Marine Shrimp Farming in Bangladesh - Case Study Example

Name Institution Course Tutor Date Economic analysis (using NPV) of marine shrimp farming in Bangladesh Table of content Table of Contents Table of Contents 1 Introduction 2 Historical economics and the industry’s background 2 Present economics associated with the marine shrimp farming in Bangladesh 3 Advice to the government of Bangladesh 5 Conclusion 8 Work cited 9 Introduction Marine Shrimp farming in Bangladesh is a practice, which has emerged for over two decades. Shrimp farming is a key industry in Bangladesh, with high economic impact. There are various economic factors, which importantly tend to influence the improvement of shrimp aquaculture. The shrimp producers apply the shrimp-rice farming system at their farm level for growth. In the Bangladesh’s fisheries sector, shrimp culture is very vital. This paper seeks to report at the historical and present the economics associated with the marine shrimp farming in Bangladesh. The paper reports on the importance of this industry in the contemporary Bangladeshi economy. The paper reports on the alternative forms of agriculture/industry it might be appropriate for Bangladesh to invest into and what is the likely level of investment required in Bangladesh. There is also identification of the employment that would be provided and what would be the likely ‘flow-on-benefits’ from the chosen alternative enterprise. Historical economics and the industry’s background Shrimp culture industry was established before 1985 when there was practice of bheri/gher acquaculture in the Bangladeshi coastal areas where fish as shrimp were produced before the introduction of the practices associated with shrimp culture. The commercial practice of shrimp farming was begun in 1960s in the Satkhira district in the SW coastal region. Around 1 million of the Bangladeshi people are involved in shrimp farming in around 1 percent of the total land in Bangladeshi comprising of approximately 141,000 ha (Ahmed, 33). In 1970s, there was a strong demand for the product in the international market at high prices. The shrimp farming accelerated also because of the fact that it was not financially viable to cultivate rice where the polders turned to be water-logged because of poor drainage. The Bangladeshi Second Five-Year plan (1980-85) led to recognition of Shrimp farming as a major industry and the set measures resulted to its increased production. Between 1979 and 1980, around 20,000 ha were used for shrimp cultivation and from 1990 to 2005, were expected to rise from 96,048 ha to 135,000 ha. Ultimately, in 1994, the Shrimp farming had occupied around 130,000 to 138,000 ha the estimate meaning that in 2005, the production would be around 89,000 tones unlike in 1995, which was 30,000 tones (Paul, and Christian, 202). The shrimp farming areas continued being expanded inclusive of Khulna, Bagerhat, Cox’s Bazaar, Satkhira, and South-western region among other districts. The mostly farmed shrimp species was the P. Monodon, which was 60% then the ‘giant freshwater prawn. The shrimp farming started being of high profit and a source of foreign exchange in Bangladesh traditionally. Present economics associated with the marine shrimp farming in Bangladesh The shrimp farming industry is very important in the present Bangladeshi economy (Swapan, and Michael, 45). According to the trend, the industry is likely to continue being highly profitable to the Bangladeshi economy because of its high contribution to the foreign exchange and its profitability. The nine hatcheries applied in Bangladesh make the wild shrimp to be of high stock, thus making the fry production to be limited. Bagda. P. monodon remains the most preferred species of shrimp to all the farmers. However, reliance on the wild stocks by the shrimp farmers makes the shrimp farming more costly. The extensive method applied in shrimp farming make farmers to acquire around 250-1,000 kg of shrimp (Ahmed, 35). Shrimp farming is currently a major contributor to the Bangladesh economy. Additionally, despite its immediate financial benefits, it contributes to poverty reduction because of its environmental effects, which allow conduct of other economic activities around the involved areas. Additionally, the cost inputs for the shrimp farming leads to reduction of the exports. The fact that shrimp farming serves a noble purpose in the food security, this means that the practice of capturing fisheries highly contributes to the fish supply especially for human consumption (Paul, and Christian, 204). There is high growth of the shrimp farming in Bangladesh due to factors like cheap labor, favorable agro-climatic condition, efficient water resources, engagement of the multinational corporations, and involvement of the global donor agencies. The shrimp farming also generates employment in Bangladesh through from seed collection to the exportation practices. However, the issue of market fluctuations negatively affects the industry. The future of shrimp farming seems to be promising, but because of the institutional weaknesses, unsuitable management practices, insufficient plans associated with seed supply, fisheries resources, water quality, and irrigation facilities. It is apparent that shrimp farming creates direct formal jobs, indirect formal jobs, and seasonal jobs to the Bangladeshi people (Swapan, and Michael, 46). These jobs comprise of post-harvest, and hatcheries jobs. The shrimp farming in Bangladesh also contributes to technological transfer, inflow of the direct investment, stimulation of the forward and backward-linked sectors, and diversification of the Bangladeshi economy. Ultimately, shrimp farming also led to reduction of the mangrove areas from 1965 to 1984 in Ecuador because of the construction of the shrimp ponds. On the other hand, the soil fertility around the farming areas reduced because of cutting of the saltwater canals across the paddy fields from the shrimp ponds. There was also the issue of marginalization and migration, as people moved to the shrimp farming areas (Ahmed, 37). Another major issue that affected the shrimp farms is the problem of farms being poisoned, and land grabbing, as well as the trading disputes. Shrimp farming is also associated with problems like water pollution, land degradation, and mangrove destruction. The issue of the international shrimp market being uncertain leads to acquisition of uncertain income by the wage laborers and the small farmers. Majority of the coastal poor get their household income from the shrimp associated activities. The shrimp fry collection from the rivers also significantly supported women and girls in getting some income Advice to the government of Bangladesh Due to the issue of water supply and environmental problems associated with shrimp farming, it is more efficient for the government of Bangladesh to focus in investing in rice farming in diverse areas. As the chief engineer working for a large international firm in Bangladesh, it is evident to me that Bangladeshi economy requires expansion in the agricultural technology (Swapan, and Michael, 47). The alternative forms of agriculture/industry it might be appropriate for Bangladesh to invest into are the textile and clothing industry, maize, vegetables, jute, and rice farming (Paul, and Christian, 205). Ultimately, due to ample water supply and the fertility of the soil in Bangladesh, farming rice would be more profitable and efficient in the nation. It is widely realized that rice is the principal crop in Bangladesh and the environmental condition in the area is favorable for its farming. The likely level of investment required for significant and profitable rice farming is standard investment. The government of Bangladesh should consider the economic fluctuations and the expected returns from investing in rice farming (Swapan, and Michael, 48). The project would be conduct to help in boosting the exports through increasing the amount of rice produced and the amount exported. It is assumed that the government is going to invest around $9,000 for the rice farming project. Ultimately, the Bangladesh government is expected to start realizing some income from sale of the rice products from the first year and it is assumed to attain around $2,500 of the rice returns every financial year. As described in the graph in the excel sheet, the government is expecting to attain high level of the expected income, which is likely to vary according to the yearly expenditure since the project would be influenced by some future changes. The employment that would be provided and what would be the likely ‘flow-on-benefits’ from the rice farming enterprise would be local employment. It is evident that majority of the local Bangladesh people know how to farm and because of the benefits associated with practicing farming, informal labor would be available for rice farming (Paul, and Christian, 207). Acquisition of local and cheap labor would help in acquiring good returns from the alternative agricultural project because the outputs are expected to be higher than the inputs. For significant economic gains from rice farming in Bangladesh, the government should plan well on how to acquire the investment capital. From the status of the rice market in Bangladesh, the rice farming in the agricultural industry is probable to have high future profitability. Additionally, based on the current profitability from rice farming in Bangladesh, it is assumed that advancing the farming even to other areas besides the coastal area would lead to more market profitability (Ahmed, 38). It is clear that the government is likely to gain around $2,500 every year from the rice production. Ultimately, the yearly income might increase according to the changes in the technology and positive market changes. It is assumed that the yearly income might remain being $2,500, but when there would be positive changes, the income might increase. As the yearly income increases, the government would be able to recover its expenditure and it would be able to realize more savings in the future. It is assumed that the market for rice would continue improving from time to time and this would lead to growth and development in Bangladesh. The government would require seeking for financial assistance from the available and promising sources (Swapan, and Michael, 50). The best government financial assistance would be getting grants from the national bank through the ministry of agriculture and irrigations. After expanding the rice farming in Bangladesh, the future profitabilities would be very high. The government should also consider the economic treats like inflation and increment of the interest rates associated with getting loans to run the rice farming project. The collapse of the economic conditions s supposed to be predicted early enough by the government responsible agencies. The associated costs for running the rice farming project would be the cost of borrowing money and other business costs, such as; asset and equipment depreciation, maintenance costs, labor costs, government taxation, cost of environmental rehabilitation, and falling future commodity price due to competing industries (Paul, and Christian, 209). The calculation of these costs would assist in the production of the discount rate. It is clear that in the future the rice farming costs are likely to increase because it is assumed that technological advancement would lead to increased investment in the machines and training of the employees to conduct the automated activities. This is assumed to make the future market or commodity prices to go up (Swapan, and Michael, 51). In addition, there is expected growth or stagnation in population and other parts of the economy because of profitability of rice farming and the growth of the GDP in general (Ahmed, 40). Conclusion The shrimp farming in Bangladesh is highly profitable in the Bangladeshi economy. It is one of the major sources of foreign exchange allowing growth and development in the nation. The commercial conduct of growing shrimp started in 1960s in the Satkhira district in the SW coastal region in Bangladesh. The product has very high demand in the international market and it is profitable to the farmers. P. Monodon is the commonly farmed species of shrimp and shrimp farming contributes to food security and poverty reduction. There is also creation of employment to the Bangladeshi people. However, due to issues like environmental degradation and other negative effects resulting from shrimp farming, the government of Bangladesh should engage into alternative agricultural projects for more growth and development. It is efficient if the government improves the growth of rice because of the ample water supply and the fertility of soil. To do this, the government requires diverting the rice growth to various regions through irrigation schemes. The Bangladeshi government would require having a reliable source of funds like taking grants from the national bank. It is also necessary to consider the associated costs and compare with the expected returns for making of the final decisions. It is assumed that in the future, the rice market will continue improving because of technological growth. Work cited Ahmed, Nesar. "Linking prawn and shrimp farming towards a green economy in Bangladesh: confronting climate change." Ocean & Coastal Management 75 (2013): 33-42. Paul, Brojo Gopal, and Christian Reinhard Vogl. "Impacts of shrimp farming in Bangladesh: Challenges and alternatives." Ocean & Coastal Management 54.3 (2011): 201-211. Swapan, Mohammad Shahidul Hasan, and Michael Gavin. "A desert in the delta: Participatory assessment of changing livelihoods induced by commercial shrimp farming in Southwest Bangladesh." Ocean & Coastal Management 54.1 (2011): 45-54. Read More