Sibtain Wahab |
With a current deficit of around $18bn, quoted by our very own and trusted finance minister, we desperately need to increase exports, and decrease the import bill, both to their maximum potential, ASAP. Unfortunately, our agriculture sector (which includes dairy, livestock, and fisheries) has been continuously ignored, despite the huge export potential and impact. Economic survey of Pakistan 2017-18 states that agriculture’s share in GDP was 18.9%, employing 42.5% of labour force, whereas industry and services had a share of around 20 and 60% in GDP, who employ a lot lesser households. So a major turn around in the lives of masses is possible by agriculture sector uplift, besides huge growth in country’s exports.
Coming over to the potential of growth agriculture sector has, let’s have a comparison. India’s agricultural exports stood at $34 bn (2017) while we exported food items worth around $5 bn only. The Netherlands, one of the leading agricultural economies, exported agriculture products worth $110 bn (€90 bn).
Let’s move to the opportunities. China’s agricultural imports in 2017 stood at $75 bn ($24.1 bn from the US) and they are ready to increase agri imports from Pakistan, Iran’s at $8-10 bn and even Afghanistan’s documented wheat import was $0.5 bn which is quite significant for our meager $5 bn exports. Moreover, curbing wheat and agri-goods’ smuggling to Afghanistan can add to it as well. Trade with India is complicated, so I have preferred not wasting time on that. Looking across the sea, we may find many potential importers of our agricultural products, especially Mango and rice, which can give a boost to our shipping industry as well.
China has categories A and AA for organic food, certified by the govt, under green food program. The export certification can work on organic and inorganic food categories as well. Farmer training may include organic production awareness.
Before moving to suggestions, let’s have a look at major imports of neighboring countries. China imports wheat, corn, soybean, farm products, grains, cotton, edible oils, sugar, beef, and milk. Iran imports Corn fodder, Barley, Banana, sugar, soybean, and rice. Afghanistan’s major import is wheat. And we produce almost all of it.
And it’s pertinent to mention that even being an agrarian country, our imports and exports of food items are almost the same, and exports and imports of the textile are $13bn and $4 bn respectively, which gives us some advantage, which is neutralized by $8bn imports of agricultural and other chemicals. And as it will take longer to compete with the developed industry and services sectors of the world, meanwhile we may rely on agriculture, in which we have an advantage over most of the world.
What the Government Needs to do?
The bureaucratic policy which is made from offices, based on research papers will yield nothing significant, unless we address the genuine concerns of the farmer, and work on the ground realities. Suggestions here include farmers’ input, practices of other countries and some brainstorming.
Read more: Agriculture development
Boosting Agricultural Production and Improving Farmers’ Lives
We have a nominal budget allocation for the agriculture sector, whereas the industry and services sectors enjoy the govt’s affection. Firstly, the govt will have to invest heavily, if it wants to increase GDP and exports, and improve the lives of 42.5% of its people.
Even a layman knows that availability of water, good quality seeds, fertilizers, and pesticides are necessary for better crop production.
- Provision of water for irrigation in arid areas should be a priority. In President Musharraf’s era, NRSP and PRSP (National and Provincial Rural Support Programs) built small single-field size dams in such areas almost free of cost. These dams are also being used for fisheries. Such an arrangement at massive scale worth a few billion rupees will boost agriculture in these areas, especially in North Punjab, AJK and parts of KP.
- Canals from rivers to arable lands, where possible, should be worked out.
- Tube wells and water turbines on easy loans and subsidized agriculture electricity-meters (unit price of Rs. 5.35 announced recently is a huge step) is another option, where underground water levels are high.
- Next step should be educating farmers about the efficient use of water beside using the right seeds and fertilizers for their soil type, identification of crop diseases, and the right time and techniques of sowing and harvesting. They might be made aware about export criteria and organic and inorganic food and their relative demand in international markets. Farmers in India are paid for these training, 24000 for a two days training and 36000 for a three days workshop.
- On-the-field soil testing should be provided to facilitate farmers, as farmers in far-flung areas can’t afford this, neither do they have any know-how of the department’s working and realization of its importance.
- The health of crops should be monitored by the agriculture department, and subsidized pesticides be made available to the farmers, on their recommendations. Another alternative is India’s practice of mobile app Crop Doctor, but it can’t be applied throughout the country.
- Fertilizer industry’s complete indigenization will reduce fertilizer cost and import bill.
- The 7-billion rupees subsidy announced by Finance Minister needs to be translated into some long-term concrete steps with the ultimate aim of providing low-cost fertilizers to the farmers in times to come, as high fertilizer cost is a big impediment in its effective utilization.
- Tractors cost 8.5 lacs and above, which is not a viable option for small farmers. Interest-free long-term tractor lease to small farmers can give a boost to their income, considerably reducing their costs, and giving them more control over the utility of their land, besides enabling them to make the unused land usable. A smart move would be to impose a condition of 4-6 weeks training, which should make the owner or anyone from his household, proficient in driving a tractor, and educating them on its utilization, as the available tractors are still underutilized in our country. This would provide a part-time employment opportunity to the farmer as well, as tractors are extensively used in a construction business, which is on the rise in Pakistan, owing to CPEC, and it will gain momentum with the 5 million houses and dam projects.
- A weak area, govt needs to work on, is introducing the latest sowing, spraying and harvesting technologies in the country. Chinese help might be sought in this regard.
- Insurance of crops would be an out of the box idea, if implemented rightly, and would make the rain, weather, disease, and market fluctuations dependent farmer financially more secure.
- Insurance for cattle (different categories for milk producing, meat source and breeding animals) can boost up livestock. For the sake of understanding, a poor farmer buys 3 buffaloes worth 5 lac rupees and one dies, he is ruined, and can never come out of the crisis. Insurance would make them secure.
- Agricultural loans have a cruel interest rate of 14%, where interest rate of SBP was 6.5% this year, increased to 8.5% now, (which is the interest rate for industrialists in fact). Farmers are not all landlords, a majority of them are small farmers, who can’t afford this. And even poorer are the haaris (whom I don’t foresee to be freed from this slavery soon, as the ruling elite has a good chunk of feudals in it) and the thaika-workers. If the govt is concerned about 42.5% of its people, this interest rate needs to be slashed. How much of subsidy would it cost to the national exchequer? Subsidy of 44 billion was announced for 5 industries, shouldn’t agriculture be given subsidy double the amount given to industry, in every budget as the share of both in GDP is same, while agriculture impacts 42.5% of the population and industry only 20%? And a political advantage to the govt for facilitating the farmers would be a ‘happy with the govt’ and content 42.5% of the population, whom PTI hasn’t been able to woo otherwise. So it’s a political point scoring move as well.
- Interest-free loans (which Punjab govt announced in this budget, but was a meager sum of 30 bn rupees, needs to be increased exponentially) would help people invest more, earn more, live better lives and contribute more to the GDP and exports.
- Another alternative could be, an arrangement between the government and commercial banks, where the banks lend money to small farmers, and only the interest amount is paid by the government to the banks. This would ensure interest-free and hence easy loans for farmers, with an outreach to maximum farmers with the same spending of the government from the budget.
- All these steps, helpful to the farmers won’t cost trillions obviously, but the impact will be huge.
- One non-monetary initiative would be the end to the exploitation of small farmers by middlemen, the ‘aarrhti’. Online markets (e-mandi) in India and China have already started a business. Govt’s true implementation of buyers buying crops from the farmers, not below the minimum rate set by the govt (called the support price) can be a big relief for them, which is not being implemented.
- The support price for wheat is constant for the 5th consecutive year. This implies that the income of the farmer is fixed with growing expenses because of inflation. So the living standard of farmers has been deteriorating for the last half-decade. And sadly, the incumbent government has done the same.
We have discussed the concerns of the farmers, and production raising agenda, next on the list is boosting exports.
- The Netherlands, the leading agricultural economy, has a ministry of agriculture, food and ‘quality’. We need to work on quality certification and classification, before exports, to earn a reputation in the international market, and value addition to earn revenues. Lack of pesticides affordability and awareness has kept the crops organic in many areas, which is in high demand these days. China has categories A and AA for organic food, certified by the govt, under green food program. The export certification can work on organic and inorganic food categories as well. Farmer training may include organic production awareness.
- Here comes a major hurdle, and also an opportunity, which needs long-term planning and heavy financing, if we are serious about increasing our exports and raising the living standards of rural farmers manifold by exporting their produce, Cold Chain.
- Cold Chain is basically a temperature controlled environment, where temperature intolerant products are stored. Studies have shown a tenfold increase in earnings and 75% reduction in wastage of food products by using this technology. 70% of agricultural produce is stored in cold chains in the UK, 4% in India (under the NCCD National Centre for Cold Chain development), and we have not even started thinking about it.
- Pakistani Kinnow and Mango are in huge demand abroad, and we can’t grab the fruit of exporting these fruits. All of the tomatoes is consumed locally or is wasted where we have huge production capability. All our farm products can be exported if we have a well connected cold chain network. It would consist of mega cold chains at Tehsil (or appropriate) level in agricultural areas, and then at ports, airports and railway terminals. Cold chain trucks network would add up employment opportunities. Working on indigenization can save revenue and import bill.
- 5th largest milk producer but zero dairy export, what an irony. Hardly 6% milk is packaged, rest is consumed or wasted the same day. Cold chains would fetch milkmen better prices with reduced losses, and end the monopoly of packaged milk brands, who are selling a liter of locally produced abundant milk at the higher price than a liter of petrol which we import.
- A crackdown on adulterated packaged milk and the milk tankers of thousands of liters each, entering cities daily, would curb this malpractice, and boost dairy.
- Once able to export, we may like to have contracts on the reciprocity basis, or MFN or reduced customs for our agricultural products for better competitiveness, with countries like China, Japan, Saudi Arabia, US and others, from whom we import most of our goods.
Read more: A looming threat: Pakistan running dry
- Value addition e. packaging, hygiene, quality and adherence to international standards would earn us bigger sums, provided there is some mechanism set in place for export quality check and certification.
- Exporters and producers should be made aware of international standards, and benefits of meeting that criterion. Packaged milk, beef, poultry, fruit and vegetable brands should be classified as per quality and exported with the aim of earning credibility for “a product of Pakistan” tag.
- But, before cold chain technology is introduced, we must focus on export of wheat, rice, and other grains and livestock, with gradually putting in place, the certification mechanisms, and hassle-free exports mechanism.
- We produce edible oil seeds, but we have an edible oil import bill of a few billion dollars. We can reverse it by facilitating local edible oil industry and raising it to export standards.
- Our tractor industry is 95% indigenized, and a tractor is relatively cheaper than many countries, so we export to Afghanistan and some African countries. Tractor industry can be incentivized and brought at par with the international standards, hence increasing exports.
For the economists who have to decide the budget allocation, here are the simple maths. Even a 20% increase in agricultural production (even before cold chain, and much higher constant growth after introducing cold chain and latest technologies in harvesting, sowing, and packaging) owing to these measures would result in 4% increase in GDP. If you somehow manage to have a couple of percentage point increase in GDP from industry and services sectors each, the result would be a mighty 8% GDP growth. So why not allocate more resources in budget and priority in govt plans to a sector which contributes the same to GDP as an industry, but employs double the workforce? Simple logic.
Sibtain Wahab is an aviator by profession and has a special interest in Economics, Public Policy and well being of his countrymen. The views expressed in this article are author’s own and do not necessarily reflect the editorial policy of Global Village Space.