National Food Policy Capacity Strengthening Programme Implemented by FAO in collaboration with FPMU/Ministry of Food and Disaster Management

with financial support of EU and USAID

TERMS OF REFERENCE #6 For the research proposal to be funded under NFPCSP Phase II

Policy options for supporting agricultural diversification in Bangladesh

1. Background and Rationale

Agricultural diversification towards products with a higher value-added contributes to more rapid agricultural income growth and employment by stimulating small farmers participation in the market. Diversification in production is also likely to lead to diversification in consumption, which is required for healthier and more balanced diets. In Bangladesh, the rapid growth in domestic demand for fruits, vegetables, dairy products, fats and oils is creating new opportunities for diversification of agricultural production beyond cereals. Cereal expenditure as a percentage of total expenditure declined from 49% to 30% in urban areas and from 60% to 41% in rural areas between 1973/74 and 2005. In contrast, during the same period expenditure for fruits and vegetables rose from 6% to 12% and from 4% to 11% in urban and rural areas, respectively.1 Between 1998/99 and 2007/08, the value of rice, fruits, vegetables and inland fish output in Bangladesh rose by 2.3%, 10.5%, 7%, and 4.5% per year, respectively. On the other hand, the value of pulses production fell by 1.6% and oilseeds production value increased only slightly by 1.7% per year during the same period, which resulted in large imports of pulses and oils to meet growing demand. By way of comparison, India witnessed a 2.3% rise in value of both rice and fish output during 1996/97 to 2001/02, while the value of pulses and oilseed production plummeted by 2.6% and 3.9%, respectively.2 National policy documents, including the Draft National Agricultural Policy (2010) and the National Food Policy Plan of Action 2008-2015, recognize the need for diversifying agricultural production. Although it is generally understood that factors such as climate and market risks, agro-ecological characteristics, tenure rights and access to inputs influence the ability to diversify, sufficiently specific evidence for informing policy interventions is not available. Through an analysis of various data sources (e.g. HIES, agricultural census, FAOStat) and the collection of primary data, this research project will identify specific factors that constrain and support different types of agricultural households across the country in diversifying their agricultural production. On the basis of this analysis concrete policy options for facilitating agricultural diversification will be provided.

1 2

Based on various HIES survey reports. Chand,R. Policy brief # 20, National Centre for Agricultural Economics and Policy research, New Delhi.

National Food Policy Capacity Strengthening Programme Implemented by FAO in collaboration with FPMU/Ministry of Food and Disaster Management with financial support of EU and USAID

2. Objectives The objectives of this research project are: a. To assist policy makers in identifying policy interventions that will allow agricultural households to diversify their agricultural production into micronutrient rich foods and/or those with a strong income generating potential. b. To examine past trends of diversification of crop and non-crop agriculture, and compare the rates of growth to those in neighbouring countries to gain some perspective on how rapid (or slow) growth in Bangladesh has been. c. To examine socioeconomic and agro-climatic determinants of and constraints to agricultural diversification. 3. Scope of the study More specifically, the study will address the following3: Trends and geographic distribution in the growth of production, area, yield and net international trade (exports minus imports) of food commodities in Bangladesh, by decade, using official Bangladesh government data. The commodities to be analyzed should include: 1. Rice 2. Wheat 3. Maize 4. Sugarcane 5. Fruits (banana, pineapple, mango, jackfruit, jujube) 6. Summer Vegetables (Okra, bitter gourd, Patol) 7. Winter vegetables (Brinjal, Cauliflower, Radish) 8. Potato 9. Pulses (lentil) 10. Oilseeds (mustard) 11. Spices (onion, garlic, green chilli) 12. Fisheries (inland, capture and culture fisheries) 13. Red meat 14. Poultry meat 15. Egg 16. Milk Non food agricultural crops, such as Jute and Tobacco, will be included in the analysis if relevant for determining trends in production diversification. Trends and rate of growth of production, area and yield of the food commodities listed above in India and Pakistan, by decade, using secondary data from FAO.4 This

3This

research project will make systematic use of available secondary datasets such as the Household Income Expenditure Surveys, reports of Agriculture Sample Surveys, Reports of Agriculture Census, and the Yearbook of Agricultural Statistics. 4 Change in net trade does not need to be analyzed for India and Pakistan.

National Food Policy Capacity Strengthening Programme Implemented by FAO in collaboration with FPMU/Ministry of Food and Disaster Management with financial support of EU and USAID

is necessary in order to gain some perspective on how rapid (or slow) growth in Bangladesh has been. Trends and comparison over time in domestic consumption in Bangladesh by location (urban, rural) and socioeconomic class (top and bottom quintiles) using data from household income and expenditure surveys (HIES) for all the commodities listed above. Compare level of per capita consumption, for all commodities listed above, calculated in two ways: (i) production plus net imports divided by population; (ii) average calculated from HIES. This comparison should be done for the most recent year for which HIES data are available. There is no need to identify the causes of any discrepancies between the two methods. Trends and patterns in domestic production by socioeconomic class, using data from multiple HIES, and description (expenditure quintile) for at least ten of the fastest growing products among those listed above. Financial and economic profitability of enterprises: review of studies on the financial and economic profitability of different crop and non-crop enterprises (including to the extent possible all those listed on page 2) in order to provide a rationale for their inclusion in the diversification agenda. No primary data collection for this particular purpose is foreseen, however. Constraints and opportunities for diversification of agricultural production: using qualitative primary survey data, assess the constraints to (e.g. lack of working or investment capital or access to technology, poor soil, climatic risks), and opportunities for, diversification of agricultural production. The surveys should cover the same ten products noted in the immediately preceding bullet point. The surveys should take place in at least two surplus production areas for each of the ten products. In each area, the surveys should cover at least 30 farmers who are involved in production of the commodity, and at least 30 farmers who grow only basic grains such as rice, wheat or maize. This assessment would also include a thorough review of the successes and failures of crop diversification programs undertaken by the Ministry of Agriculture.

The study will deliver: A draft inception report within 3 weeks from the date of signing of the contract. The inception report will detail the research programme, the literature and data requirements, methodology and expected outputs. In addition, the inception report will include the Ministry of Agriculture diversification programs that will be discussed and the ten fast growing commodities based on time-series analysis of Bangladesh production data. A final inception report within 2 months from the date of signing of the contract. The NFPCSP will provide feedback to the draft inception report within 3 weeks of its

National Food Policy Capacity Strengthening Programme Implemented by FAO in collaboration with FPMU/Ministry of Food and Disaster Management with financial support of EU and USAID

submission. The research institution will then have 2 additional weeks to finalize and submit the final inception report. A detailed methodological note (draft), within 3 months from the date of signing of the contract, which incorporates tools (e.g. survey questionnaires), approaches (e.g. sampling and areas selection) and a detailed work plan for the fieldwork. The draft note will be circulated and a final version will be submitted within 2 weeks of receiving NFPCSP feedback An interim report, within 5 months from the date of signing of the contract, presenting interim findings. The interim report should include the full literature review and data sources, preliminary findings, annotated table of contents for the final report and revised research program. In addition the interim report will present: an overview of changes in production (quantity and rate of growth), consumption and trade of agricultural commodities since independence, including a comparison with India and Pakistan; the preliminary identification of possible constraints to agricultural diversification; the questionnaires, sampling method and study areas to be selected for primary data collection for each of the selected products. A draft final report, within 10 months from the date of signing of the contract. The draft final report (length between 25,000 and 30,000 words -excluding an executive summary not exceeding 2,500 words, and annexes) should be based on the data analysis and program and literature review and should include: o Description of the purpose, relevance and background of the study and methodology used. o Literature review of secondary sources o Data analysis and statistical tools used o Descriptive statistics o Analysis of the data collected using appropriate tools o Description of additional qualitative work if any o Policy options for diversifying the agricultural production of different income quintiles into products with a strong income generating potential. 4. A final report, 12 months from the date of signing of the contract. The final report will incorporate the feedbacks and adjustments required by the NFPCSP

Duration and funding available Maximum duration: 12 months Maximum funding available: US$50,000