method with “no intentional nutritional inputs”), (2) semi-intensive (rely on natural food and supplementary feed), and (3) intensive (“depend on nutritionally com- plete diets added to the system”) (Edwards and Demaine 1998). Previously production systems were traditional and households never used improved seeds and feeds. Gradual moves toward intensification and commercialization that occurred toward the end of the last century triggered the growth in the subsector.
2 All statistics presented in Table 2.1 are the authors’ calculations based on Bangladesh, DoF data. Sector Overview and Study Design 21
Table 2.1 Area and production of fish in Bangladesh, 2014–2015
Water area Percentage of total Production in Shares (capture + Subsectors (hectares) (capture + culture) 2015 (metric tons) culture) (%) Inland capture Beel 114,161 2.4 92,678 2.8 Floodplain 2,692,964 57.2 730,210 22.1 Kaptai lake 68,800 1.5 8,645 0.3 River 853,863 18.1 174,878 5.3 Sundarban 177,700 3.8 17,580 0.5 Capture total 3,907,488 83.0 1,023,991 31.0 Inland culture Baor (Oxbow lakes) 5,488 0.1 223,582 6.8 Cage culture 10 0.0 1,969 0.1 Pen culture 8,326 0.2 16,084 0.5 Pond culture 377,968 8.0 1,610,875 48.8 Seasonal water body 133,330 2.8 201,280 6.1 Shrimp/prawn 275,583 5.9 223,582 6.8 Culture total 800,705 17.0 2,277,372 69 (Capture + culture) 4,708,193 100.0 3,301,363 100 Marine Industrial — 84,846 14.1 Artisanal — 515,000 85.9 Marine total — 599,846 100 Country Total 4,708,193.00 3,901,209.00
Source: Compiled from the Bangladesh, DoF (2015) and FAO (2016). Note: — = data not available.
However, there is large potential for further growth in pond culture in three important ways. First, the culture fisheries in Bangladesh are largely extensive (traditional, whereby fish feed entirely from the food web within the pond) or improved extensive (traditional with some supplemental feeding), with a limited number of semi-intensive or intensive systems (fish are depen- dent on the feed provided and water must be replenished at a high rate to maintain oxygen levels and remove waste).3 As a result, overall productivity is much lower relative to many Asian countries. For instance, per hectare shrimp production in Bangladesh is only about 786 kilograms, which is only about 26 percent of the 3 metric tons per hectare in both Vietnam and Thailand.
3 The definition of the farming system is obtained from EC (2012). 22 chapter 2
Productive varieties, such as pangas and tilapia, are growing but remain a small share of total area under aquaculture. For a handful of commercial farmers who use an intensive system for these varieties, productivity per hect- are is reported to be 60–70 metric tons (Edwards and Hossain 2010), which is incredibly low when compared to more than 240 metric tons in Vietnam (Phuong et al. 2007). Second, with economic growth, rice consumption in Bangladesh has been declining in recent years. For instance, according to a recently published Household Income and Expenditure Survey (HIES) report, per capita daily rice consumption in Bangladesh has declined from 416 grams in 2010 to 367 grams in 2016, equivalent to about a 2.7 percent annual rate of decline. The reduction in rice consumption in rural Bangladesh is even higher—from 442 grams in 2010 to 386 grams in 2016, or about a 3.8 percent rate of decline— during the same period (BBS 2017). This trend implies that there will be opportunities to convert paddy land to pond culture or to diversify into other crops. Finally, despite the country’s huge water bodies, rivers, and coastline, cage culture and coastal aquaculture are practically nonexistent. If the barriers to exploiting this opportunity (for example, a sound regulatory environment for cage culture; access to credit; and availability of seed, feed, and other tech- nology) are alleviated, and if their viability is enhanced, it will give an addi- tional boost to aquaculture production. The fisheries sector in Bangladesh faces serious challenges. A list of these challenges included in the official reports of the Department of Fisheries (DoF) can be grouped into three broad categories: (1) productivity, (2) hab- itat degradation and negative externalities, and (3) institutional and regula- tory challenges. The official sources identify productivity challenges mainly with the scarcity of quality seed, feed, and other inputs. However, produc- tivity enhancement is also constrained by enforcement of property rights in common pool resources. For instance, 3.9 million hectares of the total of 4.7 million hectares, equivalent to 83 percent, are under capture fisheries. Most of these lands have common property elements and hence suffer from classic “tragedy of commons” problems. While regulations can limit open access, achieving full productivity potentials can be challenging. The chal- lenges related to habitat degradation and other environmental consequences are highlighted in the Seventh Five Year Plan. In fact, the plan is to help at least 75 percent of the endangered inland water species in designated sanctu- aries reappear by 2020. Similarly, there are policies to restrict marine catches to help grow certain species, such as ilish, which was chronically declining until recently. Thanks to a government program called “Jatka [young ilish less Sector Overview and Study Design 23
than 10 inches in length] Preservation,” production figures in the past cou- ple of years have seen growth. However, this is not true for other marine fish- eries. The regulatory and institutional challenges are at all stages of the value chain—from quality input supply to ensuring food safety for the consumers. The regulatory constraints to input supply (seed and feed) are elaborated in FAO (2016), and the challenges of institutional capacity in extension, quality and safety assurance, as well as enforcement of law are articulated in various reports from the Ministry of Fisheries and Livestock.
Policy Environment The fisheries subsector policies in Bangladesh have evolved over many decades. Therefore, many rules, acts, and ordinances have been passed by the government over the years. This section presents an overview of the policies, governance, and emerging challenges and strategies in the subsector. Serious policy thinking regarding the fisheries sector in Bangladesh began immedi- ately after Bangladesh gained independence from Pakistan. Between 1950 and 1997, the Government of Bangladesh passed a total of 21 pieces of legis- lation. A quick review of these documents suggests that the basic act to regu- late inland fisheries in Bangladesh is the Protection and Conservation of Fish Act (1950). This act went through several amendments in the subsequent decades. Two of the main amendments are The Protection and Conservation Ordinance (1982) and the Marine Fisheries Ordinance (1983). One striking feature of the fisheries legislation in Bangladesh is that there are no separate sections on aquaculture, although some of the provisions are relevant to the subsector (FAO 2016). For instance, the Protection and Conservation of Fish Rules include protection of carp species, prohibit certain activities, and stipu- late that licenses to catch fish can only be issued for the purposes of aquacul- ture development. While the country had a wide range of ordinances, rules, and acts, an inte- grated National Fisheries Policy (NFP) was adopted only in 1998. The docu- ment highlights a long list of rather ambitious policy objectives, ranging from promoting economic growth to restoring environmental balance. Given cur- rent governance and institutional structure, it is unclear how these objectives can be achieved. The NFP extends to all government organizations involved in fisheries (and to all water bodies used for fisheries), with unclear mandates for any of those public entities. For instance, Section 6 of the NFP presents the details of the policies related to inland closed water fisheries that include 17 different policy actions. Of these 17 action points, 4 are related to addressing 24 chapter 2
property rights, 3 are related to private-sector development, 2 are related to research, and the remainder fall broadly under training and extension. Thus the Ministry of Fisheries and Livestock and its implementing arm, the DoF, have a tall order to enact these laws. The DoF has the overall respon- sibility to both develop and regulate the fisheries sector. While it is sup- ported by two other public entities—analytical support by the Bangladesh Fisheries Research Institute (BFRI) and industry development support by the Bangladesh Fisheries Development Corporation (BFDC)—delivering on the complex mandates entrusted under various policies and strategies is a difficult task. The governance and coordination challenges are obvious from the fact that key pieces of regulations related to feed and hatcheries as well as aquacul- ture medicinal protocol did not get passed until 2010–2011 and 2015–2016, respectively (Bangladesh, DoF 2016). New challenges continue to surface. In a recent report the DoF (Bangladesh, DoF 2015) highlights several challenges that have important implications for future growth, sustainability, food safety, and overall gover- nance of the sector. For instance, one of the key challenges is ensuring quality inputs (for instance, seed, feed, and chemicals), which is likely to have serious implications for future growth (FAO 2015). Similarly, habitat degradation, overfishing, and expansion of coastal aquaculture are of concern. Unless these challenges are addressed quickly, they can have longer-term consequences to the environment and biodiversity. There are two challenges that directly link to the overall governance. The first is the poor institutional links among the stakeholders (Bangladesh, DoF 2015), which essentially implies that the exe- cution of the recently passed policies and regulations will be difficult. The other challenge is in data generation and management. While the DoF main- tains times series data on prices and production, it uses an old survey frame- work that was devised in 1983–1984 when aquaculture was in its infancy. Given all the changes in the sector, much richer data generation, management, and analysis needs to be instituted to formulate evidence-based policies that can tackle the emerging challenges effectively.
Study Design and Data
The Process The design of the study began with a reconnaissance trip and stakehold- ers’ consultation initiated under the Policy Research and Strategy Support Program (PRSSP) of the International Food Policy Research Institute Sector Overview and Study Design 25
(IFPRI) in Bangladesh. The initial plan was to produce a value chain report for the project. However, it became clear from early consultations that there is much to be analyzed to better understand the transformation in aquacul- ture in Bangladesh. The knowledge gaps in three areas became obvious. First, the review suggested that there was no systematic assessment, based on a large sample, of the aquaculture value chain in Bangladesh. Second, even though the NFP repeatedly highlighted the importance of poverty and food security for promoting aquaculture, to the best of our knowledge, there were no stud- ies assessing the poverty and food security impacts. Finally, it also appeared important to assess prospects of further growth of the sector. Addressing these questions involved the compilation of a large volume of secondary data, use of existing nationally representative surveys and gener- ation of data with special surveys, and the application of a mix of analytical methods, including econometrics, microsimulation, and multimarket mod- els. Two large datasets have been used. The first is a specially designed stacked value chain survey as proposed in Reardon et al. (2012). This survey combined both mesodata and microdata and has been the basis of analysis on value chain transformation (Chapter 3) and cluster formation (Chapter 4). The analysis of poverty impacts, and demand and supply projections, however, had to be based on nationally representative surveys along with other secondary data. Therefore several rounds of the Bangladesh HIES have been used for these two sets of analysis. A central part of the study is the design and implemen- tation of the value chain survey. Brief descriptions of these surveys are pro- vided below.
The Value Chain Survey Administering this survey involved developing a sampling framework that can capture a representation of all actors in the value chain (VC). To do this, a large volume of data was gathered for developing a sampling frame and site selections. Based on this initial work, two sets of surveys were conducted: (1) a microlevel survey of all key actors in the fish value chain, and (2) a community- level survey to gather mesolevel information. Briefly, the sample for the micro level survey was drawn with a purposive stratified random sampling method. The reason for doing a purposive sample is twofold: (1) fish production is con- centrated in certain districts of the country, and (2) a nationally representative sample was neither necessary nor financially feasible. The sample was drawn from 20 districts that fell under four zones (clus- ters): East (Brahmanbaria, Chittagong, Comilla, Cox’s Bazar, Noakhali, and Sylhet districts); North (Bogra, Dinajpur, Gazipur, Mymensingh, 26 chapter 2
Narsingdi, and Natore districts); Southwest (Khulna, Satkhira, and Bagerhat districts); and South Center (Barisal, Bhola, Chandpur, Gopalganj, and Jessore districts). Cox’s Bazar was subsequently dropped from our analysis because we decided to focus on nonshrimp aquaculture in this report. The VC analysis also dropped the interviews with the shrimp farmers and traders from the southern districts. With all these considerations, sampling followed this approach: in each of the districts, a set of subdistricts (upazilas) were ran- domly selected using probability proportion to size (PPS), which resulted in selection of 102 upazilas in 20 districts (Table 2.2). All mouzas (sub- unit treated as primary sampling unit [PSU]) in each selected upazila were selected. Once the PSUs were selected, a census of fish farmers was conducted in each of them and 25 farmers were randomly selected per PSU (20 farmers, plus 5 replacements). The final farm household sample of 77 mouzas (PSU) is representative of 86 percent of the fish pond areas in the districts selected. In turn, the districts selected constitute 61 percent of all pond production in the country. The questionnaires for the survey of each value chain actor were designed to capture all the information necessary to carry out analysis on value chain transformation presented in Chapter 3. The process of ques- tionnaire development involved consulting the IFPRI household, trader, and market surveys in other countries, and the Reardon et al. (2012) question- naires for the staple value chain study. All questionnaires were programmed in CSPro (Census and Survey Processing System) by an IFPRI programmer to conduct the surveys with computer assisted personal interviews (CAPI) using Mirus tablets. The survey questionnaire for each of the value chain segments included questions that can be grouped into four broad categories: (1) demo- graphic and business characteristics, (2) input supplies, (3) value addition, and (4) marketing of outputs.
The Household Income and Expenditure Survey The HIES is a nationally representative survey conducted by the Bangladesh Bureau of Statistics (BBS) in five-year intervals. The HIES generates offi- cial estimates on income, expenditure, consumption, and poverty situation. The first round of the HIES was conducted in 1973–1974 in the newly inde- pendent Bangladesh. Since then, including the latest survey in 2015, the BBS has successfully completed 16 rounds of surveys. Over time, the sur- vey expanded to include additional modules to track many emerging indica- tors. For instance, the 2010 round of the HIES added four new submodules Sector Overview and Study Design 27
Table 2.2 Zones and sampled districts
Zone Districts East Brahmanbaria, Chittagong, Comilla, Cox’s Bazar, Noakhali, Sylhet North Bogra, Dinajpur, Gazipur, Mymensingh, Narsingdi, Natore Southwest Bagerhat, Khulna, Satkhira South Center Barisal, Bhola, Chandpur, Gopalganj, Jessore
Source: Authors’ compilation based on the farm household component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2013. to gather information on microcredit, migration and remittances, shocks and coping, and disability. A big scaling up of the survey occurred during the 2016 round of the HIES, as the government decided to generate many dis- aggregated estimates, and so the sample size almost quadrupled from 12,240 in 2010 to more than 46,000 in 2016. Unfortunately, these data are yet to be available. Therefore the analysis presented in this book—welfare impli- cations (Chapter 5) and demand system estimates and future projections (Chapter 6)—are based on the earlier rounds. The HIES follows an elaborate sampling method. Broadly, until the 2010 round the sampling was based on a two-stage stratified random sampling tech- nique, with samples drawn under a framework called Integrated Multipurpose Sample (IMPS). Developed on the basis of the Population and Housing Census 2001, the IMPS design consists of 1,000 PSUs throughout the coun- try. Until the 2010 round there were 640 rural and 360 urban PSUs—defined as two or more contiguous enumeration areas (EA)—each comprised of around 200 households. In the first stage 612 out of a total 1,000 PSUs were drawn from 16 different strata (6 rural, 6 urban, and 4 significant metropoli- tan area [SMA] strata). In the second stage 20 households were selected from each of the rural, urban, and SMA PSUs. In the 2010 round a total of 12,240 households were sampled, of which 7,840 were rural and the rest resided in urban areas. Following the sample design, the survey is completed in one cal- endar year (for example, February 1, 2010, to January 31, 2011, in the case of the 2010 round). Thus the survey captures the seasonal variations in a cycle of income, expenditure, and consumption patterns. The survey period is divided into 18 terms, and within each term 34 PSUs are covered to collect data from a total of 680 sample households. In the HIES 2010, 12,240 house- holds were selected, whereby 7,840 were from rural areas and 4,400 were from urban areas. 28 chapter 2
By combining analyses from various rounds of the HIES and from the primary data collected in the value chain surveys, this book seeks to fill the existing gaps in the literature on fish value chains in Bangladesh. This data provides the opportunity to review historical trends and their determinants, assess the welfare effects, and make projections for future trends and impacts to provide relevant quality policy recommendations to successfully update and complement the current policy environment.
References Bangladesh, DoF (Department of Fisheries). 2015. Annual Report 2015. Ministry of Fisheries and Livestock. Dhaka.
—. 2016. Annual Report 2016. Ministry of Fisheries and Livestock. Dhaka. Bangladesh, Ministry of Planning, Planning Commission. 2015. Seventh Five Year Plan (2016– 2020): Accelerating Growth, Empowering People. Dhaka. BBS (Bangladesh Bureau of Statistics). 2010. Household Income and Expenditure Survey 2010. Dhaka.
—. 2017. Preliminary Report on the Household Income and Expenditure Survey of 2016. Dhaka: Ministry of Planning, People’s Republic of Bangladesh. EC (European Commission). 2012. “Aquaculture Techniques.” Accessed August 21, 2018. https:// ec.europa.eu/fisheries/sites/fisheries/files/docs/body/2012-aquaculture-techniques_en.pdf.
Edwards, P., and H. Demaine. 1998. Rural Aquaculture: Overview and Framework for Country Reviews. Bangkok: Regional Office for Asia and the Pacific, Food and Agriculture Organization (FAO) of the United Nations. Edwards, P., and M. S. Hossain. 2010. “Bangladesh Seeks Export Markets for Striped Catfish.” Global Aquaculture Advocate: 58–60. FAO (Food and Agriculture Organization of the United Nations). 2014. “Fishery and Aquaculture Country Profiles: Bangladesh.” Country Profile Fact Sheets. Rome. —. 2015. Aquaculture Seed and Feed Production and Management in Bangladesh: Status, Issues and Constraints. Rome —. 2016. “Fisheries Statistics in Bangladesh: Issues, Challenges, and Plans.” Asia and Pacific Commission on Agricultural Statistics, twenty-sixth session, Thimphu, Bhutan. Phuong, N. R., L. X. Sinh, N. Q. Thinh, H. H. Chau, C. T. Anh, and N. M. Hau. 2007. “Economics of Aquaculture Feeding Practices: Viet Nam.” In Economics of Aquaculture Feeding Practices in Selected Asian Countries, edited by M. R. Hasan, 183–205. Rome: FAO. Sector Overview and Study Design 29
Reardon, T., K. Chen, B. Minten, and L. Adriano. 2012. The Quiet Revolution in Staple Food Value Chains: Enter the Dragon, the Elephant, and the Tiger. Manila: Asian Development Bank; Washington, DC: International Food Policy Research Institute. Taslim, M. A., and M. S. Haque. 2011. “Export Performance of Bangladesh: Global Recession and After.” IGC Working Paper. Dhaka: Bangladesh Foreign Trade Institute. World Bank. 2017. World Development Indicators. Washington, DC.
Chapter 3
VALUE CHAIN TRANSFORMATION
Ricardo Hernandez, Ben Belton, Thomas Reardon, Chaoran Hu, Xiaobo Zhang, and Akhter Ahmed
Introduction The majority of literature on aquaculture in Bangladesh focuses on “microso- cioeconomics” and “value chains” (VCs) and tends to have a static perspective. However, this approach is at odds with several important emerging trends (Ali 1997; Ali, Haque, and Belton 2013). First, aquaculture is growing fast in Asia. From 1984 to 2014, Bangladesh’s farmed fish jumped from 124,000 met- ric tons to 1.96 million metric tons, increasing by 1,580 percent. As a result, aquaculture now accounts for 55 percent of Bangladesh’s fish supply, up from just 16 percent three decades ago (Bangladesh, DoF 1994, 1997, 2006, 2015). Second, there has been a rapid shift from home consumption (from one’s own pond) to purchasing farmed fish from the market—consumers of farmed fish got 92 percent of it via purchase from the market in 2010 versus 79 percent in 2000 (data extracted from BBS 2012). This implies that “commercial aqua- culture” (which we define simply as fish farming output that is sold, with no specification of the farm size) has moved to be far more important than subsis- tence fish farming. Third, there has been rapid diversification of farmed fish composition. This involved a shift from traditional carps to introduced species (tilapia and pangas) that lend themselves better than carp to intensification through higher stocking densities combined with the use of manufactured feeds. This is an example of what economics terms the “product cycle,” which has not been studied in Asia as an evolution in the market. Fourth, far less studied is a rapid transformation of the structure of domestic aquaculture VCs in Asia, shown by our survey results for Bangladesh. As the sector expanded, rapid commercialization and diversification of species occurred, and there was a pro- liferation of upstream and downstream VC actors and in some cases concen- tration among them. The great majority of these changes have been driven by small and medium-size enterprises. These changes can be categorized as “immanent
31 32 chapter 3
development” (Belton and Little 2011)—that is, development unplanned and undirected by government or NGOs—arising mainly from private household, firm, and community choices, driven by changes in demand, technology, com- munications, and infrastructure, and abetted by propitious policies. This can be contrasted with “interventionist development” (NGO projects, central- ized planning by governments). The “quiet revolution” in agrifood systems in Asia—observed by Reardon et al. (2012) in rice and potatoes in Bangladesh, China, and India—is symptomatic of these broad processes of immanent development led by small farms and small off-farm enterprises. We argue that aquaculture in Bangladesh has experienced a similar quiet revolution. This chapter addresses these four trends as a confluence, with an empha- sis on the latter one (structure and conduct change in the aquaculture VC in Bangladesh), with a focus on fish. We address two questions and thus impor tant gaps in knowledge about VC transformation. First, how is the domes- tic fish value chain restructuring? Second, how is the conduct of the segments changing in terms of product composition and technology? It is beyond the scope of this chapter to explore impacts on farmers or consumers of these VC changes—that is an agenda for further research. The chapter proceeds as fol- lows. First, we outline the characteristics of the main geographical zones or clusters included in the study, where high concentrations of farms and other off-farm VC actors occur. Second, we address the structure and conduct changes in the various segments of the aquaculture VCs in these zones serving rural and urban markets. Third, we conclude with policy implications.
The Study Areas and Their Characteristics Using the VC surveys discussed in Chapter 2, we define the VC actors by size, in order to categorize and observe VC transformations (Table 3.1). Next we examine the descriptive statistics of these aquaculture regions over time, stratified by zones, to determine basic trends in fish farming production (Table 3.2). Table 3.2 shows selected characteristics of the four zones or clusters. Several points stand out. First, there is a fairly homogenous picture across zones in terms of general characteristics. This may be because all the areas identified as containing high densities of ponds are located in major lowland rice-growing areas with relatively easy access to the capital city, Dhaka. The study zones have broadly similar socioeconomic conditions, as compared with more peripheral and remote areas with less conducive geographies and ecology for aquaculture. Value Chain Transformation 33
Table 3.1 Definitions of actor size, by actor type
Actor Defining characteristic Size category Definition Hatcheries Total production area (ha) Small < 0.04 Medium 0.04–0.8 Large > 0.8
Feed mills Total metric tons of feed Small < 50 produced per month Medium 50 to 300 Large > 300
Input dealers Total metric tons of feed Small < 10 sold per month Medium 10 to 100 Large > 100
Farmers Total pond area (ha) Small < 0.2 Medium 0.2–0.8 Large > 0.8
Traders Total metric tons of fish Small < 1 traded per week Medium 1 to 5 Large > 5
Source: Authors’ calculations based on the farm household component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2013.
The study zones are of similar size. They have population densities of around 1,400 persons per square kilometer, except for the Southwest (with 800 persons per square kilometer). The lower population density in the Southwest is a function of a large part of the land in its three districts being comprised of uninhabited mangrove forest. Income differences over zones are proxied by differences in monthly per capita expenditure, which is sim- ilar across the zones at roughly US$2,700 per year for a five-person house- hold. Road density per square kilometer corresponds closely with differences in population density (lower in the Southwest, similar in other zones). The share of paved roads in total roads jumped dramatically over the 10 years from 2004 to 2014 in all zones, to more than 80 percent. The North, which had the highest share of paved roads in 2014, at 92 percent, also had the highest share in 2004, with 77 percent, indicating a historically well-developed transport infrastructure. 34 chapter 3
Table 3.2 Zone characteristics
South Item Southwest Center North East All Total area (km2) 8,710 8,492 13,752 15,809 46,763 Population density (inhabitants/km2) 757 1,354 1,388 1,445 1,302 Monthly per capita expenditure (BDT) 2,359 2,842 2,621 2,932 2,730 Road density (km of roads/km2) 2004 0.11 0.18 0.19 0.21 0.18 2009 0.12 0.19 0.21 0.20 0.19 2014 0.12 0.19 0.22 0.22 0.20 Share of paved roads in total roads (%) 2004 54 60 77 55 63 2009 79 84 92 78 84 2014 81 82 92 82 85 Aquaculture area (ha) 2004 168,493 38,614 39,795 113,994 360,896 2009 168,560 45,529 40,619 113,337 368,044 2014 220,223 116,809 126,667 111,794 575,493 Fish pond area (ha) 2004 11,815 33,570 39,758 68,037 153,180 2009 16,630 46,368 60,071 48,901 171,970 2014 24,247 44,257 60,110 71,493 200,107 Change in pond area (%) 105.2 31.8 51.2 5.1 30.6 Aquaculture production (MT) 2004 125,677 89,953 103,824 219,135 538,589 2009 140,289 114,416 121,491 231,098 607,294 2014 225,798 269,568 469,830 300,914 1,266,110 Fish production (MT) 2004 37,264 87,852 101,110 177,415 403,641 2009 32,313 149,843 292,211 156,821 631,188 2014 56,107 182,123 398,979 240,468 877,677 Change in fish production (%) 50.6 107.3 294.6 35.5 117.4
Source: BBS 2007, 2012, and 2016. Note: Aquaculture area is the total area of the two main culture systems—fish pond, shrimp/prawn farms—plus other minor production systems: pen and cage culture, culture-based fisheries in oxbow lakes baor( ) and seasonal floodplains. BDT = Bangladeshi taka. Value Chain Transformation 35
Second, as noted earlier, fish farming has developed rapidly in Bangladesh since the 1990s, accelerating during the 2000s. This is reflected in the table in the expansion of fish pond area, which grew by 31 percent across the four zones (fastest in the Southwest and North, with increases of 105 percent and 51 percent, respectively, and lowest in the East, which grew only 5 percent). Fish pond output increased more rapidly than pond area, indicating that intensification was taking place. Output rose 117 percent overall, with the greatest increase in the North (295 percent) and South Center regions (107 percent) and lowest in the East (36 percent). Third, fish production yields (per hectare of pond surface) in the zones varied considerably, with 2.3 metric tons per hectare in the Southwest, 3.4 in the East, 4 in the South Center, and 6.7 in the North. As a result of its high productivity, the North cluster (mainly Mymensingh) accounted for 45.5 percent of fish production in the four zones, from 30 percent of the pond area. Large differences in land (pond) yields across zones reflect differences in the technologies deployed, with the North being the most “advanced” zone, the “cradle” of intensive aquaculture in Bangladesh. This status is partly path dependent, reflecting a number of initial conditions, including (1) supe- rior road access to the capital city Dhaka (ADB 2005); (2) a history of com- mercially oriented “Green Revolution” rice farming in such districts as Bogra (Crow 2001); and (3) the location of key institutions such as the Bangladesh Fisheries Research Institute in Mymensingh district, which played an import- ant role in the transfer of seed and production technologies for new species to well-connected farmers and hatcheries in the area (Belton and Little 2011).
Transformation of Structure and Conduct in the Value Chain This section is organized into three subsections. The first focuses on growth and concentration, the second focuses on commercialization and spatial elon- gation, and the third subsection focuses on technological cum product com- position/product cycle change and patterns.
Growth and Concentration There has been rapid development and proliferation of the off-farm compo- nents of the fish value chain in the study zones. The combination of that plus the rapid rise in aquaculture farms in those areas is creating dense clusters of VC actors in these places. This has occurred upstream in the value chain (in hatcheries, feed milling, feed wholesale and retail, and farms) as well as 36 chapter 3
midstream and downstream (in transport, rural and urban wholesale markets [arat] and traders [aratdar], and retailing). In all segments astounding devel- opment of these enterprises—and acceleration of that development over the past 5 to 10 years—has taken place. Tables 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, and 3.9 show structural change, proxied by a number of different actors and shares of the size strata in the total number. We discuss this segment by segment, from upstream to midstream.
HATCHERY SEGMENT RESTRUCTURING Over the four zones, our survey data show that there was a 207 percent increase in hatcheries over the 10 years (Table 3.3), with the rate of growth fastest in the Southwest (314 percent) and slowest in the South Center (150 percent). This rate of expansion exceeded that of either fish farm num- bers (up 63 percent) or farm output (up 117 percent), thus suggesting a shift to purchased seed. Big hatcheries (≥ 0.8 hectares) accounted for 53 percent of hatchery area in 2014, a bit lower than 58 percent in 2004, showing slight deconcentration. The share of numbers of big hatcheries in all hatcheries over all zones together dropped a bit, from 15 percent in 2004 to 15 percent in 2014. But still, by 2014 the hatchery segment was concentrated: the big hatch- eries had 19 percent of numbers but 53 percent of total hatchery area. The rapid increase in hatchery numbers, outstripping farm growth, and the tendency toward size deconcentration may indicate the spread of new small and medium-size hatcheries beyond original “core” clusters. The prepon- derance of hatcheries in northern Bangladesh reflects the emergence of Bogra and Mymensingh as major producers of seed, for historical reasons, as Bogra hatcheries export pangas seed to India in addition to serving the domestic market (Ali, Haque, and Belton 2013). Hatchery growth has been accompanied by rapid expansion of nurseries, particularly in nearby areas, which buy hatchlings or fry from hatcheries and raise them to fingerling size for sale to farms directly, via small traders (patil wallah), or over longer distances by larger agents. Overall (from the survey but not shown in the tables), 53 percent of the seed produced by hatcheries is sold to fingerling traders, and 44 percent direct to farmers and nurseries.
FEED MILL SEGMENT RESTRUCTURING For feed mills (Table 3.4), as with hatcheries, there is a high degree of spatial concentration in the North, where 62 percent of the country’s mills are located. Just under one-third of mills are located in the East, around Chittagong, another major industrial center, Bangladesh’s second city and main seaport. Value Chain Transformation 37
Table 3.3 Structural change in hatchery clusters over 10 years
Hatcheries Share in total number (%) Total number of small of medium of large
Zone 2004 2009 2014 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 7 14 22 0 0 0 88 86 91 13 14 9 South Center 80 102 120 7 7 5 67 65 75 25 28 20 North 177 281 410 49 50 54 33 32 31 18 18 14 East 104 142 209 37 39 39 43 43 46 20 18 15 All 368 539 761 44 46 51 37 35 35 19 18 15 Share in total production area (%) of small of medium of large 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 0 0 0 71 68 79 29 32 21 South Center 0 0 0 48 45 57 52 55 43 North 3 3 3 38 38 42 60 59 55 East 2 2 2 42 45 50 57 53 48 All 2 2 3 40 40 44 58 58 53
Source: Authors’ calculations based on the mesolevel component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2014.
The number of feed mills jumped even faster than that of hatcheries, reflecting the later introduction and adoption of feeds as compared to hatch- ery seed. Interviews conducted during our rapid reconnaissance indicated that there were seven to eight feed mills (defined as formal firms, not backyard feed operations on farms) in Bangladesh in 2003. The number increased 15-fold to about 100 mills by 2004. Table 3.4 indicates numbers of mills increasing by 268 percent over the period to 255 and rising fast in all zones. The feed mill segment is even more concentrated than the hatchery seg- ment for two reasons. First, many have developed from the addition of lines by existing large domestic poultry feed firms, with a head start in the indus- try, from major investments by foreign companies. Second, there are econo- mies of scale involved in sourcing raw materials, maintaining high utilization rates, and spreading fixed costs over a large volume. Big mills accounted for 67 percent of total feed production volume in 2014, although the share of vol- ume had barely changed from 2004 (66 percent). 38 chapter 3
Table 3.4 Structural change in feed mill clusters over 10 years
Feed mills Share in total number (%) of small of medium of large Total number (< 50 MT) (50–300 MT) (> 300 MT)
Zone 2004 2009 2014 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 4 5 7 68 56 49 23 37 46 9 7 5 South Center 2 7 9 0 29 22 50 43 56 50 29 22 North 62 100 154 30 30 27 40 37 38 30 34 35 East 28 43 84 43 30 45 26 38 27 31 32 28 All 95 155 255 35 30 33 35 37 35 30 32 32 Share of total volume (%) of small of medium of large 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 17 13 11 41 59 71 42 28 18 South Center 0 3 3 28 36 48 72 61 49 North 4 3 3 33 29 29 64 68 69 East 6 3 6 23 30 26 71 66 68 All 4 3 4 30 30 29 66 66 67
Source: Authors’ calculations based on the mesolevel component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2014.
FEED DEALER SEGMENT RESTRUCTURING Input dealers (Table 3.5) are mainly feed dealers who distribute feed for mills. They are numerous, totaling 15,483 over the four zones, up from 7,690 in 2004 (hence a 2-fold growth versus a 1.6-fold growth of farmers). Like hatcheries and mills, input dealers are concentrated in the North (home to 56 percent of dealers but only 35 percent of farmers). But they are underrep- resented relative to farmers in the Southwest and the South Center, perhaps unsurprisingly given that fish yields (and thus by implication feed use) are low- est in these two zones. Some concentration in market share is present, with larger dealers having 54 percent of the traded volume in 2004. Their share dropped to 48 percent in 2014 as many new small dealers entered the scene.
FISH FARM SEGMENT STRUCTURE RESTRUCTURING Fish farmers are more evenly distributed spatially than other value chain actors over the four clusters (Table 3.6), with the North accounting for 36 percent and the Southwest and the South Center 29 percent each but the East only 9 percent. The total number of fish farmers across the four zones Value Chain Transformation 39
Table 3.5 Structural change in feed dealer clusters over 10 years
Feed dealers Share in total number (%) of small of medium of large Total number (< 10 MT) (10–100 MT) (> 100 MT)
Zone 2004 2009 2014 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 1,373 1,915 2,461 66 69 65 31 29 31 3 3 4 South Center 1,428 2,109 3,111 50 48 43 42 45 48 8 7 9 North 4,308 6,835 8,448 43 41 44 32 36 36 25 23 20 East 581 907 1,464 69 62 60 28 32 34 3 5 7 All 7,690 11,766 15,483 50 49 49 34 36 37 16 15 14 Share in total volume (%) of small of medium of large 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 13 15 12 68 67 64 19 19 23 South Center 7 7 5 61 67 63 32 27 31 North 4 4 4 31 35 38 65 61 58 East 15 11 9 65 61 58 20 28 32 All 6 5 6 41 44 46 54 51 48
Source: Authors’ calculations based on the mesolevel component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2014. grew 63 percent, from 1.08 million in 2004 to 1.76 million in 2014, but the relative share of farm numbers across zones changed little over this period. From the perspective of average household operated aquaculture land (pond surface), the average farm size changed little over the decade, even as the total population of them nearly doubled (Table 3.7). When the average area of aquaculture landholdings operated across zones between 2008 and 2013 is compared, the overall increase was moderate (7.2 percent). However, there was considerable variation between zones, with the North and the South Center registering the largest increases, up 19 percent from 0.3 hectares to 0.35 hect- ares, and 17 percent from 0.24 hectares to 0.28 hectares, respectively, with other zones registering little change. Fish farming households sampled in the stacked survey operated 0.29 hect- ares of ponds in 2008 and 0.31 hectares of ponds in 2013. Fish farmers in Bangladesh hold on average 0.86 hectares of land (fish and nonfish land com- bined). Therefore they are located in the second upper land quintile of farmers in the country, and they have approximately double the 0.45 hectares average 40 chapter 3
Table 3.6 Structural change in fish farmer clusters over 10 years
Fish farmers Share in total number (%) Total number of small of medium of large (’000s) (< 0.2 ha) (0.2–0.8 ha) (> 0.8 ha) Zone 2004 2009 2014 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 335 417 494 15 17 17 41 41 46 44 42 37 South Center 319 384 487 39 35 42 39 45 34 22 20 23 North 343 474 634 43 46 45 34 33 32 23 21 23 East 84 112 148 44 43 45 34 37 32 22 20 24 All 1,081 1,388 1,763 33 34 36 37 39 37 29 27 27 Share in total pond area (%) of small of medium of large 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 4 4 4 30 31 36 66 65 59 South Center 14 12 15 41 47 36 46 41 49 North 15 17 16 36 37 34 48 46 50 East 16 16 16 36 41 34 48 44 50 All 10 11 12 35 37 35 54 52 53
Source: Authors’ calculations based on the mesolevel component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2014. landholding of rice farmers (Ahmed et al. 2013). However, they are smaller than a typical fish farmer in other countries in the region, such as Myanmar and Thailand. Furthermore, the average 0.31 hectares of pond area per fish farm in our sample is five times the average 0.06 hectares area of “homestead ponds” reported by Belton and Azad (2012) in Bangladesh. As previously mentioned, the survey sampling purposively selected districts with high con- centrations of fish farming, which our household survey analysis shows tend to be correlated with higher shares of commercial farms and lower shares of (subsistence) homestead fish ponds. Moreover, fish farming tends to be concentrated among the upper stra- tum of small farms. Figures extracted from Bangladesh Integrated Household Survey (BIHS) data show that 89 percent of the aquaculture households con- tributed just 25 percent of total production, while the top 2.4 percent of fish farming households accounted for 50 percent of total output. Our mesolevel survey data reflect this concentration. Larger farms constituted 27 percent of fish farms but had 53 percent of pond area in 2014, with little change in this Value Chain Transformation 41
Table 3.7 Landholdings and tenancy by year and zone
Southwest South Center North East All Zone 2008 2013 2008 2013 2008 2013 2008 2013 2008 2013 Total nonfish land 0.26 0.31 0.45 0.54 0.38 0.42 0.33 0.39 0.34 0.40 overall (ha/HH) (zeroes in average)
Total fish pond land (ha/ 0.59 0.64 0.24 0.28 0.30 0.35 0.49 0.48 0.43 0.46 HH) (zeroes in average) Total operated land (used, 0.51 0.52 0.18 0.21 0.17 0.22 0.20 0.20 0.29 0.31 including owned and rented-in lands) Self-owned 0.36 0.33 0.12 0.12 0.10 0.11 0.05 0.05 0.18 0.17 Joint-owned with 0.12 0.16 0.04 0.08 0.01 0.06 0.09 0.10 0.07 0.10 another HH Rented in 0.04 0.03 0.02 0.01 0.06 0.05 0.06 0.05 0.04 0.04 Rented out 0.07 0.08 0.02 0.03 0.02 0.02 0.03 0.03 0.04 0.04 Jointly owned, used by 0.01 0.03 0.04 0.04 0.10 0.11 0.25 0.24 0.10 0.10 other HH
Total land 0.85 0.95 0.69 0.82 0.68 0.77 0.82 0.86 0.77 0.86
Source: Authors’ calculations based on the farm household component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2013. Note: HH = household. share since 2004. The share of area among farmers of other size categories also remained stable over this period, at around 35 percent for medium-size and 11 percent for small farms. This suggests that while many new producers have entered farming, there has been little if any consolidation into larger farm units. Finally, Table 3.8 shows yields of 3.35 metric tons per hectare on average in the sample in 2013. The North has far higher land yields than the rest of the zones. This helps to explain why the concentration of farms in the North is low relative to the high concentration in the North of hatcheries, feed mills, and input dealers. The North simply has a much more intensive production technology, heavy in external inputs supplied by these off-farm enterprises, and that intensification is reflected in its extraordinary yields relative to the rest of the fish farming clusters. Absolute yield growth was greatest in the North, up from 5 metric tons per hectare to 10 metric tons per hectare, while in relative terms the East grew faster from a lower base of 1.3 metric tons per hectare to 2.9 metric tons per hectare. The South Center region grew from 42 chapter 3
Table 3.8 Factor productivity in 2013
Southwest South Center North East All Observations in 2013 465 280 420 340 1,505 Total fish output (kg) per Labor day (own + hired) 9.0 7.2 32.7 20.8 18.9 Own labor day 10.3 10.5 42.5 23.8 23.9 Pond hectare (kg) 801 2,565 10,017 2,916 3,352 Capital (thousand BDT)a 5.3 9.8 25.2 10.2 13.0
Source: Authors’ calculations based on the farm household component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2013. Note: a Capital is calculated as the total variable cost (labor, rent, purchased inputs, and so on), plus the annual amortization of quasi-fixed assets. BDT = Bangladeshi taka.
Table 3.9 Structural change in rural fish trader clusters over 10 years
Rural fish traders Share in total number (%) Total number of small of medium of large (hundreds) (< 1 MT) (1–5 MT) (> 5 MT)
Zone 2004 2009 2014 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 42 46 59 71 74 76 26 22 20 4 4 4 South Center 24 33 38 61 59 45 28 26 35 11 15 20 North 34 54 128 61 58 76 22 23 14 17 19 9 East 48 74 88 68 74 71 24 21 23 8 6 6 All 148 207 313 66 67 71 24 22 20 9 10 9 Share in total volume (%) of small of medium of large 2004 2009 2014 2004 2009 2014 2004 2009 2014 Southwest 21 23 23 45 41 37 34 36 40 South Center 11 9 5 30 24 24 59 67 71 North 9 7 17 19 18 19 73 75 64 East 15 20 18 32 33 35 53 47 48 All 13 13 15 30 26 26 57 61 58
Source: Authors’ calculations based on the mesolevel component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2014. Value Chain Transformation 43
2 metric tons per hectare to 2.6 metric tons per hectare, while the Southwest remained stagnant at 0.8 metric tons per hectare.
FISH WHOLESALE SEGMENT RESTRUCTURING The fish wholesale segment has expanded rapidly. This occurred with a pro- liferation, especially during the 2000s, of rural fish wholesale markets and an increase in fish wholesale markets in such cities as Dhaka. Fish trader num- bers more than doubled across the four zones, from 14,800 in 2004 to 31,300 in 2014 (2.1 times versus 1.6 times for farmers) as shown in Table 3.9. The largest share of traders was in the North (41 percent) in 2014, which had only 23 percent of the traders in 2004. Trader startups followed the concentration of fish production; most village traders started about 10 to 15 years ago, over the same period as the beginning and development phase of the aquaculture boom.
Commercialization and Spatial Elongation In Bangladesh, mainly since 2005, the value chain for farmed fish has com- mercialized and “lengthened” geographically. This is a typical trend in trans- formation and modernization of food supply chains, with concomitant interprovince market integration and reduction of transaction costs. This hap- pened, for example, in rice and potatoes in Asia over the past decade (Reardon et al. 2012). The commercialization of fish farming is itself dependent on the proliferation of services discussed above: the development of off-farm com- ponents of the value chain permits a division of labor wherein small farm- ers can specialize in pond operations and enjoy cost savings via economies of scale, economies of scope, and economies of agglomeration by relying on the upstream feed and seed purveyers and downstream wholesale and logistic ser- vices that themselves are specialized enterprises. Belton, Ahmed, and Jahan (2014) contend that the availability of these services facilitates the entry of smaller producers into commercial fish farming; Reardon et al. (2012) con- tend similarly for rice and potato sectors. We discuss the trends of commer- cialization and chain lengthening below, from upstream to midstream.
SEED COMMERCIALIZATION Farmers have shifted from trapping wild fish on their farms or buying locally available wild seed in the early 1990s (Ahmed, Rab, and Bimbao 1993) to stocking hatchery-produced seed in the 2000s. By 2011, 98 percent of fish seed was produced by private hatcheries (Belton et al. 2011). The shift to hatchery-produced seed resulted in a lengthening of the distances over which seed was traded, which evolved due to a mix of initial environmental and 44 chapter 3
institutional conditions and the location of sources of demand. These trends have given rise to a situation in which there is a correlation of the level of activ- ity of the broad cluster and the co-location of hatcheries. There is strong spa- tial concentration of hatcheries in the North, which has more than half of the hatcheries in the four zones. But our survey also found that on average half of what hatcheries produce is sold to buyers outside of their own district (not shown in the tables). Hatcheries thus tend to be “shared” across districts and even zones.
FEED COMMERCIALIZATION The commercialization of aquaculture feeds and the geographical lengthening of that segment have occurred in lockstep. There has been a long-term shift from little use of feed of any type (Ahmed, Rab, and Bimbao 1993) to use of feed available on-farm (for example, cow manure, rice bran), to purchase of the latter, and increasingly to purchase of formulated pelleted feeds; 90 percent of the latter are made by medium- and large-scale commercial mills in 2015 (Mamun-Ur-Rashid et al. 2013). Large feed mills in the peri-urban industrial zone north of Dhaka, where most feedlot poultry farming occurs, distribute feed throughout the country. Mills are concentrated there for centralized acquisition of inputs and because (similar to other countries) many fish feed manufacturers originally produced poultry feeds before diversifying into fish feed by adding additional lines. Of the 25 largest poultry feed mills in Bangladesh, 18 also produce fish feeds (Khaleduzzaman and Khandaker 2009). The input acquisition supply chain for feed manufacture stretches over long distances. Most dried fish, one of the main ingredients in fish feed, is sourced from marine fisheries in coastal districts of Bangladesh but is increas- ingly also imported, as is soy (another key ingredient). Meat and bone meals, important protein sources for feed, are sourced from the European Union (Mamun-Ur-Rashid et al. 2013). Much of the equipment used in the value chain (for example, feed milling machines, vehicles, pumps, cold chain equip- ment) is imported, mainly from East and Southeast Asia, as are chemicals (Mamun-Ur-Rashid et al. 2013). As elsewhere in Asia, foreign expertise has played an important role in the development of hatchery and feed opera- tions (Belton 2012). For instance, internationally led training received by Bangladeshi entrepreneurs has been important in the establishment of mono- sex tilapia hatcheries. Over time, dependence on these sources of information has lessened as technical knowledge has become more widely available within Bangladesh. Value Chain Transformation 45
FISH FARM COMMERCIALIZATION The shift from subsistence to commercial production in the fish sector occurred as initially fish were only home-consumed from the household pond, then increasingly sold into nearby markets, and then also marketed to more distant urban markets. These sequential changes have occurred rapidly. As recently as the early 1990s, Ahmed, Rab, and Bimbao (1993) observed that only a small fraction of total harvested farmed fish entered the market outside the local village. In contradiction to the traditional view of fish farming in Bangladesh as mainly subsistence oriented, the value chain survey of the farm segment shows that 75 percent of households who engage in fish farming sell fish. Strikingly, the share of farms with a marketed surplus even in these dense aquaculture clusters was only 57 percent just five years prior to this, indicat- ing that extremely rapid commercialization occurred. The Southwest has the highest share of fish farming households marketing fish (88 percent), in line with shrimp and prawn production in that zone. Figures are around 70 to 75 percent for the South Center and the North, and 60 percent for the less advanced (in terms of fish farming) East. Table 3.10 shows the disposal of fish output by aquaculture households in 2013 by final user type (note that only 8 percent of the fish was home consumed). Interestingly, although yields differ significantly across zones, the marketed sur- plus rate does not—the home consumption share is 4 percent in the North zone and about 15 percent in the other zones. Moreover, in contrast to the common image of the rural fish market being dominated by small rural brokers, the market has shifted to rural sourcing by large wholesalers based in towns and secondary cities. Tables 3.10 and 3.11 show that about two-thirds of the marketed volume goes to large wholesalers; again, that differs between the North with 68 percent and the average of the other zones at about 54 percent. By contrast, local rural brokers have a mere 5 percent share of the market as shown in Table 3.11. Just over a decade earlier, fish farmers usually sold their fish to local traders or fish col- lectors (ADB 2005). Interestingly, this is the same market structure development that has occurred in rice and potatoes in Asia (Reardon et al. 2012).
RISE OF THE FISH TRADER SEGMENT TO URBAN AREAS Growth in sales of farm output has been accompanied by a proliferation of traders in the midstream segment of the chain. As urban demand has grown and the road network has developed (see Table 3.2), fish is increasingly sold by traders in the zones of production to Dhaka and from one division to another. The national Household Income and Expenditure Survey (HIES) (BBS 2012) 46 chapter 3
Table 3.10 Disposal of fish farm harvest by final user type, 2013
Southwest South Center North East All Observations in 2013 465 280 420 340 1,505 Share of farmers who grow 87.5 70.7 74.5 59.7 74.5 fish selling fish Farmer’s own consumption 15.4 18.5 4.2 12.2 8.4 Sales through different value chains Consumed by another farm 0.3 0.0 0.0 0.0 0.0 household Direct consumer 0.0 0.7 0.9 0.0 0.7 Retailer at traditional market 11.4 7.7 2.7 15.6 6.0 Assembler (collector) 5.6 2.8 8.1 14.7 8.4 Large wholesaler 49.2 54.5 68.1 56.4 62.8 Supplier (broker) 1.5 8.6 8.7 0.6 6.6 Supermarket 0.0 0.0 0.0 0.0 0.0 Auctioned 16.6 7.1 7.3 0.5 7.1 Others 0.1 0.0 0.0 0.0 0.0 Total 100.0 100.0 100.0 100.0 100.0
Source: Authors’ calculations based on the farm household component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2013. Note: “Large wholesaler” refers to the top wholesalers in the market. shows that from 2000 to 2005 the share of fish consumed in urban areas rose from 29 percent to 42 percent. The conduct of the segment has also changed from the traditional image common in Asia that traders are advancing funds to farmers to lock in farmers in transactions. Our survey showed that none of the farmers received any cash advance from fish traders. That was confirmed by our trader survey. But the trader survey showed that around 40 percent of traders, both rural (operat- ing from villages) and rural-urban (operating from secondary cities or towns), provide advances of working capital to other traders to secure supplies of fish, with an average loan duration of just under one month. Among rural and rural-urban traders, our survey shows that the great majority have stalls in rural and rural-urban wholesale markets. Most rural fish traders (63 percent) and rural-urban traders (79 percent) take a commis- sion on the transaction of fish (rather than through arbitrage where they buy and then sell). None of the rural traders and few of the rural-urban traders surveyed owned trucks, and only 6 percent rented them, indicating their role as intermediaries who operate from a base and just link buyers and sellers, Value Chain Transformation 47
Table 3.11 Disposal of fish farm harvest by final user location, 2013
Southwest South Center North East All Observations in 2013 465 280 420 340 1,505 Farmer’s own consumption 15.4 18.5 4.2 12.2 8.4 Sales through different value chains Consumed by another farm household 0.3 0.0 0.0 0.0 0.0 Direct consumer 0.0 0.7 0.9 0.0 0.7 Retailer at local (village, union, upazila) 11.4 7.7 2.7 15.6 6.0 traditional market Assembler locally 5.6 2.6 5.5 14.7 6.7 Assembler in same district 0.0 0.2 2.5 0.0 1.7 Large wholesaler locally 46.3 46.7 64.4 31.8 55.5 Large wholesaler in same district 2.7 4.3 2.9 14.8 4.9 Large wholesaler in different district 0.1 3.5 0.8 9.7 2.3 Supplier (broker) locally 1.2 8.6 6.9 0.6 5.4 Supplier (broker) in same district 0.3 0.0 0.0 0.0 0.0 Supplier (broker) in different district 0.0 0.0 1.8 0.0 1.2 Supermarket 0.0 0.0 0.0 0.0 0.0 Auctioned locally 16.3 5.4 1.9 0.0 3.4 Auctioned in same district 0.1 1.1 5.3 0.0 3.6 Auctioned in different district 0.2 0.6 0.1 0.5 0.2 Others 0.1 0.0 0.0 0.0 0.0 Total 100.0 100.0 100.0 100.0 100.0
Source: Authors’ calculations based on the farm household component of the Bangladesh fish value chain survey conducted by the International Food Policy Research Institute in 2013. relying on hiring transporters (or having the farmer hire transporters) to deliver. The average monthly working capital of rural traders was a little under half that of rural-urban traders, as expected. Few traders (less than 2 percent) owned ice-making plants, and almost none owned cold storage. Only 31 percent of rural traders and 20 percent of rural-urban traders reported icing the fish. This likely reflects their role as commission agents, who rapidly broker sales between buyers and sellers, with- out taking possession of the fish themselves, with buyers usually assuming responsibility for procuring ice from ice suppliers or manufacturers. The low ice use rate is not for lack of access to ice firms: 80–90 percent of traders felt they had good access to ice firms. The domestic market demands whole fresh fish, with little if any value addition occurring. It is thus not observed that wholesalers, feed companies, or hatcheries process their own fish. 48 chapter 3
Technological cum Product Composition/Product Cycle Change and Patterns Important interlinked changes have occurred in the technologies and the product composition of farm production concurrent with the above structural changes in the value chain.
THE PRODUCT CYCLE The product cycle is a widely observed feature of product development in many sectors of the economy, which can be observed for a range of agricultural sectors, including fish and fruit, in a number of other countries. Sequentially, the five stages of the product cycle are (1) the local niche product stage; (2) the commodity stage, during which a local (or exotic) niche product is “com- moditized” by production in large quantities, driving down costs, but with little product variety or quality differentiation; (3) the product differentia- tion stage, when the commodity becomes differentiated along the lines of sev- eral possible tangible and intangible attributes (for example, variety, quality, organic versus conventional, confined versus free range); (4) the commoditi- zation stage, where the differentiated products are themselves produced on larger scale and commoditized; and (5) the introduction of new niche or dif- ferentiated products. The cycle can continue indefinitely depending on the capacity of innovation in the sector and the market. We posit that the Bangladesh fish sector has followed a typical product cycle development path, facilitated by the linked technology changes along the value chain described above, although to date only the three stages can be dis- cerned. The first (and ongoing) technology change linked to the first prod- uct cycle step (moving from niche to commodity) is the shift from capture of wild fish stocks from open waters to their production in ponds under con- trolled conditions. This shift began in earnest during the 1980s, as ponds were increasingly used for aquaculture, primarily by stocking native carp species, an important component of inland capture fisheries at that time (Ali 1997). As the decades progressed, additional species were introduced and commod- itized, such as exotic carps in the 1980s, pangas in the mid-1990s, and mono- sex Nile tilapia in the early 2000s (Ali, Haque, and Belton 2013; Belton and Little 2011). Later, in the late 2000s, many additional native fish that were formerly available only from domestic capture fisheries were incorporated into farm production. Data from BIHS depict the consumption side of the product cycle (Figure 3.1). After becoming commoditized during the 2000s, pangas and Value Chain Transformation 49
Figure 3.1 Average weekly consumption per capita of the 10 most consumed fish species in rural Bangladesh
50 Q1 Q2