"By the end of the 1970s, the Bangladesh seafood processing industry had expanded rapidly. But sanitary facilities, technology adaptation, and adequate training did not keep pace. Shrimp exports suffered in the late 1970s, and the U. S. Food and Drug Administration placed seafood imports from Bangladesh under automatic detention. This was only the beginning of the export market problems arising from substandard product safety and quality that Bangladesh's shrimp industry faced over the next two decades. This case study illustrates the actions taken by Bangladesh, with the aid of external partners, to overcome substantial obstacles to participation in world shrimp markets." from TextFood safety ,food security ,trade ,health ,Export marketing ,

Cato, James C.

Subasinge, S.

English

Research Papers in Economics

FOR FOOD,AGRICULTURE,
AND THE ENVIRONMENT
FOCUS 10  •  BRIEF 9 OF 17  •  SEPTEMBER 2003
FOOD SAFETY IN FOOD SECURITY
AND FOODTRADE
Case Study:The Shrimp Export Industry in Bangladesh
JAMES C.CATO AND S.SUBASINGE
B
y the end of the 1970s, the Bangladesh seafood processing
industry had expanded rapidly. But sanitary facilities, tech-
nology adaptation, and adequate training did not keep pace.
Shrimp exports suffered in the late 1970s, and the U. S. Food
and Drug Administration placed seafood imports from
Bangladesh under automatic detention.This was only the
beginning of the export market problems arising from substan-
dard product safety and quality that Bangladesh’s shrimp indus-
try faced over the next two decades. This case study illus-
trates the actions taken by Bangladesh, with the aid of external
partners, to overcome substantial obstacles to participation in
world shrimp markets.
THE NEED TO BUILD A SAFE INDUSTRY
Recognizing both the potential for Bangladesh’s exports and
the problems with safety and quality of the product, the Food
and Agriculture Organization of the United Nations (FAO)
helped Bangladesh develop product standards, regulations, and
fish inspection schemes in the early 1980s. In 1983, the
Bangladesh government created a Fish and Fish Product
Ordinance (Inspection and Quality Control) and in 1985
upgraded the inspection laboratory and its personnel.
FAO initiated a 1996 project to assist in the preparation of
a fish safety and quality control program for the shrimp and fish
plants in Bangladesh,based on the Hazard Analysis Critical
Control Point (HACCP) approach. The program provided train-
ing in HAACP procedures to both the public and private sec-
tors. It also informed the government about new requirements
of major importing countries. A parallel Common Fund for
Commodities/FAO project carried out by the Intergovernmental
Organization for Marketing Information and Technical Advisory
Services for Fishery Products in the Asia Pacific Region
(INFOFISH) focused on the export promotion of value-added
products and their sustainable development. Activities ranged
from industry training to the development of export opportuni-
ties.Despite these efforts to upgrade product quality and safety,
Bangladeshi shrimp exporters continued to suffer from real
problems and those that importers perceived as real.
In 1997, the fourth leading export item in Bangladesh was
frozen shrimp and fish, with a 7.3 percent share of the total
export market. The major importers at the time were the
European Union (EU), accounting for 34–50 percent of
Bangladesh’s exports, the United States at 23–38 percent, and
Japan at 15–26 percent, depending on the year. At that time,
the value per kilogram of Bangladesh’s frozen shrimp was
lower than average for the Asian region. Furthermore,
Bangladesh had a reputation for producing seafood that some-
times did not meet minimum international standards as speci-
fied by the Codex Alimentarius Commission. With a low per-
centage of the world market, a lower-valued product, and a
negative reputation in quality, Bangladesh has been a price-
taker, rather than a price-setter.
THE EU BAN
On July 30, 1997, the EU banned imports of fishery products
from Bangladesh as a result of EU inspections of Bangladesh’s
seafood processing plants. Inspections found serious deficien-
cies in the infrastructure and hygiene in processing establish-
ments and insufficient guarantees of quality control by
Bangladeshi government inspectors. The ban was estimated to
cost the Bangladesh shrimp-processing sector nearly US$15
million in lost revenues from August to December 1997. (In
this brief all dollars are US dollars.) The impact on both the
industry and the economy of Bangladesh was substantial.
The only way Bangladesh can improve its export position
in the shrimp market is to improve the safety and quality of its
exports. Safety improvements over the last two decades, with a
major effort in the late 1990s, have been made by the industry
and government, and by bilateral and multilateral agencies pro-
viding technical assistance. While the short-term loss in for-
eign currency from the EU ban was high for a developing
country, the ban did increase the commitment by industry and
government to raise product quality to meet international
standards. Both exporters and government made major
investments in plant infrastructure and personnel training in
order to achieve international technical and sanitary standards.
This included new employee acquisition and employee training,
sanitation audits, plant repair and modification, new equipment,
new laboratories, and other costs.
INVESTING IN SAFETY
Some upgrades were in progress at the time of the EU ban. By
1997, the Bangladesh shrimp processing industry had invested
$17.6 million in plant upgrades, the government had invested
$382,000 in laboratory and personnel upgrades, and outside
partners had invested $72,000 in training programs in
Bangladesh. Unfortunately, these improvements were not in
place early enough to prevent the ban.The total fixed invest-
ment cost of $18 million was only slightly more than the near-
ly $15 million in lost revenue from the ban over a period of
five months. These improvements would have almost been
paid for had they been implemented in time to make the ban
unnecessary. Research has also determined that the annual
recurring costs to maintain HACCP programs and meet inter-
national standards would be $2.2 million for industry and
$225,000 for government.
Subsequent inspections by the EU determined that some
plant improvements now met EU standards. Subject to certainprovisions, the EU ban was lifted for six approved establish-
ments for products prepared and processed after December
31, 1997. By July 1998, a total of 11 plants had been approved
for export to the EU. Collective efforts by the industry, the
Bangladesh Department of Fisheries, and the Bangladesh
Frozen Food Exporters Association have continued to
strengthen the export-processing sector. By 2002, out of 65
plants licensed for export by the government, 48 plants had EU
approval.
THE CHALLENGES AHEAD
As the industry faces new challenges, ensuring safety and quali-
ty continue to be important elements in industry development.
One concern is the sustainability of shrimp production. The
revamped factories, having greater capacity, are mostly operat-
ing at about 20 percent of capacity due to limited supplies of
shrimp. This has resulted in a growing focus on sustainability in
the production sector with increased emphasis on hatchery
production of shrimp post larvae for seeding the ponds, rather
than harvesting from natural stocks. As hatchery production
expands, Bangladesh has also placed increased emphasis on
good aquaculture practices as well as certification of aquacul-
ture facilities.
A second challenge is the need to become more diversi-
fied in terms of both products and markets. A large number of
export processors are now producing increasing amounts of
value-added products such as individually quick-frozen, peeled
and deveined, and butterfly cut shrimp, as well as cooked prod-
ucts. In 2001 these value-added exports made up almost 25
percent of the total exports of 32,500 metric tons, valued at
$363 million. Technical assistance from FAO and INFOFISH
continues to play a role in industry development
by transferring simple, low-cost technologies for
adding value and by matching buyers and sellers
to facilitate market diversification. Industry and
the government also continue to upgrade the
export sector as a whole.
Improvements are making a difference
because the unit price of exports has risen steadi-
ly over recent years,in contrast to the sharp
decline in 1997 (see the figure). Some exporters
are now recording an average unit price of more
than $15 per kilogram,a price comparable to that
received by major exporters from the region.
The average volume of exports has also increased
from about 24,000 metric tons in 1990–92 to
about 30,200 metric tons in 1999–2001.
Improvements in food safety have thus set the
stage for Bangladesh to become more competitive
in the global market for seafood.Moreover,
improvements in the shrimp sector have undoubt-
edly impacted the seafood and food-processing sectors as a
whole,due to the intertwined nature of the food-processing
industries in the country.Even in 2002,however,Bangladeshi
shrimp exporters did experience some safety problems,and
more testing laboratories were established.
Developing countries can often compete in world food
commodity markets because export products can be produced
at a lower cost than in developed countries, provided the prod-
uct can meet minimum safety and quality standards. To accom-
plish this, developing countries need assistance not only with
technology, but also with training workers to use technology
and conform to world food-handling, sanitation, and personal
hygiene standards. This normally requires a cooperative effort
between a country’s industry and government and its external
partners. The Bangladeshi shrimp export case demonstrates
that these efforts can be successful. It shows that developing
countries, with careful guidance and focused effort, can success-
fully face the challenges of the global market. ■
For further reading see J. C. Cato and C.A. Lima dos Santos,
“European Union 1997 Seafood Safety Ban:The Economic
Impact on Bangladesh Shrimp Processing,” Marine Resource
Economics 13 (No. 3, 1998): 215–227; J. C. Cato and C.A. Lima
dos Santos,“Costs to Upgrade the Bangladesh Frozen
Shrimp Processing Sector to Adequate Technical and Safety
Standards and to Maintain a HACCP Program,” in The
Economics of HACCP: New Studies of Costs and Benefits, ed. L.
Unnevehr (St. Paul, Minn., USA: Eagan Press, 2000); and M.
Rahman, Market Access Implications of SPS and TBT:
Bangladesh Perspective (Jaipur, India: CUTS Centre for
International Trade, Economics and Environment, 2002).
James C. Cato (JCato@ifas.ufl.edu) is a professor of food and resource economics and director of the Florida Sea Grant College Program at the University of
Florida, Gainesville, USA, and S. Subasinge (infish@po.jaring.my) is director at INFOFISH, Kuala Lumpur.
International Food Policy Research Institute
2033 K Street, N.W. •  Washington, D.C. 20006-1002  •  U.S.A.
Phone: +1-202-862-5600  •  Fax: +1-202-467-4439  •  Email: ifpri@cgiar.org
www.ifpri.org 
Value of Bangladesh’s Shrimp Exports, 1990–2001 
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Sources: FAO Commodity Updates and Bangladesh Frozen Food Exporters Association.
U
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Case study the shrimp export industry in Bangladesh

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Case study the shrimp export industry in Bangladesh

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