INVESTMENT POTENTIAL IN SINDH AGRO INDUSTRIES

TARIQ AHMED SAEEDI (feedback@pgeconomist.com)
Feb
8 - 14, 2010

Agro industries can help alleviate poverty in Pakistan and bring food security in the country. Agriculture sector of Pakistan is limited to its primary activity of providing raw materials to a small number of manufacturing industries. Nonetheless, it can become a prolific source of inputs to number of small, medium, and large industries if agro enterprises are promoted. Besides, this can also give boost to quality and quantity of farm produces in addition to balance impact of growing population and reduce urban-rural disparities.

Imports of foods cause flight of precious foreign exchange from the country. Development of edible oil industry can lessen burden on balance of trade. Agriculture experts suggest cultivable wastelands on coastline can be productive to cultivate oil seeds. Absence of oil extraction plants near the farmhouse, however, puts efficacy of outputs in lurch. Supporting industries are must to consume farm outputs at optimum. Distance of industries from the farms is a main reason of underperformed agro industries.

A publication 'Agro-Industries for Development' by food and agriculture organization of the United Nations says development of agro enterprises is important to create income, enhance employments, and augmenting the quality of and demand for farm products. This publication presents a convincing account of why development of agro industries can be a trigger of poverty reduction in rural areas of developing economies. Introduction of new products within the system would not only improve income of farm producers at primary level, but also it would expand the basket of produces, it says.

Agro-based industries are developed through utilization of farm outputs for stimulating primary, secondary and tertiary activities. Pakistan is a primary sector-dependent economy as it exports significant portion of agriculture outputs in raw forms or semi-produced commodities.

Pakistan's agriculture sector has over 20 percent share in gross development product, 60 percent in employment base, and 70 percent in exports. Agriculture sector of Pakistan has been a main foreign exchange earner for the country, and is a source of raw materials for manufacturing sectors. It provides cotton to textile industry, which accounts for more than half of total exports from the country. Value addition of cotton that is $1000 per bale earns the country sizeable export revenue can further be enlarged.

Agriculture sector is not only a source of food consumed or exported in raw form, but also it can become a source of inputs for processed food industry, which is underdeveloped in the country. Processed foods can fetch relatively more foreign exchange revenue. Government has announced incentives to enhance exports of processed foods from the country. It allowed six percent research and development fund on exports of processed food. However, there are some strict content laws in international market, which processed foods must comply. Falling in predefined standards can cause reshipment or cancellation of export consignment. Fruits fall short of quality standards because of post harvest inattention. Agriculture sector of Pakistan is not up to the internationally recognized standards. Horticulture suffers a lot due to incongruity with international standards. Standard agriculture practices are indispensable to have full access to international market. Agriculture produces from the country have faced noncompliance contentions in recent past. Prevalent trade policy has set forth agriculture practices for five horticulture exports including mango, citrus, date, potato, and, onion.

Processing of horticulture products can increase exports revenue manifold. For example, date processing plants can not only save tons of produce from wastage that occurs because of improper warehousing and inclement weather, but also preserve its export value.

Sindh is the second most populace province of Pakistan. It produces 73 percent banana, 34 percent mango, and 88 percent of chillies in the country. Non-availability of processing and preservation facilities causes 20 to 40 percent post harvest losses. Sindh has huge potential for foreign investments in agriculture sector. Some potential areas of investment in the province include corporate farming, seed production and processing industry, date processing industry, vegetables and fruits processing and canning industry, fresh mango processing, essential oil extraction industry, food processing industry, compartmentalized cold storages, green house farming of cut roses, plant nurseries, and viscous fibre from cotton waste.

Using residue of farms can also give a source of energy besides giving off fibres. It can become an independent industry. The province has 28554 acres of land at 10 government farms for cooperate farming. It produces 250,000 tons of dates per annum. The production can be increased to 450,000 tons.

Financial constraints are hampering the growth of agro industries. Development of agro industries can be effective in alleviating poverty and minimizing the rural-urban divide. Different governments started financial assistance programmes to extend financial outreach to agriculture community. In first half of the current fiscal year, loans to agriculture sector rose almost seven percent to Rs106 billion over Rs99 billion in the corresponding period last fiscal year. State bank of Pakistan set for July-June 2009-10 agriculture credit target of Rs260 billion while all banks loaned Rs233.01 to agriculture sector in FY09.

Asian Development Bank's assistance programme for Pakistan has been focusing on development of agriculture sector since 1966 when the country joined ADB. Out of total loan amount of $14.3 billion disbursed as of the end of 2008, 20.9 percent was allocated for agriculture and natural resources second only after energy sector.

Value addition can spur growth in manufacturing sector and give way to new enterprises to enter in off-farm activities of processing, packaging, and transportation. This directly will lead to improvement in standard of living of poverty-stricken rural population and bring small famers to increase their participation in mainstream agriculture sector.