FOREIGN INVESTMENT IN AGRICULTURE
THE APPREHENSIONS MUST BE REMOVED BY ANNOUNCING PRUDENT POLICIES AND IMPLEMENTING THOSE IN LETTER AND SPIRIT
SHABBIR H. KAZMI
Aug 6 - 12, 2012
Agriculture contributes over 20% to Pakistan's GDP but foreign investment in the sector has remained miniscule. While it is true that the policy planners remained skeptical of the participation of overseas investors, there was also resistance to corporate farming. Despite the fact that two of Pakistan's large scale industries, sugar and textiles and clothing are agro based, capacity utilization of both the industries have remained dismal due to the shortage of raw material, sugarcane and cotton.
Pakistan is among the top five top cotton producing countries but suffers from two contentious problems: 1) yield is disappointingly low and 2) the country has not been able to increase production of medium and long staple fibre. The result is production of huge quantity of yarn of coarse counts and failure to produce fine and super fine counts keeping value of locally made made-ups low. Some sector experts say that the prevail dismal state is the outcome of poor research and development due to shortage of funds, but there is growing consensus that switching over to and from cotton to sugarcane, especially in Punjab, and herd mentality of growers has not allowed any improvement in cotton and sugarcane yields. The blame also go to seed marketing companies, which often sell seeds susceptible to pest and virus attacks.
Poor yield is also attributed to in efficient crop management, from leveling of field to taking water to tail end and from applying balanced fertilizer to failure in timely spray on crops. Till recently, poor availability of credit was said to be one of the constraints. However, now banks are disbursing about Rs300 billion to farmers annually. The central bank and financial institutions are ready to lend more after the introduction of 'credit insurance' scheme. While private sector insurance companies have been prompt in paying the claims, National Insurance Corporation has dismal track record. It has not paid claims originating in 2010 and 2011. Not only the farmers were affected, National Bank of Pakistan also had to take a hit.
Lately, a policy was being reviewed to allow the foreign investors to take land on ownership or long-term lease and take the entire production to the country of origin from where the money had come. The policy was resisted on the ground that it will yield no benefit to Pakistan. The details could have been worked out making it mandatory to sell 25% of total production in Pakistan. The other apprehension was that the cultivable land will be acquired by the foreign investors. This issue could also have been resolved by announcing a policy whereby the investors could acquire government land on long-term lease only.
Foreign investment in agriculture is likely to help in achieving two objectives: 1) bringing baron land under cultivation and 2) irrigation through tube wells. One of the reasons for poor use of tube wells is high cost of electricity which can be overcome of installing windmills and solar panels. Though, it involves huge capital expenditure but operational costs goes down considerably.
There are ample opportunities for value addition i.e. production of ethanol, milk processing and export of Halal products and seafood preparations. Foreign investment can also be solicited in logistics and storage. It is on record that nearly one-third of total produce goes stale before reaching the markets. Development of a supply chain on modern lines will on one hand in saving this huge waste and boosting exports. Some of the quarters object on export of agriculture produce but hardly realize that this enables the growers to achieve international standard, optimize cost and above all improving income of rural pollution.
If Pakistan wishes to be a leading exporter of agriculture produce and livestock the work has to begin from the scratch. If agriculture inputs have to be guaranteed at competitive cost, livestock population just can't be increased without producing ample quantity of green fodder. If policy planners simply focus on increasing cultivation of corn it can yield many benefits. Every part of the plant is useable with the largest benefit in the form of corn oil. At an average Pakistan annually imports US$2 billion edible oil and any increase in local production of oil seeds can be of enormous benefit for the country.
Pakistan should also benefit from the experience of cultivation of canola in Canada. Since this oilseed can be cultivated on 'average' land increasing its cultivation will not have any adverse import on any other crop. The propaganda that increasing cultivation of canola will have adverse impact on wheat output in completely baseless and a tactic of importers of palm oil. Along with this production of sunflower should also be increased in the country. The added advantage will be production of oilcake in the country, an important feed for cows and buffalos.
It is often said that Pakistan is among the top milk producing countries, but it still imports huge quantity of dried milk and baby food. The country has managed to pack less than 5% of total milk produced in the country in tetra packs. The major advantage of tetra packs are longer shelf life and ease in handling. The time is ripe for creating new facilities for the production of dairy products.
Over the years foreign investors in agriculture have remained skeptical due to poor law and order condition in the rural areas. Atrocities of feudal lords are too obvious, land grabbing and theft of livestock being the two favorite pastimes. Added to this has been 'war on terror' being fought in KP. This has caused not only huge displacement of people but severely affected agriculture and production of fruits in the province.
There is a saying that foreign investors are like migratory birds in search of safe sanctuaries. The ground realities may not be as bad as being painted by the Western media. Offering of incentives by the government remain of no consequence unless the ground realities change.