Once a major contributor to Bangladesh’s export earnings and rural employment, the shrimp industry is now grappling with a combination of challenges that have led to widespread factory closures and a dramatic decline in production. The sector, which once flourished with the support of export subsidies and low-cost financing, is now in a state of crisis, affecting hundreds of thousands of livelihoods.
Factors Behind the Decline
A combination of factors has contributed to the industry’s rapid downturn, including a shortage of raw materials, declining global demand, environmental changes, financial mismanagement, and failure to adapt to changing market conditions. These challenges have compounded over the years, leading to the closure of many shrimp processing units.
In the 1990s, cashing in on export subsidies and rising global demand, shrimp processing units sprang up in the southwestern, southern, and southeastern regions of Bangladesh. The booming industry was supported by low-interest loans from banks and strong demand for shrimp on the global market. However, as global demand subsided and the incentives faded, the industry began to falter. The situation worsened with a shrinking local supply and the emergence of a domestic prawn market, further weakening the sector.
Shrimp Factory Closures
According to the Bangladesh Frozen Foods Exporters Association (BFFEA), out of 109 registered shrimp processing factories, only 30 in Khulna and 18 in Chattogram remain operational. The remaining factories are struggling to stay afloat due to a severe shortage of raw shrimp, which has left them unable to meet their production capacity. The primary raw materials for shrimp processors—black tiger shrimp (Bagda) and freshwater shrimp (Golda)—have become increasingly scarce, and the factories are now receiving only a small fraction of the shrimp they need.
Shyamal Das, director of the BFFEA and managing director of MU Sea Food Limited, stated, “This scarcity has already forced many factories to shut down. My own company is getting only 25-30 percent of the shrimp it needs, making it impossible to run operations throughout the year.”
The shrimp industry, which once provided employment to around 60 lakh people directly or indirectly, now faces an uncertain future. As production shrinks, factory closures have disrupted the livelihoods of workers and farmers who relied on the sector for income.
Financial Mismanagement and High Interest Rates
One of the major obstacles the shrimp processing industry faces today is the high interest rates on bank loans. In the 1990s, many investors secured loans at low interest rates to establish shrimp processing units, but today’s rates, hovering around 13-14 percent, are a significant financial burden. This has made it difficult for companies to remain competitive in the global market, especially given the stagnation in shrimp supply.
Researcher Gouranga Nandy, in his book Shrimp Profit for Whom, pointed out that the rapid expansion of the shrimp processing industry in the 1990s was not backed by a sustainable strategy. Factory owners and the banking sector failed to assess the actual availability of shrimp in the market. Many factory owners defaulted on their loans after rapidly expanding operations based on inflated projections of demand.
Environmental Impact on Shrimp Farming
Several environmental factors have also contributed to the crisis facing the shrimp industry. Rising temperatures, fluctuations in water salinity, and the decreasing depth of shrimp enclosures have led to poor shrimp yields. In addition, the quality of shrimp larvae has declined, and water supply and drainage issues have plagued many shrimp farms.
Natural disasters like Cyclones Aila, Amphan, and Yaas have devastated shrimp farms, causing massive stock losses and forcing many farmers to abandon their operations. Climate change, coupled with declining shrimp fry availability and outdated farming practices, has left farmers struggling to maintain production.
Farmers in regions like Khulna, Satkhira, Bagerhat, and Cox’s Bazar face challenges such as water shortages and increased disease outbreaks in shrimp enclosures. Despite over five decades of shrimp farming in Bangladesh, scientific advancements in farming techniques have been minimal, and many farmers still use traditional methods that are ill-suited to modern environmental challenges.
Financial Struggles of Shrimp Farmers
Along with environmental issues, farmers face difficulties accessing bank loans, as financial institutions rarely provide credit for shrimp farming. Instead, many farmers rely on personal savings or high-interest private loans, further exacerbating their financial burden. Some farmers have quit shrimp farming altogether, while others have joined local movements protesting against shrimp cultivation due to its negative environmental impact.
The Vannamei Solution?
One potential solution to the shrimp industry’s woes is the cultivation of vannamei shrimp (also known as king prawn), which is cheaper to produce and yields a higher output than traditional shrimp species like black tiger and freshwater shrimp. Countries like India, China, and Vietnam have successfully cultivated vannamei shrimp on a large scale for export, benefiting from its lower cost and adaptability to modern farming techniques.
However, Bangladesh has yet to approve the commercial cultivation of vannamei shrimp, despite strong demand from processors and farmers. The Department of Fisheries has expressed concerns about the potential environmental impact of introducing non-native shrimp species. Farmers argue that vannamei shrimp could significantly boost production and make Bangladesh more competitive in the global shrimp market.
The Rise and Fall of Shrimp Investors
The last decade has seen a sharp decline in shrimp processing factories, with around 25 shutting down. Many investors who entered the industry with high expectations have exited just as quickly. In Khulna’s Rupsha area, once home to over 35 shrimp factories, only half remain operational.
Professor Anwarul Kadir, a member of Transparency International Bangladesh (TIB) in Khulna, noted that while environmental factors played a role in the industry’s decline, mismanagement and corruption have exacerbated the situation. He pointed out that some factory owners diverted bank loans meant for shrimp production to other ventures and failed to repay them, contributing to factory closures.
