CAN FOREIGN INVESTMENTS UPGRADE THE AGRICULTURE SECTOR?
Jan 4 - 10, 2010
Pakistan with the present population of 180 millions growing at a rate of 2.6 percent is expected to cross the populace of 230 millions by the year 2030. The agricultural productivity is to be planned to enhance twice in limited cropping area to feed the growing population during next two decades. This is only possible through vertical developments of agriculture sector.
Agriculture being the only sustainable contributor to national GDP has always been unique in national economy as it provides food security to the masses. A considerable improvement in production of cereals and cotton has been achieved since independence even deployment of meager resources in terms of finance and skilled manpower.
It is the time to enhance pulses and oilseed productivity to reduce import bill that has shaken the national economy several times.
There are huge investment opportunities in the agriculture sector of Pakistan. However to achieve desired results it is necessary to streamline things in the country's agriculture sector. Foreign investment in agriculture sector can help check rising poverty graph in the country. The government needs to initiate efforts on priority basis to revitalize the agricultural sector in the short and medium terms, agriculture experts told Page.
According to them, the idea of corporate farming, if implemented, in the country with necessary safeguards, can bring revolution in the country's agriculture sector. Those opposing the idea need to realize that through this concept country can get latest technology that would definitely enhance production of this vital sector. This would also provide new job opportunities besides putting in place the modern farming concepts.
It may be noted that the global food security crisis endangers the lives of millions of people, particularly the poor who live in countries already suffering from acute and chronic malnutrition. The rapidly increasing energy costs, lack of investment in agriculture, trade distorting subsidies, recurrent and weather and environmental degradation, subsidized production of bio-fuels that substitute food production, imposition of export restrictions leading to hoarding and panic buying are multiple factors behind food security crisis.
Experts believe that there are following areas in agriculture sector in which foreign investment can be made.
- Land Development/Reclamation of
- Barren Land, Desert and Hilly Areas for culture purposes and Crop Farming
- Reclamation of Water Front areas/Creeks, crops, fruits, vegetables, flowers, farming/integrated agriculture (Cultivation and Processing of Crops),
- Modernisation and Development of Irrigation Facilities and Water Management, Plantation/Forestry, Horticulture, Dairy,
- Small Ruminants (sheep and goats) and all other Livestock Farming and Breeding.
As per conditions, there is no upper ceiling on land holdings for registered agricultural companies. However, the income of these companies is taxable. A foreign company permitted to invest in the agriculture sector is not allowed to transfer land to any other foreign company unless specifically approved by the federal and the concerned provincial governments.
Agriculture has an important direct and indirect role in generating economic growth. The importance of agriculture to the economy is seen in three ways: first, it provides food to consumers and fibres for domestic industry; second, it is a source of foreign exchange earnings; and third, it provides a market for industrial goods.
The total geographical area of Pakistan is 79.6 million hectares. About 27 percent of the area is currently under cultivation. Of this area, 80 percent is irrigated. In this regard, Pakistan has one of the highest proportions of irrigated-cropped area in the world. The cultivable waste lands offering good possibilities of crop production amount to 8.9 million hectares.
Agriculture is largely dependent on artificial means of irrigation. Of the total cultivated area, about 82 percent or around 17.58 million hectares is irrigated, while crop production in the remaining 3.96 million hectares depends mainly upon rainfall.
The Irrigation Canal Command Area (CCA) has been grouped into classes on the basis of the nature and severity of its limitations, water logging, salinity, sodicity, and texture.
At present about one-fifth of the cultivated land in CCA is affected by water logging and salinity to varying degrees. An additional area of 2.8 million hectares suffers from sodicity.
Thus, Pakistan needs to overhaul its entire drainage and reclamation strategy to reduce cost and increase productivity.
A number of countries including France, Argentina, Arab States including Saudi Arabia, Malaysia etc., have already shown keen interest for investment in country's agriculture sector particularly livestock and dairy development. There are 35 French companies working in Pakistan at present. Although the total direct foreign investment by French companies remained low, major French multinational companies established subsidiaries in Pakistan that created over 10,000 job opportunities.
In foreign trade agriculture dominates through exports of raw products such as rice and cotton and semi-processed and processed products such as cotton yarn, cloth, carpets and leather production.
Agriculture is essential for sustainable improvements in internal and external balances. Of the total export earnings, the share of primary commodities and processed and semi-processed products constituted almost 60-percent of the total exports. There have been some structural changes over time, but the contribution of agro-based products has more or less sustained its position.
Experts believe that there are countless investment opportunities in farm mechanization, seed sector, palm oil production and post harvest handling, infrastructure development and horticulture for the foreigners.
Tunnel farming for growing off-season vegetables' production and hydroponics for growing fruits and vegetables may be other areas of interest for foreign investors.
Pakistan's thrusts on farm mechanization include tractor manufacturing, and manufacturing of farm machinery and equipment, high efficiency irrigation systems (drip and sprinkles) and solar pumping system for irrigation.
Pakistan Agri Forum (PAF) Chairman Ibrahim Mughal asked the government to increase overall agriculture production targets by 10 to 15 percent for the up coming season. During the current year, he said Pakistan witnessed negative agriculture growth, as poor marketing and heavy post harvesting losses resulted in wasting of nearly 40 percent of crop outputs.
He said that the government had done nothing for the farmers and they were forced to sell their products to middlemen and brokers at nominal rates. He claimed that during the current year Pakistan's per acre crop production particularly of major crops including wheat, rice, cotton, maize, different pulses and sunflower declined.
According to him, Pakistan has the capacity to increase per acre output by 25 percent. The government must set higher production targets for the major crops. In 2009, Pakistan produced about 24 million tons of wheat and for the upcoming year it could easily produce 27 million tons. To achieve this higher output figure requires sincere efforts on the part of the government as well as other concerned quarters.
He said the government should increase paddy production target to 8 million tons, gram production target at 1.2 million tons, sunflower production target at three million tons and sugarcane production target at 60 million tons.
On provincial level, the Punjab Board of Investment and Trade (PBIT), in the pursuit of its mandate to attract investment and promote trade in Punjab, is engaged in identifying new technologies, inventions and innovations in various economic sectors including agriculture sector to boost production and stimulate investment for commercialization of these technological innovations.
The PITB's effort is to abridge the yawning gap and disconnect between research and development and the up-scaling of proven technologies so that higher thresholds of production, efficiency gains and cost-savings could be achieved in the highly competitive market environment, a spokesman of the Board told this scribe.
According to him, a mechanized system of Rice Intensification (MSRI) has been developed by private sector which has led to 50 percent water efficiency gains, 20 percent per acre cost savings in inputs and a minimum of 60 percent increase in yield per acre.
In this connection, agriculture sector offers enormous potential for technological interventions not only to transform subsistence production system to commercial agriculture but also to induce investment at the value chain level. Thus, it benefits subsistence farmers, progressive farmers and agro-industry in Punjab. Recently, PBIT liaised with the private technology developers in the agriculture sector who have achieved remarkably good results in intensive rice cultivation through a package of input technology, mechanization and best crop management practices.
He further said that the hallmark of the innovation is the development of multiple function agriculture machinery which will help the farmers in securing vertical productivity increase through better land preparation, nursery plantation and fertilization. MSRI technology is guided by motto the 'more from less'. The process needs less quantity of rice seed due to plastic mulching. Only four lbs of seed are sufficient instead of 10 to 16lbs used in conventional rice growing practice.
The spokesman said that huge opportunities for investment are available in the field of agriculture and as such PBIT is endeavoring to act as a catalyst and proactive facilitator to fully harness this potential for the ultimate benefit of the farmers and agro-industrialists.
Another historic decision taken by the Punjab Government is to lease out land to agriculture graduates. This decision, if implemented in its true spirit would help promote agriculture business as well as production. According to Dean Faculty of Life Sciences and Business Management University of Veterinary and Animal Sciences (UVAS), Dr Muhammad Aleem, leasing of land to agriculture graduates is an appreciable step to improve the countries per unit land production.
"Livestock contributes more then 50 percent of agriculture GDP and it is impossible to think for country's prosperity without including livestock in the above reforms. As poorest folks are keeping the livestock it becomes imperatives that similar approach has to be adopted to develop livestock entrepreneurship. Turnover in livestock business is much faster than typical agro-related business," he said. He added that leasing land to the Animal Sciences graduates would develop a culture of self-employment, which subsequently lessens the burden on the government from creating more jobs.
Dr. Muhammad Aleem also stated that there are many areas of livestock business, which could be initiated through graduates and could work as milestone to develop the future export of dairy and meat products.