LAND REFORMS -THE ONLY WAY OUT

SHAMSUL GHANI (shams_ghani@hotmail.com)
June 30 - July 06, 2008

According to the Economic Survey, agriculture is the single largest economic sector of Pakistan contributing 21 per cent to the GDP and employing 44 per cent of the total work force. More than two third of the population of Pakistan is lodged in the agriculture sector finding its survival and heavily dependent on agricultural and allied activities. The poverty issue is described as a rural phenomenon with 70 per cent of the rural community living with no or minimal land holding and made to face, in consequence, the harsh economic realities of life

Lately, the economists and the policy makers have been endeavoring hard to shift the focus from an agro based economy to an industrial economy without gauging the potential of agriculture sector so very rich in land and human capital. The huge canal irrigation system is also in place to give a cutting edge to the sector. The policy shift has raised the share of manufacturing sector to the GDP from 12 per cent to 19 per cent during the last 52 years with a simultaneous decrease in the share of agriculture sector from 46 per cent to 21 per cent during the same period. This is a travesty of what should have actually happened. The decrease in one sector should have been followed by at least an equal increase in the other thereby allowing for import substitution and lesser dependence on export of food items. On the contrary, the so called shift of focus has resulted in severe scarcity of food items followed by a high level of food price inflation. More painful is the reality that we have failed to make any headway on the industrial front simply because the economy got a midway policy twist when service sector was given an unwarranted boost. The manufacturing sector's energy was diverted to the service sector and we ended up as a consumer economy. The agriculture sector was left at the mercy of natural forces that endowed it with staggering highs and lows 6.7 per cent in 2004-05, 1.6 per cent the next year and then again 1.5 per cent in 2007-08. The following table shows the growth pattern followed by the economy during the last six years.

 

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

GDP

4.7

7.5

8.6

6.6

6.8

5.8

Agriculture

4.3

2.3

6.7

1.6

3.7

1.5

Manufacturing

6.9

14.0

12.6

10.0

8.2

5.4

Large manufacturing

7.2

18.1

15.6

10.7

8.6

4.8

Services

5.2

5.9

8.0

9.6

7.6

8.2

The neglect of agriculture sector by denying it the center place in the economic policy design has allowed the natural elements to become the driver of this crucially vital sector of economy. The record high and low of 9 and 1.5 per cent during the last two decades is proof that this sector is not being dealt with on modern scientific lines. What is more surprising is the successive governments' failure to take up the vital issue of land reforms. The present coalition government has come up with some relief to the sector in the shape of increased subsidy on DAP, withdrawal of GST on fertilizers and pesticides, increased allocation for agriculture credit and abolition of 5 per cent excise duty on crop insurance. The failure of the democratic set up to address the issue of land reforms pending since General Zia's draconian decision to undo even the partial land reforms introduced by Bhutto, is quite unexplainable. The PPP who claims to be the champions of the cause of poor farmers and labor should know well that relief measures for the agriculture sector cannot have a trickle down effect in the absence of meaningful land reforms. They won't get a more opportune time to free the landless and small-size-holders from the decades-old stranglehold of the traditional feudals. The reported avoidance of the concerned ministers to discuss the prevailing land holding structure that has been the major hurdle in the path of green and white revolutions is quite surprising. Small farmers with no or minimal land holding are the ones who heavily contribute to whatever output this sector has to offer year after year. This segment having no access to the means of production is languishing since long. A major portion of the farm credit gobbled by the high-ups of this sector is squandered on luxury spending. The 70 per cent have-nots of this sector hardly benefit from the credit allocations with the result that cheap substandard inputs are used to produce low quality small-size outputs. The poor and thus ineligible non-borrowing farmers have been left unattended by our banking sector. They need to be helped out to make them a bona fide agricultural borrower.

As repeatedly emphasized by this scribe that in the present international food market situation, we have a life-time opportunity. To grab this opportunity, we must immediately introduce wide-range land reforms breaking the hold of large size land holders and then put our money on the hard working small growers by pampering them with high subsidies, generous farm credit and modern farm technology. The resulting good quality bumper crops will not only solve domestic food problems but will also give boost to our dwindling export sector. Those who advocate withdrawing of subsidy from the farm and energy sectors at the behest of World Bank, are wrong from both economic and social standpoints The US, Japan and European countries have heavily invested in farm subsidies to save their farmers from the onslaught of market forces and to allow them to maintain focus on quality farm output. The rationale for subsidiary-free economies given in various World Bank manuals should also apply to world's leading economies mentioned above. The government has not done well to cut the subsidies by 25 per cent.

It has been economically proved that the distribution of total agriculture land among a greater number of small-size-holders practically busy in agricultural activities results in good quality high yield than when the same land is owned by few large-size-holders physically absent from the scene of production. Farm mechanization measures in the absence of effective land reforms give rise to social problems when a multitude of farm labor is laid off with no alternate employment opportunities. Our farm sector needs mechanization based on modern farm techniques. The benefits of the measure will accrue only if mechanization is preceded by radical land reforms.