Disruptions in informal trade between Bangladesh and India may have an immediate impact on food security
The World Bank has suggested Bangladesh to make certain trade responses in order to avoid a food security crisis owing to a prolonged Covid-19 pandemic.
The Covid-19 health crisis can lead to a food security crisis in Bangladesh if proper measures are not put in place, warned the Bretton Woods Institution in one of its recent policy notes.
“This global pandemic may cause breaks in food supply chains, food shortages and food price spikes in Bangladesh and a broader range of countries,” the World Bank policy note stated.
However, it said, trade policies can be an essential instrument in the management of the coronavirus related food security issues.
“Trade responses such as eliminating tariffs, refraining from imposing export restrictions, and facilitating trade flows can play an important role in maintaining access to and reducing the cost of essential food products.”
As the pandemic spreads and its economic impact deepens, the World Bank has proposed several measures to address food security concerns in Bangladesh.
It said, maintaining food security will require special attention to ensure: (i) functioning food markets and value chains (domestically and internationally); (ii) maintain purchasing power (social protection measures) of the rural and urban poor, including the large informal sector; and (iii) safeguard production of the next agricultural season (input and labor supply).
Although at this stage, trade-related disruptions seem less acute than domestic supply chain disruptions, border closures may pose short-term food security challenges in Bangladesh, World Bank cautioned.
“Connectivity and logistics challenges in importing countries such as Bangladesh can affect the availability of essential food products,” said World Bank, referring to an April report that indicated storage space exhaustion at Chittagong due to disruption in normal transportation routes during nationwide shutdown.
It also indicated that disruptions in informal trade between Bangladesh and India may have an immediate impact on food security in Bangladesh especially for the poor.
On top of these, logistics costs in Bangladesh are high in most sectors, including food products ranging from about 10% of sales (for dairy) to almost 50% of sales (for horticulture). Congestion and delays are pervasive problems across the country from roads to seaports and land ports.
According to an earlier World Bank estimation, if congestion on the roads was eliminated, logistics costs would be at least 7–35% lower, depending on the sector. Bangladesh’s logistics system is fragmented in terms of both infrastructure and services.
The World Bank said trade restrictions can affect import-dependent essential food products such as wheat, sugar and edible oils in Bangladesh.
“While Bangladesh is self-sufficient in rice production, the country is largely dependent on imports of other essential items such as wheat and sugar. In addition, around 90-92% of demand for edible oil is met through imports.”
World Bank suggests Bangladesh to consider following trade responses -
Measures to facilitate trade: Recent measures implemented by the National Board of Revenue to expand customs assessment at ports to reduce congestion and waive storage fees for containers during the national shutdown can be complemented with additional interventions to sustain and enhance the efficiency of logistics.
For instance, implementation of a “National Single Window” to automate and integrate all key processes and procedures associated with the application, submission, processing, payment and clearance of trade related permits, licences, certificates and declarations.
Although Bangladesh has phased out mandatory pre-shipment inspections (PSIs), it could eliminate all voluntary PSIs for essential food products. A focus on automation and electronic procedures can facilitate the distancing between traders and border officials in addition to improving logistics efficiency.
Removing import tariffs: Bangladesh can remove import tariffs and taxes on key food products to increase the availability of essential food products.
World Bank recommended that lowering prices for staple foods such as cereals, sugar, meats and nuts can be done at a relatively reduced fiscal cost.
Refrain from trade restrictions: World Bank said Bangladesh can work with neighbouring countries on a cooperative trade initiative to refrain from imposing trade restrictions including export bans or taxes on critical food staples.
As part of the recently launched Saarc emergency initiative for Covid-19, Bangladesh can lead a regionally coordinated response to avoid export restrictions to reduce the cost and improve the availability of key food products in the region.
Furthermore, the World Bank suggested, Bangladesh can work with Southeast Asian neighbours such as Malaysia and Indonesia (the main source countries for Bangladesh’s imports of edible oil and palm oil) to eliminate existing trade restrictions and avoid lengthy and costly requirements related to trade licenses and permits.