Situation

Bangladesh is a developing country of 124 million people. Fisheries play a major role in nutrition, employment and foreign exchange earning in Bangladesh. About 60 percent of animal protein is supplied by seafood and 1.2 million people are directly employed, with an additional 11 million people indirectly employed, in fisheries. Frozen shrimp and fish is the fourth leading export item at 7.3 percent of the total in 1997. Bangladesh frozen shrimp and prawns exports represent 2.2 to 3.0 percent of the volume and 2.1 to 2.7 percent of the value of the world's frozen shrimp and prawns exports. The value per kilogram received by Bangladesh frozen shrimp exporters has recently been from seven to 16 percent lower than values received by other shrimp producing countries in Asia. Bangladesh has increasingly relied on three major markets for frozen shrimp: United States, European Union and Japan. Total value of Bangladesh frozen shrimp imports into these three markets reached a maximum of US$287.6 million in 1996 with the United States accounting for US$109.6 million, the European Union US$108.8 million, and Japan US$69.2 million. Bangladesh has a reputation for producing seafood that sometimes does not meet the required standards of safety and quality.

Recent Actions

Buyers from the United States, European Union and Japan have experienced problems with some shrimp imported from Bangladesh. In mid-1997, the European Commission banned the imports of seafood into the European Union from Bangladesh. The ban was lifted for a small number of companies in early 1998. During 1997, the United States Food and Drug Administration automatically detained 143 shipments of frozen shrimp for inspection before allowing entry into the United States. The United States now requires that importers of seafood into the United States have HACCP plans in place that are consistent with United States HACCP requirements. Individual plants in Bangladesh must now be inspected (including having a HACCP plan) and approved by the European Commission before imports from these plants are allowed into the European Union.

Based on a survey of 19 shrimp processing plants in Bangladesh during April 1998, the average plant has invested US$239,630 to upgrade the plant to minimum technical and sanitary standards. An additional US$37,525 in investment is anticipated to complete the upgrades for a total of US$277,155 per plant to be fully in compliance with minimum (basic) technical and sanitary standards. The estimate for industry-wide expenditures is US$17,553,150. The average plant expects to spend US$34,875 each year to maintain a HACCP plan, or US$2,208,750 industry-wide. The cost per kilogram (pound) for plant upgrades was US$0.7141 (US$0.3239 per pound) or 6.72 percent of average price received in 1997. The cost to maintain a HACCP plan (depending on costs included) ranged from US$0.0327 to US$0.0899 per kilogram (US$0.0148 to US$0.0408 per pound) or from 0.31 to 0.85 percent of 1997 price received. The only comparative cost per pound for HACCP plans in shrimp plants is for United States breaded, cooked and raw shrimp plants at US$0.0009 per pound. As expected, the cost for HACCP plans in developing countries is much higher than for developed countries. The Bangladesh Department of Fisheries has also spent US$201,483 through December 1997 to upgrade its facilities and train employees to monitor HACCP in the shrimp plants. An additional US$180,676 will be spent in 1998 and US$225,039 will be spent annually each year following to monitor HACCP plan utilization by the shrimp processing industry. The Department of Fisheries maintains that an expenditure of US$14.9 million is needed to implement the highest levels of HACCP monitoring. A donor is needed for about half the funds. The Food and Agriculture Organization of the United Nations has invested US$72,000 in Bangladesh training programs to prepare Bangladesh industry and government to use HACCP in the seafood industry. Across industry, government and externally funded training costs, the total investment to date in Bangladesh to upgrade shrimp plants to minimum standards represents 9.4 percent of export sales for one year. The annual cost to maintain a HACCP program represents 1.26 percent of export sales for one year.

Policy Implications

The requirement by importing countries (usually developed) that exporting countries (often developing) implement HACCP or HACCP-like programs before accepting the imported product has a number of policy implications. Many are much more complicated than those expected when a country requires HACCP in-country. They are even more significant since developing countries now provide 51 percent of the world's seafood exports.

Consumers. Consumers in importing countries have the right to demand safe and high quality seafood. However, differing desires among major markets on what constitutes safety and quality of seafood products may cause confusion and extra investment by exporting countries to satisfy differing requirements of importing countries. Consistency among quality and safety standards is needed. Consumers also need to be prepared to pay higher costs if the cost of HACCP-like programs in exporting countries create added costs that must be passed along to consumers. Consumers in developed countries may also indirectly pay for safer seafood from developing countries if aid programs to train and create adequate processing infrastructure in developing countries are funded by developed countries.

Production and Processing. Seafood processors must determine if the extra costs of HACCP can be borne by the plants and allow the processors to remain competitive on a price basis. The positive as well as negative benefits of HACCP must be determined. Seafood plants in developing countries must also determine if HACCP should be extended to the production level, and work with the relevant inspection authorities to expand HACCP if warranted. Industry and government must determine the effects of HACCP on the structure of the production and processing industry in developing countries and determine if major shifts will occur in the size and number of processing plants due to safety and quality requirements.

Trade. The effect of HACCP or HACCP-like requirements that a developing country may not be able to implement on a timely basis needs to be determined. Requirements with a short window for implementation or safety related bans may allow more successful and higher quality producing regions to take markets from developing countries. The time required to regain the markets may be substantial. Governments, trade associations and inspection authorities must determine if HACCP-like programs are being used as non-tariff trade barriers. The effect of HACCP-like programs may create investment needs by developing country processors they are unable to meet. This may create direct foreign investments that change ownership patterns of plants in developing counties.

Government. Major investments in safety and quality in processing plants in developing countries may place heavy burdens on developing country governments. The burdens range from subsidizing investments in processing plants to upgrading government facilities and capabilities. Developing country governments may also be required to care for temporarily displaced workers due to plant closures due to safety-related requirements. Developed countries may need to invest in donor-type plant upgrading or training programs to assist developing countries to meet safety standards. Taxpayers in developed countries will pay for these investments. Failure to do so may eliminate a needed product source and create other social problems in developing countries that become the burden of another part of govenment.

¹Presented during poster session at the "Economics of HACCP" Conference, Washington, DC, USA, June 15-16, 1998.
²James C. Cato is professor of food and resource economics and director of the Florida Sea Grant College Program, University of Florida, Gainesville, Florida.
³Carlos A. Lima dos Santos is Senior Fishery Industry Officer, Fish Utilization and Marketing Service, Fisheries Industry Division, Fisheries Department, Food and Agriculture Organization of the United Nations, Rome, Italy.

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