IMPROVING VALUE ADDITION IN AGRICULTURE

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
Feb 14 - 20, 20
11

Frequently, we come across a term value addition in our daily life occupied with activities related to trade and industry or academic engagements. The epithet has been defined properly and there is perhaps no debate on it as far as the precinct of economic activities is concerned. However, the difference raises its head and variation starts surfacing when its applicability and subsequent advantage become variable from region to region, country to country, or place to place.

If the process of value addition is well planned, not only domestic economy is strengthened, but also export revenue can grow largely. Therefore, value addition is accepted as a globally popular methodology of resource optimization.

Value addition has an internationally acceptable definition of adding, improving or optimising resources in a way that the process scales up commercial value of goods and services as well as human capital.

A World Trade Organization's report advocates the improvement in shares of value addition in the economies of developing nations to reduce poverty and unemployment. It said value addition could prove an effective trigger to economic growth.

Unfortunately, value addition in Pakistan is less than a quarter of country's gross domestic product. It was 24 per cent in 2009, according to a World Bank's report gauging economic performance of its member countries on several indictors. China and India, in the same year, had 46 per cent and 28 per cent value additions respectively.

Pakistan's economy under the stress test of multiple pressures from all the directions is likely to exhibit growth rate of two to three per cent for the current fiscal year. Over the years, the sectors that underpin the economy can be counted on fingertips.

Agriculture sector commands the leading force to propel the engine of economy. The sector absorbs the highest share of workforce in the country and its share in gross domestic product exceeds quarter of the total national outputs. It also provides backend supports to the textile industry, which accounts for nearly 60 per cent of total exports from the country. In percentage of GDP, however Pakistan's exports of goods and services are lowest when compared to its neighbouring countries. In 2009, the country's exports happened to form only 13 per cent of GDP. The figure was same in 2008, 14 per cent in 2007, 15 per cent in 2006, and 16 per cent in 2005, data in the World Bank's report suggested. Indian exports constituted 21 per cent of the country's GDP in 2009. China's exports, on the other hand, made 27 per cent of its economy. As per this indicator, Pakistan also lagged behind Afghanistan, which exported products 16 per cent of its total economic outputs. The latest data on Iran was not available, yet for three years up to 2007, Iran's exports had an average 32 per cent share in its GDP. The data is a manifestation of performance of export sector of Pakistan and above all, it is indicating a room for the expansion of exports from the country.

Why do Pakistani exports show lacklustre performance and are still unable to surpass imports to make balance of trade positive-that is nearly cent per cent negative when compared to the import bill in a year? Pakistan has to import petroleum products, food items, and other engineering goods to run its economy and it is still laming to go beyond primary economic activities. Despite being an agriculture economy, the country has to meet domestic food consumption needs by importing food items in bulk. Manufacturing sector's shares in exports can be doubled and trebled.

Analysts said the economy could see trade surplus only if value additions are given importance. Besides, surge in domestic economy as a result of manufacturing products in the country will create array of job opportunities. Unemployment is rising because of the inertia in job market and that spell of inactivity can be broken with the help of exploring the potential within the existing trade and industry.

Agriculture sector that is the mainstay of Pakistan's economy can become a propeller of prosperity. The straitjacket approach of national policy makers to earn foreign exchange through exports of raw materials has created an impression that they are afraid of challenging the status quo. No efforts have been rendered to optimise process of production in agriculture sector and export value added agriculture. Attempts by the private sector in the agriculture value addition are discouraged or not appreciated. Share of Pakistan's total exports in global trade is negligible and though it ranks in the world's top-ten-nations list for production of its various crops, it has a minuscule share in the global agriculture value addition.

While it seems that all sectors work on self-help basis, agriculture sector is doomed because of the government's apathy. Measures in the name of reforms and revolutions used to reverberate in the atmosphere, but all were emptied. The state of agriculture sector and farmers is deteriorating. There is a need to treat the agriculture sector at par with other sectors to enhance the contribution of this sector in exports.

The government must consider about giving rural areas status of model villages on the basis of their productions of major and minor crops. For example, Sindh produces various grains and fruits. Dates, banana and mangoes are few of fruits that can become healthy foreign exchange spinners if draped with value-addition. Cold storages and processing plants increase shelf-life and commercial values of these fruits. Model village concept is successfully working in western agriculture economies. Garlic ceremony is held in some place in Europe to celebrate harvesting season and variety of garlic-made foods are prepared during the occasion. The government has to follow this well-emulating example to enhance community participation in the agriculture activities.

No doubt, agriculture sector can enhance exports from the country and value addition can bring about a revolutionary change. Government should encourage private sector to invest in value addition of agriculture sector in order to increase exports.