Vertical integration and vegetable production

However, today in this column, I shall attempt to present a case study on the export of vegetables. The idea is to inform the readers about the linkage between institutions, incentives and small vegetable growers. How are small holders hooked on with the vertical integration in a globalised regime? To this effect, I shall draw upon the experiences of an institution engaged in harnessing the opportunities available to small growers.

BRAC breakthroughs

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Bangladesh Rural Advancement Committee (BRAC) -- a reputed NGO -- is one of the leading exporters of vegetable products. I am told that the organisation accounts for one-tenth of our total vegetable exports taken together. BRAC aims to feed the famous supermarkets in Europe and the Middle-east countries at the moment but hopes to harp on other outlets in future.

BRAC started the business in 1997/98 with 30 contract growers covering seven acres of land in Chandina Thana. The place is very close to Comilla town and stands just by the side of the Dhaka-Chittagong highway. The contract with growers stipulates that growers would supply vegetables to BRAC as per specification, quality and price set by BRAC. The "unwritten contract" has been in effect since the time BRAC started business and now applies to 300 or so growers covering 40 acres for whom BRAC appears as a buyer. Growers bring their produce to BRAC export office at Chandina where sorting, grading and cooling facilities are available. From Chandina, the products are sent to Tongi,Dhaka, where BRAC has recently built a modern pack house -- costing around Tk.60 million. The products are assembled there and marked for foreign markets via airlines. The pack house is yet to be fully furnished with equipment but given that, BRAC could comfortably cater to the needs of the growing demand that it expects to face.

Allow me to remind the readers that Chandina and adjacent areas are well known for the cultivation of vegetable crops due to favourable soil condition and water supply. I recollect my early days in that area when I also used to witness a lot of vegetables being grown and harvested and trucks filled with to feed distant domestic markets.

Beyond boundary

This time it looked different to me. First, the products are mostly destined for markets outside the country compared to inside in the past. Second, prescriptions provided by the GAP -- good agricultural production -- from the European countries are being followed with right earnest. The GAP manual suggests the farmers about what chemicals to avoid, how much organic manure should be applied and what are the ways of growing green crops. By and large, cleanliness and cost effectiveness are the two important lessons that they seem to have learnt over the years. Third, during the discourse, it could also be observed that over half of the income of the small households originate from vegetable production. And finally, they had accepted the unwritten contract "because never ever we observed a breach".

The contract helped them in three principal ways. First, they no longer have to submit to the swings of prices of their produce marked by the whims of the market. Second, the contract helped them plan production, receive training and adopt technology. And third, the contract abolished the role of the middlemen in between the producers and the buyers. As I could understand, long beans are being bought at Tk. 13/kg where the fob price is Tk. 29 giving the farmers 44 per cent of the total price. In the presence of middlemen, the share could hover around 35-40 per cent.

The unknown

French Beans are not produced in Bangladesh. But in the world market, there is a great demand for this crop. Kenya is reported to be one of the principal sources of supply in the world market. BRAC imported the technological and economic knowledge to embark on growing French Beans in Bangladesh, for the first time, through its contract growers and sell to foreign markets. One important ramification of this new variety, reportedly, is that the women do the whole harvest. Again, one acre of French Beans requires 200 mandays of employment which is much higher than cereals and other vegetables. Thus French Beans production is not only labour intensive but also pro-women. In winter, this crop claims more than 90 per cent of the land under vegetables grown by the contract growers.

Safe food, secured women

Because BRAC aims to export the vegetables different supermarkets of the world, it has to see that proper grading, sorting and cleaning is done before putting them on plane. I was told that 30-35 women work throughout the year to make things acceptable to foreign buyers. Half of them are reported to hail from female headed households, about one-third are divorcee and the rest from very poor socio-economic conditions. The opening up of Chandina vegetables to foreign markets thus opened up the doors for poor women to engage in activities not generally generated by those destined for the domestic market.

Determinants of development

In a recent research paper, Ashok Gulati and Sudha Narayan (IFPRI) noted important village level determinants for vegetable production. Relating their findings from India to Bangladesh, I observed small variations in terms of the issues under consideration. Vegetable production in Chandina has been surging over the years. The major drivers to this development are the following. First, good infrastructure -- roads and telephones -- to quickly connect the area with major consuming areas in and outside Bangladesh. This is also aided by market high density (number of markets/1000 ha of gross cropped area). Second, relative profitability of vegetable production is higher than comparable crops. Farmers, reportedly, feel more economically sound with growing vegetables than other crops. Third, the climate is conducive for increased production. Fourth, the advent of the modern rice technology helped release land for crop diversification and finally, urbanisation and increased per capita income acted as a driving force from the demand side..

Access and ability

But exporters of vegetables -- be it an institution like BRAC or individuals -- face a volley of problems as they vie to capture world market for vegetables. The most important problem is transport. For example, Bangladesh Biman is the only airline that they can rely on -- when other airlines refuse to carry vegetables. The reliability of Biman to carry the goods time remains a big question mark. It is therefore imperative that either other airlines should be induced to carry Bangladesh vegetables or some craft should be converted into cargo. In fact, cargo availability could increase exports by a big margin, I was told by exporters. The second problem is related to accessing markets. The US and Japanese markets are not meant for Bangladeshi vegetables. An arsenal of tariff and non-tariff barriers tend to bedevil exports. The Chinese government has somehow managed the access through bilateral negotiations and thus China emerged as the dominant player in vegetable markets of those countries.. It is not clear as to why Bangladesh vegetables should not be allowed provided the exporters follow the food safety rules. The government should try to reach for such negotiations.

And finally, to make vegetables a safe food for foreigners, exporters should be allowed to import machinery at zero duties and provided with capital at reduced rate of interest from banks. Besides, vegetable exporters should be supplied with trainers and other consultants free of cost. By and large, government's helping hand in capacity creation could make the beans a boon.

Last words

Pessimism is, perhaps, the pet position for most of us especially pertaining to exports. And if it is primarily agricultural produce, needless to mention, our pessimism seems to perk at pinnacle. The policy makers, sordidly, never pondered on the prospects of agricultural exports in a globalised regime. They had only been minding the manufactured exports luring them with a lot of incentives and institutional supports. It would not be unwise to claim optimism on the future of our agricultural exports. The government should seriously think about expanding the exports of rice and vegetables in the world market. And Chandina experience of BRAC suggests, neither food safety regulations nor technology or training would discourage our growers from facing the chiming challenge. Only the government needs to rise to the needs with proper policy prescriptions.

Abdul Bayes is professor of economics, Jahangirnagar University