Friday, 29 September, 2023

Marketing turning into syndicating: Reasons and remedies 

Food commodity market in Bangladesh has changed significantly over time. The move toward syndication is one of those modifications. Syndicates are associations of traders who work together to set prices and supplies of goods at the expense of customers. Syndicates have developed in Bangladesh's food commodity market to control the flow of a variety of goods, including rice, sugar, edible oil, and most recently, broiler chicken are few names of a long list.

The high rate of corruption in Bangladesh is one of the primary causes of this shift toward syndication.  Due to the lack of effective regulating organizations, the system has been abused by strong participants in the market. In order to increase their profits, they can therefore feign shortages and manipulate prices. Additionally, in order to obtain the licenses, permits, and other papers required for their operations, syndicates frequently depend on dishonest officials.

Another element that encourages syndicate growth is the lax enforcement of laws and rules pertaining to market competition and syndicate formation. Syndicates take advantage of lax regulatory frameworks to carry out unethical activities like price-fixing, hoarding, and faking shortages. A report by the Bangladesh Competition Commission claims that there are over 1,500 active syndicates operating in a variety of economic sectors, including the market for food commodities. These syndicates hinder innovation by regulating prices, restricting supply, and using their collective negotiating power.

The absence of competition is another element influencing the expansion of syndicates. Without fair competition, there are opportunities for traders to work together and control the market, which results in artificially high prices and decreased quality. Only 30% of Bangladeshi families, according to the World Bank, have access to competitive markets, showing a considerable lack of consumer alternatives. Due to the absence of competition, syndicates can operate with impunity, raising prices and reducing consumer options.

In Bangladesh, there is a significant demand for food products, which has increased corporate competition. Many small and medium-sized enterprises have turned to creating syndicates in order to survive in the market due to the lack of expansion options. This is especially true for companies that are involved in the distribution of necessities like rice and cooking oil.

Additionally, the issue is made worse by the agriculture sector's inadequate infrastructure. It is difficult for farmers to get their crops to market since there aren't enough processing factories, storage facilities, or transportation systems. As a result, there are few players, which syndicates take advantage of. Due to the small number of suppliers, syndicates may easily regulate prices and limit supply, making it challenging for customers to get basic goods.

However, the emergence of syndicates has brought up a number of difficulties in the market for basic commodities. The detrimental effect on consumers is one of the main obstacles. Because of deceptive price increases by syndicates, basic food items are out of reach for those with limited incomes. The amount of poverty in the nation is significantly impacted by this.

The effect on small and medium-sized firms is another difficulty. Syndicates frequently control the market, making it difficult for smaller companies to compete. This restricts competition and innovation, which stunts the sector's economic progress.

Additionally, syndicates cause supply chain inefficiencies. They frequently stockpile necessities, causing fictitious shortages in the market. This results in lost resources and greater transaction costs for both firms and consumers.

There are numerous solutions that can be used to overcome these problems. To stop the establishment of syndicates, the government must first strengthen its regulatory authorities. To lessen bribery and other criminal actions, the government should also enforce anti-corruption laws and regulations.

Additionally, it is important to encourage market competitiveness. By offering them funding, training, and improved market access, the government can support small and medium-sized businesses. Due to increased competition and innovation, the supply chain will become more effective. The government should also spend money on infrastructure to expand communication and transportation systems. This will lower transaction costs and ease market access for companies.

The government could also raise consumer awareness of ethical pricing procedures. This will give consumers the information they need to choose where to buy their necessities.

The Bangladesh government has taken action to combat this problem by putting a stop to syndicate operations and encouraging more market competition. For instance, the government has established a task force to look into and prosecute syndicate activity and has put policies in place to encourage accountability and openness in the agriculture industry. However, much more work needs to be done to entirely stop syndicate activity.

Encourage the entry of new competitors as one way to increase market competition. This can be done by offering small businesses and entrepreneurs incentives and by putting rules in place that support fair competition. In order to give farmers better access to markets, the government can also spend money on improving agricultural infrastructure, such as better storage facilities and transportation systems. This will lessen the influence of syndicates and level the playing field for all players.

Educating the public about syndicates' harmful effects is another option. Consumers should be aware of how syndicates function and how to guard against being taken advantage of. As a result, there will be a need for increased market accountability and transparency, which may serve to weaken the influence of syndicates.


Md. Muzakkeerul Huda, Chairman, School of Business, Presidency University