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Onion market of Bangladesh: Role of different players and assessing competitiveness

Accelerating growth, generating employment and reducing poverty and inequality are the predominant goals of the current development paradigm in Bangladesh. The country has been recorded as a lower middle income country by the World Bank with per capita Gross National Income (GNI) of US$1080 (Atlas method, current US dollars 2014) and it is expected that in near future Bangladesh will be eligible to apply for graduating to a developing country from the current status of a least developed country (LDC) according to the definition of the United Nations. Though Bangladesh is pursuing a manufacturing-led development strategy,agriculture is still an important source of gross domestic product (GDP) and the dominant source of employment. Despite these remarkable achievements, the country’s development process is still marked by several major challenges, such as high incidence of poverty, growing inequality in income and assets, and persistent food insecurity among poor. Volatility in the price of a range of essential food items aggravates the food security situation. Specially, sudden rise in essential products like onion fuels dissatisfaction not only among poor but also middle income households. If price volatility is associated with sub-optimal level of competition in the market, then correction to price volatility could be managed by bringing more competition in the markets of these commodities. Often it has been difficult to understand reasons behind price volatility because of lacks in correct insight regarding various actors associated to the value chain of those commodities and their roles in the market. Roles of different actors actually frame the level of competition in the market. If there is lacks in competition, then certain groups of actors can influence the market. Thus it is important to understand the roles of different actors in the markets and their power (if any) to control the market at different level of the value chain. 

Effective policy and market intervention to stabilize price of essential agricultural products depend on proper understanding of the values chain of a product and the actors involved in the value chain and their power to distort competition in the market. Clear understanding of the role of various actors in the market for essential commodities couldassist various institutions like the Competition Commission to suggest timely measures to keep the market competitive. 

In recent years Bangladesh economy has experienced repeated volatility in prices of, among other essential things, onion. Few studies have also tried to understand the onion market (for example Ahmed and Ahmed, 2013 etc.). However to understand the onion market, a study on the whole value chain is required. 

The proposed study will provide a clear understanding on the respective value chain of onion, role of various actors associated to production, marketing and import of onion and power of the actors in different segment of the value chain. The study will indicate possible sources of market distortion that would lead to imperfect behavior in the market. This study will also discuss the potential roles of institutions like the Competition Commission to bring competitiveness in the market of onion.

Objectives of this study: 

(a) Analyzing the trend in onion demand in Bangladesh based on “growing season” and imports.

(b) Assessing the production costs of onion 

(c) Conceptualizing the market structure of onion in Bangladesh

(d) Identifying the onion value chain, and role of different agents involved in onion marketing

(e) Conceptualizing the international market of onion

(f) Comparative analysis on local and international market for onion 

(g) Assessing the onion market in terms of various indicators of competitive market

(h) Analyzing the government policy related to onion exports and imports in Bangladesh

Two researchers from BIDS will be involved in this study. Team Leader: Dr. Nazneen Ahmed, Senior Research Fellow, BIDS Member: Dr. Md. Mainul Hoque, Research Fellow, BIDS.

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