Addressing supply chain gaps in Bangladesh
In recent times, the escalation of prices in essential commodities has presented a formidable challenge for individuals with lower incomes in Bangladesh.
The surge in food prices, as cited in a World Bank report, has become a pressing concern for 71 percent of households. The government has acknowledged the issue of commodity prices, as evidenced by its notable inclusion in the recent election manifesto. The manifesto articulates the government's commitment to addressing the rising cost of goods, emphasising the imperative of aligning prices with the purchasing power of the populace.
In light of the prevailing market dynamics, it is evident that the government's efficacy in curbing inflation has been compromised. Prior to the onset of the Covid-19 pandemic, inflation in Bangladesh stood at approximately 5 percent. In the fiscal year 2022-23, the average inflation rate surged to 9.02 percent, marking the highest annualised figure in a decade.
The paramount challenge facing the new government is the imperative to rein in inflation. The prevailing market management shortcomings, coupled with the influence wielded by syndicates, are significant contributors to this predicament. Despite the acknowledgement of syndicates by policymakers, the absence of decisive actions against them remains a regrettable aspect of the current scenario.
Bangladesh has ascended to the third position globally in vegetable production, marking a remarkable transformation in its cultivation landscape. This silent revolution is attributed to the collaborative efforts of agricultural research institutes, agricultural universities, and innovative institutions, which have played a pivotal role in the development of perennial vegetable seeds and effective marketing strategies. The unwavering dedication of farmers has further propelled this positive shift, ensuring a consistent supply of various vegetables throughout the year.
Despite these strides, the current market system grapples with a critical challenge – the absence of a robust supply chain for agricultural products. This deficiency hinders the seamless flow of produce from farm to consumer, resulting in adverse implications for both farmers and end-users. The prevalence of middlemen exacerbates the issue, preventing common consumers from accessing agricultural produce and essential commodities at equitable prices.
Presently, the capital's wholesale market witnesses diverse potato varieties being priced between Tk 62 and Tk 65 per kg, with retail markets quoting Tk 70 to Tk 75 per kg. This escalation sharply contrasts with the affordability observed in the previous year.
In the realm of modern agricultural management, the integration of a comprehensive supply chain system holds paramount importance, as seen in developed countries. This system facilitates the direct movement of products from the production process to the end consumer, ensuring efficiency and fair pricing.
In the context of Bangladesh's agricultural landscape, the absence of such an integrated supply chain management system is conspicuous. Given the perishable nature of agricultural produce, the dearth of appropriate technologies further underscores the need for a paradigm shift in the marketing approach.
While attributing the surge in product prices to international market fluctuations was a common rationale, the current disconnect between the declining global prices and their impact on the Bangladesh market raises concerns. Analysts suggest that ineffective government policies and actions, coupled with a lack of market control, contribute to unabated food inflation. Additionally, some unscrupulous traders exploit temporary supply shortages to irrationally hike prices, defying logical explanations.
Market monitoring institutions, including the Ministry of Commerce and the Directorate of National Consumer Rights Protection exhibit weaknesses in monitoring. They need to vigilantly observe and address unreasonable inflation to ensure the integrity of the market system.
The author is a former head of supply chain advisory services at KPMG Bangladesh. He can be reached at khan.ashraful@gmail.com