How agro-processing can secure Bangladesh's export resilience
With the RMG sector under strain, Bangladesh can eye agro-processing as a low-risk, high-potential export alternative to diversify its economy

With Bangladesh's readymade garments (RMG) sector facing growing threats in the form of uncertain global demand, protectionist US tariffs among them, the nation focuses on agro-processing as a potential export alternative.
Since agriculture provides 40% of jobs and 11.5% of Bangladesh's GDP, experts believe agro-processing can build on this strength. It requires less investment, helps reduce post-harvest losses by extending shelf life, and offers a chance to diversify exports. This shift could make the economy more stable and tap into the global processed food market, which is expected to reach $4.1 trillion by 2027.
Bangladesh's $47 billion RMG industry, which brings in 84% of export revenues, is facing historic challenges. The US—its largest market—imported $8.4 billion worth of apparel in 2022–23 but has imposed average tariffs of 15.3% on certain categories under Section 301 of the Trade Act. Although intended to target China, the measure has inadvertently affected Bangladeshi re-exports.
Meanwhile, increasing production cost and competition from Vietnam and Ethiopia are denting Bangladesh's cost leadership. The World Bank warns that over-reliance on RMG exposes the economy to external shocks and demands diversification.
Agro-processing or value addition of raw crops to products like juices, dried fruit, and snacks suits the agrarian economy of Bangladesh where less initial investment is needed. Unlike RMG that involves expensive machinery and foreign inputs, agro-processing utilises existing crops, thus reducing the cost of inputs. For instance, it cost $50,000-$100,000 to establish a small-scale fruit processing plant compared to $2-$5 million for a medium-scale apparel factory. It involves less complex technology that suits local entrepreneurs in rural settings.
Bangladesh produces over 40 million metric tons of vegetables and fruit every year, yet 30% of it gets lost after harvesting due to inadequate processing and storing, as per Food and Agriculture Organization (FAO)'s 2021 statistics. Excessive or perishable fruits may be converted by agro-processing to shelf-stable products that reduce wastage and increase farm income. For example, 12–18 storable mango pulp may be exported all year round, while raw mangoes will last for weeks.
Bangladesh's agro-processed exports—$1.2 billion in 2022–23—are already on the rise. Value-added food like frozen fish, spices, and potato flakes are exported to 52 nations, the Middle East, the EU, and Japan. 4,600 Bangladeshi products, including processed ones, enjoy duty-free market access in the EU under the Generalised System of Preferences. $2.5 billion of processed foods imported in 2022 by the Middle East represent halal-certified opportunities.
For example, Bangladeshi conglomerate PRAN exported jams, snacks, and beverages amounting to $600 million in 2023 to supply diaspora demand in Asia and Europe. Even small enterprises like ACI Foods ventured into Gulf countries by marketing dried onions and turmeric powder.
National Agricultural Policy 2018 prioritised agro-processing by providing it with tax incentives, low-cost credit, and export incentives. It also targets increasing agro-processing GDP share to 5% by 2025, from 2%. The Export Promotion Bureau in 2023 allocated $15 million for establishing 50 village processing clusters equipped with packaging and cold storage facilities. Bangladesh's processed food sector grew 8.3% per year since 2020, compared to 5.1% for RMG.
However, despite prospects, challenges remain. Only 12% of agro-processors are certified to meet international safety standards like ISO or HACCP, which limits access to high-value markets. A 2023 World Bank report cites lack of cold chain infrastructure, with only 15% of perishables being transported under refrigeration. Finance remains an issue for SMEs, with banks extending less than 5% of loans to agriculture.
Upgrading of technologies, enhancing workers' skills, and streamlining export certification would make Bangladesh globally competitive. Technical skills may be acquired by cooperating with corporations like Nestlé and Unilever, and public-private partnerships would amplify processing zones.
While RMG endured turbulence, agro-processing is a low-risk, viable export driver. Value addition to agrarian plenty can keep Bangladesh's wastage to a bare minimum, empower the locals and earn a spot in the value chain of the world. Through consistent policies and strategic investment, the industry can follow RMG's success template and ensure economic prosperity in the next generation.
K M Arshad is an undergraduate student in the Department of Economics at Dhaka University.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.