Current Status of the Industry

Frozen food export is the third largest export item of Bangladesh, earning more than
600 millions of foreign currency yearly which is about 3% of total export and
contributing 4.39% in GDP. Shrimp contains more than 80% of frozen food item.
Bangladesh captured 2.5 % of world shrimp market. At the present time the world
market demand for shrimp is increasing day by day. A significant area of southern
part is under cultivation of shrimp culture. There are 148 (78 renewed their license
by GOB, 75 are approved by EU) sea food processing plant in our country. The
processing capacity of the industry is 350,000 million tonnes per year. However, the
processing plants are utilizing only 14%-16% of their total capacity due to
significant inefficiencies in various steps of the value chain. The industry is
dominated by ten market players who control 50% of the market share. Gemini Sea
Food Ltd, Apex Foods Ltd, Seamark (BD) Limited, Jahanabad Sea Foods Ltd, Modern
Sea Food and National Sea Food are a few among them. The sector suffers from a
lack of vision and strategic direction. An integrated strategy at each stage of value
chain for sustainable growth and to respond emerging trends in the competitive
global market place can increase the shrimp export earnings of Bangladesh.
Evolution of the Industry
During the 60s the seafood industry commenced their existence. Industries which
were serving the market back then do not exist anymore. The second generation
came into this industry during the 80s and since then Gemini Sea Food has been
the only one to survive. Gemini Sea Food began operations from 1982 and up until
now, this is the only running oldest industry of the current market. Industries which
came into the market after 90s are still ruling the market as the market leaders.
Our company started running the business from1982 as a public limited company
and most probably this company is one of the oldest one in this sector.
Seafood industry has evolved gradually by overcoming several barriers. The EU
launched strict monitoring measures in 2009 after allegations were raised over the
presence of harmful metallic elements and chemicals such as nitrofurans, a banned
antibiotic, in the shrimps and fisheries items. The EU delegates who were observing
the frozen food items from Bangladesh are now satisfied over the measures the
Government of Bangladesh took after getting their complaints. Considering the

precaution and measures, they submitted reports on our favor, and subsequently
EU come to the decision in November 2011 to withdraw the embargo of 20%
compulsory test on frozen food items including shrimp and other fish items entering
its market. It has created a possibility for Bangladesh to be the lone Red-Alert-free
country in Asia that is exporting frozen fisheries items to the EU. The compulsory
tests for frozen food items is still effective for India, Thailand, Myanmar and the
other countries in Asia who export fish products to the EU.
Production Value Chain
Our value chain starts with the farmers followed by the media and ending with the
processors-exporters. Media or middlemen basically refers to the Farias and
Atradars. Above middlemen there are account holders in the value chain, who are
basically the suppliers of the factory. They are the major supplying agents.
Supplying agent basically supervises the local farias. A factory orders all the
materials and buys them with the help of the supplier agent. This is how the goods
get delivered to the factory and from the factory the goods are then exported
straight away to the buyers. Hence this basically sums up the entire value chain.
The media acts as a bottleneck for the industry. We are trying to reduce the level of
hierarchy of the value chain process through seeking help from the government,
since shortening the process will prove to be benefitting for us.
Technology and Machinery
This is a frozen food industry so we usually use the refrigeration machineries.
Freezing machines are used as well including plate freezing machines and blast
freezing machines. These machines are generally huge in size. At the same time
cooking machines are used for Ready to Eat foods. The entire sets of machineries
used during the process get imported from abroad. Most of the machines are from
Europe and we always try to bring the highly branded machines from the market
leaders. When it comes to the local products, only certain accessories are used.
Export Market Scenario
According to EPB, overall shrimp exports from Bangladesh decreased last year.
Countrys export earnings from shrimp stood at $ 472.37 million in the fiscal year
(July to June) 2015-16 showing 7.33% decline compared to that of 2014-15 fiscals

$509.72 million. Seafood sector failed to reach the target of $ 515 million (-8.28%).
This is because of mainly global economic recession, devaluation of Euro and
Pounds, and impact of Vennamei shrimp. In recent years demand of Black tiger
shrimp in the international market has dropped significantly due to the availability
of new cheaper species of Vennamei shrimp. The Bangladesh government did not
allow the cultivation of Vennamei shrimp in Bangladesh yet. However, in nearby
countries like India, Vietnam, Indonesia and Thailand are producing the Vennamei
shrimps in a very large scale. Therefore prices of Vennamei shrimps dropped
causing a significant negative impact on the demand and price of Black tiger.
Moreover, the European importers are in very conservative mood due to
devaluation of Euro and Brexit effect. Nevertheless, exxports of shrimp and frozen
fish to the European Union (EU) market rose to Tk47.03 billion last year almost
double the 2009 exports figure, as the government took stricter steps to maintain
quality and control contamination. Exportable shrimps are cultivated mainly in
Khulna, Satkhira, Bagerhat, Jessore, Narail, Coxs Bazar, Pirojpur, and Gopalganj
areas. Bangladesh mainly produces saline water bagda or black tiger shrimps and
the rest are freshwater galda or fresh water prawn.
Government Incentives and Initiatives
The government provides subsidy to the sector. However, the subsidy is based on
different slabs of glaze. The highest amount of subsidy is 10%. We basically have a
glaze on fish, in some cases it depends on the type of market from where the buyer
belongs. If a buyer wants a 25% glaze or suppose 10% glaze, and then based on the
percentage of the glaze a slab if offered. If any fish has above 10% glaze, only then
the highest level of subsidy is offered by the government. The entire system is
divided into many categories, like for 20% 1 slab is given, for 30% another. I believe
that the subsidies should be provided in a more practical manner, since subsidy is a
lingering process. It is time consuming and there are times when we have to go
through different problems because of it and government does not always offer us
such subsidies.
The government has established modern quality control laboratories in Savar,
Khulna, and Chittagong including LCMS (Liquid Chromatography coupled to Mass
Spectrometry) and GCMS (Gas Chromatography coupled to Mass Spectrometry)

equipment. Installation of the laboratories in Chittagong and Khulna has been

finished while construction of the Savar one is nearly complete.
According to the Department of Fisheries, the LCMS facility is applied mainly for the
analysis of thermally unstable molecules in complex samples like biological fluids
while the GCMS is applied for the analysis of volatile compounds in complex
samples such as gasoline and petroleum products. To improve the quality of shrimps
in shrimp farming areas all the shrimp enclosures have been brought under
registration and monitoring system by DOF to eliminate the risk of metallic and
chemical contamination.
Regulations and Maintenance
Our basic standard is HACCP (Hazard Analysis and Critical Control Point) and for the
EU market there are certain EU regulations followed to maintain the standard. For
America there is USAD regulation. These are for adhering to the rules of the
international market. For Bangladesh there is FIQC for complying with the laws, also
known as Bangladesh Matsho Ain. Under the department of fisheries, there is
another department which is known as FIQC (Fish Inspection and Quality Control).
We have to fulfill the requirements of Bangladesh Matsho Uddhadesh. There is
also an internal control parameter for the buyer, which is applicable for only certain
buyers and we always have to meet up with those demands.
We do face hurdles in maintaining these standards. Since Bangladesh is a
developing country, the entire system of the country, infrastructures, health
hazards and level of hygiene are so poor that complying with all these rules and
conditions becomes nearly impossible or difficult for us. The mindset and lifestyle of
our workers are not hygienic as well, even though we are aiming to do a task of a
high level quality. The mindset of the people, the social condition and the standard
of our country all these factors act as a huge obstacle in meeting or complying with
all the conditions.
Excess Capacity
The overall utilization is actually below 20% and major reason behind it is shortage
of property. In our industry the demand of raw materials is roughly around 300
thousand metric tons and we dont even produce 100 thousand metric tons. So

there is always a presence of scarcity and due to the seasonal dependent product
we have an Extensive Culture. The entire cultivation process is basically done in a
natural manner, without the use of any harmful medicines or chemicals, especially
in case of shrimp. Since we have this extensive culture system, our products/ fishes
are very much vulnerable to the environmental and weather related issues and
being attacked only once by a virus is enough to destroy the entire sector. As a
result expanding the size of the factories wont do any help due to this vulnerable
situation. Even though one might want to increase the production capacity, but the
scarcity of the raw materials will always act as an object of obstacle to meet the
required demand.
Inventory Management
We do not have much freedom in case of the raw materials and due to that reason
inventory is developed. Most of the times we have to buy the raw materials in lot
basis; we always buy and store whatever supply of fish is available from a particular
supplier. There is no choice of our own in this regard. So this is one reason for
developing inventory.
In Bangladesh there is still no single foreign exchange bank, which will act as an
expert in dealing with such relations. The proceeds which we receive from Europe,
America and London in the form of LC are always folded in nature. The entire
process keeps on running from one bank to another bank. The payment is never
made directly. Bangladesh lacks in proper efficiency in dealing with foreign
exchange issues and absence of proper dynamic banking arrangement is making us
suffer a lot in every shipment.
In our case, the management of inventory has been done in a proper manner due to
setting targets for the short run. The production and selling of the goods are done
based on a short term basis. We try our best to mix match the sale of our goods.
Mix and match in sales and consciousness are the two key factors enabling us to
cope up with the level of inventory. Apart from that we also follow the Just in Time
(JIT) approach, to make it possible for us to deal with such difficulties. Holding
inventory is very costly and these goods are frozen and perishable in nature, this
automatically makes it even more important to store the fresh stock of inventories.
The frozen goods are always stored in 18C or else bacteria can germinate at any

time. Storage of such goods consumes a lot of electricity and we always have to use
the electricity, compressor and ammonia gas to keep the goods in a good state.
Human Resource
Human resource is a challenge for the sector. This particular sector or industry has
evolved in the remote southern areas of Bangladesh, because of which we still lack
in having proper human resource and skilled labor. For the most part it is Khulna
based and the rest of them are in Chittagong. Job seekers do not really consider
working in such places as a lucrative opportunity. The employee turnover rate is
very high over here. Since the zone itself is very small, chances of the skilled labor
getting hijacked is very high. It is very difficult to hold on to a skilled labor. If we look
at the garments sector, we will notice that the workers over there belongs to
different backgrounds and districts, whereas the sea food sector is so remote that
creating space for such diversified workplace is not a feasible option here. This
sector is more like an enclosed place, since there is no place for others and only the
local ones are available for work. As a result this sector is highly deprived of
external development.
Waste Management
Controlling the environment compliance and waste management are not really
possible without focused management. The maximum numbers of factories of
Khulna are located near the banks of the river; as a result the wastages get
disposed of in the rivers directly. Apart from this there is not really any other issues
regarding the environment. Chemicals are not really used for cultivating the fish;
therefore the waste waters are not that harmful. Only food grade chemicals are
used in the process, which is human consumable. When it comes to the waste
management process, we have an established ETP system which most of the
companies do not possess/follow. The local authority is not also playing a
responsible role in forcing the companies to maintain a proper waste management
process.
Role of Bangladesh Frozen Foods Exporters Association (BFFEA)
BFFEA is actively working for it by maintaining a liaison between the government
and different regulative bodies, by addressing all the small issues/ problems of the

sector and placing everything in an organized manner. In order to make a noticeable

change or raise the growth level, raw material production needs to be increased.
There are two possible ways for that, one is our intensive culture. Our man crop is
Baghda and Golda. Baghda is massively produced in Satkhira using the extensive
culture system. We can apply the semi intensive process in the production method
of Bagda by applying different measures of farming. In this manner the production
of Bagda can be expected to increase 8 to 10 times than the present rate.
There is a shrimp named Vennamei, which is more like a farm chicken; is being
produced in countries like India or other competitive countries. The government of
Bangladesh is a bit skeptical and nervous regarding the production of this shrimp in
our country, due to which other countries are acquiring heavy resources because of
the presence of such a Vennamei culture. Over the past 2 years India has doubled
their export rate, whereas we are not being able to do anything because of using
only 16-17% utilization of resources. So government can introduce this Vennamei
culture in Bangladesh or they can shift the Bagda production into semi intensive
one. Few initiatives have started already, but that has to increase at an exponential
rate so that banks will start to offer loans, entrepreneurs will be invited to invest.
This way a change or an improvement can be done to this sector. The local people
are just carrying on with the usual cultivation system of fishes and they are just
simply using the local salty water to run the production. To increase the rate of
shrimp production at least 10 times more than the current rate, we need implication
of modern farming processes. Only then the growth or expansion of this sector will
be attainable.
Opportunities and Challenges
As far as opportunities are concerned, Bangladesh is currently the green zone for
the natural shrimp market because of EU being a little bit lenient regarding the 20%
compulsory test. The market size of this natural shrimp has declined in the world
market and due to Vennamei countries like India and Vietnam have lost their
opportunity in this regard. Natural shrimp is also known as the extensive culture
shrimp. We have another competitive advantage since Bangladesh is the only and
the biggest reserve of Black Tiger. Utilizing this advantage with the help of proper
branding and through increasing the level of production in the semi intensive level

we can grab an opportunity to play in the world market with the help of this shrimp
production. We are the only ones to have that capability and even though it is a
narrow market it still has the potential to serve a huge market both home and
abroad.
Secondly, branding and image in the food safety level needs to be developed.
Bangladesh has a very poor image of the goods which gets produced or exported to
other countries. Everyone has a negative perception about it and considers the
foods to be filled with bacteria and viruses and other things. Government needs to
shed light on these concepts, since this is high time to change such a negative
image.
The sea food industry is worth more than BDT 50 billion and doubling its worth is
not a difficult task. It can be made possible by tapping into the right segments.
Another opportunity is our Bay of Bengal, which can also be referred to as the
Heaven of Fish. We are facing a gradual slope in the production of fishes in such
sandy areas. Huge amount of seafood is available in these kinds of places and
government is still not exporting those goods and at the same time has failed to
take advantage of such a lucrative opportunity. We are still dealing with shrimp;
almost 90% of the exported goods are shrimp. Apart from shrimp we need to
consider exporting the seafood items, like crabs, sea fish etc. Mishandling of the sea
fish is still occurring in different places and thus not getting exported to European
and American countries with proper compliance. Initiatives to meet the
requirements of high end markets should be considered. We need to start working
with sea fish. Sea weed is another one, which is consumed in places like Japan and
is highly valued as food item. Majority soup items are made using sea weed as a
crucial ingredient.
Another opportunity is value addition. Currently we are just exporting the raw fish
by freezing them on a basic level and we can certainly add value to it. Introducing
new variations will help in this regard. In Tokyo, countries like Vietnam and
Indonesia are heavily engaged in such kinds of variations. Our main export market
is Europe and secondly we have America. Japan used to be the third country on the
list but thats not case anymore because of various quality issues and other
problems. We severely lack in the numbers of committed business people and due

to that reason we have always failed to meet the expectations of our foreign clients.
Currently Japan is importing from India and Vietnam and thats how the market can
be segregated.
On a global basis, China is considered to be the leader in exporting of such
goods/items. However, currently China is importing more goods than they are
exporting. Few countries are doing quite good in terms of exporting as well, like
Vietnam, Thailand, Philippines, Ecuador and Chile. Bangladesh ranks 4 th in the list of
major fish producer and export is only a small segment compared to the overall
level of fish production. Our sea resource is not being properly utilized and several
generations of fishes are being captured by the local people in a nonprofessional
manner and in other cases; countries like India and Thailand are illegally taking it
away from us. As a result we still cannot use our resources in the right way. The
government of Bangladesh is quite alert about this issue and recently two ships
have been launched with the sole purpose of conducting a survey from this
November. Once the survey gets done, we will get access to the authentic
information and based on that permission will be given
Our first challenge is the scarcity in the raw materials and we need to increase our
production rate by, either following the semi intensive culture method or by
Vennemei culture process. The second challenge is posed by the middle people like
farmers, since they are the ones to control the price of raw materials and affect the
rate of contamination. They are the ones to contaminate the fishes and putting the
factories and the entire nation into grave danger. The fishes get contaminated by a
jelly type of chemical which are actually killing the fishes at the end of the day.
These are basically done to make the fishes look bloated and no one likes to have
that kind of fish; therefore eventually the containers of ships are getting returned by
foreign countries.
Second challenge is the poor image of our country. Despite having the supply of the
best shrimp all over the world, we are still lagging behind because of poor branding
image. We are thereby losing out on revenue, by failing to serve the target market
with the right supply of goods. When other countries are adding value to the same
fish which we are trying to sell, they are automatically selling it at a rate twice than

ours. Due to this poor image of Bangladesh, buyers do not even expect such goods
from us and even if the goods are offered, it faces a lot of scrutiny in the process.
Labor and human resource is another challenge for us. At the strategy level we do
not have many professionals to take the lead. Most of the factories have their local
members and the number of educated officials is still very few in number. Real
professionals to handle such situations and make strategic decisions are highly
required. Garments and Pharmaceutical sectors have advanced to a huge extent in
this regard.
Compliance and regulatory bodies is another challenge for us. Foreign relationship
in terms of banking is still very weak in Bangladesh. While working for the export
sector, communicating fluently is very crucial and unfortunately this does not
happen in Bangladesh.