Agro-chemical struggles as Bangladesh misses 50 years of LDC benefits

As a least developed country, Bangladesh's pharmaceutical industry has flourished by producing medicines with patent benefits under a WTO agreement, while the agro-chemical sector has struggled to capitalise on similar benefits due to a lack of policy support and regulatory complexities.

As a result, around 90% of the country's Tk15,000 crore agro-chemical market remains import-dependent. While multinational and foreign companies dominate the market, they have not established manufacturing plants in Bangladesh, according to industry insiders.

When Bangladesh became an LDC in 1975, its pharmaceutical sector relied heavily on imports. During the Ershad era, the government, under Dr Zafarullah Chowdhury, introduced the national drug formulation to support domestic production.

The government encourages investment in the pharmaceutical sector by banning the import of a drug if two local companies produce the same medicine without supply shortages.

However, the agro-chemical industry has not received similar support and has struggled to benefit from the WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement as an LDC.

According to the National Board of Revenue, agro-chemical imports, including raw materials and finished products, totalled Tk4,500 crore last year.

To support food security and meet agro-chemical demand, the government has not introduced a tariff gap between raw material and finished product imports to attract investors. Currently, finished agro-chemical products face only a 5% tariff.

KSM Mostafizur Rahman, president of the Bangladesh Agrochemical Manufacturers Association, told The Business Standard that multinational companies still control 90% of the market. Despite 22 local companies being established, they struggle to compete due to a lack of government policy support.

"As an LDC, Bangladesh had the chance to achieve self-sufficiency in agrochemical production and export, like the pharmaceutical industry. However, in 54 years, the government failed to extend TRIPS-based support to this sector, causing the country to miss that opportunity," Rahman said.

"Foreign companies are now benefiting from the opportunity to import finished products that domestic companies produce, with only a 5% duty. As a result, trading through imports is easier than domestic production," he added.

Therefore, he said, the Federation of Bangladesh Chambers of Commerce and Industries has proposed to the National Board of Revenue's advisory committee to impose a 25% duty on the import of locally produced agro-chemical products.

In Bangladesh, 22 companies have been granted permission to produce agro-chemicals locally, but only 10-12 have started production, with a total investment of about Tk700 crore.

Local producers argue that various laws and regulations favouring foreign companies have discouraged local production.

The "single country, single source" condition has limited raw material imports, and after arrival at Chattogram Port, a no-objection certificate from the Ministry of Agriculture is required for release.

This process takes about 15-20 days, and if a company imports raw materials 10 times a month, officials visit the factory 10 times.

Md Hafizur Rahman, administrator of the FBCCI and former director general of the WTO Cell at the commerce ministry, told TBS that the agro-chemical industry has not received much attention in the past.

"As a result, the sector remains import-dependent. Several factories have been established locally in recent years, and with policy support, domestic investment and production would increase, reducing import dependence," he added.

Bangladeshi pesticide consumption is set to reach 17,000 tonnes by 2026, marking a 1.3% average annual increase. Since 1995, the market has grown by an average of 2% annually.