PAKISTAN CAN DRAW FARM OUTSOURCING AS LIKE IT
With the liberalization of global markets and declining subsidies, Pakistan could emerge as a vibrant and globally competitive agriculture country
By Dr. AMAN ULLAH CHAUDHRY
Sep 26 - Oct 02, 2005
PAKISTAN FUTURE LIES WITH AGRICULTURE BECAUSE OF MANY REASONS:
Oil will run out as resources in the next 30-40 years. As the world moves closer and closer to this scenario, prices of oil will keep going up, pricing out agricultural produce from North/South America and Europe to Asia because of high cost of freights. Oil is the cheapest source of energy for transportation of produce by large ships. The West will face a double whammy of rising freight rates and declining subsidies. Pakistan has the advantage of doing railway rake shipments to many of the deficient countries in Asia. In future we will have rail shipments even into Asia as it has the largest population among continents and is the biggest importer of agriculture produce.
In future contract farming like models will evolve where Pakistan could become the food factory to Asia. This scenario will play out exactly like the IT industry today. Farming will be outsourced to Pakistan for the same reasons that IT services are outsourced to Pakistan: 1. Global market 2. Lower cost of labor in Pakistan 3. Ability to deliver quality. Pakistan has no shortage of farm labor for the next 50 years with a very large population of people under the age of 35.
Pakistan is endowed with an immense agricultural resource base and agro-ecological diversity, which makes crop production possible throughout the year. High quality fresh water is abundantly available in our rivers and extensive canal network for irrigation. Alluvial soils stretch over thousands of kilometers of the Indus Basin plain. We have a rural population which is seeped in the culture of farming since centuries. All these factors combine to make Pakistan as an agricultural producer with one of the lowest costs of production. It is due to this inherent comparative advantage that large investment in agriculture will be forthcoming once we have in place the law and policies, which provide safeguards and incentives to potential investors. Pakistan also has very low productivity, which is a blessing in disguise and is probably the only large country where mere knowledge dissemination and plugging of extension gaps can lead to doubling of food grain.
The Pakistani farmer has no support and is not heavily subsidized like his counterparts in the rest of the world. Iceland farmers get 69 percent of their incomes through subsidies and their Swiss and Norwegian counterparts get 68 percent. South Korean farmers get 63 percent and in Japan the percentage is 56 . At the bottom end of the scale, Australian agriculturists get only four percent of its income from support and in New Zealand the figure is only three percent. The United States increased the percentage of subsidies in its farmers' income from 15 percent in 2003 to 18 percent in 2004 to a cash of $ 46.5 billion. India provides heavy subsidies to farmers on a range of items from fertilizers and power to seeds and purchase of farm products. India's export of wheat and rice has dipped since August 2003 after the government ceased giving subsidies for exports. In Pakistan subsidies are not only withdrawn, the general sales taxes at the rate of 15 percent are imposed on inputs like fertilizers and pesticides. With the liberalization of global markets and declining subsidies, Pakistan could emerge as a vibrant and globally competitive agriculture country.
Pakistan is a resourceful agricultural country blessed with fertile lands and well established irrigation system. West Punjab alone was producing at the time of partition, enough food grain virtually to feed entire Sub-continent.
For the above scenario to play out the government's clear vision is very critical. If the government supports the correct initiatives Pakistan will become an Asian power in agriculture. The following are some of the measures which need to be taken.
A seamless railway spanning Asia is moving closer, with trial runs inspiring officials and shippers, promising a boost for economic growth and jobs. Whether those benefits arrive on time depends on 27 governments- due to sign an agreement in 2006-giving the project high priority. Faster shipping can reduce costs, making goods more competitive, translating into sales, higher profits and more jobs. This railway is not going to appear overnight. Four corridors grew out of the Asian Land Transport Infrastructure Development Project that began in 1992. In 1995, United Nations Economic and Social Commission for Asia and Pacific officers and national officials identified a northern corridor combing elements of railways in China, the Koreas, Mongolia, Kazakhstan and Russia. They also agreed a corridor covering the Association of Southeast Asian nations. Four years later, they finished drawing a southern corridor across their maps stretching from Yunnan and Thailand by way of Myanmar, Bangladesh, India, Pakistan and Iran to Turkey. In 2001 they drew up a corridor linking northern Europe to the Persian Gulf through Russia, Central Asia and Caucasus. Pakistan should support these initiatives.
PAKISTAN SHOULD MAKE AN AGGRESSIVE PUSH FOR LIBERALIZING THE SECTOR.
Recently, Pakistan has made rapid strides in economic growth, foreign trade, services and industry. Accelerated growth has trickled down and helped poverty reduction, though the extent and pace are hotly debated. The liberalization in industrial goods and services has, however, bypassed agriculture, where growth rates have been fluctuating. How can economic gains be distributed across a broad spectrum, when two-thirds of the population continues to be dependent on a sector contributing a fluctuating share of national income?
Liberalization of the industrial and service sectors made markets globally contestable. This has improved efficiency and per capita productivity, through access to latest technology and managerial practices. And redirected investment to areas where the country had a competitive edge. Access to deeper markets meant greater potential for sustained growth. Subsidies are fiscally unsustainable. Lack of income has limited demand for agricultural goods amongst the poor. Trade in agriculture is still effectively closed. Since the majority of the world's poor are dependent on it, free trade here will have far greater impact on broad-based income growth than industrial goods and even services. In the industrialized world, free agricultural trade would result in lower taxes (through elimination of tax-funded subsidies) and low prices for agricultural products).
Pakistan has inherent advantage in labor costs. Once trade, investment, subsidy, price and ownership distortions are rectified and international trade opened we can emerge as a competitive agricultural power. Land legislation needs to be drastically overhauled, with emphasis on employment, investment, productivity and income generation. Poverty, after all, is the outcome of low incomes, deriving from low per capita productivity. Concerns on national food security (especially in war and famine) and employment, all genuine sovereign concerns, have checked emergence of transnational corporations (TNCs) in agro production.
With a global consensus on rollback of subsidies agro TNCs will operate out of developing countries such as Pakistan due to their competitive advantage. We need to ponder creation of powerful transnational constituencies that would push for opening international trade and investment in agriculture, as with merchandise trade and services. For a country with 75 percent of its population living in rural areas, international economic integration is an inevitable way to market farm products abroad. Trade liberalization will open up great opportunities for Pakistan to export its farm products. The country should adjust practices and create an equal investment environment to attract foreign direct investment in agriculture sector. These should help the agriculture product processing industry, produce high quality animal and plant breeds and increase the competitiveness of the sector in world market. Further, Pakistan integrates into the world, the greater challenges the country faces. The economic development scale of rural areas is still limited which prevents the application of science and technology. The processing and preservation process still lags behind production and development growth. During the process of trade liberalization, several areas that cannot secure a firm foothold will die out. As a result, parts of the rural population will become unemployed. To deal with these issues, Pakistan should build a complete social welfare system for agriculture sector such as income insurance, support fund and vocational training.
SECOND GREEN REVOLUTION
Agriculture is on the verge of second green revolution. The first made the post-colonial Pakistan food self-sufficient. But this time, critics say the slogan is "profit rules"; much of the new crop technology - such as genetic modification is in private hands. It appears to focus on crops that boost export economy and serve the middle classes, ignoring crops that can feed Pakistan's poor. Reports of malnutrition as well as hunger in recent years have led countries to pin their hopes on biotechnology to usher in a green revolution similar to the one that put countries on the path to self-sufficiency in the 70s. There is, however, a problem; unlike in the 1970s, when high-yield varieties of seeds, gigantic dams, irrigation projects and pesticides were welcomed uncritically, the attempt to launch a new round of science-led transgenic farming is being met with skepticism by non-governmental campaigners.
Farmers, particularly poor peasants, remain desperate enough to try anything.
Many environmentalists take a measured view of the Green Revolution these days, saying the high yields came at a high price: soil salinity from water - logging, pesticide and disease resistance, soil degradation from chemicals and even rural inequalities. Our agriculture now faces the challenge of having to produce more farm commodities for our growing human and farm animal populations under conditions of diminishing per capita arable land and irrigation water resources, and expanding environmental stresses.
To achieve these, our farmers - will have to be provided with the best available technologies such as biotechnology and information, space, nuclear, renewable energy, and precision farming technologies and scientific organic farming methods. Indian Council of Medical Research estimates that the global market in transgenic plants may grow to six billion dollars by 2005.
Clearly, the Second Green Revolution is being pegged around the new realities of development in the 21st century.
Self-sufficiency is no longer the buzzword. Rather the aim appears to be the position of the humble Pakistani farmers as a player - albeit a small one - in the international trade in agricultural produce so that agriculture can contribute substantially to Pakistan's economic growth.
THE KNOWLEDGE ECONOMY
Recently the Indian government has set up National Knowledge Commission, with a definite objective of transforming India into knowledge power within 36 months. This will deal "on matters relating to institutions of knowledge production, knowledge use and knowledge dissemination.
According to the World Development Report 1999-2000. Most advanced economies today are "truly knowledge based," in which "the balance between knowledge and resources are shifted so for towards the former that knowledge has become perhaps the most important factor determining the standard of living - more than land, tools and labor."
Today's technologically advanced economy is a triangulation of knowledge, labor and capital. But driving force is knowledge produced by information technology, innovations which make labor and capital more efficient, the kind of knowledge that is being generated in technology parks. A handful of technology-based knowledge producing cities could lift the whole country through surging ripple effects. Technology-based knowledge, unlike capital and labor is inexhaustible and is "non-rivalrous".
In Victorian England, where some of most important technologies of the industrial revolution were developed, because of the British class systems which valued "gentlemen" more than engineers, traders and entrepreneurs, industrial leadership passed on to the United States and Germany in the 1850. England raised trading rather than manufacturing ventures and commercial banks, but no venture capitalists like the Unites States, a person "who has the means and mentality to finance the unexpected and unproven". Venture capitalists are mostly responsible for the information technology growth in the United States. At the heart of information revolution is not the computer, which at best is a tool to routinise information processes; nor is it software, which is nothing but "the reorganization of traditional work, based on centuries of experience, through application of knowledge and especially of systematic, logical analysis".
It is rather the creation of knowledge, which is fuelling the next wave of information revolution.
Future economic growth would come from those industries where knowledge workers would be as important as the financier or the capitalist. for example, biotechnology where the gestation period is long and rewards for workers cannot be stock-market driven. Since performance in these new knowledge industries will come to depend upon running the institution so as to attract, hold, and motivate knowledge worker, we would have to do something else, something symbolic, for example, giving knowledge workers the status of "fellow executives and partners". In the knowledge factories of the 21st centuries, there will be hire workers, you may call them principals and partners and give them flexible work hours or freedom to work wherever you go with the wireless laptops. But there would still be the need for command and control and vision of venture capitalists. Therefore to meet the knowledge challenge of the 21st century, "the greater need is to create a system where entrepreneurs and venture capitalists grow and accept the challenge of the unexpected and unproven". The government should study how the marketplace, apart from the universities, could be harnessed to create knowledge that generated innovations that can raise Pakistan's growth permanently in a kind called "a virtuous cycle".
India has planned that by 2007, each of the 600,000 villages are promised with a village knowledge centre based on broadband internet connectivity. There will be one million knowledge workers within this year. Village knowledge centre is one of the essential components for realizing their goal of graduating into a knowledge society. These centers will disseminate relevant information relating to agriculture, animal husbandry, fisheries, health, education, rural enterprises and disaster management.
In Pakistan when irrigation systems was planned the provision for drainage was not provided as a result water logged and salinity area in the Indus basin is 6.8 million hectares and outside Indus basin is 6.3 million hectares. Soil salinity may be robbing Pakistan of about 25 percent of its potential production of major crops. For sustainable agriculture it is essential that drainage system should be constructed in all irrigated areas and the brackish water should be pumped into the Arabian Sea. In order to realize the dream of food factory of Asia, Pakistan needs lot of cheap energy by investing heavily under clean development mechanism for pumping drainage effluent into sea.
The author is from Department of Agronomy, University of Agriculture, Faisalabad.