Bangladesh has seen relatively stable economic growth over the last couple of years. If we’re to talk about the last 10 years alone, we can see it starting from 6.5% and then ending at 6.9%. During the COVID-19 pandemic, the GDP dropped to 3.4%. But it quickly rose to 6.9% in 2021.
From the 6.7% growth projected in April and June of this year, the World Bank has reduced its GDP growth forecast for Bangladesh down to 6.1% for the current fiscal year 2022-2023. The World Bank's South Asia Economic Focus identified increased inflation and ongoing power outages as the economy's two main obstacles, reducing the growth projection by 0.6 percentage points. The international lender also concluded that there were no meaningful signs that the economy will recover in the following fiscal year and forecasted 6.2% growth in that period.

The World Bank had previously predicted a growth rate of 5.4% for the upcoming fiscal year; however, it has since upped that rate by 0.8 percentage points. The government set a goal for the current fiscal year's GDP growth of 7.5%. The World Bank's forecast for growth is 1.4 percentage points less than the government's goal. In the Asian Development Outlook (ADO) 2022, which was unveiled in the final week of September, the Asian Development Bank (ADB) similarly reduced its growth predictions for Bangladesh and predicted 6.6% growth for the current fiscal year. This is an overall summary of the current economic condition of Bangladesh.

Sam likes to think of himself as an entrepreneur. Sam completed his education pretty recently. A normal graduate goes job hunting as soon as he or she is done with their education. But instead of doing that, this guy decided to start off his career as a businessman. Being a local boy of Khulna, he wants to do his business here in his hometown. Sam has quite a few business ideas going through his mind. And he’s already tried some of them. But to be perfectly honest, none of them did very well. Evidently, he had shut all of them down. His ideas weren’t bad, but the current market condition isn’t being very kind to anyone right now. Besides, running a new business completely alone has proven to be troublesome for him. Whatever business he starts, ends up as a waste of both his time and money. While talking to a cousin back in his village, a new idea lit up in his mind. Sam’s cousin ran a poultry farm and was telling Sam how his business was going and how that was proving to be quite successful for him. This piqued Sam’s interest in the agriculture sector of Bangladesh. While doing some extensive research, he came across the article given below-
“The demand for aquaculture goods on the domestic and export markets in Bangladesh is the main factor driving the market. In addition, as fish is a staple food in Bangladesh, there is a growing demand for it, which is boosting the market's expansion. The market is also fueled by the general public's rising desire for frozen and packaged seafood. Additionally, the adoption of producer-friendly aquaculture rules by Bangladeshi government entities is favorably impacting the market expansion. Along these lines, the government is also launching steps to open up full-time jobs in aquaculture farming, which will improve the market's outlook.

Additionally, a growing focus on sustainable development and rising consumer health concerns are fueling an increase in demand for organic aquaculture goods, which is fostering the market's expansion. Keeping everything in mind, the Bangladesh aquaculture market is expected to exhibit a CAGR of 2.30% during 2022-2027.”

After thoroughly going through the article, he decided it was best to do fishery business here in Khulna. The Bagerhat district of Khulna was already quite famous for fisheries. Now all he needed to do was master it.

To carry out his plan, he is trying to identify the major cost drivers, assets required to start the fishing farm, and other investment requirements. After identifying all the drivers for cash outflow or investment, he projects an outlook for his business. He estimates that he can produce 1800-2000 kg/acre every 3 months. He plans to prepare his 1-acre ancestral pond with the cost of 620000 BDT. He is also estimating to sell the fish at 200-250 BDT/kg. 5 laborers are needed to maintain one acre of the pond and on average 1.25 kg of fish feed is required to produce 1 kg of fish. The salary of each laborer is 10000 BDT/month. He gently took his time to set up his new business. This time, he made sure everything was on track. There could be no room for error. And there wasn’t any. He started off pretty well. Profits started coming in pretty much from the start. And from there, his business was only going to get bigger. Fast forward 3 years and Sam’s business is booming.

Every day he spends hours pouring over his work. And just like that, he gets to enjoy the fruits of his labor too. Every night before he goes to sleep he thinks to himself, “Business is good”. Until one day, cyclone Chitra hit the coasts of Bangladesh. It originated over the Bay of Bengal and made Bangladesh its first target. And to make matters worse for Sam, Bagerhat just happened to be one of the biggest victims of Chitra. It had a major impact on businesses all throughout Bagerhat including Sam’s fishery business.

During the cyclone, seawater seeped into the villages causing a small flood. But what’s worse is, the isle of his pond broke and the seawater went inside the pond.
This caused all the fish in the pond to die. And this put quite a dent in his business.
After the cyclone, he again had to bear a negative cash outflow for his farm to rebuild. This time he thought about the future and decided to take a loan of 900000
BDT and strengthen his pond with concrete isles so that future calamities have less impact. His interest rate on the loan is 8.5% with an annual payment. Then 8 years had passed. In all this time he didn’t try to take any risks. Rather he tried to understand the whole market of his business. This led him to become an expert. He now knew all the ins and outs of the fishery business in his region. So, he decided to expand his business. He installed new ponds as per his plan. Initially, it
was looking quite well for him. But over time it created another problem. Now, he was producing so much that his supply far exceeded the market demand. And because he only ever conducted business in his local region, this was something completely new to him. There are so many fish in his ponds now that his fish are starting to die in the ponds. None of his buyers were able to sell his growing supply.

Questions)
1) Assume that Sam could have invested in some safe, fixed-income securities if he didn’t opt for fish farming. Which project do you think is more profitable, safe investments or fish farming for the first three years? 30 marks

2) Assume that in year 4 the whole amount of the loan is used by Sam to fix the farm, pay salaries and produce fish. Now, consider 8 years as the timeline of the project (from fixing his ancestral pond to 4 years after the cyclone) and determine the required rate of return. 40 marks

3) What strategies can Sam take to tackle the problem of overproduction? You can study the market, and find latent demands and problems that can be solved so that Sam can target outside his locality. 20 Marks

4) What strategy do you think will be the optimum one? Justify your response. 10 marks

Answer rating: 100% (QA)

1 Assuming that Sam could have invested in some safe fixed income securities if he didnt opt for fish farming the more profitable project for the firs... View the full answer