BANGLADESH

Published:  12:23 AM, 15 May 2019

Development and growth of food processing industries


The era of food processing began about 2 million years ago when our distant ancestors put flame to food and discovered cooking. After that, we see fermenting, drying, preserving with salt, and other primitive forms of food processing. This ultimately led to the modern food processing methods of today, which give us an abundant, safe, convenient, affordable and nutritious food supply.

Processed Foods can be defined as- "any deliberate change in a food that occurs before it's available for us to eat. It can be as simple as freezing or drying food to preserve nutrients and freshness, or as complex as formulating a frozen meal with the right balance of nutrients and ingredients" (International Food Information Council Foundation, Sep 2010).

Background of food processing industry

Bangladesh is a low-middle income country and is growing fast and aspires to become middle-income status by 2021, the 50thanniversary of its independence. With economic growth of 8 percent per annum, the $2.2 billion food processing sector in Bangladesh grew on average 7.7 percent per annum between fiscal years 2004/05 and 2010/11, responding to growth of the Bangladeshi middle class over the same period.

The beverage industry more than doubled during the same period to $29 million, showing an average growth rate exceeding 8 percent per annum. (Hussain &Leishman, 2013, p.2).According to Bangladesh Bureau of Statistics, in its 2006 Economic Census, there were approximately 246 medium-sized food processing industries employing 19 percent of the industrial manufacturing workforce in Bangladesh or 8 percent of the total manufacturing labor force.

The food industry employs 2.45 percent of the country's total labor force, and its share in the GDP was 2.01 percent in 2010. There are also numerous small-scale factories and domestic units engaged in food processing throughout the country. According to some industry analysts, the food processing sector in Bangladesh is a $4.5 billion US Dollar industry (Wikipedia, n.d).

Demand for processed foods is increasing due to busy lifestyles and rising incomes of bourgeoisie class. Overall sales of processed foods are anticipated to grow at a compounded annual growth rate (CAGR) of 17 percent a year over 2013-2018, reaching a value of $21.2 billion in 2018, according to Euro monitor International, an independent market researcher. The market for processed food was valued at $9.8 billion in 2013 (Rahman, Sep 2015).

Dairy, poultry, baby food, noodles and pasta and confectionery performed extremely well, while sales of sauces, jams and juices also grew significantly. Euro monitor valued the soft drinks market at $235 million in 2013, registering a compound annual growth rate of 18 percent between 2009 and 2013. Soft drinks are forecasted to see a compound annual growth rate of 15 percent over 2013-2018 (Rahman, Sep 2015).

Due to the'free market economy' Bangladesh gains access to international market which helps to increase export, import of processed foods. Due to increase amount of imported processed foods, now we can taste and consume various foods that are not available or have shortage in Bangladesh and get the access of consuming branded companies' processed food. So, food and beverages industries including processed foods contributes a lot in increasing GDP and developing economic growth of Bangladesh.

Processed foods, market industry and GDP

There is deep linkage between growth of market industry and processed foods. Processed foods help to enhance market competition and become attractive product for market industry that helps to increase not only development of market industry but also increase GDP growth of Bangladesh.

According to Dr. ABM Shahidul Islam, Professor, Dhaka University, - "Processed foods can be very crucial sector for development of market industry in Bangladesh. In the food processing sector, quality maintenance is an important matter as people are now very concerned with health hazards.

If any company keeps in mind these issues and makes their product beneficial for health, so consumer will be attracted to that company and consumer will become loyal customer to that company. In this way, it will create market competition among industrial sector. Customer Satisfaction is very important for sustaining the market.

Producers have to target customers' perceptions such as their demand, needs, perceptions, purchasing capacity, desires etc. so that a company hold their customer and sustain in the market competition both in nationally, regionally and globally. This philosophy is called "Market Oriented Philosophy". In 2005, a book was published called "Emotion Marketing" that describes emotional touch as very important for any market competition.

If any company can convince their customer about their product that is honest, loyal, health friendly, good qualities, then customers will be loyal to that company. In this way companies that produce processed foods can develop their company through this policy and helps to sustain their company in the market competition. There is another philosophy called "Islamic Marketing" where ethical issues are very important.

If any company maintains this and cannot cheat their customer such as product must be hygiene, real weight, no deception;so customers will be loyal to that company and will also buy their product.

Collecting raw materials to ultimate production all are important for food processing. In the Harvard Business School, Michael Porter proposed a "Competitive Advantage" theory that means if any company focuses on one thing and develops one product in such way that no one can beat the company, in this way too, they will prevail market competition and here too, processed foods can be very attractive for any market company. Here, processed food can play a very important role holding customers and will increase market competition."

For GDP growth, Professor Shahid added that- "Processed foods also help to increase GDP growth of Bangladesh. In Bangladesh, there is low labor cost and if we use this labor properly with packaging, processing and production, then it will help to increase GDP growth.

Preservation is very important because if we preserve seasonal fruits and vegetables at the right time and in right way, then we will be able to get fruit juice, pickles etc. and will be able to supply both in nationally and globally that will result increasing amount of GDP growth in Bangladesh."  

Technical barriers

Technology and equipment that are imported mainly are financed for commercial basis rather than development assistance. The developed and developing countries use 'dependency theory' on this so that LDCs countries may dependent on them and developed and developing countries will take the benefit. Developed countries export technology, but they don't teach how to use those technologies and equipment. In this way, LDCs including Bangladesh may remain dependent on them and cannot develop their own machinery and equipment.

As Bangladesh gained eligibility for graduation from least developed country (LDC) to a developing country, so it will be more difficult for Bangladesh to get development assistance from developed countries and therefore, technology and equipment will be imported on commercial basis. The Committee for Development and Policy (CDP) in its First Triennial Assessment meeting, held at the UN on March 16, 2018 cleared Bangladesh's eligibility for graduation from least developed country (LDC) to a developing country.

Unquestionably, Bangladesh will lose benefits of LDCs in terms of Duty-free, Quota-free (DFQF) market access; non-compliance of Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) flexibilities and patent protection for pharma products. Bangladesh and other LDCs have been claiming "supply side constraints" - pertaining to infrastructure, sea and land ports, technology, capacity building, etc(Hannan,18 March 2018).

So, we can see that because of LDC graduation, developed countries from those Bangladesh import technologies to produce goods and foods in cheaper rate, now those developed countries will export technology to Bangladesh at a higher rate. Now, Bangladesh will have to import technology with high cost. So, it will be helpful if Bangladesh contribute much on research such as- how technology can develop or improve locally, how new technologies can be use and practice on various sectors, how local technology can contribute in higher growth in processed foods etc.

Recommendations

Here, we can see few recommendations to develop processed food industry:

a.     Govt. can create food processing zone (FPZ) like EPZ with all modern facility.

b.     There should be clear regulatory law and all ministries that are concerned for regulating food safety and laws should work together with clear policy, accountability and transparency.

c.     Govt. can give tax holiday and incentives in the food processing companies so that food processing industry can develop rapidly. In the garments sector, govt. gave cash incentives. In this way, govt. can give incentives in the food processing sector, too.

d.     In Bangladesh, many companies lack R&D (Research and Development) department that helps to analyze consumer's demands, needs, perception, how to increase export, preserve, process, production, how to maintain quality. On the other hand, many MNCs has R&D department that helps to research on food processing. So, there must be R&D dept. of each company regarding food processing sector.

Conclusion

So, we can see that food processing sector has become a "thrust sector" for Bangladesh as it contributes 5% of total GDP in Bangladesh. If we can preserve, process and produce at right time with right way, then this sector will help to increase not only the GDP growth of Bangladesh but also help to contribute for Bangladesh becoming as a developing country in the upcoming years.

Govt. should focus on loopholes regarding this sector because there are 10 to 13 ministries that take the responsibilities to ensure the food safety and rules and regulation. But there are no combinations with these ministries, and therefore, we see no proper regulation to control the companies that produce processed foods.

So, we have to ensure the proper combination among these ministries, and there should be accountability, transparency and check and balance inthese institutions so that food processing industry can develop further both in nationally and globally and will ensure proper diet with proper nutrition.



The writer is Junior Consultant, IFPRI Bangladesh

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