The economics of aquaculture production and consumption emphasizing the nutritional benefit of the poor in Bangladesh

Abstract

Fish is an important source of high quality protein and micronutrients for people around the world. It is the primary source of animal protein providing more than 60 percent of total animal source protein consumed in developing countries. Rising population with higher fish consumption around the world is influencing the global demand for fish. As a result, a dramatic change has been observed for the last three decades in the structure of fish demand and supply with an increasing demand for fish in both domestic and international markets. A rapid growth in production and increased trade of fish are keeping pace together to meet the growing demand for fish worldwide. By providing fish from both capture fisheries and aquaculture sources, Asia has become the major contributor of this expansion. Although the global supply of capture fisheries has remained static for the last 20 years, aquaculture has contributed the major share in the recent growth of fish production and consumption. Moreover, smallholder aquaculture is playing a very significant role at the household level, especially for the poor households by increasing fish consumption, improving food supply through generating additional incomes, and creating employment opportunities. Although aquaculture is contributing much for reducing micronutrient deficiencies in developing countries, little research has been done so far to identify production, consumption and nutrition linkages. Additionally, there has been active interest from the donor to promote aquaculture with a view to identifying the linkage between aquaculture and poverty. This thesis makes the following contributions to the existing literature on economics of smallholders’ aquaculture production and consumption in Bangladesh. First, by disaggregating the fish demand at species level, this thesis has identified necessary species for poor households that need supply-side interventions designed from the government to expand the production of fish for the poor. Second, how aquaculture can benefit the poor is identified through production, consumption and nutrition linkages for which there is no empirical research so far. Third, due to lack of comparable micro-level data, there exists lack of longitudinal analysis in the literature of aquaculture. This gap has been fulfilled by using panel data collected from smallholder fish farmers in Bangladesh to identify the observed and unobserved difference between the farmers who did commercialize and who did not commercialize. Fourth, methodologically this thesis makes the key contribution to empirical research by applying a two-step endogenous switching regression (ESR) model in a correlated random effects (CRE) framework to estimate the impact of aquaculture commercialization on household welfare. This analysis will shed some lights on the link between aquaculture and poverty in Bangladesh. To this end, this thesis aims to study the economics of aquaculture production and consumption in Bangladesh, emphasizing the nutritional benefit of the poor households. The specific research objectives are: (i) to examine the household fish consumption pattern in Bangladesh by analyzing the changes in demand for fish by species and by poverty groups; (ii) to establish a link between fish consumption and nutritional outcomes by analyzing the effect of aquaculture production on household food consumption and dietary diversity outcomes; and (iii) to find out the aquaculture production systems practiced by the poor households and analyze the transition from subsistence to more market oriented production approach to understand the contribution of smallholder aquaculture on household welfare in developing countries like Bangladesh. The data used in this research, which includes three different papers, are from three different sources. The first paper examines the fish consumption pattern of households in Bangladesh using the micro level household data collected from the most recently available of the Bangladesh National Household Income and Expenditure Survey (HIES), i.e., 2010-2011. HIES is based on a countrywide survey of a nationally representative number of rural and urban households. The second paper examines whether income from homestead aquaculture contributes to household nutritional outcomes in developing countries like Bangladesh. This study uses the primary data collected from the household survey of ‘Fish Production, Consumption and Nutrition Linkages’ by University of Hannover, Germany, and WorldFish, Penang, Malaysia from May 2016 to June 2016 in Bangladesh. The third paper examines the possibilities of smallholder aquaculture farmers in developing countries to more effectively contribute to fish production by transforming from subsistence-type of home-pond producers towards a more modern, commercialized small-scale aquaculture system. This study uses a two-period balanced panel data collected from households who are engaged in homestead pond aquaculture in Bangladesh. The first round was collected in 2011 through a household survey titled as the ‘Economics of the Homestead Pond Aquaculture System in Bangladesh’ conducted by WorldFish, Bangladesh under the USAID-funded CSISA-BD project while the second round uses the primary data collected in 2016 by University of Hannover, Germany and WorldFish, Penang, Malaysia. The results suggest that fish consumption does not vary much by types between poor and non-poor households. However, poor households rely more on fish as their primary source of animal protein. For example, carps mainly sourced from aquaculture, and small indigenous fish species mainly sourced from capture fisheries are the most frequently consumed fish species for the households in Bangladesh. The results also find that aquaculture has good potential to compensate for the decline of fish supply from inland capture fisheries. Furthermore, the results show that homestead fish production remains important for many low-income households in spite of the emergence of commercial aquaculture in Bangladesh. It generates additional cash income and stimulates higher fish consumption from home production. Consequently, it increases food consumption and improves dietary diversity at the household level. Moreover, home production of fish contributes to improve the quality of households’ diet by purchasing more calories from the market with the additional income. Therefore, the Department of Fisheries should reconsider its view on the role of homestead pond production and give it more recognition in its extension activities. Additionally, the results reveal that commercialization among subsistence homestead farmers continues to take place but at a slower pace. Households who commercialized have higher per capita income and lower rate of poverty headcount compared to those who remain in a low intensity subsistence scale. Also, commercialized households become specialized overtime. Moreover, farmer who did not transform would in fact benefit even more from commercialization than those who did. Support from non-government organizations, and fish farmers’ associations at village level play a crucial role to facilitate the commercialization process in Bangladesh through providing information regarding market condition and prices. Hence, this thesis concludes that while aquaculture is growing faster than any other agriculture sector in Bangladesh, a continued favorable policy environment needs to be maintained by the Government for the growth of aquaculture, however, continuing the support for capture fisheries. Better market access, improved infrastructure and appropriate market information for farmers may be effective policy instruments for the long-term development, and sustainable growth of aquaculture sector in Bangladesh and many other developing countries.