TIME RIPE FOR INVESTMENTS IN PAKISTAN'S FOOD INDUSTRY

KANWAL SALEEM
(feedback@pgeconomist.com)
Mar 29 - Apr 4, 2010

Food processing is a relatively capital intensive industry. The growth rate of the food industry is steadily growing.

The most rapidly growing items are dairy products, fish processed, bakery items, sugar, biscuits and confectioneries, fruit juices and other soft beverages. Food products (except rice) do not, however, make up a significant proportion of Pakistani exports and there is a considerable potential for expanding such exports, especially to Europe and the Gulf region.

Around 90 food manufacturing companies are on the list of Karachi Stock Exchange. Some of the biggest groups in the market are Crescent, Habib, Fecto, Premier, Lakson, Burma Oil (producing vegetable oils), Brooke Bond, Clover Foods, Lever Brothers, Murree Brewery and National Foods. The food manufacturing firms have generally performed well on the stock exchange.

Thus, there is a significant scope for investment expansion in the food industry.

Domestic demand is buoyant and export prospects are bright and they are yet to be adequately explored. Several major companies including well known multinationals have substantial investment commitments and there are also a large number of middle sized upward mobile domestic firms. Scope also exists for the establishment of wholly owned subsidiaries. There is also a need for technology transfer agreements, which can facilitate the access of Pakistani companies, to modern technology and know-how in the areas of processing, preservation and packaging of foods. Several Pakistani firms have developed ambitious modernization programmes.

Agriculture experts told Pakistan & Gulf Economist that Pakistan through intensive cultivation can increase its cereal grain production more than three times the amount currently produced in the country. The present cereal production is around 26.3 million tonnes. A production target of 54 million tonnes of cereal production would be sufficient to meet Pakistan's entire food needs and also to enable it to be the major exporter of grains to South Asia and the Middle East.

Pakistan has immense potential to become the food granary for the countries of Asia and Africa in view of its vast potential of water resources and its biggest canal system in the world. Major sources of dietary proteins are cereals, pulses, fruits, vegetables and animals. In the case of rice Pakistan already exports more than a million tonnes of rice to Middle Eastern and South Asia countries.

Pakistan is ranked fifth amongst the world citrus growing countries. At present Pakistan produces five million tonnes of fruits and vegetables annually. Since improved methods of cultivation are now in use both the production and acreage continue to rise. However, it is observed that 50 per cent of fruits and vegetables harvested in the country go waste during harvesting, transportation, preservation and storage. If only 25 per cent of the wastage could somehow be avoided Pakistan could earn $100 million worth of foreign exchange annually through the exports of fruits and vegetables.

Pakistan is expected to have enough surplus of vegetables (onion and potato) and fruits, which will help in sustaining the growth and momentum of exports achieved so far. Pakistan produces 20 million tonnes of milk annually which is half of milk produced by rest of the 49 countries of the Muslim world.

Punjab alone produces more milk than all the 12 OPEC countries put together. Pakistan is also importing milk and milk products.

Pakistan is ranked amongst those few fortunate countries where milk is produced in excess its local consumption.

Pakistan can earn huge forex through export of poultry and dairy products.

Statistics release by Federal Bureau of statistic (FBS) show food group export from the country during the month of February 2010 witnessed an increase of 35.59 per cent over the same period of last financial year. Food commodities worth US$ 297.10 million were exported during February 2010 as against US$220.74 million in the same month last year. The rice export from the country in last month also registered an increase of 56.03 per cent as against the rice export of February 2009. Rice export from the country reached 459,996 metric tonnes during last month amounting US$ 206.16 million as compared to the total quantity of 194,399 metric tons amounting US$ 132.13 million in February 2009. However, rice export from the country in February 2010 registered decrease of 11 per cent as compared to the month of January 2010. About 74,063 metric tonnes of basmati rice were exported during the period under review as against 73,986 metric tons of same period last year. Pakistan earned US$69.78 million by exporting the basmati rice during the month of February 2010 as against US$ 132.13 of same period of last year.

The export of other food commodities from the country also registered and increase of 141.97 percent during February 2010.

About 385,933 metric tons of other food items were exported and earned the country US$136.33 million as against the total quantity of 120,413 metric tons worth US$ 56.36 million of same month last year.