Climate Change Impacts on Business in Bangladesh

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Table of Contents

Introduction
Impacts of Climate Change on the country’s Economic Sectors
Impacts Climate Change on the Economic Growth
Impacts of Climate Change on Agriculture
Tea production
Conclusion
Reference List

Introduction

According to World Bank resource analysts Ahmed, Huq, Koudstaal, Rahman, and Werners, human induced climate change has led to the rise of various metrological hazards such as rise in sea level, frequent droughts, increase in floods and coastal storms which seriously affect Bangladesh (Ahmed, Huq, Koudstaal, Rahman, and Werners 1999).

According to Anwar Ali, a meteorologist working with the Space Research and Remote Sensing Organization in Dhaka, Bangladesh, the country is prone to environmental hazards and experiences disasters almost annually leading to loss of life and property (Ali 1999, p 109). This also jeopardizes the country’s economic development (Ali 1999, p 109). Almost every sector of the economy is bound to be affected by the impacts of the global climate change (United Nations Framework Convention on Climate Change., 2007).

According to environmentalists Canziani, Dokken, Leary, McCarthy and White, the magnitude of the impacts of climate change in Bangladesh is still uncertain although Bangladesh remains highly vulnerable to these impacts (Canziani, Dokken, Leary, McCarthy and White 2001). According to the Intergovernmental Panel on Climate Change, Bangladesh is the most vulnerable to impacts of the global climatic change particularly from the rising sea level since it is located on the low altitude Bay of Bengal in the Ganges Delta (Ahmed et al. 1999).

According to the Institute for Sustainable Environment in Oregon University in Pennsylvania, US, areas most vulnerable to the impacts of climate change on Bangladesh are in the south and include areas like Ganges, Meghna and Brahmaputra deltas and are also densely populated (Institute for a Sustainable Environment 2005). These areas are prone to tropical cyclones, monsoon rainfall, floods as well as storm surges from the Indian Ocean (Angus, Hassani and Parris 2009, p. 2721).

Impacts of Climate Change on the country’s Economic Sectors

Bangladesh’s economy highly depends on agriculture as well as natural resources such as biodiversity, wildlife, forests, water, and land among many others which are also susceptible to impacts of climate change especially from the rise in sea level; and this implies that climate change is a threat to Bangladesh’s economic growth (Ahmed et al. 1999).

According to Mahbub Hasan who is a research assistant working with the Coastal Development Partnership in Bangladesh, about 85% of the country’s rural population depends on agriculture either as small scale farmers or landless farmers (Hasan 2010). However, according to Hasan (2010) climate change has an enormous impact on the country’s food security. Increasing temperatures as well as rainfall unreliability influences the country’s food productivity (Hasan 2010). It also affects other economic sectors particularly those that depend on agricultural raw materials such as manufacturing industries (Hasan 2010).

Impacts of climate change has serious negative impacts on human health since it increases the population’s vulnerability to water borne diseases such as cholera and diarrheal diseases, agricultural production as well as availability of fresh drinking water (Ahmed et al. 1999). According to environmental resource analyst and managers Qazi Kholiquzzaman Ahmad, Abdur Chowdhurry, and Neil Ericksen; considering the dense population and limited farm land available in Bangladesh, environmental hazards cause pressure on agricultural production which has in turn led to increase in malnutrition experienced by the population (Ahmad, Chowdhurry, and Ericksen 1997).

Impacts Climate Change on the Economic Growth

According to Wayne Palmer, an economist, balancing economic growth and environmental sustainability is normally a great challenge since climatic changes have adverse impacts on operational costs as well as the cost efficiencies and effectiveness in the long term (Palmer 1965). Due to the country’s low capacity to manage environmental hazards such as floods and cyclones causes constraints on the country’s economic as well as social developments (Ahmed et al. 1999). Such environmental hazards have seriously affected foreign investment particularly in the coastal regions where natural gas and oil resources occur (Ahmed et al. 1999). These hazards hinder exploitation of resources as well as industrialization in the region (Ahmed et al. 1999).

The government has concentrated its efforts in either mitigating and managing the impacts of the frequent environmental hazards or developing the country’s capacity to manage and mitigate the impacts of climate change (Ahmad, Chowdhurry, and Ericksen 1997). Floods and cyclones usually destroy the existing infrastructure, property and increase food insecurity leading to serious food shortages and hunger.

According to economists Pellinga, Özerdemb and Barakatb, the impacts of environmental hazards strains the government’s budget since it has to meet the cost of restructuring the infrastructure and helping the citizens overcome the impacts of the hazards thus straining economic growth of the country and this in turn affects the revenue collection by the government (Pellinga, Özerdemb and Barakatb 2002). Hazard mitigation costs severely affect the government’s expenditure (Pellinga, Özerdemb and Barakatb 2002).

According to the International Finance Corporation which works to promote sustainable private sector in the developing countries, impacts of climate change certainly have cost-push effects on inflation which in turn affect the food prices in the country and hence leading to food insecurity (International Finance Corporation 2010, p. 27). These imply that climate change diverts the government’s efforts from economic developments to efforts aimed at implementing policies and strategies aimed adapting to the impacts of climate change such as management of climate change and hazard information, capacitating institutional responses, researches on climate change, coordinating integrated planning efforts, constructing cyclone shelters and embankments among many other efforts (Ali 1999, p. 115).

Inadequate capacity and mechanisms to mitigate climate change and its impacts highly contributes to the country’s vulnerability (Ahmed et al. 1999). Besides, a large percentage of the population is still not fully aware of the long-term impacts of climate change and their contributions towards the epidemic (Ahmed et al. 1999). The country has experienced extreme environmental hazards and still faces an increase in hazards arising from the effects of climate change such as cyclones and floods (Ahmed et al. 1999). It is therefore in the process of improving its hazard management and mitigation capacity (Ahmed et al. 1999).

Impacts of Climate Change on Agriculture

According to Farming First which is a coalition of multi-stakeholders concerned with worldwide sustainable agricultural production, agriculture is a key sector of the economy of Bangladesh and accounts for about 20% of the country’s GDP (Firming First 2010). Agriculture also contributes greatly to the employment sector in Bangladesh and accounts for about 65% of direct or indirect employment to the country’s population (International Finance Corporation 2010).

However, due to climate change the country is projected to experience about 3.1% annual decrease in its agricultural contribution to the GDP (Farming First 2010). According to Farming First (2010) most regions in Bangladesh are expected to experience a decline in at least one crop. According to Najam, who is an environmental expert, the country’s main crop, rice, is also predicted to decline and this implies that the country is set to rely more on imported food crops and also to divert to production of other crops (Najam, 2003). Tea which is also produced in Bangladesh also earned the country about $350 million in 2009 (Najam, 2003).

According to Hasan climate change has limited the farmers’ ability to use the local traditional crop seed varieties (Hasan 2010). Today, some multinational seed companies operating in Bangladesh have shifted to producing hybrid and genetically modified crop seeds (Hasan 2010). Farmers have also shifted to using the modern crop seeds and this implies that climate change is compelling farmers to lose their indigenous crop varieties (Hasan 2010).

Climate change has led to changes in cropping practices along the coastal regions (Ali 1999, p. 115). New crop varieties particularly that of rice which is the country’s main seed crops have to be developed so as to adapt to the high salinity and temperatures that have resulted from the global climatic change (Ali 1999, p. 115). Climate change has also led to changes in crop production periods since crops have to be planted and harvested before the cyclonic periods (Ali 1999, p. 115).

According to the International Finance Corporation, private companies especially those involved in agricultural production activities in Bangladesh will be forced to change their strategies towards environmental management and adaptation (International Finance Corporation 2010, p. 14). Companies involved in producing crop seeds have to develop, distribute and adapt to seed varieties which are flood, drought and saline tolerant (International Finance Corporation 2010, p. 14).

The crops also have to be those that mature fast. These companies also collaborate on risk and vulnerability mapping and developing alternative irrigation systems (International Finance Corporation 2010, p. 14). According to David Colander who is an economist, these increase the cost of production for these firms (Colander 2008). These companies also have to develop modern technologies which can enable production of vegetables and other crops in water-logged lands as well as fish farming during floods (International Finance Corporation 2010, p. 14).

Private firms have also been involved in providing agricultural extension services in the coastal regions as well as in developing agricultural systems which can be adapted in the coastal regions (International Finance Corporation 2010, p. 14). They also collaborate in developing climate resilient infrastructures such as roads, cyclone shelters and among others as well as research on impacts of climate change on the private sector (International Finance Corporation 2010, p. 14).

Climate change has also increased the cost of production on the farmers’ part (Pellinga, Özerdemb and Barakatb 2002). The cost of irrigation is expected to increase with increase in the bulk water prices (International Finance Corporation 2010, p. 31). Besides, increase in temperatures is predicted to increase the farmers’ water consumption (International Finance Corporation 2010, p. 31). With the increasing demands on other farm inputs resulting from climate change, the cost of production is expected to increase (Pellinga, Özerdemb and Barakatb 2002). This is expected to increase the country’s inflation rates and food prices (Pellinga, Özerdemb and Barakatb 2002).

The government’s funding towards agricultural research and extension has also been affected by climate change (International Finance Corporation 2010 p. 27). According to the International Finance Corporation, the government’s funding has seriously reduced over the last three decades between 1980 and 2007 from about 17% to 4% respectively (International Finance Corporation 2010 p. 27).This is because the government directs most of its expenditure in relief and emergency services as a result of environmental hazards (Pellinga, Özerdemb and Barakatb 2002).

Climate change is also expected to impact on the country’s fish production from aquaculture (International Finance Corporation 2010, p.28). Demand for fish is predicted to increase with the increasing population; however, climate change remains a barrier to the country’s capacity to cultivate more fish. According to economists Angus, Hassani and Parris, it is predicted that the rising sea levels and the increasing storms activities as well as saline water intrusion into Bangladesh’s main river deltas will greatly affect fish species which are not tolerant to saline conditions (Angus, Hassani and Parris 2009, p. 2720).

Tea production

Tea Farming in Bangladesh

According to Fairtrade Foundation which is an independent organization responsible for the licensing of Fairtrade mark on UK products, Bangladesh has been in the top ten among tea producing countries in the world over the last two decades and in 1999, Bangladesh occupied the tenth position in the global tea market. In 2009 the country produced approximately 59 000 000 tonnes of tea which was still below the country’s highest production of 60 140 000 tonnes in 2005 (Fairtrade Foundation 2010).

According to Bangladesh Sangbad Sangstha which is a national news agency of Bangladesh, tea farming has been on the rise and small-scale tea farming has had a tremendous improvement to match the plantation tea farmers (Bangladesh Sangbad Sangstha 2010). The government has been providing support to small-scale tea farmers in Bangladesh (Bangladesh Sangbad Sangstha 2010). Tea has been a major boost to the country’s economy and in Panchargah District alone, tea farming accounts for over 7,000 jobs (Bangladesh Sangbad Sangstha 2010).

However, climate change has greatly affected tea production worldwide over the last three decades. This has affected the price of tea due to increased cost of production leading to inflation in the market prices. According to the Technical Centre for Agricultural and Rural Cooperation in London which is an independent non-profit making institution working to improve agricultural information among agricultural stakeholders, tea prices have had a tremendous increase between 2002 and 2009 as a result of severe droughts experienced in the major tea producing countries as well as the increased tea consumption (Technical Centre for Agricultural and Rural Cooperation 2010).

Uniliver Tea Company

Uniliver Tea Company is among the few major companies that dominate the tea production worldwide (Technical Centre for Agricultural and Rural Cooperation 2010). However, it is not the largest tea producing company in the country (Bangladesh Sangbad Sangstha 2010). It grows about 350,000 tonnes of tea on its plantations across the world (Technical Centre for Agricultural and Rural Cooperation 2010).

Besides, it also buys about 290,000 tonnes of tea from other tea growing companies and individual farmers in the country (Technical Centre for Agricultural and Rural Cooperation 2010). The company buys black tea from about 7,500 tea estates across Asia (Uniliver 2007, p. 2). Uniliver Tea Company in Bangladesh sells its tea in the Dubai Tea Trading Centre where tea is sold on auction (Technical Centre for Agricultural and Rural Cooperation 2010).

The increasing impacts of climate change has generated unpredictable harvests particularly among small-scale tea farmers in Bangladesh due to increasing temperatures since most parts of Bangladesh fall in low altitudes (Ahmed et al. 1999). For example, in 2009, severe droughts experienced in most parts of the country affected the country’s overall tea production forcing the government to offer more support to small-scale farmers in researching for better tea varieties (Bangladesh Sangbad Sangstha 2010).

It is also predicted that that continued increase in temperatures would lead to the currently suited areas becoming unsuitable for growing tea. Arid conditions could expand into suitable areas for growing tea leading to small-scale tea farmers diversifying into other sectors (Technical Centre for Agricultural and Rural Cooperation 2010). This implies that Uniliver Tea Company would have lower amounts of tea available for trading hence reducing the company’s revenue generating opportunities in the country (Technical Centre for Agricultural and Rural Cooperation 2010).

Impacts of climate change have limited the company’s tea production areas and its future expansion and investments particularly in the Southern regions such as the Ganges Delta due to the frequent tropical cyclones and floods experienced in these regions (Ali 2009). According to Van der Wal who is an environmental expert particularly on sustainable agriculture, the increasing climatic change particularly in the increasing temperatures in most parts of Bangladesh which is predicted to increase beyond 32⁰ C in the near future may also affect the company’s production (Van der Wal 2008).

Climate change also affects the company’s cost of production since the company has to incur more cost on insuring its tea against the likely risks that may result from the environmental hazards which the country is prone to since the country lacks proper adaptive capacity to adapt to the impacts of climate change (International Finance Corporation 2010, p.28).

Besides, the Uniliver Tea Company may also join other private companies in developing adaptive and mitigation measures to environmental hazards particularly on research on the implications of climate change on the company, building cyclone centres and embankments among many others (International Finance Corporation 2010, p.28). Conservation and management of the environment has been inflated by climate change (Van der Wal 2008). It also leads to increased expenses on researching on more modern technologies and tea varieties that can withstand the climate change as well as in technologies that can enable it reduce its water consumption and other better agricultural practices (Uniliver 2009).

Climate change leads to destruction of transport and communication lines and other infrastructures such as electricity poles (Angus, Hassani and Parris 2009, p. 2720). This impacts on the flow of the company production as well transportation to the market. Floods, cyclones and storm surges destroy infrastructures as well as properties belonging to the Bangladesh citizens (Colander 2008). The company therefore has to contribute towards reconstruction process and humanitarian aid to support the victims of the hazards (Angus, Hassani and Parris 2009, p. 2720). These also contribute to the company’s overall operating cost and hence an increase in the cost of production (Van der Wal 2008).

Climate change is expected to cause more negative impacts on the country in general (Ali 1999). However, climate change is also expected to increase the amount of rainfall and rainfall reliability in the country and this might improve the company’s capacity to produce buy more tea in the country (Uniliver 2009).

Conclusion

Considering that climate change is predicted to affect the country more in the near future, Uniliver Tea Company need to realise that achieving long-term goals of the company depends more on its ability to adapt to better sustainable ways of tea production. Climate change is expected to cause serious impacts on the country’s economy especially if the causes of climate change are not dealt with. Uniliver Tea Company can not manage environmental conservation and climate change adaptation and mitigation on its own.

It is therefore important for the company to employ a coordinated institutional approach with other players in the private sector, non-governmental institutions concerned with environmental conservation and management as well as government institutions to respond to the climate change and its impacts on the country. This should include important government institutions like the National Councils on Water Resource and Environment and the Inter-ministerial Climate Change Committee as well as the Rainforest Alliance.

Uniliver Tea Company also needs to create a technical environmental department within the company to coordinate climate change adaptation measures. This department would be responsible for undertaking more research on higher-yielding tea varieties which are technologically sound and can adapt to the impacts from climate change.

It would also be responsible for climate change information management which includes researching and analysing accurately information on climate change as well as evaluating the impacts of the climate change data on the company. The department will be responsible for carrying out environmental impact assessment on the company’s project and develop mitigations measures which can be taken by the company. It will also be responsible for monitoring and recording the regional and the country’s climate data and advising the management accordingly.

The company also needs to take an integrated planning approach which focuses on strengthening the local communities’ participation on climate change adaptation. It is important to involve the small-scale tea farmers by supporting their research activities and disseminating information on new and better tea farming practices. This would help improve the quantity and quality of tea produced by the small-scale farmers and this would in turn lead to increase in company’s revenue collections.

Uniliver Tea Company has to reduce the amount of carbon dioxide released from the company into the atmosphere by adapting more efficient energies for production from its factories. It also has to put more efforts on planting more trees to improve the environment as well to reduce soil erosion.

In general, the impacts of climate change have had adverse effects on agriculture and in particular, tea production in Bangladesh. It has caused fluctuations in tea production in the country and has also limited the country capacity to produce more tea. Thus the country’s tea industry market share has been unstable and may continue if the causes of climate change are not controlled.

Reference List

Ahmad, Q. K., Chowdhurry, A. R, and Ericksen, N. J., 1997. Socio-economic implications of climate change for Bangladesh. Dhaka: Bangladesh Unnayan Parishad.

Ahmed, A.U., Huq, S., Koudstaal, R, Rahman, A. & Werners, S.E., 1999, Considering Adaptation to Climate Change Towards a Sustainable Development of Bangladesh. Washington, D.C. World Bank.

Ali, A,1999, Climate change impacts and adaptation assessment in Bangladesh. Dhaka: Sher-e-Bangla Nagar. pp.109 &114-115.

Angus, S.D., Hassani M. B, and Parris, B., (2009). Climate change impacts and adaptation in Bangladesh: An agent-based approach. Melbourne: Monash University Press. pp. 2720-2722.

Bangladesh Sangbad Sangstha 2010, Small-scale tea farming becomes popular in Panchargah. Web.

Canziani, O., Dokken, D. Leary, N., McCarthy, J., and White, K. (Eds). 2001. Climate Change 2001: Impacts, Adaptation & Vulnerability. Cambridge University Press: Cambridge.

Colander, D., 2008, Microeconomics. (7^th Edition). New York: McGraw-Hill.

Fairtrade Foundation., 2010., Stirring up the Tea Trade: Can we build a better future for tea producers? London: Fairtrade Foundation.

Farming First, 2010, Climate change risks and food security in Bangladesh. Web.

Hasan, M., 2010, Climate Change Impact on Food Souvereignty in Bangladesh. Maastricht: European Journalism Centre.

International Finance Corporation., 2010, A strategy to engage the private sector in climate change adaptation in Bangladesh. Asian Tiger Capital Partners. p. 14, 27, 28, 31.

Institute for a Sustainable Environment 2005, The Economic Impacts of Climate Change in Oregon: A preliminary assessment. Oregon: University of Oregon Press.

Najam, A. 2003. The Human Dimensions of Environmental Insecurity: Some Insights from South Asia: Environmental Change and Security Project Report 9: 59-74. Cambridge University Press: Cambridge.

Palmer, W. C., 1965. Meteorological drought. Research Paper No. 45. Washington, D.C.: U.S. Department of Commerce Weather Bureau. 34.

Pellinga, M., Özerdemb, A., & Barakatb, S., 2002. The macro-economic impact of disasters. Progress in Development Studies, 24, pp. 283–305.

Technical Centre for Agricultural and Rural cooperation, 2010, Tea: Trade issues for the ACP. London: ACP.

Uniliver, 2009, Sustainable Development Overview 2009: Creating a better future every day. Web.

Uniliver, 2007, Sustainable development 2007: An Overview. Web.

United Nations Framework Convention on Climate Change., 2007, Climate change: Impacts, vulnerabilities and adaptation in developing countries. Bonn: Climate Change Secretariat.

Van der Wal, S., 2008, Sustainability Issues in the Tea Sector: A Comparative Analysis of Six Leading Producing Countries. Amsterdam: Stichting Onderzoek Multinationale Ondernemingen Centre for Research on Multinational Corporations.

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