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Technical Assistance Consultant’s Report
Project Number: 38430
Technical Assistance Number 4723
October 2008
Pakistan: National Agriculture Sector Strategy
(Financed by the Technical Assistance Special Fund)
Prepared by Lourdes Adriano, assisted by Ma. Adora Deguito and Ma. Roanna Santos, of
the Asian Development Bank (ADB), based on a consultant report for the National
Agriculture Sector Strategy formulation unit of the Ministry of Food, Agriculture & Livestock
in collaboration with ADB through a Technical Assistance grant.
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents.
TA 4723-PAK
National Agriculture Sector Strategy
TOWARDS A SUSTAINABLE RURAL ECONOMIC GROWTH
STRATEGY - AN AGENDA FOR ACTION
Prepared for
Government of Pakistan
Ministry of Food, Agriculture and Livestock
and
Asian Development Bank
This report was prepared by Lourdes Adriano, assisted by Ma. Adora Deguito and Ma. Roanna Santos,
of the Asian Development Bank (ADB), based on a consultant report for the National Agriculture Sector
Strategy formulation unit of the Ministry of Food, Agriculture & Livestock in collaboration with ADB
through a Technical Assistance grant.
This report does not necessarily reflect the views of ADB or the Government concerned,. ADB and the
Government cannot be held liable for its contents.
ABBREVIATIONS
DRC — Domestic Resource Cost
GDP — Gross Domestic Product
GVA — Gross Value Added
MINFAL — Ministry of Food, Agriculture and Livestock
NARC — National Agricultural Research Center
NASS — National Agriculture Sector Strategy
NWFP — North West Frontier Province
O&M — Operation and Maintenance
PARC — Pakistan Agricultural Research Council
PRSP — Poverty Reduction Strategy Paper
R&D — Research and Development
R&D&E — Research, Development and Extension
RNF — Rural Nonfarm
TFP — Total Factor Productivity
WTO — World Trade Organization
2
CONTENTS
Page
1. INTRODUCTION 4
1.1 Background 4
1.2 Purpose and Scope 5
2. RURAL ECONOMY- FEATURES AND SOURCES OF GROWTH 7
2.1 Introduction 7
2.2 Agricultural/Farm Sector Profile 7
2.2.1 Agriculture- Still a Dominant Sector 7
2.2.2 Diverse Agro-ecology 8
2.2.3 Prevalence of Small-sized Farm as Unit of Production 10
2.2.4 Crop Production Trends 11
2.2.5 Reaching the Limits of the Production Frontier 14
2.2.6 Livestock Subsector 15
2.3 Rural Nonfarm Sector Profile 17
2.4 Prospects 19
2.5 Conclusion 21
3. WEAK LINKS IN PAKISTAN’S AGRI-BASED SUPPLY CHAINS 22
3.1 Introduction: Agri-Based Supply Chain Approach 22
3.2 Key Constraints 23
3.2.1 Macro Constraints 23
3.2.2 System-Level Constraints: Weak Links to the Chain 25
3.3 Conclusion 48
4. FROM AGRICULTURAL TO SUSTAINABLE RURAL ECONOMIC GROWTH
STRATEGY 49
4.1 Introduction 49
4.2 The Vision 49
4.3 The Strategy 49
4.4 Core Principles 49
4.5 Key Themes of the Action Agenda 50
4.6 Agenda for Action 50
APPENDIX 1 53
APPENDIX 2 60
3
1. INTRODUCTION
1.1 Background
1. Like all developing countries, Pakistan is striving to become an industrialized
economy. The path towards industrialization is indicated by decreasing share of
agriculture to gross domestic product (GDP), labor force and export revenues, and
correspondingly higher shares of manufacturing/industry and service sectors in GDP, labor
use, and export receipts. Shifting economic sector focus will also be accompanied by a
geographic movement of human and capital resources from rural to urban areas. While
there is a tendency for income inequality to become more skewed as the economy shifts
gear from agriculture-dependency to industrial/service sector focus, per capita incomes
will eventually rise, poverty will decline, and a more egalitarian society will evolve.
2. Pakistan economy is showing the trends of declining importance of the agriculture
sector and the increasing importance of the service and industry/manufacturing sectors.
However, the pace of structural change has been extremely slow (more than half a
century). Growth rates showed a boom-bust cycle. Only recently had growth rates of the
economy been on a modestly upward trend, although the next few years may again show
a downtrend. Inequality is still highly skewed and poverty has not decreased significantly.
3. The turtle pace feature of the structural transformation of Pakistan’s economy has
a lot to do with the nature and quality of growth in the rural economy. Rural economy
pertains to the economy of the rural area, which would include population concentrations
in farms, villages and towns below a threshold of 40,000 people. Essentially the rural
economy consists of farm and nonfarm activities.1 Farm or agriculture sector consists of
crops, livestock, agro forestry and fishery/aquaculture. Nonfarm activities include all rural
economic activities outside farm agriculture. It includes self-employment, wage
employment and nonfarm production.
4. Although nonfarm activities are increasing in relative size and significance as
employer of labor force in the rural economy, agriculture remains as the major source of
income in rural areas and is the driver of growth of the rural economy. However, the
agriculture subsector’s performance in the past half century has been mediocre, averaging
at 2.8% annual growth rate, and dependent on a few commodities― wheat, cotton, rice,
and sugarcane. Diversification to other commodities has been slow and integration to
value-adding supply chains and the global markets have been weak. Where supply chain
networks exist, integration has not stimulated further growth and multiplier effects in the
manufacturing and service sectors in the rural nonfarm subsectors. The rural nonfarm
subsector is thus characterized by micro and small to medium economic activities
involving a numerous number of geographically dispersed and low-capital using
intermediaries. The end-result is a virtuous circle of slow growth in the rural economy,
lagging expansion of the service and industrial sectors, concentration of urban growth in a
few large metropolis centers, and slow rise of per capita incomes (mainly in urban areas),
leaving the majority of the rural populace still impoverished.
1
A typology of farm and nonfarm rural economy is expounded in Husaini (2008), Strengthening rural
nonfarm economic activities to foster agricultural value chains, NASS Report, volume 2.
1.2 Purpose and Scope
5. The Asian Development Bank (ADB) provided a technical assistance (TA) grant
to Pakistan to help the Ministry of Food, Agriculture and Livestock (MINFAL) in
developing a participatory-based medium-term national agriculture sector strategy
(NASS) that would include priority areas for policy reforms, institutional measures and
investment programs at the federal and provincial levels.
6. The formulation of the strategy has taken into account the lessons learned from
the Agriculture Sector Program Loan - II completed in June 2007, the ongoing
Agribusiness Development Project, as well as other programs and projects for
sustainable growth of agriculture and for rural development.
7. The TA NASS has focused on issues, constraints, and priorities involved in
making the agriculture sector (i) efficient, competitive, and profitable; (ii) grow at a
sustainable rate to meet future food security and export requirements; (iii) diversify from
low value to high value products; and (iv) generate employment and help reduce rural
poverty.
1.3 Technical Reports of TA NASS
8. This strategy report builds on the works of the TA NASS. The TA produced
several reports, which are appended to this strategy document. These reports include
the following: (i) the main report (volume 1), (ii) three thematic papers (volume 2), and
(iii) eight background papers (volume 3).This strategy report highlights the key findings
that were presented in the three volumes, and suggests the vision and five-year strategic
actions for an inclusive and sustainable rural economic growth.
9. The background papers provide snapshots of the likely sources of growth in the
future by analyzing the economic potential of all subsectors of agriculture: major crops,
high value crops and their related input supply and processing activities, and livestock
products. While major crops such as cotton, wheat, rice and sugarcane comprise a large
share of agricultural value added and the national GDP, minor crops are also important
for productivity growth because of the diversification opportunities they offer. Moreover,
some minor crops, fruits and vegetables have significant potential as points of entry in
the process of reorienting agriculture towards production of high value products in
response to market demand. The background papers also highlight the constraints and
issues facing the crop sector–factors that have impeded realization of the growth
potential to the expected extent.
10. Livestock is also an important subsector of agriculture, contributing nearly half of
agricultural value added. One background paper focusing on this major subsector
highlights the issues currently facing the livestock sector, which broadly fall into milk and
meat categories. Issues facing milk production include problems at the primary level and
pertaining to storage, transportation, processing and marketing of milk products. Issues
facing meat production are more concerned with whether and how the integrated low-
input to low-output system can be changed to a high-input to high-output one. Fodder,
occupying an important position in the farming system, is also linked to productivity of
the livestock sector.
5
11. The background papers outline programs of all the development partners in
addressing these constraints. The papers on crops and livestock primarily focus on
prospects and problems, whereas the papers on governance, marketing, and rural
finance focus on the constraints as well as progress (past and present) of development
partners. Research and extension services are also reviewed to show the progress
made in reforming these critical services for agricultural growth.
12. The rural nonfarm economy paper is an exploratory piece that highlights the
need to expand the analysis of the rural economy from a perspective of economic
linkages (horizontal and vertical) of the agriculture sector with their respective supply
chain networks (the inputs to farm production and the marketing, processing, and
domestic and international distribution aspects after farm production). Finally, the value
chain analysis and the agriculture crops sector papers provide the case study for
assessing agri-based commodities from a value chain approach.
13. This strategy report benefitted from the main report document of the TA NASS
(volume 1). Volume 1 summarized the major drivers of growth in the past, the
constraints and challenges for growth in the 21st century, and the elements for a
sustainable rural economic growth. It served as the building block for developing the
strategy report.
1.4 Contents of the Strategy Report
14. The proposed strategy as expounded in the subsequent chapters takes a
broader view of agriculture as it encompasses the backward and forward linkages that
are directly linked to agriculture and are based in the rural areas. In this sense the
strategy considers the entire rural economy covering both farm and nonfarm sectors.
Additionally, the strategy not only looks at the “what to do” but also puts equal emphasis
on the “how to do” aspects.
15. The report is an attempt to first explain what were the drivers of growth in the rural
nonfarm economy and why these cannot be the locomotors for sustained growth leading
to a virtuous industrialization path. Second, the report then identifies what were the
constraints that hampered agriculture and rural nonfarm subsectors from providing the
impetus for sustained industrial growth. These discussions will provide the rationale why
“the business as usual” approach will not work, and why there is need for a more dynamic
paradigm that builds on the development of market-responsive integrated value chains
linking the economic agents at the farm and nonfarm rural subsectors with vibrant
agribusiness partners. These discussions will also highlight the changed roles of the
Federal and Local Governments of Pakistan.
16. The last part of the report suggests the strategy and the five-year action plan for
laying the ground work to invigorating the rural economy so that it can contribute
significantly to ensuring a sustained and inclusive industrial growth path for Pakistan.
6
2. RURAL ECONOMY- FEATURES AND SOURCES OF GROWTH
2.1 Introduction
17. This chapter provides a profile of the rural economy of Pakistan, specifically from
the perspective of the agriculture/farm sector, and the rural nonfarm sector (RNF). The
discussion highlights the key economic features of these sectors. It identifies the sources
of growth in the past and elucidates why these growth factors will no longer be available
or sufficient for accelerating the Pakistan economy’s movement up the economic
transformation ladder from one that is agri-dependent to a full-scale industrial economy.
2.2 Agricultural/Farm Sector Profile
2.2.1 Agriculture- Still a Dominant Sector
18. Agriculture remains to be an important sector of Pakistan’s economy. From 2000-
2008, the sector accounted for 23% of Pakistan’s GDP, 25% of export receipts, and 44%
of the total labor force. Agriculture is also a major contributor to the growth of the
manufacturing sector. The impressive 8.7% growth from July-April 2006-2007 of large-
scale manufacturing was due to the increased output of the cotton-dependent textile
industry, and the food, beverage and tobacco industries.
19. Agriculture/farm sector comprises of crops, livestock, fisheries and forestry sub-
sectors. The gross value added (GVA) share of crops, livestock, fisheries and forestry for
the years 1960-2008 are 48%, 51%, 0.6% and 0.4%, respectively (Figure 1). The crops
subsector is divided into major and minor crops. The major crops include cereals (wheat,
rice, maize, jowar, barja, and barley), cotton, sugarcane, tobacco, and rapeseed/mustard
and gram. The minor and cash crops are fruits and vegetables, fodder, lentils, pulses,
groundnut. The overall share of major and minor crops to the GVA of agriculture has been
on a downtrend. Until 1990, major crops provided the largest contribution to the GVA of
agriculture. By 1994-95, the GVA share of livestock (mainly, buffaloes, mutton, chicken)
has surpassed that of major crops, and since then has been providing more than half of the
GVA of agriculture. Fisheries and forestry sub-sectors contribute the lowest share of GVA,
or barely 1% per annum for the years 1960-2006.
20. Though wide yearly variations are mainly attributed to droughts, insects and
disease attacks, the overall agricultural growth rate trend in the past 57 years (from1950-51
to 2007-08) was on the rise (Table 1). The average growth rate for the period was low at
2.8%. The growth performance from 2000 has been particularly volatile with the lowest
growth rate recorded in 2007-2008 at 1.5%. Much of the dismal performance during this
fiscal year was due to the negative growth rates posted by the major crops (mainly, wheat,
cotton, and rice) and the forestry sub-sector. The positive, albeit low growth rate of the
sector was because of the higher production achieved by the minor crops, livestock and
fishery sub-sectors. As discussed below, there are potentials for further growth if the
composition of agriculture is diversified, relying less on the traditional major crops and
producing more of the minor crops and raising livestock. Already there are signs of
diversification, albeit a slow process. In 2000-2008, GVA share of major crops to
agriculture averaged at 35%, livestock contributed 51%, and nontraditional cash crops
(chilies, garlic, onions, potatoes, pulses, horticulture) at 12%. As noted below, the
potential areas for diversification are in horticulture, oilseeds, and fishery products.
7
Figure 1. Sectoral Shares of Agriculture Subsectors, 1960-2008
Table 1: Mean Annual Growth Rates in GDP of Pakistan Agriculture and its
Subsectors, 1950-2008, in percent (%)
Years Agriculture Major Minor Livestock Fisheries Forestry
crops crops
1950-55 1.35 1.16 1.41 2.38 0.24 1.65
1956-60 2.11 2.36 0.81 2.13 11.01 -0.71
1961-65 3.59 4.85 5.36 1.93 3.86 10.47
1966-70 6.35 9.36 4.10 1.97 14.53 1.51
1971-75 0.83 -0.15 4.31 2.00 -12.93 7.66
1976-80 3.91 4.12 4.47 3.07 10.00 20.77
1981-85 3.78 3.16 4.54 4.60 8.24 6.18
1986-90 4.37 3.64 3.59 5.93 5.62 5.89
1991-95 4.59 3.10 5.87 5.70 3.31 -2.02
1996-00 3.70 4.60 0.03 4.65 -2.19 18.71
2001-06 2.28 1.57 0.58 3.88 3.13 -3.52
2006-07 3.70 8.30 -1.30 2.80 0.40 -29.50
2007-08P 1.50 -3.00 4.90 3.80 11.00 -8.50
P
Preliminary estimates.
Source: Pakistan Economic Surveys, various years.
2.2.2 Diverse Agro-ecology
21. That crop diversification is possible is demonstrated in Table 2. Pakistan has a
rich and vast natural resources base, covering various ecological and climatic zones.
Based on physiography, climate, land use and water availability, Pakistan can be divided
into ten agro-ecological zones. The country has a great potential for producing a range
of agricultural crops. Prior to the introduction of the Green Revolution in the 1960s,
cropping patterns and cropping systems were fairly diverse in Pakistan. With the adoption
of Green Revolution technologies and focus on attainment of food self-sufficiency, a narrow
band of cropping systems developed with cropping systems like rice-wheat and cotton-
wheat emerging and becoming predominant cropping pattern. Wheat, the major food
8
staple crop, is grown in all the agro-ecological zones while crops like cotton and rice are
grown mainly in irrigated belts. A variety of technically potential cropping patterns can be
developed in the countryside particularly for horticulture and floriculture products as well
as oilseeds but because of the political-economic environment that favored a few major
crops, production of these potentially high-valued crops preference is concentrated
mainly in wet mountains and northern and southern irrigated plains.
Table 2: Ecological Zones, Features, and Existing and
Potential Cropping Patterns in Pakistan
Ecological Temperature Soil Type Water Existing Cropping Technically
Zones (oC) / Availability Pattern Potential
Rain (mm) Cropping Pattern
Indus Delta 34-40 Clayey and Silty Canal irrigated and Rice, sugarcane, Rice, wheat, cotton,
(125-250) poor drainage pulses, berseem, mustard,
wheat vegetables
Southern 38-45 Silt Loam, Sandy Canal irrigated Rice, wheat, cotton, Rice, wheat, cotton,
Irrigated (125-250) Loam, Silty Clay sorghum, mustard, mustard,
Plains sugarcane vegetables
Sandy Desert 40 Stable Sand Ridges Rain-fed but extreme Guar, millets, wheat Tree parks,
(I) shortage of water rangelands,
(150-350) drought-tolerant
crops, salt-tolerant
crops
Sandy Desert 40 Stable Sand Ridges Rain-fed but extreme Gram, wheat, cotton, Tree parks,
(II) shortage of water maize, oilseeds rangelands,
(150-350) drought-tolerant
crops, salt-tolerant
crops
Northern 39.5 Sandy loam and Rice, wheat, cotton, Rice, wheat,
Irrigated Clayey loam Canal irrigated sugarcane, oilseeds tobacco, sugarbeet,
Plains (I) (200-500) oilseeds
Northern 43-44 Clayey Intensively cultivated Sugarcane, maize, Maize, tobacco,
Irrigated lands/ canal irrigated tobacco, wheat, sugarbeet
Plains (II) (500) berseem
Barani Land 38 Silty loam, silty Rain-fed agriculture Wheat, millets, rice, High value fruits,
clayey, clay loam maize, oilseeds, vegetables,
(200-1000) melon oilseeds
Wet 35 Silty loam, silty clay Steep mountain, Maize, wheat, rice, Maize, rice, wheat,
Mountains (> 1000) slopes/ rain-fed deciduous fruits fruit
Northern Dry Undifferentiated Deep and clayey Galleries and snow Maize, wheat, fodder, Maize, wheat, fruit,
Mountains formed of alluvial fields fruit trees tree parks
(300-1000) material and alluvial
deposits
Western Dry 30-39 Strong calcareous Numerous hill torrents Fruit, wheat, Tree parks,
Mountains (125-500) soils, gravelly soils vegetable, fodder, rangeland, fruit,
maize fodder
Dry Western 33-40.5 Strong calcareous Sailaba, Tropical fruit, wheat, Tree parks,
Plateau (50-200) soils, silty loam soil, agriculture/torrent summer cereals rangeland, wheat,
gravelly soils water fodder
Sulaiman 40-43.6 Loam, clayey Sailaba, Wheat, gram, lentils, Tree parks,
Piedmont agriculture/torrent oilseeds, millets, rangeland, wheat,
(125-250) water sorghum gram
• Note: Rainfall is in parenthesis.
• Source: Pakistan Agriculture Research Council.
9
22. On a provincial basis, crop and livestock production are largest and mainly
concentrated in the provinces of Punjab and Sindh. Of the total 22.2 million has of
cultivated area in Pakistan, 16 million has (or 72%) are located in Punjab province, 3.1
million has (14%) in Sindh province, and the remaining 3 million has (14%) are in North
West Frontier Province (NWFP) and Balochistan. In terms of total irrigated area of 18
million has, 79% are in Punjab, 12% in Sindh, and 9% in NWFP and Baloschistan. Land
use, cropping, and irrigation intensities are highest and above the national average in
Punjab, followed by Sindh. In terms of livestock population, Punjab houses the largest
share at 49% of the total cattle number of Pakistan, 65% of buffaloes, and 37% of goats.
This is followed by Sindh, and NWFP. Balochistan has the largest share of sheep
population.
2.2.3 Prevalence of Small-sized Farm as Unit of Production
23. Crop production in Pakistan is essentially smallholder based. In 2000, of the 6.6
million ownership holders, 3.8 million (or 58%) owned farms of less than 5 acres in size.2
However, they cultivate only 17% of all agriculture land (Table 3). The Gini coefficient for
operated area in Pakistan has become more skewed, from 0.52 in 1990 to 0.61 in 2000.
The small farms witness relatively sharper deterioration in access to farm area relative to
their percentage share in number of operational holdings. As a consequence, mean farm
area for small farms declined form 2.2 acres in 1990 to 2.1 acres in 2000.
Table 3: Distribution of Land Ownership and Farm Operated Areas in Pakistan,
1990-2000 (in percent and acres)
Farm Size % Distribution of % No. of Farms % Farm Area Mean Farm Area
range Owned Areas (acres)
(acres) 1990 2000 1990 2000 1990 2000 1990 2000
<5 12 15 47 58 11 16 2.2 2.1
<5-12.5 21 24 34 28 27 28 7.1 7.6
12.5-<25 18 16 12 9 22 19 16.4 16.6
25-<50 15 16 5 4 16 16 31.5 31.5
50-<150 17 15 2 1 14 13 70.4 70.3
.>150 17 15 10 8 311.8 296.1
Total 100 100 100 100 100 100 9.3 7.6
GINI 0.52 0.61
coefficient
for operated
area in
Pakistan
Source: Qureshi, S. 2008, Development and Management of Land Resources (volume 2), Tables 3,4,5.
24. Livestock-raising supplements smallholding cultivation, and is also a major income
source for the landless. Small farms and the landless rural labor force own on the average
1-3 cattle buffaloes, a few small ruminants, and some chickens. Livestock smallholder
schemes are run mainly by women. Women are responsible for the daily management of
2
Small farms are defined in various ways (see Qureshi, 2008, Modern Inputs and Agriculture Development,
volume 2, pp. 34-35. The most common yardstick used in many developing countries is the size of
operating farm holding which is often less than 5 acres. For this report, small-scale farms are those with
less than 5 acres.
10
the herd, particularly when household male members are working elsewhere as laborers.
Aside from providing milk as a major protein source to the family, livestock raising provides
30-40% of household income, and serves as security against crop failure and emergency
situations.
25. Small farms account for a large number of livelihoods, a large proportion of rural
poor, and a large share of agriculture outputs. Historical trends show that small farms
retained their numerical strength for a very long period. It is envisaged that small farm
agriculture economy will dominate the sector’s landscape for another three or four
decades.
26. Small farmers in Pakistan are also generally poorly organized and have weak
social networking between them. They are unable to voice their concerns and thus, fail to
influence Government policies and the markets, and sharing of information among them is
also very poor.
27. The predominance of poorly organized smallholders in the foreseeable future has
important implications in the design of the rural economy’s growth strategy. There are
special difficulties that the small holders face in diversifying to other high value
crops/products and in accessing markets for modern high value products as well as the
nature of competitive advantage and disadvantages the small holders have relative to the
medium and large farmers. There are certain characteristics of small farms in production
that give them an advantage over larger farmers. Such edge lie mainly in their low
transactions costs in supervising family labor. However, in most respects, small farmers
have higher transactions costs. There is a need to reduce these transactions costs faced
by small farmers so that they can play their due role in sustainable rural economic growth.
2.2.4 Crop Production Trends
28. The total output of all crops, except for millet and sorghum, increased with time.
Overall output of cereals recorded the highest rate of output increases in the past five
decades, with wheat leading but followed closely by maize and rice (Table 4). Rising
output trends were likewise registered by the two major cash crops, cotton and
sugarcane.
Table 4: Average Total Production of Crop Output in Pakistan, 1950-2008
(million metric tons)
Period Average Wheat Rice Maize Sugarcane Seed Cotton
1950-53 3.13 0.81 0.37 6.09 0.82
1960-63 4.01 1.09 0.47 14.52 0.99
1970-73 6.95 2.27 0.71 18.94 1.94
1980-83 11.73 3.33 0.97 34.01 2.21
1990-93 15.47 3.21 1.19 37.30 5.35
2000-03 18.81 4.38 1.68 47.94 5.85
2003-06 20.80 5.14 2.60 48.44 5.87
2006-2008P 22.52 5.50 3.20 59.33 12.25a
P
Preliminary.
a
In thousand bales.
Source: Mehmood Hasan Khan (2006) and Agriculture Statistics of Pakistan.
29. The largest improvement in terms of yield can also be observed in major crops
(Table 5). As noted above, growth of cereal productivity has been the most impressive
11
with yield levels growing by more than three times over the last 55 years. Productivity of
seed cotton follows with its output per hectare increasing by about three times during the
same period. Looking at the three major cereal crops individually, wheat experienced
the highest increase in the yield level, and maintained a steady growth rate from the
1960s. Rice follows next with little change in the average yield levels during the 1970 to
1990 period followed by a significant jump over the last decade, more than doubling its
yield per hectare. The yield level of maize increased more than two and half times with a
marked increase during the last decade.
Table 5: Average Yield of Major Crops in Pakistan, 1951-2008
(tons per hectare)
Years Majora Minorb Cerealsc Cash Some Selected Crops
crops crops crops Wheat Rice Cotton Fruits Vegetables
1951-55 1.314 n.a. 0.722 4.848 0.778 0.883 0.212 n.a. 7.948
1956-60 1.528 n.a. 0.742 5.941 0.781 0.848 0.213 n.a. 7.558
1961-65 2.000 n.a. 0.797 8.427 0.834 0.929 0.208 7.471 8.794
1966-70 2.454 n.a. 0.937 9.769 0.978 1.151 0.290 9.681 9.740
1971-75 2.526 n.a. 1.167 8.717 1.218 1.531 0.339 8.367 12.232
1976-80 2.926 n.a. 1.346 10.321 1.445 1.569 0.285 8.339 12.075
1981-85 3.314 n.a. 1.483 10.924 1.596 1.681 0.343 8.436 12.020
1986-90 3.288 13.934 1.600 9.207 1.773 1.600 0.544 8.516 12.336
1991-95 3.762 14.390 1.743 10.820 1.951 1.624 0.595 8.567 13.168
1996-00 4.216 15.119 1.985 11.877 2.194 1.919 0.558 9.629 13.630
2001-06 4.512 14.705 2.190 12.304 2.409 1.992 0.645 8.559 13.976
1951-60 1.421 n.a. 0.732 5.395 0.779 0.866 0.212 n.a. 7.753
1961-70 2.227 n.a. 0.867 9.098 0.906 1.040 0.272 8.576 9.267
1971-80 2.726 n.a. 1.256 9.519 1.331 1.550 0.312 8.353 12.154
1980-90 3.301 n.a. 1.542 10.066 1.685 1.641 0.443 8.476 12.178
1990-00 3.989 14.754 1.864 11.349 2.072 1.771 0.576 9.098 13.399
2001-08 4.512 14.705 2.190 12.304 2.409 1.992 0.645 8.559 13.967
Source: Agricultural Statistics of Pakistan, various issues.
a
Major crops include wheat, rice, cotton, sugarcane, maize, jowar, bajra, barley, tobacco, rapeseed/mustard
and gram.
b
Minor crops include fodders, vegetables, onion, garlic, chilies, coriander, turmeric, ginger, potato, tomato, all
fruits, groundnut, linseed, sesamum, soybean, sunflower, safflower, castor seed, sun hemp, jute, sugar beet,
guar seed, mung, mash, lentil, peas, other kharif pulses and other rabi pulses.
c
Cereal crops include wheat, rice, maize, jowar, bajra and barley.
30. Prior to the early 1960s, agriculture growth was based mainly on an increase in
cultivated area. With the increase in population, the availability of land per person started
declining. Agriculture growth became possible only after genetic breakthroughs (through
the green revolution) in wheat, rice, maize and cotton evolved after the 1960s and were
adopted widely by farmers in the 1970s and 1980s. By the early 1990s, use of the green
revolution technology has reached high levels with over 90% of major crops under
modern varieties. Additionally, green revolution technologies required the use of
fertilizers, pesticides, controlled water, and access to subsidized electricity and credit on
a large scale. The Government of Pakistan actively promoted the use of inputs and
farming practices required by the new technologies by adopting both price and non-price
measures. Specialized institutions for water, credit, fertilizers, seed, and pesticides were
established. Price and non-price measures resulted in higher use of modern inputs
which causes higher productivity and output. The intensive use of inputs and the
12
wasteful use of water took a toll n the finite land and water resources by the late 1990s
and 2000.
31. Various studies (Ali, 2000; Rosegrant and Evenson, 1993; Khan, 1997) which
examined the total factor productivity (TFP) of Pakistan’s crop subsector noted that of
the 1.5%-2.3% of annual growth rate of TFP for the years 1980-2000, more than half
were accounted for by growth in productivity. Further decomposition of the TFP by
technical (yield increases due to improved technology) and economic (improved use of
existing factors of production including technology) efficiency indices for the period
yielded 1.1% and 1.2% contribution to TFP, respectively (Coelli and Rao, 2005). During
these years, crop-breeding research has made a significant contribution. In Pakistan more
than 70 varieties of cotton, more than 30 varieties of rice and sugarcane, and nearly 100
varieties of wheat have been produced during the past 60 years. Combined with improved
technical practices, these have significantly contributed to maintaining output productivity
growth for these key major crops of Pakistan.
32. Estimates of domestic resource cost (DRC), a measure of comparative advantage
of tradable goods, also showed comparative edge in the production of wheat, rice, and
cotton at least until 2000 for Punjab and Sindh (cf. Rehman, et. al., 2007). The country has
a comparative advantage in wheat for food self-sufficiency but not for export purposes
(Khan, 2001; Anwar, 2005). On import parity price, the country has comparative advantage
in producing wheat as an import substituting crop (Khan, 2001). In the case of cotton, Sindh
registered a lower DRC than Punjab reflecting a better comparative edge, which can be
attributed to closer proximity of cotton growing areas to the available Karachi port. A major
factor for the good DRCs in cotton pre-2000 was the use of improved cotton varieties. In
the early 1990s, about 60 high yielding varieties were disseminated for production. There
will be need to update the DRC estimates to validate if these major crops remain to have a
comparative edge.
33. As noted above, the ecological diversity of Pakistan holds immense comparative
advantage for production of horticulture products3 – fruits, vegetables and floricultural
products – for exploitation of the worlds plus US$80 billion annual fresh fruit and
vegetable market. But the country remains a ‘low level’ producer and trades essentially
for the domestic markets. Small quantities of exports are limited to two ‘monopoly
products’, kinno and mango with small amounts of exports of potato, onions and lady
fingers to regional markets like Sri Lanka and Middle East. The share of horticulture in
agriculture value added is about 12% but has further expansion potential. Punjab produces
the most fruits and vegetables compared to the other provinces: 63% of fruits and 60% of
vegetables. Horticulture subsector can be a good source of foreign exchange earnings as
there is high demand for Pakistani vegetables and fruits in international markets, especially
mango, apples, dates and citrus. Export values of fruits and vegetables as a proportion of
world’s revenues for fruits and vegetables are on the uptrend, albeit slowly- from 0.12% in
1990 to 0.16% in 2004.
34. Barring a few commercial vegetable farms which are vertically linked to high-end
local markets, bulk of the vegetable production is concentrated around urban centers for
supply to local fruit & vegetable markets for daily auction. Most vegetable farms are
3
Vegetables like broccoli, brussel sprouts, lettuce, all kind of green beans and asparagus grows very well
in Pakistan’s ecological conditions. Since these vegetables are not a part of local cuisine, there is no
local market and export linkages have not been established.
13
small scale, and labor intensive operations to exploit proximity to urban markets. As for
fruit farming, it is driven by perspectives of capital formation in orchards as prospective
source of ‘easy money’, rather than by export driven commercial enterprise. Orchards
are grown with traditional skills of ‘Malis’ (skilled gardeners) without any technical
support from research and modern technology transfer from developed countries.
Orchards are grown by rural elite with surplus land and easy access to cheap
(sometimes captive) labor.
35. Overall horticulture production in Pakistan has been rising steadily. This was
primarily due to the increase of area under production. Yield growth has been slow
especially since the early 1980s. Unlike the major crops, both vegetable and fruit farming
received minimal research and development and extension services from Government.
Horticulture farming is characterized by low input use and hence low output situation,
leaving substantial improvement for yield improvement. Still a nascent exporter of high
value and perishable commodities like fruits and vegetables, Pakistan’s horticulture
subsector will have a lot of catching up to do to become a competitive exporter of these
commodities, starting from production of huge quantities of high quality and cost
competitive products, which would require among others, compliance to the stringent
international standards.
2.2.5 Reaching the Limits of the Production Frontier
36. Production and productivity growth rates of major and minor crops have tapered off
by 2000. Yield gaps when compared with optimal yield potentials and when benchmarked
with other country comparators have widened. Available evidence shows for example, that
the overall yield gap in the production of major crops lies between 40% and 50%.
37. The sources of agriculture growth in the past were mainly due to area expansion,
extensive use of water resources, and technological improvements. Growth through area
expansion and extensive use of and access to water has reached its point of diminishing
marginal returns. Relying on expansion of these physical resources as drivers of growth will
not be a technically viable option in the future. With a growing population, limited land use-
intensive based technologies that are being developed, increasing areas of degraded land,
and a skewed land ownership structure, there is hardly any cultivable land that would be
available for agriculture. While there is about 8 million has of culturable wasteland or farm
area that at present are unfit for cultivation, a huge investment will be required to turn these
into productive farmland. Further, current agronomic practices and other factors which are
discussed in the next chapter impede the prevention of existing quality land from
deteriorating and from investing in the conversion of culturable wasteland into usable land
base.
38. Depending on extensive extraction of water resources as a means to improve or
maintain production levels is also not a viable route in the future. Both ground and
freshwater are becoming a scarce commodity, as demand for this resource to satisfy
competing uses continue to intensify. Like land, water has been allocated irrationally and
inefficiently (see next chapter), resulting to the lowering of water levels and deterioration of
its quality. Studies have shown that even under a low demand scenario and with an
assumption of increasing water use efficiency by the year 2024/25, there would be a
shortfall of around 23% under the existing supply scenario. Clearly, overall water availability
will be a serious constraint on future agriculture crop growth.
14
39. Increased cropping intensity through intensive use of land and water resources
was another growth source factor until the 1980s, after which the growth of multiple
cropping leveled off. Water shortage and land degradation are the basic factors for the
variation in cropping intensities. Extrapolations based on the past cropping intensity
trends do not reflect much potential for the cropping intensity to increase markedly in the
future. This may change with the development of relevant technologies but as discussed
in the next chapter, the present approach to research and extension coupled with the
limited access to credit, appropriate market infrastructure, and markets, if continued, will
not ensure sustained production and dissemination of appropriate technologies for
improved crop productivity.
40. The use of green revolution technologies and the appropriate agronomic
practices served as the major impetus for yield growth especially for the major crops.
With limited technological breakthroughs (particularly for the potential minor crops) and
unchanging technical practices, growth from yield improvements has also stagnated. As
noted above, productivity growth from genetic breakthroughs combined with appropriate
agronomic practices will not be available nor will these be easily accessible especially to
the major smallholders unless major reforms are taken in research and extension, and rural
finance. A confluence of factors will be needed to expand the production frontiers of the
crop subsector; the major bottlenecks impeding the growth potentials of the sector are
identified and discussed in the next chapter.
41. In essence, the lesson learned from the past experience is that doing “more of the
same” to unleash the growth potentials of the agriculture/farm sector will not likely yield as
much results. A new development strategy paradigm is required for sustainable growth.
The strategy will have to be based on moving into higher technological orbits, reformation
of marketing systems, and moving towards value addition through processing and branding
of agri-based products for export viability.
2.2.6 Livestock Subsector
42. Livestock is a large sub-sector of agriculture economy in Pakistan, contributing
52% of GVA of agriculture and 11% to GDP in 2007-08. About 30-35 million rural
dwellers derive 30–40% of their incomes from livestock. Livestock rearing has been a
traditional part of agriculture activity since history began. It is a matter of prestige for
medium and large farmers4 and a question of survival for small land owners and landless
tenants to own animals. Livestock has played a major role in sustaining the rural poor
over the past few decades without which the intensity of poverty would have been much
worst and totally disastrous.
43. The sub-sectors within livestock include: (i) dairy – cattle, buffaloes, goats; (ii)
meat – cattle, buffaloes, goats, sheep and poultry; and (iii) transport and traction power –
camels, horses, cattle, mules and asses. There has been generally an uptrend in the
population of cattle, buffaloes, sheep, and goats, with the largest growth rate being in
goat population followed closely by the growth of buffalo number (Table 6). Despite far
lower allocations in research & extension compared to crop sector, livestock sector has
4
This is one of the major constraints in livestock sector that medium and large farmers do not keep animals
for productivity but for prestige. A recent study of Lahore region indicated that the percentage of lactating
animals out of total herd was found to be inversely proportional to herd size ,i.e., the larger the herd size
the more the number of dry animals.
15
maintained a steady and higher rate of growth than crop sector, averaging at 5.8% in the
past decade. This shows its inherent potential for development.
Table 6. Livestock Population In Pakistan, 2001-2008 (million heads)
Species 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Cattle 22.8 23.3 23.8 24.2 25.5 30.7 31.8
Buffalo 24.0 24.8 25.5 26.3 28.4 28.2 29.0
Sheep 24.4 24.6 24.7 24.9 25.5 26.8 27.1
Goats 50.9 52.8 54.7 55.6 61.9 55.2 56.7
Camel 0.8 0.8 0.7 0.7 0.7 09 1.0
Horses 0.3 0.3 0.3 0.3 0.3 0.3 0.3
Asses 3.9 4.1 4.1 4.2 4.3 4.3 4.4
Mules 0.2 0.2 0.2 0.3 0.3 0.2 0.2
Source: Pakistan Economic Survey, 2007-2008.
44. Major livestock products include milk and meat. Hides, skins, and wool are the
other products that have become more important due to their value added products like
leather garments and carpets.
45. Dairy. Milk is the largest and the single most important commodity. Milk provides
about three fourths of the total value of the livestock sector, which in recent years
contributed around half of the GVA of the agriculture sector. The dairy subsector
generated a total value in 2005 of about Rs 289.12 billion, or about 18% more than the
combined earnings of the three major crops of the country- cotton, wheat, and
sugarcane. Total investments of the farmers owning animal for dairy produce are
approximately Rs 1.78 trillion.5 This excludes the investments of processors and dairy
products producers and other ancillary services related to dairy production, marketing
and distribution. As most rural households own livestock (around 8 million farming
households), milk is an important additional income and protein source. Next to cereals,
milk and other dairy products is the second largest food item cost among Pakistani
households,6 hence its importance in the attainment of the food security objective of the
Government.
46. Pakistan is the fifth largest milk producing country in the world with 33 billion
liters of milk produced annually. The potential of the dairy industry is huge but is
hampered by its largely fragmented, small-scale, and subsistence oriented milk
production structure. About 95% of the country’s milk output (called mainly in the form of
loose milk which is consumed in the villages and or sold in the cities through
intermediaries called "Gawallas" in unhygienic conditions and without any quality
standards) is produced by the informal sector comprising of 8 million farming households
with an average of 2-5 animals per household, who are spread thinly all over the
countryside preventing economies of scale in production, practice traditional dairy
farming techniques resulting to low milk yields, and are not linked to formal markets.7
Only about 3-4% of total milk production is processed by the processing industry and
marketed through formal channels.
5
With an average value of Rs. 35,000 per animal (average price of buffalo and cow), this is multiplied with
the 50.5 million number of animals (source of basic source: FAO).
6
An average consumer spends about one-fourth of his/her food budget on milk and milk products.
7
White paper on Pakistan’s Dairy Sector: A publication of Pakistan Dairy Development Company.
16
47. Meat. Meat market in Pakistan consists of mutton, beef and poultry. An anomaly
unique to the subcontinent is that mutton is higher priced than beef. In India, bias against
beef is embedded in religious origins but in Pakistan, the bias has no obvious rationale
except that it lingers at subliminal level in people’s mind, most of whom are Hindu
converts by genealogy. Organized beef farms have not developed in Pakistan for this
reason, apart from the fact that animal rearing resides almost totally in the informal
sector. Beef is second rate meat for poorer sections of society and comes from old
animals and male calves no longer needed for tillage or traction purposes. In contrast,
mutton is the premium meat after fish (a delicacy for its short supply). Goats and sheep
are reared by small farmers, landless tenants and nomadic clans on marginal lands and
grazing on idle land along canals and railway tracts, etc.
48. Poultry production, taking place in two broadly different systems in Pakistan, has
experienced the most dynamic transformation in the livestock subsector over the last 25
to 30 years. Commercial poultry production has spread to almost all parts of the country,
especially around cities and large towns, with investments running into billions of rupees.
An average commercial flock consists of 2,500 layer birds and 2,200 broilers. Brick or
concrete structures house the birds, with cooling arrangements in hot places and
seasons. Poultry farms usually purchases poultry feed, but some of them also use
home-mixed feed. The other form of poultry production is small-scale. Almost all rural
and 15-20% urban households keep flocks of 5-10 birds usually with one rooster. These
birds are scavengers living on kitchen waste and crop residues and are confined to the
house at night. Women, exercising considerable discretion for the disposal of birds and
eggs, usually manage the household poultry.
49. Challenges. The livestock sector is characterized by widening shortages in
production to meet the growing demand for dairy and meat products. By 2020, the gap
between supply and demand is projected to be 55 million tons of milk and 2.3 million
tons of beef. The key constraints are: (i) development of innovative institutional set ups
for organizing the fragmented dairy and meat farms to reap the gains from economies of
scale; (ii) addressing the seasonal variation of milk supply and lack of marketing
infrastructure for highly perishable milk and meat products; and (iii) reducing the high
incidences of health diseases due to consumption of unhygienic milk and meat products.
The meat subsector is also hampered by an old food law by which meat cannot be sold
in a municipality unless the animal has been slaughtered within the municipal limits in an
approved abattoir. This law precedes the times when refrigeration was available for
preservation of meat. This regulatory anomaly protects and supports wet meat shops at
the cost of development of frozen and packaged meat sales stores.
50. The major opportunities are the increasing incomes of and rising demand from
domestic urban-based consumers; huge investments of formal processors as
demonstrated by their current total capacity requirements of 7 million liters per day; and
the increased support of Government for dairy/livestock development.
2.3 Rural Nonfarm Sector Profile
51. The RNF is an important part of Pakistan economy, providing 40% to 60% of
incomes and jobs in rural areas. Much of the RNF activity occurs in the trading and
services sectors, with some in the processing sector. A large proportion of the RNF
sector’s value addition relates to the forward and backward linkages stemming from
agriculture/farm sector. Little of this is tradable and its growth depends on the primary
17
activity such as agriculture. The RNF sector in Pakistan is mostly small-scale using little
capital and is low on productivity, offering low returns. Activities operating at a larger
scale with more capital investment are generally less prevalent.
52. A profile of Pakistan’s RNF enterprises indicates that they are still at a
rudimentary stage. A typology of RNF activities is illustrated in Husaini’s report (2008,
Table 1). The following are the basic characteristics prevalent in the nonfarm
enterprises:
• As in other South Asian countries, the nonfarm sector in Pakistan’s rural
villages consists of family based micro-enterprises (with an average of
two workers);
• Trading enterprises dominate (57% of rural nonfarm enterprises) followed
by the service sector (31%); and only 12% are engaged in
production/manufacturing activities. Most of these are informal;
• Most enterprises have been in existence for less than 5 years reflecting
high closure rates;
• 80% of businesses are owner-managed; and
• The median value of fixed enterprise assets is Rs.200 (less than US$4)
for village enterprises.
53. Nonfarm enterprises are, however, a key sector for the rural poor in Pakistan as:
• Overall, 40% of rural households rely on nonfarm activities as their main
source of income;
• Poor farmers also derive about half of their incomes from the nonfarm
sector; and
• Nonfarm households (not including agriculture labor households) account
for 57% of the poor in 2004-05.
54. Since, low capital–low return activities are accessible to the rural poor, nonfarm
activity is an essential instrument for mitigating poverty and preventing destitution in rural
areas. It is, however, less clear whether such activities can alone eradicate poverty. A
number of rural nonfarm activities provide support to growth sectors, but as long as
these activities primarily relate with trading and servicing primary production, they are
not by themselves drivers of growth and poverty alleviation. Further, unless there is
demand for improved services, both from downstream and/or upstream users, the
incentive to improve the technology and quality of services is limited.
55. A recent World Bank study8 on rural investment climate in Pakistan suggests that
there is significant scope for investment and expansion of rural enterprises. The main
obstacles to rural enterprise expansion are access to cost of finance, poor infrastructure,
corruption, and economic policy uncertainty. Specifically the five constraints are (i) lack
of binding demand for quality service; (ii) inadequate rural infrastructure, particularly
utilities such as power, storage facilities, and communication network (farm to market
type roads); (iii) inadequate legal support, and redress mechanism in case of contractual
default and disputes; (iv) lack of technical institutional support for quality improvement;
and (v) access to credit and rural financial services.
8
Sur, Mona and Zhang Jian. 2006. The Pakistan Rural Investment Climate Survey. Background Paper.
World Bank. Washington, D.C.
18
56. The main challenge with the RNF sector is that like their farmer counterparts,
economic players in the rural nonfarm economy are numerous, fragmented, small-scale,
low input users, and therefore low-output suppliers of good and services. Their nature
and extent of services provided to the farm sector are characteristic of “middlemen”
responses to the political economic environment in the rural setting. These are
influenced by the quantity and quality of market infrastructure that is available, the
degree of market imperfections of related supply chain networks, the level of maturity of
economic institutions and human resource skills mix, and the extent of government
interference in the supply chains.
57. Conceptually, agriculture/farm sector is the main economic activity that creates
demand for other economic activities in the RNF through two routes: (a) it raises incomes
which are then the source of growing consumer demand for the products of other
activities; and (b) it creates derived demand on the input side for other outputs and creates
derived demand for processing downstream. Unfortunately, the link between the
agriculture/farm sector with its backward and forward rural nonfarm activities is in general
weak and inefficient, involving numerous small-scale and low-technology based
stakeholders that result to low value addition products and services. The agri-related
manufacturing and service sectors in rural areas are essentially informal and low capital
using entities that cater mainly to domestic markets. The symbiotic relationship between
these sectors is a virtuous low input-low output case that unless revamped, will continue to
serve as engine breaks to Pakistan’s attainment of industrialization.
58. The potentials for efficient and market-responsive supply chains are highest
where domestic and multinational agribusiness and supermarket chains participate.
There are however major barriers for their participation. Aside from the recent entry of
supermarket chains, there are binding constraints for their less involvement in the
establishment of strategic alliances with the farm-producers. These include the lack of
organizations of farmers; fragmented and numerous farmers result to higher transactions
costs in terms of negotiations and attainment of economies of productions scale. There
is also strong government presence in activities that the private sector knows better to
operate and limited or is overlapping (due to lack of coordination of government
agencies involved) in areas where government support is required. Further, basic
infrastructure is inefficient or lacking; and human resources are not skilled.
2.4 Prospects
59. Pakistan’s rural economy is not lacking of economic opportunities for growth. At
the agriculture/farm sector level, the supply potential and demand prospects for growth
are in both existing and emerging high value commodities.
60. Pakistan has a strong competitive position in cereals (particularly rice, maize and
wheat), for which there is strong world demand. In fact, with increasing incomes and
growing demand for bio-fuel, the market demand for cereal is going to rise in the future,
which would put Pakistan in a strong position. Pakistan can easily become self-sufficient
and even an exporting country in wheat.9 Pakistan is already a significant exporter of
Basmati rice. Pakistan can increase its share of world markets through tariff concessions
and better branding. Pakistan has a special competitive advantage in maize production
as well.
9
At present, Pakistan is already exporting wheat products to Afghanistan largely through informal trade.
19
61. Pakistan also has a strong comparative advantage in cotton, but has been
producing at the low end of the value chain. During the past five years, local textile
industry requirements of cotton have increased to over fifty and Pakistan has turned
from a net cotton exporter to a cotton importing country. Need to import cotton has
changed this paradigm now. Thus the prospect for cotton in Pakistan would largely
depend on its ability to move from its present cotton (medium staple with poor ginning
grades and contamination) to higher quality cotton and textile industry producing better
quality products.
62. Most studies in the past have shown that Pakistan does not have comparative
advantage in the other cash crop, sugarcane. It thrived because of protection and under-
pricing of a key input, water. The diversion of sugarcane towards bio fuels in many areas
of the world has significantly increased sugar prices globally. With changed demand
structure, sugarcane may become competitive even with payment of economic price for
water.
63. Pakistan has strong potential in horticulture. The record of growth in main
horticulture crops-mango, citrus, apple and date is generally good, but could be much
better. The yield levels of these fruits have not changed by much, except for apple. In
the case of apple, the yield levels more than doubled by the early 1990s but since then,
it has fallen by about 40%.This raises hope that other horticulture crops could improve in
productivity. Some of these horticulture crops are being exported, but average prices
are lower that what competing countries are getting. This is due to weak quality control
infrastructure.
64. Pakistan has a strong potential in improving value addition in its livestock sector,
especially through capturing an external market for livestock products. Even with far
lower allocations to livestock in research and extension compared to crop sector, the
sector has maintained a steady and higher rate of growth than crop sector, which shows
its inherent potential for development. Poultry has already done well, with further
prospects for expansion.
65. The same is also true for fisheries. While the fisheries sector accounted for only
0.3% of GDP, there is substantial headroom for its development. In 2005-06 and in
2007-08, this sector grew at astounding high rates of 20.8% and 11.0%, respectively.
Both marine and inland fishing contributed to the sector’s growth in these two years. The
sector absorbs 1.0% of the country’s labor force, being a source of livelihood for 400,000
fishermen and their families. Its contribution to export earnings is quite substantial: in
2007-2008 (July-March), fish and fish products generated $188 million; main buyers of
fish are not only its nearby neighbors like China, Sri Lanka, and Middle East but also
developed and far flung economies such as USA and Japan.
66. At the RNF sector, the opportunities for growth are largest in the economic
activities that will ensure more efficient and effective coordination and integration of the
forward and backward linkage activities related to agriculture with their domestic and
global markets. For Pakistan’s rural economy to prosper and catalyze the
industrialization process there would be need to develop efficient and effective agri-
based supply chains. Agri-based supply chains (or agri-related value chains) cover the
full range of activities required to bring a product or service from conception at the farm
level, through the intermediary phases of production (provision of inputs to processing
20
and marketing of the agriculture commodities), delivery to final consumers (domestic
and/or international) and final disposal after use. The value chain approach looks at farm
and nonfarm activities from a holistic view but at the same time provide a mechanism for
breaking down the sequence/chain of business functions into strategically relevant
activities through which utility is added to products or services. The succeeding chapter
proposes this new driver of growth for and the direction of the structural transformation
of the rural economy.
2.5 Conclusion
67. This chapter provided an economic profile of the farm/agriculture and the rural
nonfarm sectors. The discussion showed that growth prospects in the crop subsector
from exploiting the physical resource bases, land and water, as well as the technical
gains from technological breakthroughs have reached their potentials. Doing the same
things will only result to further diminishing returns. In the potentially growth enhancing
livestock subsector, the challenges are the dominance of geographically dispersed,
unorganized and low-capital small livestock raisers who are disconnected from the large-
scale formal processors due to non-access to appropriate productive technologies and
extension services, unavailability of market infrastructure, policy impediments that serve
as disincentives to modernize, and prevalence of archaic institutional arrangements that
inhibit access to innovative financial and production and marketing contract
arrangements. The section of the RNF shows opportunities for providing value addition
to primary production at the farm level, but is hampered by the numerous middle level
low capital using players who add little or no value to products and services.
68. The overall conclusions that can be derived from the agriculture/farm and RNF
sector discussions are that: (i) it not just the growth rate that matters, but more
importantly the nature and quality of growth that ensue from these sectors are essential;
and (ii) business as usual approach in the rural economy will require a major paradigm
shift for the economy to track the sustainable industrialization path. There are prospects
for serving as catalyst to the structural transformation toward a sustained
industrialization, and these prospects are in harnessing the development of
integrated/coordinated agri-based value chains.
21
3. WEAK LINKS IN PAKISTAN’S AGRI-BASED SUPPLY CHAINS
3.1 Introduction: Agri-Based Supply Chain Approach
69. The prospect for sustained growth of the rural economy is in the development of
efficient and effective agri-based supply chains that link the agriculture sector with their
corresponding upstream and downstream links in the rural nonfarm to the national and
international markets. Box 1 illustrates a generic agri-based supply chain, and a brief
description of the key stages. The value chain approach looks at farm and nonfarm
activities from a holistic view, while at the same time it provides a mechanism for
breaking down the sequence/chain of business functions into strategically relevant
activities through which utility is added to products or services.
Box 1. The Agri-Based Supply Chain
Stages of Value Chain:
(a) Provision of inputs and services required for the production of primary agricultural
produce. The inputs include sale and supply of agricultural machinery, equipment
and hand tools, rented custom machinery, seeds and planting materials,
farmyard manure, agrochemicals, water and all other production-facilitating
services.
(b) Production of primary goods from natural renewable resources such as field
crops, fruits and vegetables, flowers and herbage, condiments and herbs, fungi,
livestock, milk, poultry and eggs, freshwater and marine fishes, timber and non-
timber products.
(c) Grading, packing, handling and transportation of goods to the processing centers
or wholesale markets.
(d) Processing to semi and finished goods.
(e) Distribution to final local consumers and/or exporters.
70. For Pakistan’s rural economy to jumpstart growth in a sustainable trajectory, the
proposal is to pursue the development of agri-based supply chains. The strategic
measures hinge on identifying the critical constraints that stymie the growth and the
weak links in the supply chains that affect majority of the agriculture and RNF sectors.
71. This chapter discusses these bottlenecks. In identifying these weak links in the
value chain, the report examined the situations of existing value chain networks that
have a large share in the economy, and whose stunted development in the immediate
and medium-term impedes the overall growth of the rural economy. These are in wheat,
rice, cotton and sugarcane. Potential areas where diversification has commenced but
has not been given the big push in contributing to poverty reduction are horticulture and
livestock.
3.2 Key Constraints
72. The critical constraints that impede the full realization of the rural economy’s
potentials are at three levels: macroeconomics, system-level, and the crop-specific
constraints. The next sections discuss at length the first two constraints, while the
background papers (in a separate volume) provide a more detailed discussion of the
crop-specific constraints. A summary of the crop-specific constraints are in Appendix 1
of this chapter.
3.2.1 Macro Constraints
73. Macroeconomic stability is important for any economic activity to flourish. It is a
major indicator of the government’s performance in overseeing the health of the national
economy and provides the signals to private sector on whether or not it will invest in the
economy.
74. In recent years, especially in fiscal year (FY) 2007 and 2008, deteriorating
deficits in the private, public and external accounts have been observed. Trade deficits
are expected to rise to 8% GDP, and are projected to go even higher in subsequent
months. External deficits were financed largely by increasing dependence on external
financing. Share of total investment financed by external resources showed a dramatic
uptrend from 8% in 2004-2005 to almost tripled value of 22% in 2006-2007, and
escalating further to 38% in FY 2007-2008. This meant a decline in national savings,
from 17.6% in 2000-2001 down to 11% in 2007-2008.
75. Fiscal deficit is also widening as government spending increased substantially
without a commensurate increase in the tax level effort. From 2005-2007, budget deficit
rose to 5% of GDP. At end of fiscal year 2007-2008, the budget deficit is projected to
surpass 7% of GDP. The uptrend on the fiscal deficit is due mainly to the huge subsidy
expenses totaling Rs 407 billion.10
76. The worsening macroeconomic conditions were fuelled partly by the uncertain
political environment and the global economic slowdown. The latter was caused by the
subprime crisis in the US and its continued economic downturn, as well as the upsurge
in global prices of food and fuel. The runaway price increases of food and fuel have a
negative effect on Pakistan’s inflation rate. During the first half of 2007, inflation was at
manageable level of less than 10%. Between July 2007 and May 2008, the average
10
The total subsidy amount comprised of subsidies for petroleum totaling Rs 175 billion; electricity, Rs 139
billion; wheat, Rs 45 billion; and textiles and fertilizers, Rs 48 billion.
23
annual inflation rate increased to 11.1% with food inflation rising to 16.3%. High inflation
rates have already eroded much of the growth gains of Pakistan’s economy in the past
few years. It has also adversely impacted the poor and vulnerable groups. For FY 2007-
2008, the purchasing power of the lowest income groups has diminished by 14%. Food
inflation came mostly from wheat flour (with price increases by 72.3%), rice (increased
by 103.6%), vegetable ghee (53.7%) and fresh milk (21.4%).
77. Rising global food and fuel prices is foreseen in the next few years, which will put
more pressure on domestic inflation. The macroeconomic imbalances will also not be
reduced significantly in the near term unless there are significant cuts in the subsidies,
huge increases in the tax level effort, major improvement in export revenues, and an
uptrend in the net capital inflows. While the Government is implementing remedial
measures to reduce the deficits and cushion the poor and vulnerable groups from the
continued erosion of their purchasing power, there is now more urgency to push for the
structural transformation of the moribund agriculture sector towards market-oriented and
diversified agri-based supply chains.
78. The boom-bust nature of the country’s growth performance in the past and in
recent years was largely debt-driven. This is not only riskier but also unsustainable. With
global inflation on the uptrend (projected to reach 8% by end of 2008) and domestic
inflation, currently at double digit figures and still rising, there is a need to rethink on the
growth strategy. Tempering inflation before its spirals off uncontrollably and result to
stagflation is the top priority. Concomitantly, the growth strategy will need to put in the
center stage of its industrialization agenda the transformation of the moribund agriculture
sector into a vibrant, diversified and competitive rural economy. Laying the foundations
for a more dynamic rural economy in the immediate- and medium-term will be a key in
financing a more robust industrial sector. It will also serve as the engine break for the
inflation spikes caused by spiraling food price increases.
79. A very recent event whose implications will need to be factored when designing a
pro-rural growth strategy is the breakdown of the Doha round of talks at the World Trade
Organization (WTO). Successful conclusion of the Doha round negotiations would have
provided a unique vehicle for rebalancing the multilateral trade system, particularly in
addressing the long-systemic distortions with regard to agriculture subsidies of the
developed countries, and providing predictable and more effective market access for
developing countries to export their products. The impasse in the negotiations and the
uncertainty on whether or not it will be resumed have re-opened the debate on the
viability of promoting fair trade under a “WTO regime,” as the WTO has become a forum
for backdoor negotiations and political maneuverings resulting to a not-too-free trade
regime. This has rekindled the call for new approaches to global trade system and
relations. Within national boundaries, the setback in the Doha round discussions may
revive the call for protectionism and insularity at one extreme. It may also warrant the
need to refocus in the interim, while the WTO status is still uncertain, on regional
cooperation/integrations as a middle ground approach towards the development of a
global village. Pakistan is a member of numerous regional economic blocs, which can
serve as trade avenues for expanding the markets of its agri-based products and for
honing its competitiveness.
80. Against the backdrop of global price hikes in food and energy, an uncertain WTO
future, and rising inflation and huge deficit in Pakistan, ensuring sound macro policy
becomes important in setting the overall business environment for the development of
24
agri-based supply chains. Trade, tariff and exchange rate policies affect the price
competitiveness of agri-related exports and the pricing of imported inputs used by
farmers, rural nonfarm traders, processors and service providers. Policies on access to
foreign exchange, repatriation of profits, foreign direct investments, and public-private
partnerships will influence the nature and extent of inflow of foreign agribusiness
investments into the country. Monetary and inflation-related policies will guide financial
resource allocations by sectors, the incentive structures, risk premiums, and prices of
goods and services that are exchanged in the country. Lastly, fiscal policies will be
important for rural economic growth. Government expenditures will need to shift away
from subsidies and other types of public expenses that serve as disincentives to agri-
based suppliers to become competitive. Instead, public expenses should focus on
financing more development programs and enabling policies and institutional reforms
that would compensate for the decades of investment neglect of the rural economy. The
challenge to the Government is how to balance competing vested interests to enable
existing and potential competitive agri-related supply chains to flourish.
3.2.2 System-Level Constraints: Weak Links to the Chain
81. The various assessments on the existing and important agri-oriented value
chains identified several weaknesses or key missing ingredients that are generic and
cross-cutting. These critical system-wide bottlenecks, if addressed, will redound to
improving the coordination and integration of the various players in both existing and
potential supply chains.
82. The most important of these constraints are as follows:
• Numerous, geographically dispersed and small-scale farm and livestock
producers who dominate the primary production side of the value chain. Because
of being unorganized, smallholders have difficulty in ensuring economies of
production scale and of accessing the inputs required for achieving the potential
yields;
• Large number of geographically dispersed and low capital-using intermediaries
who do not meet the sufficient quantity and high quality-standard requirements
for the trade of perishable and nonperishable agri-based commodities;
• No critical mass of essential supply chain infrastructure and services;
• Unsustainable management of the finite land and water resources and absence
of land and water markets;
• Poor environmental management;
• Weak human resources development;
• Under-investment in science- and technology-based research and development
and inadequate and inappropriate extension services; and
• Weak public governance.
83. The first two constraints deal with the inherent weaknesses of the existing
organizational structure of the major actors at the farm and marketing processes which
hinder agri-based supply chain development. The next five focus on the deficiencies in
the provision and utilization of the major factors of production used in the different supply
chain processes. These are land and water at the farm level, productive and market
infrastructure, human resources, research and development, extension services, and
environment-related resources. The last constraint concerns the nature and degree of
government’s role in serving as the catalyst to rural economic growth, specifically in
25
enabling agri-based supply chains to become competitively responsive to the changing
demands of the dynamic national and foreign consumer markets and the volatile
geopolitics. Each of these points is discussed below.
84. Small-sized Farm Production Units. There are several concerns about primary
production being dominated by numerous, geographically dispersed, and fragmented
small-scale farming units as in the case of Pakistan’s agriculture sector.
85. While small-scale farm holders/livestock producers are efficient in the use of
labor, their whole production line is geared for subsistence and not for commercial
orientation. Smallholders are low-output producers because of limited access to vital
inputs, capital, technology, and good farming practices. They also have no incentive to
invest on their land because of unsecured land use rights. Without an open land market,
productive farmers are inhibited from augmenting their land to achieve economies of
scale. The end-result is a vicious cycle of subsistence production, low income and
poverty.
86. Smallholders also face difficulties in accessing markets for modern high value
products. High value supply chains have the potential to include small farmers when
activities they engage in are labor-intensive. However, while smallholders may have a
competitive advantage relative to medium and large farmers, high transactions costs
entailed in negotiating contracts with numerous smallholders put them at a
disadvantage.
87. Additionally, due to the increasing importance of standards, a shift to high value
products poses serious problems for small farmers. The standards are especially
exacting for the export markets but can also be demanding in the case of high value
domestic markets. Such standards often require fundamental changes in production
methods and involve significant capital investments. Unless small farmers prove
themselves as reliable partners in supplying the products that processors need in a
specified quality, there is a tendency on the part of wholesale suppliers to deal only with
large-scale producers. The combined result is that small farms cannot enter or are
forced out of trade channels in the quantity/safety conscious supply chains.
88. Lastly, small farmers in Pakistan are generally poorly organized and have weak
social networking between them. They are unable to voice their concerns thus fail to
influence Government policies and the markets. Sharing of information among them is
also very poor. There are some farmer associations in Pakistan (e.g. Farmers’
Associations of Pakistan), but their internship is primarily confined to large farmers.
Associations of smallholders can be effective forums for establishing farmers’ field
schools for capacity building and continuous up-gradation of their knowledge and skills.
89. In sum, majority of the smallholders under the present Pakistani environment are
left out of the value chain network. The challenge is how to organize the smallholding
farms into farm sizes that are sufficient to achieve economies of scale production; and to
access modern inputs, water, and value product markets in a timely and least-costly
manner; to meet the quality standards of those markets. There are institutional
mechanisms such as contract farming (see Box 2) that can address these constraints.
Promoting these innovative contract arrangements will require removing antiquated
policies and providing opportunities towards appropriate productive and market
infrastructure for agri-based supply chain development.
26
Box 2. Contract Farming in People’s Republic of China
On China farms, consolidation push grows
Motivated by profit, ‘dragon heads’ boost food output, quality
By Nicholas Zamiska
LAIYANG, China – For decades, like most of China’s 700 million farmers, Zhu Suixing
worked on a tiny plot of land no bigger than a few basketball courts. He planted peanuts
and corn on the 1,300 square meters the government gave him in the early 1980’s after
China’s sprawling agriculture communes, including the one he lived on, were
dismantled.
Now he is part of a different kind of collective. Mr. Zhu, 70 years old, is one of the 23,000
employees at Longda Foodstuff Group Co., one of the largest agriculture companies in
China. With 1,600 hectares of farmland in Shandong, Henan and Inner Mongolia
provinces, Longda processes 150,000 tons of food every year, and has about 30
subsidiaries exporting a range of foods including spinach, apples and frozen meat.
Longda is a leader among a new wave of Chinese farming giants revolutionizing
agriculture in a country that is one of the biggest consumers and exporters of food.
Companies such as Longda - dragon heads, as they are known here - are, in a sense,
recollectivizing China’s atomized farmland. But instead of aggregating it into inefficient
agricultural communes, they are industrializing it with technology and economies of
scale.
As strains on the world’s food production system force food prices higher, China’s new
ranks of large food companies may play a role, through their size and efficiency, in
slowing the rise of food prices.
Consolidation also offers an important benefit in the area of food safety, a sore spot for
China after several scandals involving tainted food exports last year. In May, U.S. Health
and Human Services Secretary Mike Leavitt said the U.S. will bar Chinese companies
that don’t meet product-quality certification standards from the American market. That is
likely to tilt the playing field in favor of bigger companies that are better equipped to
enforce quality control and are easier to monitor.
These are early days in China’s agricultural shift. “Megafarms are still the exception, but
they are developing fast, in particular in eastern provinces,” says Andrzej Kwiecnski, a
senior analyst with the Organization for Economic Cooperation and Development. The
trend, he adds, is being driven by market demand: specifically, food-processing
companies and supermarkets needing foods that meet certain quality and safety
standards.
Source: Zamiska, N. 2008, 25 July. On China Farms, Push For Consolidation Is Growing. Wall Street
Journal.
90. Superfluous Intermediaries in RNF. Like their smallholder counterparts at the
production level, there are also numerous intermediaries involved in processing, storing,
marketing and distributing the agriculture produce. In many of the existing agri-based
supply chains, they form a complex web of redundant, low capital using, small-scale,
27
traditional technology-based, with insignificant value addition “middlemen” functions that
are tolerated due to the lack or absence of vital market infrastructure, asymmetry of
market information, and non-functioning rural formal financial institutions. These
multifarious middlemen have also developed fairly well-entrenched social networks in
the rural economy that provide a formidable barrier to establishing more efficient supply
value chains.
91. The major challenge is how to consolidate and rationalize these intermediary
functions; ensure quality control in agglomeration; provide incentives for normal profits to
be earned from the coordination/integration of these players; and for large agribusiness
firms to undertake marketing and input supply links with the multitude of rural players.
92. For the small players in the RNF supply chains, the reforms that they will need to
undertake are especially difficult as their integration to the modern supply chains will
require a re-engineering of their skills, and the need to mobilize finance and other
resources. They must also learn to respond rapidly and flexibly to the fast changing and
more stringent requirements of agri-based exporters, supermarkets, food retail chains,
and multinational agribusiness firms. For those who cannot adapt, they will eventually
have to find alternative livelihoods.
93. Moreover, different modalities of organizational and logistics arrangements will
be required to reform existing production methods and practices so as to meet the
sufficient quantity and quality requirements. Assembly infrastructure, institutions for
grading and standards, and the contracting enforcement policies to facilitate the
integration of this multitude of small players with the large agribusiness players will have
to be put into place. There will be a need for some collective and concerted action that
will facilitate their integration to modern supply chain networks; and for those who will not
be integrated, some temporary safety net measures for livelihood options. The objective
is to ensure that high quality agriculture products reach their domestic and foreign
market destinations in a timely and least-costly effective manner.
94. Inadequate Supply Chain Infrastructure. In Pakistan, rural infrastructure for
expanded agri-based supply chain operations and management are highly inadequate or
are non-existent (Table 7). The most inadequate of the productive infrastructure in terms
of client outreach and service area are the irrigation facilities, majority of which are now
dilapidated; quality control testing facilities for seeds and other inputs; soil and water
testing laboratories; and weather stations, and localized meteorological information
centers. Modern equipment for processing are also vitally lacking particularly in the
cotton gins. The dearth of science and technology-based research and development
infrastructure as well as inadequate provision of electricity and access to rural finance
cut across the key supply chains- from production to marketing operations.
95. For market infrastructure, there is acute lack of supply to almost complete
absence of all those listed in the table. Aside from rural finance, electricity, farm-to-
market roads, and telecommunications, the major market infrastructure that cut across
all the supply chain systems are notably related to knowing more information about the
current and potential market requirements and meeting the stringent food and agri-
based standards of foreign consumers, including specialized warehouses.
28
Table 7. Types and Features of Infrastructure Deficiencies
in Pakistan’s Agri-based Supply Chains
Types and Production Processing, Marketing, Markets
Features of Distribution
Infrastructure Backward- Producers- Processing Producers- Marketing- Marketing-
Producers Processing Processing- distribution:
Storing, Distribution: Foreign
Marketing Domestic Market
function Market
Inadequate/Non-
existent
Productive Seed, other Irrigation Modern
inputs quality Weather processing
control stations equipment
testing Meteorological
laboratories information
centers
Soil and water
testing
laboratories
Research and Development: Science and Technology
Electricity
Rural finance
Market Field heat removal farm centers
Environment controlled space/facilities for sorting Land transport infrastructure
and grading: from farmgate- feeder terminals- network
wholesale markets- feeder large-scale Refrigerated transport
terminals Air/sea port infrastructure w/
Cold storage facilities for temporary storage of agriculture commodity storage
produce and for long storage of produce and handling facilities
Treatment/packing facilities especially suited for perishable
Wholesale/retail market chains goods
Cool chain facilities network for dairy/meat
products
Transport Infrastructure: refrigerated vehicles
Commodity exchange facilities for future/spot trading
Rural finance
Electricity
Telecommunications
Farm-to-market roads
Market intelligence system
Market information system
Quality, hygiene and food safety control
Certification infrastructure
Standardization infrastructure
Specialized agriculture commodity/input warehouses
Poorly Irrigation Wheat infrastructure- Customs,
Maintained inefficient go downs, grain Immigration,
grades and standards Quality Standards
facilities, grain quality testing Controls at
laboratories, mechanized Borders (CIQS)
storage and handling
facilities Foreign embassy
attaches (market
Lowly-priced, Government has about 4.5 intelligence
not equal to million metric tons of grain systems)
economic storage capacity including
29
Types and Production Processing, Marketing, Markets
Features of Distribution
Infrastructure Backward- Producers- Processing Producers- Marketing- Marketing-
Producers Processing Processing- distribution:
Storing, Distribution: Foreign
Marketing Domestic Market
function Market
pricing bag warehouses, using 6
types of grain storage
facilities: permanent storage
houses (69%), hexagonal
bins (6.9%), bini-shells
(14.4%), concrete silos (6%),
open bulk heads (3.7%), and
temporary storage such as
bulk bag storage plus
temporary outdoor storage
on plinths covered with
tarpaulin or polyethylene
(capacity of 1,000-2,000 MT)
Farm-to-market roads Farm-to-market roads - Road network links
Electricity
Research and development: science and technology
Rural finance
96. There are three infrastructure deficiencies that impact on all the supply chain
processes and can be considered as both productive and market infrastructure. These
are electricity, rural finance and telecommunications. Provision of reliable supply of
electricity is made more difficult with the continuous rise in energy costs and the huge
financial burden on the Government which had subsidized this expense.
97. While mobile telecommunication and internet systems are rapidly penetrating the
rural areas, notably lacking are the use of these modern information technologies in rural
centers to develop market intelligence and market information systems that provide
reliable and up-to-date statistics to all players in the supply chain. Special attention
should also be accorded to trade facilitation infrastructure at the borders (customs,
immigration, quality standards or CIQS). There may also be need for a drastic makeover
of foreign embassy and attaché centers. The roles of foreign embassies and their trade
attaché centers may need to be redefined towards more proactive and catalytic
intermediaries in the marketing chains (market intelligence, information centers, trade
fair promotions, etc.).
98. While availability of rural financial institutions is a problem especially in remote
areas, the more challenging constraint is the limited financial products that can be
accessible to and are tailored to the needs of smallholders and of micro, small and
medium nonfarm rural enterprises to become efficiently linked to the agri-based supply
chains. Barely 30% of total agriculture requirement is met by formal financial institutions.
The rest is catered for by informal village traders and loan sharks. Whatever agriculture
credit is available from commercial banks it is more due to a “directed” effort of the
government, largely through Zari Tariaqati Bank Limited and cooperative banks. Until a
few years ago the State Bank of Pakistan used to allocate compulsory lending targets to
leading five banks and imposed penalties for failure to comply. As a “conditioned
behavior pattern,” agriculture is perceived as a state largesse rather than a commercial
activity. Default rates are particularly high in Sindh and Baluchistan. For the small
30
farmers, outreach of banks has been extremely limited and rent seeking by lower bank
functionaries had been high, making credit more expensive. Commercial banks have
started to expand their rural operations in agriculture credit but they face at present lack
of adequate infrastructure and skills to service large numbers of small advances and a
lack of credit rating system for rural clients. Microfinance schemes are also on the rise
but are still constrained in terms of outreach. What is direly needed are new financial
products that provide a hedge on the volatile movements of commodity prices; insurance
schemes that protect against the adverse financial impact of natural disasters or sudden
family-related problems; savings and investment measures suited for small-scale rural
entrepreneurs; and institutional arrangements like contract farming arrangements that
enable farmers to access not only credit but also inputs, extension services and markets.
99. Another serious constraint is the poor maintenance and under-pricing of public-
funded rural infrastructure mainly irrigation, farm-to-market roads and electricity. Focus
of development planning of government has been on hardware with little cognizance on
need for investments on software such as maintenance, appropriate economic pricing of
public-funded rural infrastructure, and human resource development. Physical structures
are built up while staffing and running finances lag behind. This happens because of
political orientation of development priorities. Scarce resources are spread as thinly as
possible over wide areas to gain politically good optics and create impressive
development statistics. Heavy demand for development funds from rural hierarchies to
appease their constituencies also plays a great part in infrastructure construction that is
immature in service delivery. As infrastructures deteriorate due to lack of maintenance
(and poor building standards) more development funds are allocated for replacements
that reflect positively in overall development outlays but not in terms of efficacy in service
delivery.
100. Development planning is rarely coordinated through long term regional plans.
Immediate political contingencies dominate over horizontally and vertically linked
development of infrastructure components. So there may be villages with electricity and
no road, and areas where there are road systems but no electricity. Economic and
commercial considerations for provision of infrastructure take a backseat to political
gratification. Eventually the sum of the whole is far less than the components because of
disintegrated planning driven by political equity rather than social equity or economic
sense.
101. The challenges in upgrading rural infrastructure development are daunting. With
a cash-strapped Government, competition for its limited development funds will be stiff
between federal and provincial/local governments and among different infrastructure
uses. There are also high energy and fuel costs that will need to be addressed in dealing
with the problems of low level and immature types of rural infrastructure. The key in the
short term would be determining through a consensus basis, (i) the criteria and selection
process for prioritizing the rural infrastructure requirements that will still need to be
financed by the public sector (i.e., identifying the “critical mass” of rural infrastructure),
(ii) the action plan for moving towards economic pricing of these infrastructure; and (iii)
the mechanisms for involvement of the private sector in infrastructure build up and
maintenance.
102. One distinctive feature of the majority of the productive and market rural
infrastructure requirements that is needed by Pakistan’s rural economy is that many of
these types of infrastructure can be financed through private sector investments. The
31
challenge to Government is how to provide the enabling policies and institutional
mechanisms for the private sector to finance these infrastructure gaps. Part of the
challenge is defining the public-private partnership schemes that may facilitate the entry
of private investments in this area. To date, experiences on public-private partnership
schemes are limited to large-scale infrastructure, and even in these cases, the success
rate is mix. Another approach of encouraging private investment is through enabling
policies that will encourage the development of institutional arrangements.
103. Non-Existent Land Market and Land Degradation. There are two
considerations that will need to be tackled with regard to land. The first concerns the
decline in the physical quantity and quality as well as the poor management of land
resources for sustainable agriculture development. The second concerns the inexistence
of a land market.
104. Of Pakistan’s total 79.61 million hectares, only 28% (22.05 million hectares) can
be cultivated. A large growing proportion of this area for cultivation is under threat of
degradation, such as salinity and sodicity, erosion, water logging, fertility depletion,
negative nutrients imbalance, deforestation and desertification (Table 8). While some are
due to natural factors, land degradation has also been largely manmade, and which can
be minimized through appropriate land management. As noted in the previous chapter,
increase in crop production through land expansion may no longer be possible unless
technologies that regenerate land quality are employed. While these could be done, it
would take a long time before these bear fruit.
Table 8. Indicators of Nature and Extent of
Land Degradation in Pakistan
(million hectares)
Year Punjab Pakistan
Soils with saline-sodic quality 2001-2003
Irrigated 0.0977 0.130
Un-irrigated 0.530 0.1633
Total 2.667 6.281
Extent of water logged areas No year
0.695 1.569
Cultivated areas (in water table depth)
0.686 1.427
100-150 cm
0.239 0.318
50-100 cm
0.078 0.292
<50 cm
0.368 0.816
Uncultivated areas
0.010 1.569
<150 cm
Area afforested 1998-1999 0.005 21.1
2001-2002 0.007 25.3
Area affected by water erosion No year 1.904 13.050
Slight (sheet and rill erosion) 0.061 0.328
Moderate (sheet and rill erosion) 0.896 3.635
Severe (rill, gully and/or stream bank erosion) 0.588 5.640
Very severe (gully, pipe and pinnacle erosion) 0.357 3.446
Area affected by wind erosion No year 3.804 6.173
Slight 2.251 2.595
Moderate 0.279 0.469
Sever to very severe 1.274 3.081
Source: Qureshi 2008.
105. Another important area is the development of a land market. Foremost in the
agenda would be the need to ensure security of tenure especially to existing small-sized
32
farm tillers. Not only will this provide incentive to farmers to invest in the land, but will
also enable the use of land use rights as collateral instruments to access finance. With
ownership of land, farmers will undertake the necessary management measures to
prevent any forms of land degradation; produce the appropriate crops or raise livestock;
and have the incentive to market their produce so as to maximize their economic
returns. With land titles serving as collateral instruments, farmers will have more access
to credit from formal financial institutions.
106. Equally important for the establishment of land market is enabling farmers to
freely sell, mortgage or rent land. Presently, farms are being fragmented into smaller
sizes, which are uneconomic. Per capita cultivable land has declined from 0.19 hectares
in 1990-91 down to 0.14 hectares in 2006-07. Because of non-security of land ownership
and the non-existence of a land market, the problem of consolidating land into larger
farm areas (through rental, contract farming, nucleus estate formations, etc.) that can
achieve economies of scale in production has become a major challenge and an
impediment to developing efficient and effective agri-based supply chains. Over time,
there will be a need to convert present agriculture land for non-agriculture purposes.
Without a land market, there will not be a rational mechanism of allocating land from
agriculture to non-agriculture uses.
107. Inefficient Use of Scarce Water. Available evidence shows that the overall
yield gap in the production of major crops lies between 40% and 50%. A critical factor for
decreasing the yield gap is the timely availability of water. Water resources are the
mainstay of Pakistan’s agro-based economy. Agriculture uses about 96% of available
surface and ground water largely for irrigation purpose, the domestic sector uses 2.2%
while the industrial sector consumes 0.6%, which is mostly ground water. The major
issues with regard to irrigation water are its low supply, the degradation of the resource,
and its inefficient use.
108. Overall water supply in Pakistan is highly limited and its availability is decreasing
rapidly. Current water availability is just 1,200 cubic meters per person. By 2025, per
capita water is projected to drop to 800 cubic meters per person, qualifying the country
as water-stressed. About 90% of its water originates from the Indus River, thus making
the country highly vulnerable given this single source’s water flow variability. Climate
change has only exacerbated this fluctuating flow as evidenced by the series of droughts
and flooding Pakistan experienced in recent years.
109. Irrigation systems were built to distribute water to a contiguous 14.9 million
hectares; an additional 3.5 million hectares are earmarked for irrigation through separate
water systems. Unfortunately, expanded irrigated area and increased cropping intensity
developed faster than the actual water availability. Stable water supply cannot also be
assured because of the highly dilapidated state of the irrigation infrastructure majority of
which are a century old. The design of the infrastructure is outmoded, to meet the
specific requirements of modern supply chains. Canal irrigation efficiency has thus
deteriorated to less than 50% meaning that 40 million acre feet (MAF) of water are lost
annually from the system. Moreover, the very few storage capacities that are available
along the Indus River system are being progressively lost due to siltation of major
reservoirs. Because of inadequate water, inequities in water allocation become more
pronounced with the farmers at the tail end of the canal system being more deprived,
and water thefts by influential farmers at the head of the water course intensifying.
33
110. Declining surface water sources has prompted the Government to promote tube-
well development to mine groundwater. Tube-well construction grew exponentially as the
Government introduced subsidies for tube-well installation and imposed flat charges for
electricity used for operating tube wells. A water market for ground water flourished with
most farmers installing tube-wells to sell water. This subsequently led to over extraction
of underground water. In the 1990s, the price distorting policies were removed, which
partially abated the water mining through tube wells.
111. The problem of low water levels from ground and surface water is compounded
by declining water quality. Untreated agriculture, industrial and municipal effluent is
being discharged improperly. Low irrigation efficiency estimated at 40% and poorly
managed water distribution system, have caused waterlogging and soil salinity/sodicity
problems in at least 8 million hectares of agricultural land. Increased siltation of major
reservoirs has also decreased existing water storage capacities by 30%.
112. Not only is the quantity of water resource getting scarcer and its quality being
threatened but the limited water is also being used and managed inefficiently. The main
factors for the inefficient water use are: the low priority accorded to and the under-
funding of maintenance and repair work of the irrigation facilities, weak incentives for
efficient water use and pricing, institutional weaknesses in implementing and enforcing
integrated water resource management, limited participation of farmers in the
management of irrigations systems, lack of transparency and accountability on water
distribution and service delivery, and weak regulatory systems.
113. There is preference for construction of new irrigation facilities rather than regular
maintenance for the upkeep of existing facilities because of its political mileage. Due to
the decrepit condition of these systems, construction and rehabilitation would require
substantial investments. The Government not only has to contend with limited financial
resources, but also its current financial practice does not even ensure that water
charges, which are pooled into the provincial fund and not as a separate budget for
operation and maintenance (O&M), are commensurate to the amount of water used or at
least recover the costs for O&M.
114. Water is not priced according to its economic opportunity cost, resulting to
misallocation of this scarce resource, water wastage, and inefficient water service
delivery. For instance, sugarcane production, an intensive water-using crop, would have
been uneconomical to cultivate if irrigation water was charged anything close to its
economic price. Similarly, rice producers also benefit from under-pricing (rice is irrigated
from tube-well water). However, in the present system, basmati rice producers receive
transfer of resources from taxpayers.
115. Water and land use for agriculture are inextricably linked. Efficient use of water is
strongly related to the crops that are cultivated, their intensity and yield levels.
Investments in water conservation techniques also hinge on the type of crops produced.
As mentioned earlier, if water were appropriately priced, water-using crops such as
sugar may not be economically competitive to produce. Instead, production of water
efficient crops like horticulture and fodder may have been encouraged. With transparent
water and land use entitlements, crop diversification would have evolved and
sustainable use of these resources would have been the normal practice. These in turn
would stimulate the development of nonfarm value addition activities.
34
116. An equally important lacuna is water use management. If efficiency in water use
were to be improved, there is a need to identify and address the institutional
weaknesses and governance-related issues that impede the implementation of an
integrated water resource management approach. This approach will be urgently
needed to rationally address the competing water uses and vested interest groups’
concerns; define the roles and responsibilities of the different tiers of government
involved in water management; provide incentive mechanisms for the development of
markets for groundwater and the regulatory measures for the unhampered market for
surface water; ensure participation of farmers’ groups; and lay the governance reforms
for transparency, accountability, improved economic incentives, and sustainable O&M.
117. In sum, the challenges of ensuring sustainable use of water resources for
development of agri-based value chains involve addressing the concerns on enhancing
water availability through investments on infrastructure build up especially for water
storage and rehabilitation; instituting governance and institutional reforms for
implementation and enforcement of integrated water resource management; and
maintaining resource integrity and productivity. The challenge is daunting considering
that even under a low water demand scenario and with an assumption of increasing
water efficiency by the year 2024/25, there would be a shortfall of around 23% under
existing supply scenario.
118. Poor Environmental Management. Many environmental problems are
associated with policy-induced economic distortions that create incentives for individuals
to pollute or use the natural resource base in unsustainable ways. As noted,
inappropriate price policies, that reduce economic efficiency, provide disincentives for
the sustainable management of natural resources and should thus be replaced with win-
win strategies that promote more efficient and sustainable use of resources.
119. Win-win policies are a necessary but not sufficient condition for effective
environmental management. In addition to economic policies that remove distortions,
targeted policies are needed that directly address environmental problems arising from
market failures. Environment-specific policies aimed at internalizing the externalities
imposed by the use of a resource or the emission of pollution should also be introduced.
120. Environmental issues should be mainstreamed; meaning that these issues
should be considered at all levels of economic planning and policy. This process has
begun only modestly in Pakistan and will have to be strengthened considerably.
121. Supportive measures for improved policy and institutional effectiveness are also
called for. For example, given the lack of experience of the present environment agency
in green issues, training is crucial. Each implementing agency should immediately
undertake an assessment of its training needs and develop appropriate training plans.
Training should also emphasize in-house training for staff by consultants/institutes with
extensive experience in pollution prevention, environment impact assessment
techniques, enforcement, and environmental management approaches.
122. The need to strengthen mass awareness about environmental issues is urgent.
Mass awareness programs should include seminars, radio, and television programs,
newspapers and magazine articles, announcements on billboard and posters, and other
means. Both federal and provincial governments, NGOs and local community groups
35
should be supported in continuing their work on improving the understanding of
environmental issues at the local level.
123. In order to achieve greater public participation in natural resource management,
some form of decentralization of decision-making to the local level is needed. Future
efforts to decentralize natural resource management will require stronger links between
the federal and provincial governments and local governments and local organizations.
There is a need to replace supply-led programs—often financed by donor support
channeled through the federal and provincial governments— with demand-led
approaches, with local governments, NGOs, and community organizations demanding
and purchasing the needed services from higher levels of government or the private
sector. Demand for this kind of change can be encouraged through increasing public
awareness of environmental issues so that local organizations recognize their stake in
natural resource conservation.
124. Finally, climate change represent a new emerging challenge and is likely to
threaten agricultural growth with increases in temperature, changes in intensity and
length of wet and dry periods causing variable precipitation levels and spread, water
scarcity (drought) in some areas, and flood damages causing inundation and/or soil
erosion in others. Climate change is likely to exacerbate pressures on resources.
Although it is hard to quantify its impact, farming systems and livelihoods will be
increasingly vulnerable to the vagaries of nature, particularly in rainfed areas, river
corridors and deltas. This challenge, however, needs to be addressed in the long-term
strategy and plans of any economy, Pakistan, in particular. The agricultural system and
research need to prepare for developing solutions to cope with the impacts of climate
change. Pakistan should also take into account the likely transformation and factor this
in formulating agriculture sector strategies in the future. The likely consequent water
regimes may severely affect Pakistan’s capacity to produce enough to meet the food
demand of its population, and reach a crisis level in the next few decades. With the
onslaught of the negative impact of an unfavorable water availability regime, stresses on
agriculture production systems, particularly on wheat, rice and maize production, would
be significant.
125. Deficiencies in Human Resources. Agriculture remains to be the major
employer in Pakistan. In 2006-2007, the sector’s share to the total labor force was 44%,
only 5% lower from its employment share in 1999-2000. Around 60% of the total
workforce (33.11 million people) is in the rural areas, around 36% are self-employed,
and another 34.3% are unpaid family workers. The public sector’s programs in the
livestock and dairy sectors created the additional demand for unpaid family helpers. Of
those engaged in non-agriculture, mainly wholesale and retail trade (14.4%), community
and social services (14.4%), and manufacturing (13.5%), almost three fourths belonged
to the informal sector.
126. There have been serious deficiencies in human resource development in the
rural areas and specifically for the agriculture subsector. The problems are two-pronged:
(i) the immediate-term lacuna in human resources, which are the skills mix required to
shift from the present largely subsistence/low-level production to commercial operations
of farm and nonfarm rural activities; and (ii) the medium-term requirements for human
capital development which need reforming the formal education and vocational
institutions.
36
127. Commercial agriculture in Pakistan remains starved of adequate human
resources. To date, there is virtually a total dearth of two critical cadres of trained
manpower. The most serious deficiency is in the absence of ‘grassroot technicians’, a
counterpart of the factory foreman in the industry. The knowledge chain from the
research institutions passes down the skill-lines of extension workers, farm owners to
field workers. Between the farm owner, farm manager (munshi or mukhtar kar) and the
field workers - machinery operators, irrigators, etc., there is a vacuum of skilled
operations people who can translate knowledge from academic form to practical field
application. There is also an acute lack of skilled mechanical operators. Tractor
operators are self-learned and illiterate village boys who underwent informal
apprenticeship (with a teacher called ustaad). Irrigators who are low-paid are often farm
hands workers who have learned manual skills that were passed down generations.
128. This dearth of grassroot technicians is a serious impediment towards adoption of
sophisticated farm machines and cultural practices. The social stigma attached to
manual labor prevents educated or literate persons from indulging in field operations.
Therefore, at the cutting edge of field operations, there are semi-skilled, ill-trained
personnel who are unable to handle machines that require literate skills.
129. The other area where commercial farm enterprises lack required skills is on farm
management. Most farmers/owners do not keep accounts and operate on season-to-
season cash flow constraints, without any prior planning, financial analysis or credit
management. For this reason, banks are hesitant to capture the huge agriculture credit
market which is about Rs 300 – 400 billion, as against formal sector’s advance of just Rs
150 billion to the agriculture sector.
130. There is a need to provide two levels of formal training to the agriculture sector:
(i) Para-technical skills like farm machine operations, irrigation control, pruning
fruit trees and managing postharvest operations, etc.; and
(ii) Farm management training for bookkeeping, enterprise analysis, resource
utility analysis, budgeting and credit management, etc.
131. Farm management institutes are not setup to provide the above skills that are
indispensable for moving Pakistan’s agriculture into a higher technical orbit in today’s
competitive world. The various agencies for technical training like polytechnic institutes,
vocational and technical training institutes, etc. are more focused on providing technical
training for construction and manufacturing industries. For example, there are only 600
tractor operators being produced in the country today, against annual sales of 30,000
plus new tractors.
132. In the medium-term, as the economic base of the agriculture sector becomes
more buoyant, investments in rural education and health are important. Ultimately, if the
rural labor force will move to more lucrative nonfarm jobs, they will need to upgrade their
human and physical capital. The policy challenge is to provide the start up investments
for more solid formal education and vocational schools. Presently, the five agriculture
universities in the country produce graduates of academic skills with little bearing to
commercial agricultural productivity and links with farms or downstream processing
industry. The graduates from these universities and colleges do not possess marketable
skills and primarily opt for government jobs or as field representatives of agriculture
chemical companies. The exaggerated emphasis on Ph.D.s is misplaced since basic
research is not a major constraint as applied research in agriculture production and
37
value chain processes and management. These manpower quality deficiencies will need
to be addressed to shift farmers and farm work to higher gear of commercialization, and
to upgrade, rationalize and mainstream the plethora of micro, small, and medium-scale
rural nonfarm enterprises and middlemen to coordinated supply chain networks.
133. Under-Investment in and Inadequate Research, Development and
Extension Services. Innovation on a continuous basis has to be promoted through
science and technology. Investment in science- and technology-based research and
development (R&D) and appropriate and timely extension services have been effective
ways to gain competitiveness. Competitiveness of Pakistani agricultural products in the
global market in the future would depend on its ability in producing value added/demand-
responsive agri-based products.
134. R&D and extension (R&D&E) for farm and RNF are funded and managed by
public institutions. These institutions lack coordination, capacity and incentives to
generate, adapt and disseminate new technologies and information for promoting
competitive and diversified agriculture. The linkages and interfacing between them have
been extremely weak as shown in Figure 2.
Figure 2. Technology Development Chain
Research Industry/ Extension worker/ Farmers
Institute Manufacturer Product
Salesman
Weak Links
This route is not possible
135. There is low funding support for R&D&E. Funding level for R&D is around 0.2%
of the GDP, which is lower than what was recommended by the National Commission on
Agriculture. An international study shows that Pakistan ranks as the lowest in the region
behind Bangladesh, Nepal and Sri Lanka, both in terms of financial allocation as well as
number of scientists on a per hectare basis.
136. Pakistan’s agricultural extension program is also finance-deficient and is not
functioning efficiently and effectively. Small farmers are by-passed as extension agents
contact mostly the large farmers. The system is top-down and supply driven. Extension
services are also not attuned to the current environment.
137. Ironically, while public funds for R&D&E have dwindled, the number of research-
based institutions at the federal and provincial levels has proliferated and public-run
extension facilities and services have expanded, resulting to limited resources being
spread too thinly and ineffectively. The present R&D&E system has also not been able
to make optimal use of science and technology in recent years, and do not provide
support for RNF activities.
38
138. The other key issues and challenges faced by the agriculture research-extension
system in Pakistan include lack of effective autonomy of research institutes particularly
at provincial levels; poor coordination among research agencies; numerous bureaucratic
restrictions and protocols; poor incentive frameworks and human resource development
for quality research; unsatisfactory technology dissemination (poor research-extension
linkages); and the need to rationalize the roles of the other constituent agencies under
Pakistan Agricultural Research Council (PARC) (See Box 3).
Box 3. Key Research Institutes in Pakistan
The National Agricultural Research System in Pakistan consists of federal research
establishments, provincial research institutes, and agricultural universities. At the
federal level, ministries or government agencies involved are Ministry of Food,
Agriculture and Livestock, Pakistan Atomic Energy Commission, and the Education,
Commerce, Planning and Development, and Environment Divisions. Some research on
specific problems is also carried out in research centers of the Ministry of Science and
Technology and Water and Power Development Authority. Coordination between all
these agencies belonging to different ministries is quite challenging and in practice it is
largely ineffective. A key element of the mandate of PARC is to ensure effective
coordination but since agricultural research is a provincial subject, a federal agency like
PARC may not be in a position to coordinate activities of provincially controlled
agencies.
PARC is the apex policy body for agricultural research, but at the same time, it directs
and carries out research through the National Agricultural Research Center (NARC)
and other research establishments. This is a central issue for the rationalization of roles
for PARC, NARC, and other institutes. PARC must have a role in providing strategic
thinking for orienting the whole research system, leaving day-to-day implementation of
research in the hands of NARC. Instead of coordinating the overall research policy,
PARC gets involved in directing and coordinating actual research, which should
preferably be the domain for NARC and other institutes. Similar rationalization would be
desirable for NARC and provincial research outfits.
139. In order to address the problems cited, a comprehensive reform program for
research and extension for agri-based supply chain development is required. Among the
provinces, Punjab has set up an autonomous Punjab Research Board and has already
initiated a program to turn research outfits for five crops—cotton, sugar, rice, mango and
citrus—into autonomously-run corporate agencies. In Sindh and NWFP, similar research
boards or committees have been set up under the chairmanship of Additional Chief
Secretary (Dev), whereas the Punjab Board is headed by a non-government official.
140. Although overall progress, especially in Punjab, has been substantial, much
more remains to be done. Thus a key element of the strategy is to complete the
unfinished tasks in the field of agriculture research especially in Sindh, NWFP and
Balochistan. These tasks include: (i) setting up of provincial Research Councils; (ii)
granting autonomy to research agencies; (iii) reform of personnel management and staff
incentive policies; (iv) rationalization of role and responsibilities of existing research
agencies; and (v) augmentation of research funds.
39
141. There is also a need to define the research agenda for agri-based supply chains.
Table 9 below lists the strategic areas for science and technology in developing
internationally competitive supply chain networks:
Table 9. Priority Research Agenda for Agri-Based Supply Chain Development
in Pakistan
Areas Agenda Topics
Improved farm High yielding/disease resistant varieties for fruits, vegetables, cotton,
productivity grain, livestock, using biotechnology
Integrated plant nutrient information packages that combine use of
organic material, bio-resources and chemical fertilizers for sustainable
crop production
More efficient agronomic practices in wheat, cotton, sugarcane,
fruits/vegetables, livestock rearing
Techniques for clean cotton production and harvesting
Nutrition in feed, livestock breeding houses, silage methods and
techniques for lean fooder periods
Certified plant nurseries for fruits/orchards
Water and land use management: yield improvements wherein
production is based on per unit of water consumed
Cleaning and grading equipment suitable for Pakistan-produced crops
Technology transfer facilitation through agricultural equipment supply
companies
Orchard management techniques (tree pruning, weed control and
irrigation techniques), seed treatment, locally suited harvesters for
basmati rice, sugarcane, grains, cotton; locally tailored planting
machines, seed driers, and modified mechanical harvesting machines
for canola and sunflower
Effective pest control: blight in basmati; viral disease called mosaic
afflicting sugar seeds, problems of afltoxin for rice
Broadening production Development of indigenous crop production techniques in engineering
base terms
Biofuels in addressing high energy prices; inter-linkages of energy and
food lines
Dairy and feed mills
Climate change Environment-and gender-friendly and pro-poor proactive adaptive
technologies and mitigating measures
40
Areas Agenda Topics
Improving value chain Adjusting to globalization on food safety and quality
lines
Harvesting methods, packaging materials, and transport arrangements
for fruits/vegetables
Shifting from jute bags to volume; customized trolleys for transport of
wheat; village-sized silos to replace godowns for wheat storage
Upgrade of ginning facilities
Marketing and Rice: branding for consumer recognition
institutional
arrangements Culinary preferences of local consumers for vanaspati ghee (that use
imported hydrogenated and granulated palm oils) to the detriment of
developing more profitable and healthy oil crops (sunflower and
canola)
Culinary preference for buffalo milk by local consumers but buffaloes
are less efficient in producing milk
Institutional innovations in rural finance, like commodity exchange,
information technologies, warehouse receipts, crop insurance
schemes, market-based risk management
142. In the medium-term, the conventional approach of purely public-funded and
operated R&D&E will not be sufficient to meet the dynamic domestic and global
requirements. Many public research organizations face serious institutional constraints
that inhibit their ability to meet rapidly changing demands for innovation. There will be a
need for continued and massive use of and reliance on science and technology to
improve the efficiencies and integration of both farm and nonfarm/marketing levels.
Service providers other than the government will need to be explored. Increasing
participation of the private sector in agriculture research and extension in the future
would be most desirable. Private sector protection in research can be encouraged
through access to competitive grant funding, as is being done in the case of Punjab.
When the Intellectual Property Rights and Pakistan Patent Act are in place, private
sector’s participation in research would rise over time.
143. Continued presence of the public sector in full strength will not always be
possible because of the changing environment of market-oriented economic
development. The rise of higher value markets is opening new opportunities to foster
institutional innovations along the value chain often involving collective action by the
public sector, private sector, farmers and civil society. In the interim, there may lay a
solution in emerging public-private sector partnerships for service delivery, and other
innovative private- and public-led schemes, which should address the provision of
support services to rural and rural nonfarm producers. Other possibilities include
outsourcing and experimenting on various models with nonprofit institutions and
international research linkages. Box 4 provides some emerging service provider
schemes that may be emulated.
41
Box 4. Emerging Service Provider Schemes
There are several successful examples of public-private sector partnerships involved in
service delivery that include Rural Support Program’s (RSP) extension-cum-enterprise
development initiatives (e.g. National Rural Support Program’s (NRSP) technical training
programs for village volunteers nominated by village organizations at public sector institutions
on a cost-sharing basis to act as village veterinary assistants, extension agents, and artificial
insemination agents).
Farmers Field Schools successfully operating in the cotton producing areas are another
example of the private sector’s collaboration with the public sector to promote integrated pest
management, and it is now being adapted to promote integrated crop management in non-
cotton areas in a bid to reduce production costs and improve farm productivity. Adoption of the
Farmer Field School approach, which uses farmers’ fields as classrooms, would help increase
access of small farms to extension messages. The farmer field school approach is being
implemented quite effectively in parts of Punjab and NWFP provinces.
A few other areas of collaboration and partnership development between the public and
private sectors are public horticulturists providing technical services to nursery developers in
producing certified seeds and seedlings to growers, or the private sector sharing embedded
extension services in drip and trickle irrigation, precision land leveling, grading and packaging
semi-perishable and perishable farm produce.
A most recent example is the Rural Community Development Society (RCDS), which
mobilized around 2,000 farmers in its operational area to promote group enterprises in 2006.
After group formation, RCDS carried out capacity building of these groups in management,
finance, marketing, and in quality improvement techniques for adding value to their
horticultural and dairy produce. The groups are now applying for Agri-business Support Fund
grants for development of their agri-business. RCDS individual group members excel in the
production of fruits, vegetables and milk but are generally smallholder farmers with poor
income levels.
Innovative schemes have also been spearheaded by the private sector. Agrimall is a one-stop
building facility that houses several agribusiness input/equipment suppliers, and service
providers (e.g., legal experts and veterinarians) in strategic rural centers. Additional facilities
are being constructed in other rural centers of Punjab.
The government of Punjab has also initiated the rent-to-own scheme for the purchase of
motorcycles by extension providers, and the development of village-based women para-
veterinary/agronomic extension workers. Outsourcing of extension services may also ensue in
the future. The environment for experimenting on these various institutional schemes of
privatizing extension services should be facilitated.
144. Weak Governance. Improving governance is vitally important for promoting
growth in both farm and nonfarm sectors. Rationalizing the role of the government is the
first order of business. At present, the public sector in Pakistan has an over-extended
role in areas where the private sector is better suited to perform, and its performance
falls short in areas where it has a legitimate role to play such as provision of public
goods. Table 10 shows the key guiding principles for efficacious public governance, the
nature and extent of government intervention in Pakistan and the suggested directions of
change.
42
Table 10. Modalities of Government Intervention in Pakistan
and Intervention Options
Principles Issues/ Concerns: Pakistan Intervention Option/s
Situation
Efficiency Absence of Land Land market Creation of land rental markets
and Water Markets Institutional arrangements for agglomeration of land
operations but not land ownership (contract farming,
long leasehold system, leaseback arrangements,
corporate models)
Provision of passbooks to all landowners
Computerization of land titles
Land use planning and zoning
Water market Integrated water resource management,
Move towards economic pricing of water
Irrigation development appropriate to changing
geophysical landscape
Market Failures/
Imperfect markets
♦ Huge Too many Market infrastructure provision (cold chains, storage
transactions middlemen facilities, wholesale markets, information systems,
costs, resulting involved between farm to market roads, spot markets) through public-
to myriad of farm gate and private schemes
geographically final market
dispersed destination Institutional arrangements for product consolidation,
monopolists/ access to credit, inputs, and technical know how,
monopsonists warehouse receipts and other risk management
mechanisms
♦ Asymmetry of True for all agri- Market intelligence, training and extension, market
information based value information systems on new technologies and
chains agronomic practices; consumer awareness of rights,
provision of para-legal rights, adaptation and
mitigation measures for climate change;
environment
Too little private
sector participation, Private-partnership arrangements for value chain
needs inducement Not much foreign development
or large domestic
agribusinesses Infrastructure and institutional reforms for quality
directly linked to control and standardization
primary
production
sources for most
agri-based supply
43
Principles Issues/ Concerns: Pakistan Intervention Option/s
Situation
chains
Non-standardized
quality control
measures that
are internationally
acceptable
Market distortions Wheat industry Market-based wheat industry; more efficient reserve
from too much management stock using commodity exchanges,
government futures markets, regional cooperation
intervention
Market distortions Market
due to infrastructure
outdated/overlappin
g/conflicting
policies, but there
remain gaps and
inconsistencies
Equity Income disparity Numerous, Innovative institutional arrangements promoted such
between fragmented, and as contract farming, warehouse receipts, forward
progressive and geographically contracts
laggard provinces dispersed
smallholders,
Skewed income micro, small and
disparities medium RNF
entrepreneurs or
Unequal access to enterprises
assets and involved in all
productive agri-based supply
resources chains
Flawed and weak
Poor and targeted food Targeted food subsidy nets; re-evaluate the utility
vulnerable groups safety net policy store program of government with end-view of
measures coming up with more targeted food subsidy for the
poor and vulnerable
Environmental Soil and water Increasing Integrated water resource management, promotion
sustainability quality degradation problems of of land conserving and water enhancing
saline soils; technologies and agronomic practices
dropping water
levels and higher Market information systems, weather stations
salt contents in
ground water; Strategy and action plan that includes adaptation
polluted fresh and mitigation measures for climate change
water resources
Climate change Consumer awareness
Need for strategy
and action plan Promotion of public-private partnerships on science
on adaptation and technology-based research and extension
and mitigation
measures to
address climate
44
Principles Issues/ Concerns: Pakistan Intervention Option/s
Situation
change
Sustained Weak research and Increase research funds
rural growth extension services; Government-led
less reliance on research and
science and extension;
technology proliferation of
institutions with
declining
resource support,
resulting to weak
delivery of these
services
Disconnected
research and
extension link
with private
sector; not Sound and prudent macro policy, targeted food
Global concern on demand driven safety net
high inflation and
food insecurity Fiscal deficit
problem; not
targeted
interventions
Good Overlapping Blurring of Inter-ministerial action to clarify roles and
governance functions /lack of jurisdictional responsibilities on rural economic development
coordination among functions
ministries, between between federal Further clarification of decentralization and
federal and government and participation
provincial provinces and
between
provincial and
district
governments
Weak technical
capacities and Huge
limited resources of bureaucracy,
provincial/local limited public
governments resources and
funds for human
resource
development
Encourage rent-
seeking activities
145. The government’s role should be to encourage the development of a smoothly
functioning market through institutional and regulatory reforms that facilitate private
sector activities and market efficiency. In cases where market failure is not an issue and
where intervention has led to market inefficiency, the best strategy is to reduce the
government’s role. This means policy reforms and strengthening the process of market
liberalization.
45
146. Getting prices right is a basic step towards improving the markets. Besides
pricing, there are other distortions from public sector intervention into commodity
markets. In Pakistan, most commodity markets except wheat, cotton and sugar are
competitive and free of public sector intervention. Government occasionally intervenes
into the cotton and sugar markets but over the years these interventions have declined.
However, to ensure quality they need to be totally eliminated except the regulatory
framework. Livestock is also a vital sub-sector of Pakistan’s rural economy and there
has traditionally been a practice of fixing the retail price of milk and meat by local
authorities, which must also now end.
147. The best way to reduce prices (of any food items) is to increase its supply by
improving agriculture productivity through public investment in agricultural research and
rural infrastructure to create efficient markets. The design of innovative risk management
instruments such as weather insurance can also increase productivity. While investment
will not reduce food prices in the short-term, it is important to keep these longer-term
measures in mind or else sustainable food security would be difficult to achieve.
148. Distortions in factor markets can lead to a suboptimal use of resources. In recent
years, the Government intervened in the fertilizer market by subsidizing some imported
fertilizer to ensure a balanced use. But such ad hoc interventions may not produce the
desired outcome on a sustained basis besides the possibility of the subsidy being
misused. The key aspect for Pakistani agricultural growth is to ensure inclusion of
smallholders into efficient production systems by improving their access to input
markets.
149. Getting the institutions right for the factor markets would include several specific
steps to improve access of all farmers, especially smallholders to financial products,
development and management of water resources and improvement of agricultural
research and extension.
150. The RNF economy has already become crucial for poverty alleviation and rural
growth. Basic elements of a strategy for RNF growth should include developing physical
infrastructure and promoting education. The lessons from micro-finance may provide
useful application for the RNF sector. Furthermore, a supply chain analysis of the
potential for clustering of rural businesses merits attention. The public sector can help by
facilitating access to information on market opportunities. It is well recognized that poorly
functioning financial systems in rural areas are an impediment to growth of the RNF
sector, but development of more credit facilities would have to be complemented with
training on how to develop business plans and approach financial institutions. Table 11
lists down possible interventions to promote nonfarm economy.
46
Table 11. Categories of Interventions to Promote Rural Nonfarm Sector
Demand Stimulus for RNF Goods and Services Supply-Side Interventions
System-Level Interventions (Multiple-Firm Impact)
1. Policies • Pro-agricultural policies • Macro policies affecting input cost and
• Government procurement output prices (tariffs, exchange rates, labor
• Trade policies affecting laws)
competitive imports • Subsector-specific policies (licensing,
• Tourism promotion taxation, subsidies, zoning, building and
health codes)
2. Public Investments • Rural infrastructure (roads, electricity,
communications)
• Rural markets
• Rural town infrastructure
• Industrial parks and estates
• Credit institutions
• Education
3. Large Firms as • Export promotion • Supplier credit
Intermediaries • Promote linkages • Technical and management assistance.
(subcontracting, business linkages)
Direct Assistance to Individual Firms
4. Credit Capital
• Credit
• Subsidies
• Facilities rental
5. Business • Marketing Assistance • Appropriate technology research and
Development extension
Services Management
• Entrepreneurship screening and
training
• Management training and advice
Labor
• Technical training
Raw Materials
• Bulk purchasing
Source: Haggblade, Hazell and Reardon 2002.
151. The roles and mandates of the various tiers of government, i.e. the federal,
provincial and the district, are not well defined leading to duplication of efforts, loss of
direction, and a confused distribution of responsibilities. Likewise, the distribution of
functions and responsibilities between MINFAL and the provincial agricultural
departments is not clear, leading to rivalry and program confusion. MINFAL should
handle the regulatory functions and top coordination, while the implementation and
formulation of priorities and programs should rest with the provincial governments.
152. Another set of governance issues arise out of the manner in which the mandate
is actually practiced. Actual practice can be grouped into two -- policy formulation and
coordination; and implementation of policies and programs. Policy formulation could be
assessed on the basis of adequacy, consistency and relevance. Similarly, governance
issues arise out of the way policies and programs of the government are implemented.
In both formulation and implementation of policies and programs, governance issues
may arise, either because of ignorance (wrong policies based on incomplete
understanding or knowledge), or due to deliberate manipulation (by vested
interests/powerful groups). The latter type of governance problem would be more
serious and harder to tackle.
47
153. A recent study, Small Farmer Development Plan, strongly recommends up-
scaling of rural support programs. According to the report, the line departments are
structured such that they neither listen to the voices of the small farmers, nor do they
involve them effectively in development work. The Agha Khan Rural Support Program
and the National and Provincial Rural Support Programs have succeeded in organizing
village communities to rectify weaknesses of line departments. Social mobilization has
been the key to their success. Based on lessons from pilot programs, it should be useful
to extend their activities to the entire country in a phased manner. A district support
organization needs to undertake development work in this direction. The key to success
would be to ensure high quality and commitment of staff of such district support
organizations and promote a culture of cooperation with the line departments and other
partners.
3.3 Conclusion
154. The prospect for sustained growth of the rural economy hinges on the
development of agri-based supply chains. This chapter identified the critical constraints
or weak links in the supply chains that affect the agriculture and RNF sectors. The
discussion focused specifically on the macroeconomics and system-level bottlenecks as
well as the requirements for addressing these weaknesses. It is apparent that the
business as usual approach will not work in the current uncertain geopolitical and
environmental conditions. The next chapter suggests the strategy and the key actions
that will be required to induce the development of vibrant and competitive agri-based
supply chains.
48
4. FROM AGRICULTURAL TO SUSTAINABLE RURAL ECONOMIC GROWTH
STRATEGY
4.1 Introduction
155. The Poverty Reduction Strategy Paper I (PRSP I) lays down the framework for
the broad policies and goals for all development sectors in Pakistan. The second phase
of PRSP is currently underway. The overall approach to PRSP is grounded on four
pillars: (i) achieving sustained high and broad-based economic growth while maintaining
macroeconomic stability; (ii) improving governance and consolidating devolution, both as
a means of organizing development initiatives, delivering better services, and ensuring
social, economic and distributive justice; (iii) investing in human capital with renewed
emphasis on effective delivery of basic social services and enhancing productivity; and
(iv) targeting the poor and vulnerable.
156. The PRSP prioritizes development of the agriculture sector as a means to
alleviate poverty through income increasing policies. This would mean facilitating a shift
to value added agriculture. In this century of globalization and intense competition, value
addition will entail diversification of commodities that are efficiently produced in
agriculture and the integration of these commodities to their respective supply chain
networks to reach their domestic and foreign market destinations in a timely manner, at
the least cost possible, and of internationally acceptable standards. For this to happen,
agriculture sector will need to be effectively linked to the nonfarm rural sector comprising
of manufacturing and service-related sectors. The growth of market-responsive and agri-
based supply chains will blur the divide between agriculture and RNF sector and will
result in the emergence of a vibrant rural economy. Expansion of value chains to global
networks will fuel rural industrialization. This in turn, is the building block for an equity-
based and sustainable industrialization path.
4.2 The Vision
Development of globally competitive, dynamic, demand-driven, diverse, and
integrated agri-based value chain networks.
4.3 The Strategy
• Strengthening and reinvigorating existing agri-based supply chains which
demonstrate clear competitive advantage for Pakistan. These are: (i)
Wheat Supply Chain, (ii) Cotton-Textile, (iii) Rice Supply Chain, and (iv)
Sugarcane Supply Chain; and
• Facilitating the establishment of potential agri-based supply chains.
These include: (i) Livestock-Dairy-Meat Products Supply Chain, (ii)
Horticulture Supply Chain, and (iii) Edible Oils Supply Chain.
4.4 Core Principles
• Focus on smallholders to become commercial entities
• Private sector as the driver of growth
• Improved management of natural resources for sustainable agricultural
growth
49
• Participatory approach to ensure strong stakeholders’ ownership and
support for the measures
4.5 Key Themes of the Action Agenda
• Get the price and incentives right in the product markets. The major products for
the strategy are: (i) major food crops, with focus on wheat, livestock/dairy, rice,
sugarcane, edible oils; (ii) major non-food crops, especially cotton; and (iii)
minor/cash crops, principally horticulture.
• Get the prices and incentives right in the resource-based and other factor
markets. The key resource-based factors of production are land and water/irrigation.
Other factors of production that are essential for effective backward linkages are: (i)
agriculture machinery, (ii) seed industry, and (iii) fertilizer industry.
• Invest on productive and market infrastructure that: (i) reduce the pre- and post-
harvest losses, and (ii) increase value addition of primary production in agriculture.
• Invest on science and technology-based research and development and
innovative ways of disseminating and promoting new technologies.
• Invest on efficient and effective institutions for integrated agri-based value
chains. These would include (i) improved public governance, (ii) need to re-engineer
rural finance, and (iii) measures to re-train rural based human resources.
4.6 Agenda for Action
157. Appendix 2 is the proposed Agenda for Action. It lists the building blocks that will
need to be in place for the development of diversified, demand-driven, globally
competitive, and vertically coordinated agri-based value chain networks. The measures
to be taken are enabling, regulatory, and promotional policies. Also highlighted are the
institutional reforms and the specific infrastructure investment areas that will need to be
financed through public-private partnership schemes.
158. The action agenda is time-bound: immediate actions to be implemented within a
year; short-term actions between 1 and 3 years; and medium-term actions from 3 to 5
years.
159. The key macro policy areas are pre-conditions for the development of market-
responsive, inclusive and sustainable rural economic growth. Addressing the fiscal
deficit is top priority. Substantial policy measures that can assist the Government in
rationalizing its expenditures relate to the provision of subsidies to the agriculture sector
in the form of lower-priced irrigation water, uneconomic pricing of electricity, subsidies
accorded to wheat farmers and the blanket subsidy enjoyed by wheat flour consumers,
and subsidies for fertilizers and other agriculture inputs.
160. The immediate term measures that can and should be done within the first year
are as follows:
(i) Defining the food security strategy
(ii) Getting Government consensus through multi-stakeholder dialogues
leading to:
• Water Policy Summit
• Road map for research and development, and agri-based
extension
• Rural Finance Strategy
50
• Market infrastructure action plan
(iii) Initiating policy dialogues of existing and prospective private sector
players in agri-based supply chains for development of institutional
arrangements resulting to:
• Transformation of subsistence to commercial farms
• Development of commercially viable rural nonfarm enterprises and
service providers
(iv) Rationalizing subsidy policies for inputs
(v) Crop-specific and doable policy actions affecting the basmati rice
industry, cotton-textile industry, livestock subsector, and land market.
161. The short- and medium-term agenda are divided into three categories of
intervention modalities, as follows:
Table 12: Areas and Sub-areas of Change Actions by Type of Interventions
Area of change Sub-areas of change action
action
Intervention Modality 1: Enabling, regulatory and promotional policies
Product Markets Food Value Chain Wheat-wheat products
Basmati rice value chain
Livestock-dairy value chain
Sugarcane industry
Horticulture value chain
Food safety and quality measures for food
chains
Non-food value chain Cotton-textile
Edible oils, oilseed crops and bio-gas
Factor Markets Resource-based markets Land market
Water and irrigation
Other factor markets Science- and technology-based research
and development
Extension
Rural finance
Water-conserving technologies and
agriculture machinery
Variable inputs
Market infrastructure
Intervention Modality 2: Institutional reforms and capacity building
MINFAL-related MINFAL and inter-federal
interface with others
MINFAL- provincial-district
MINFAL and private sector (farmers, corporate entities, NGOs)
MINFAL and multilateral and bilateral cooperation
Federal agencies relating to water
51
Area of change Sub-areas of change action
action
Water-related
agencies Federal and provincial water-related agencies and their relations with the
area water boards, water users’ association, farmers’ organizations
From subsistence to commercial farms
Development of commercially viable rural nonfarm entities
Public-private partnerships for strategic value chain development and capacity building
Consumer awareness on safety and protection, environment, and water use
Intervention Modality 3: Infrastructure Investments
Productive Land registration and land titling
infrastructure through
public-private Rehabilitation and construction of canals
partnerships
PPP for one stop processing of basmati rice
Food safety, quality Specific types of infrastructure for quality control, food safety and weather
standards, and agro- forecasting
meteorology
Market infrastructure Market infrastructure and logistics centers
for PPP or private Commodity exchanges
sector investments Market information portals
Divestment of public- Wheat industry
owned facilities
52
Appendix 1
CROP SPECIFIC WEAK LINKS
1. Wheat
(i) Agronomical practices recommended by extension services and research
departments are for yield optimization per unit of land (acre), whereas it
should be for per unit of water consumption (acre inches). Water is the
limiting resource, not land. Recommendations for seed rate, fertilizer
doses and irrigation schedules are for optimum water availability. If
recommendations were to be tailored for available water, all those
parameters would be different, resulting in more efficient wheat
production.
(ii) Seed drills used cannot plant closer than 9 inches row-to-row distance
which is too far for 40 kgs seed rate. Seed drills that can plant as close as
6 inches (or even 4 inches) would give a more evenly distributed plant
stand with 10–15% higher production.
(iii) Herbicide use for weed control at first irrigation is very low (below 10% of
wheat area). Weeds decrease yields by 15% on average.
(iv) The practice of harrowing after first irrigation – for weed control and
promotion of tillering) is totally forgotten. It is neither recommended nor
practiced. This is because of lapse on part of research and extension
services to dispense comprehensive crop technology packages.
(v) Manual harvesting incurs high losses of around 10% in grain shattering.
(vi) Threshing by stationary threshers incurs another 5–10% loss in the form
of grain blown away into the straw.
(vii) Farmers put a premium on recovery of beaten straw (bhoosa), which is
valued as an important source of animal feed. For recovery of straw,
manual harvesting is often preferred even though this incurs grain losses,
while bhoosa almost have no nutritional value, but just stomach filler for
cattle.
(viii) Weight measure in maunds (40 kgs) is labor intensive and time wasting,
and bagging system is biased against farmers. Purchasing agencies,
private and public, deduct over 2 kgs per bag of 100 kgs as weight of bag
and dirt sticking to the jute bags, whereas in reality this is never more
than 0.75 kgs. So there is a 1.25% discount built in the marketing system
because of the archaic measurement by weight in jute gunny bags.
(ix) Centrally located wheat godowns (stores) incur dual expenditure in
transport costs. Transporting from village to godowns would cover 50–
200 kilometers, and another 50-200 kilometers from godowns to flour
mills. If there are smaller village/moza silos, at least one-third transport
costs can be saved.
(x) Godowns, owned and operated by Food Departments and PASCO, are
mammoth structures of substandard quality where wheat is stored in jute
gunny bags. Large losses, averaging -15%, are incurred by these stores
in grain being eaten by vermin and rotting. Lack of bulk storage incurs
cost of manual labor loading and unloading wheat stocks.
2. Cotton
(i) Lack of deep tillage: cotton is deep rooted crop and must be grown on
well opened soil created by furrow-turning ploughs or chisel ploughs.
Consequently, cotton roots are stunted.
53
(ii) Planting in a deep, loose furrow makes crop vulnerable to showers/rain
during planting season. Even light showers form crust in the furrow and
prevent germination. When this happens on a wide scale, the market
does not have quality seeds for replanting. Seed placement mechanisms
on planting drills needs to be modified.
(iii) Planting and inter-row tillage operations in damp soil create compaction
between rows where roots cannot spread easily. Consequently, the plant
has stunted lateral spread of branches. This is visible in all cotton fields
as ‘apical dominance’ or pyramid like profile of plants. This compaction
needs to be broken by deep tillage with chisel plough in standing crop
before ‘earthing up’ operation, which is never done.
(iv) Plant protection practices rely solely on chemical control. Cultural and
biological controls are not generally adopted.
(v) Fertilizer applications (nitrogen) are made too late in the season at
flowering time, which does not promote yields and even make plants
more susceptible to pest infestation.
(vi) Picking is started too early when there is much dew on the fibre which
raises moisture in the pick and deteriorates lint quality.
(vii) The contamination issue has been discussed earlier.
(viii) Ginning factories have old technology copied by local manufacturers from
1950’s US machinery. Ginning process degrades lint quality, floating
fibres and fails to remove trash. Pakistani cotton is discounted by 5-10%
by international standards.
3. Sugar Cane
(i) Barring a small area in Sindh, climatic conditions in Pakistan generally do
not favor sugar cane cultivation, which requires high humidity and
moderate temperatures throughout the growing season. Most areas in
upper Sindh and Punjab have two months of cold and three months of
high temperatures with low humidity. Therefore optimum growth period for
sugar cane is reduced to seven months in a year.
(ii) Hot water treatment is essential for healthy seed to remove viral diseases
like mosaic which is a serious problem. Seed treatment is not available in
Pakistan and bulk of crop is sown with infected seeds. Ratoon crops give
poor yields, considered as one of the major factors responsible.
(iii) Infected seed and short growing period necessitates close inter-row
distance – 2.5 feet instead of 4 to 5 feet – to make up for low cane stem
mass. This restricts sunlight availability to leaves and results in low
sucrose contents in the crop.
(iv) Cane requires high doses of potash fertilizer that is not commonly
applied. This reduces sucrose content by decreasing cane crop’s
efficiency of converting nitrogen and water to sugar.
(v) Cane has an almost linear co-relation to water. At the evapo-transpiration
rates in most areas sugar cane needs about 110 inches of water during
crop cycle. Farmers do not calculate availability of water while planning
sugarcane cultivation. To attract higher returns per acre, more cane is
planted than water made available. Consequently, cane fields are under
irrigated. Ensuing low yields (abysmally so at times) reduce water and
fertilizer efficiency.
(vi) Manual harvesting, which incurs high costs due to high cane populations,
is a slow tedious process. Added to this is the long distances to the mills
54
where crushing delays can be anywhere from 3 – 6 days. Such a long
delay between harvesting and crushing causes around 30% reduction in
sugar recoveries.
(vii) Value addition is low at sugar mills as white sugar is the prime product.
Molasses are disposed at low rates for exports. Processing for spirits,
yeast, acetic acid and citric acid does not exist with local industry.
4. Rice
(i) Super Basmati variety, a long grain high value strain, is susceptible to
bacterial blight attack, especially under high humidity weather conditions.
The remedy lies in grading and selection of blight resistance plants to
isolate disease resistant geno-type for multiplication in seed producing
facilities. Apparently the research station at Kala Shah Kako is not
undertaking this task with any measure of success. Farmers are
becoming wary of planting this variety, which accounts of a bulk of high
value exports.
(ii) Super Basmati is hard to thresh manually. Combine harvesters used for
harvesting rice are rental machines without proper adjustments in the
threshing components. The result is very high ratio of broken grain at the
harvesting stage, lowering the value of the produce.
(iii) Paddy crop should ideally be harvested at moisture content of 18 – 20%.
It is actually harvested at 30% moisture. And it should be dried within 16–
18 hours of harvesting otherwise a toxic and carcinogenic mold called
afflotoxin begins to develop. The drying process takes longer than 20
hours because of damp paddy and lack of seed driers.
(iv) Afflotoxin resides on the upper layer of grain in the bran. Brown rice is
exported to EU countries because of quota and tariff facilities but local
exporters cannot always comply with less than 4 ppb afflotoxin standards.
The main cause of this failure is improper drying of paddy grain after
harvesting.
(v) At the moment, rice value chain passes through three agents: (1) Sheller
dries the paddy and removes the husk creating brown rice; (2) The miller
who removes bran and polishes white rice; and (3) Trader-exporter who
packages and exports rice. Quality control is weak in this three tier
arrangement.
(vi) Ideally, one step processing should be encouraged where drying,
shelling, milling and export is combined under one roof and brand name.
Quality control can only be secured through this processing facility.
(vii) India has been successful in taking custodianship of Basmati rice
varieties in order to take advantage of EU tax laws that pertain to
preservation of traditional strains of plants. It is marketing many
variants/crosses (like CSR-30/Yamini) of Pakistan’s original ‘Kernal’
variety as traditional Indian basmati strains.
(viii) India has listed Basmati-386 and Taraori Basmati (HBC-19) in the EU’s
list of basmati. These are actually different names of Pakistan’s “Kernal
Basmati”. Furthermore, in the EU list, Basmati-217 is also listed by India
as one of their basmati. In fact, it is also a Pakistani basmati but not
kernel basmati as grain shape is different. The linkage of Basmati 217 to
Pakistan can be verified from the FAO report titled “New avenues for
augmenting and sustaining rice exports from India.”
55
(ix) The issue has become critical as India is now in the process of patenting
their commercially grown basmati varieties, which may prove to be the
last nail in the coffin for Pakistani rice heritage. India has already
misreported on basmati varieties to the EU and Food Standard Agency
(FSA), and has misled and misinformed consumers at large.
(x) Pakistan has to come up with a genuine legal definition of basmati in
consultation with India or separately in case India tries to dilute the
definition. India’s dream of monopolizing the basmati trade by shipping
anything grown in India as basmati can only be prevented if Pakistan fully
embraces DNA technology to check the adulteration in basmati. Finding a
marker for CSR-30/Yamini to separate it from genuine basmati would be
the first step in this direction.
5. Oil crops
(i) In cultivation of canola and sunflower, a weak link is the lack of adjustable
planting machines (since seed rates of both are very low) and modified
mechanical harvesting equipment for both crops.
(ii) For sunflower, need for seed driers to reduce postharvest losses.
(iii) Weak linkage done in strategy development for edible oil and livestock
industry.
(iv) Key anomaly with edible oil value chain in Pakistan is the traditional
culinary preference of consumers towards hydrogenated and granulated
oils (vanaspati ghee) that resemble the old ‘ghee’ made from dairy butter,
over liquid vegetable oil products.
6. Horticulture Products
• Vegetables
(i) Virtually all vegetables are grown prospectively without any market links
and price security, making it a high risk business.
(ii) Vegetable seed industry is mostly informal, domestically produced seeds
of traditional ‘noble’ varieties with low yield potentials.
(iii) Most seed farms utilize sewerage waste water from urban areas as
organic fertilizer, which carries bacterial diseases and toxic chemicals that
find their way into vegetables as serious health hazards.
(iv) Many farmers sell their crop at maturity to ‘Arhtis’ (middlemen) that adds
an extra link in the value chain to the detriment of crop value accrued to
the farmer.
(v) Many farmers are captive producers to the middlemen money lenders
because of lack of access to formal credit. Due to high risks involved in
production (weather vagaries, diseases, pests, etc.) and price instability,
formal sector lenders are shy of advancing credit to small vegetable
growers. The indirect interest charged by financer-middlemen through
pricing is unbearably large. Thus all market risk is passed down to the
grower.
(vi) The transport and rotting losses from farm gate to auction floor and from
there to the consumer through retail chain is passed on to the consumers.
(vii) Lack of field heat removal technology at farm, environmentally controlled
sorting, grading and packing facilities near vegetable wholesale markets
reduces the shelf life of most products to couple of days in summer and
weak at most in winter. This short time window, combined with lack of
56
proper packing material for transport limits inter-regional movement of
perishable products. The conventional transport means of gunny bags or
wooden crates cause considerable physical damage in transport.
(viii) There is no regulatory mechanism to check residual plant protection
chemicals on fresh vegetables at any stage of the value chain. The high
incidence of stomach ailments and kidney diseases in the country can be
traced to toxic residues on fresh vegetables.
(ix) Exporters do not have direct access to farm gate produce. They collect
their goods from fruit and vegetable market auction floors and do grading,
sorting, and packing in unhygienic buildings around the market premises.
(x) Export is tedious and risky since air terminals and cargo flights do not
have any infrastructure for handling perishable horticulture products and
all export is done on exporters’ risk, with no insurance cover and without
formal access to credit.
(xi) Under these conditions, exporters resort to heavy under invoicing to
phantom buyers in Gulf and UK markets against DAA,11 and not letters of
credit. State Bank of Pakistan’s horticulture export data is therefore
understated.
(xii) Foreign corporate trading houses cannot operate in Pakistan under these
circumstances of uncertainty and concealment practices. The opportunity
for becoming suppliers to international fresh food chains cannot be
realized.
• Fruits
(i) Low tree populations. Internationally, citrus are being grown with over 250
plants and mango with 110 plants per acre. In Pakistan, citrus population
is kept around 60 – 80 plants and mangoes at 25 – 30 plants per acre.
Accordingly yields are far lower than international averages (e.g., citrus
yield are only 6 – 10 tons per acre against 25 tons in US and 40 tons in
Brazil).
(ii) The varieties grown are acceptable or popular only in domestic markets.
There has been no orientation towards international market demands in
selection of genotypes to be grown.
(iii) There are no certified plant nurseries to guarantee purity of variety or
adaptation of plant breeding for export orientation.
(iv) Skills for orchard management are limited to archaic practices. Tree
pruning, weed control and irrigation techniques have not been upgraded
according to modern research.
(v) Inter-cropping is frequently done with adverse effects on crop and trees;
thus, causing mis-utilization of water and fertilizer resources.
(vi) Orchard produce is sold at fruiting to middlemen who take responsibility
of security against birds and poachers until harvest. The middlemen are
usually operating as front-men for large agents in the fruit and vegetable
markets. Orchard owners often make contractual agreement to sell
orchard produce for two or more years in advance against cash
advances. This credit is recovered in highly discounted price for the fruit
subsequently.
11
Documents Against Acceptance.
57
(vii) The conventional marketing arrangement binds orchard owners rigidly
and they cannot break out of the advance payment cycles even if they
want to harvest and market the produce themselves. The role of these
middlemen operative becomes indispensable in the fruit value chain.
(viii) Harvesting methods, packaging materials and transport arrangements
cause considerable physical damage to fruit and the discounts for this are
passed on to the orchard owner. Sorting and grading is mostly done at
the retails shops after wholesale purchase from the fruit and vegetable
markets and the losses passed on to the consumer. The middlemen in
the value chain extract profits through easiest and least efficient ways and
have no stake in preserving quality or reducing losses.
(ix) For exports, the parameters are the same as described above for
vegetable exports.
7. Livestock Sector
(i) The sector is in the informal sector (over 95%). As such institutional
outreach for formal level interventions is difficult or impossible, as is its
regulation.
(ii) There are no concentrated clusters of animal breeding (except the buffalo
colony outside Karachi with over 200,000 buffaloes). Outreach of
research and extension is difficult in the vast areas of thinly populated
livestock units.
(iii) The traditional animal husbandry methods are counter productive and
adapted to the particular socio-economic conditions in the rural areas. A
radical change in mindset of animal owners will require much effort and
physical support systems.
• Dairy Sector
(i) Most dairy farmers have subsistence orientation rather than commercial
outlook because of small herd size (average 1- 2 animals) and illiteracy.
(ii) Low milk yields due to poor extension practices:
(a) Inadequate nutrition in feed. Two myths persist in feed habits: (i)
wheat straw is considered the stable feed although it is only filler
with no nutritional value; and (ii) cotton seed cake with high oil
content is preferred whereas oil has little value and passes
through the digestive system. Most farmers do not understand
how to prepare and give balanced feed.
(b) Animals being tied because of lack of space and security
concerns. Tying animals changes the natural disposition of
animals and reduces milk yield.
(c) Water is not given on need basis, freely. Tied animals are
provided water on farmers’ convenience.
(d) There is no tradition of making silage for lean fodder periods that
occur twice a year – May/June and October/November. Feed to
animals is compromised by this constraint during those periods.
(iv) On veterinary services,
(a) Lack of veterinary services on farmers premises manifests in
animals infected with various diseases that adversely effect
animal health and quality of milk.
(b) Lack of artificial insemination services or easy reach to bulls often
results in farmers missing the critical ‘heat’ period. Especially
58
buffaloes are ‘silent heaters’ and hard to detect. This shortcoming
reduces the total number of lactation cycles in an animal’s life,
reducing the total milk that it can produce.
(v) On market anomalies and consumer awareness,
(a) Consumer preference is for buffalo milk with white color and high
fat content. Buffaloes are less efficient converters of ‘feed to milk’
than cows. More so, buffalo is more heat sensitive and milk
production drops radically in summer months. The high ratio of
buffaloes to cows in most dairy herds is not desirable from
productivity point of view.
(b) Unhygienic milking conditions, nonfood grade containers12 and
lack of cool chain infrastructure reduce fresh milk life to a few
hours, which results in high rate of spoilage or gross adulterations
with unclean ice and undesirable chemicals.
(c) Poor rural infrastructure and lack of market access are key
bottlenecks to development of a dynamic and productive dairy
sector in the rural areas. Despite the huge volume of milk
produced in Pakistan, processors find it hard to procure sufficient
milk to meet consumer demand, increasing demand for imported
products.
(d) Consumers are unaware of the milk quality they are buying, and
most cannot afford the higher cost/higher quality presentations
offered by the processing industry.
(vi) On regulatory weaknesses,
(a) Lack of pasteurization law13 and strict implementation mechanism
of milk food safety standards.
(b) Alternative milk products to expensive UHT milk have not
developed due to absence of regulatory pressure so most
consumers have little option other than buying adulterated and
unprocessed milk.
(c) The multinational and national milk processors have not been a
help in creation of medium and large commercial dairy farms
because they are content with keeping a captive supply line from
small subsistence farmers who cannot bargain for price structures.
Also these companies have opposed introduction of laws that
would make pasteurization mandatory since that would create a
competition from cheaper milk products against their high priced
UHT products.
• Meat Subsector
Apart from the technical shortcomings described under dairy sector weaknesses
for animal husbandry, the meat sector is hampered by an old food law by which
meat cannot be sold in a municipality unless the animal has been slaughtered
within the municipal limits in an approved abattoir.
12
High bacteria count due to these conditions accelerates milk souring process.
13
Most countries prohibit sale of unprocessed milk in urban areas, minimum requirement being
pasteurization.
59
Appendix 2
The Suggested Action Agenda for the Genesis of the Structural Transformation of the Rural Economy
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
1. Policy/Regulatory Reforms and Promotional Policies
1.1 SOUND MACRO AGENDA
• Lower deficits through reduction of subsidy provisions
• Higher development funding for agriculture & rural economy development
• Lower inflation rate (move to single digits)
• Rationalize tariffs, trade policies
• Prudent monetary policy
1.2 PRODUCT MARKETS
1.2.1 Food Value Chain
1.2.1a Wheat-Wheat Food Security Action Plan: 3-5 year plan that ♦ Review provincial Pure Food ♦ Amend contract laws to enable
Products is multi-stakeholder participated & will focus in: /Adulteration Ordinances that regulate commercially efficient & fair link up
food items available for sale but do not of small rural producers, rural
♦ Buffer Stock Management: specify clearly the food standard nonfarm enterprises (RNFEs) with
(i) remove government-determined support & requirements, enabling adulteration that agribusiness corporations for
issue price for wheat & wheat flour & replace may be hazardous to health marketing & export of food products
with market-determined pricing of wheat &
wheat flour; ♦ Implement market-based wheat
policy; encourage private sector
(ii) base strategic reserve stock management involvement in wheat/wheat products
on 2-3 months wheat flour consumption supply value chain network
requirements;
♦ Revise system of regulation,
(iii) free domestic (intra and inter-provincial) & certification, and quality assurance &
international trade movement of wheat; standardization of food products to
ensure global competitiveness
(iv) restructure Pakistan Agriculture Storage
and Supplies Corporation (PASSCO) &
provincial food departments;
(v) replace blanket wheat subsidy with
targeted food safety net program; and
(vi) establish a buffer stock reserve system
60
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
with a wheat market intelligence system, and
mechanisms for forward contracts for
imports/exports with private sector
participation
♦ B-Enhanced Private Sector Participation
(from 1-5 years):
(i) legal framework for development of
warehouse receipt, collateral management,
forward contracts to sustain strategic reserve
management;
(ii) divestment of public-owned wheat-based
market infrastructure; and
(iii) policies for promoting storage, grading, &
transport facilities of private sector.
1.2.1b Basmati Rice ♦ Secure copyrights on basmati in ♦ In consultation with Rice Exporters
Value Chain cooperation with Intellectual Property Association of Pakistan, provide
Organization, Pakistan & Rice Exporters measures for export of rice through
Association of Pakistan: brand names and not generic type of
rice to enhance value addition
(i) Find a marker for CSR-30/Yamini to
separate it from genuine basmati;
(ii) Come up with a genuine legal definition of
basmati in consultation with India;
(iii) Invest on DNA technology to check
adulteration in basmati
1.2.1c Livestock- Dairy ♦ Amend provincial Animal Slaughter ♦ Ensure measures that will make
Value Chain Control Act and Abottoir Act that Pakistan a foot and mouth disease
constrain development of meat industry free country
♦ Remove involvement of local ♦ Conduct inventory of food safety
governments in fixing retail prices for laws that specify fat contents and
meat & milk products include standards on microbial
61
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
counts, chemical & hormonal
♦ In consultation with local adulteration, etc.
governments & private sector, introduce
promotional policies for open yard ♦ Review viability of introducing
animal husbandry & other development pasteurization law
policies that increase milk yield
♦ Formalize milk middlemen/ traders
through regulatory measure that ensure
their official registration including their
utensils & food grade materials
♦ Introduce time-bound & transparent
incentives for small/medium
pasteurization unit suppliers
1.2.1d Sugarcane ♦ Amend Sugar Cane Act 1934 in
Industry tune with contemporary conditions
♦ Conduct consultations & assist
stakeholders in development of
enhanced & standard contracts between
growers & mills based on sucrose
content of cane (ensure mandatory
testing at supply point by mills) &
linkage of cane prices with sugar price
in market
♦ Evaluate viability of developing time-bound & transparent incentive
schemes for mills to install efficient boilers & turbines for conversion of excess
bagasse to electricity generation
♦ Evaluate viability of developing time-bound & transparent incentive
schemes to mills for the processing of molasses to alternative fuel/alcohol
production
1.2.1e Horticulture ♦ Overhaul provincial Agriculture
Value Chain Produce Market Ordinances that
regulate trading activities, the setting up
62
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
of market infrastructure, licensing,
levies, and trading practices
♦ Encourage private sector
participation in development of feeder
cool chains (from farm gate to
wholesale markets), terminal cool
chains infrastructure, & other
marketing/value adding activities
♦ Develop time-bound & transparent
incentives to improve horticulture
product quality, grading, and packaging
to international standards
♦ Develop regulatory measures for
inspection & control of chemical
residues on fruits, vegetables, and other
food items; Participation of private
sector, nongovernment organizations
(NGO), and institutes is needed
1.2.1f Food Safety & ♦ Rationalize existing food safety &
Quality quality (including adulteration)
Measures for measures consistent with international
Food chains food quality standards & processes
requirements & World Trade
Organization (WTO) measures. These
would include: Pure Food Ordinance,
1960; Cantonment Pure Food Act,
1966; Pakistan Hotel and Restaurant
Act, 1976; Pakistan Standards & Quality
Control Authority Act, 1996
1.2.2 Non-Food Value Chain
1.2.2a Cotton-Textile ♦ Reinvigorate “clean cotton program” ♦ Review & revamp provincial Cotton
Control Acts to address contemporary
♦ Introduce policies that discourage the use requirements for ginning factory
of jute bags for transporting cotton standards
63
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
♦ Stricter regulation & enforcement on ♦ Promotion/incentive schemes for the
ensuring only the sale of certified cottonseed use of improved ginning machinery/
/Bt cottonseed varieties modernization of gins
♦ Clarify which agency should be tasked to ♦ Review impact of collapse of Doha
undertake certification process for cotton; round negotiations on cotton-textile
Provide the infrastructure required for industry in context of rationalizing tariffs,
certification sales taxes, withholding, & turnover
taxes affecting textile industry & other
♦ Ensure regulation policies for adoption of areas for increasing competitiveness of
seed cotton & lint standardization & grading industry (technological upgrade of
using internationally acceptable cotton grading ginning, weaving, processing, &
standards garment production; product
diversification & value addition; etc.)
1.2.2b Edible oil, ♦ Develop quality control measures ♦ Develop strategies for
oilseed crops, with communication strategy/plan on development of locally extracted
bio-gas vanaspati ghee production oilseeds & dairy sector feed mills
♦ Review tariff structure of local
oilseed production and extraction in
relation to imported oilseed crops;
review the need for import substitution
promotion policies
♦ Formulate development strategy and action plan for alternative fuel taking
into account food needs, climate change, and viability of pilot testing in remote
rural communities and/or rural based enterprises
64
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
1.3 FACTOR MARKETS
1.3.1 Resource-Based
1.3.1a Land Market
♦ Review the viability of updating annually & ♦ Develop a National Policy on Land ♦ Revamp Land Revenue Act to
issuing pass books to all land owners Resources Development & pave the way for development of
Management that addresses the 2 efficient land market, specifically:
objectives of (a) conserving & managing
land resources for sustainable (i) at present more than 50% of land
14
agriculture development, and (b) entitlement is collective with no
ensuring development of an efficient physical demarcation of land; will
land market15 need to be revised to ensure titling
enabling use of collateral instrument;
(ii) outdated system for recovery
procedure of dues; and
(iii) ensure consistency with national
policy on land
♦ Revamp Land Acquisition Act to
pave the way for a land market
1.3.1b Water and ♦ Water Policy Summit: Through consensus ♦ On the basis of a Water Policy & ♦ Develop and enforce policies for
Irrigation building process, develop the Pakistan water Road Map, provinces to rationalize their formalization & institutionalization of
policy and road map16 with the end-view of respective water-related legislations transferable water rights &
14
The first objective entails inter alia: (i) institutional framework & harmonization of various departments & agencies involved in land conservation, development & management; (ii)
conduct of scientific survey for estimation of profile of land degradation; (iii) encourage sustainable measures for addressing land degradation and marginal lands (e.g., land leveling,
saline agriculture, encouragement of farm forestry & community-based agro-forestry in marginal lands, etc.); and (iv) linkage of land and water management
15
The second objective of leading to an efficient land market would require: (i) updating of land records through computerization before titles can be conferred;
(ii) streamlining and modernizing institutions on land use; (iii) simplifying settlement of land disputes in a transparent & accountable manner; and (iv) In the
interim, promote institutional arrangements for land rental/lease and for consolidation (e.g., contract laws to ensure contract farming) will need to be developed
to take advantage of economies of scale in production
16
These draft reports can be used as starting point for developing the road map. These are the water policy report initiated by the Water Policy (Ministry of Water
and Power, MOWP), draft Water Policy (Planning Commission), and Water Sector Strategy (MOWP)
65
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
building an integrated & holistic approach to including local water usage rules and entitlements
water resource management17 implementation of integrated water
resource management
♦ Formulate policies to develop
reliable data collection on surface and
ground water availability, allocation for
different canal commands, &
groundwater quality at provincial/district
levels; Federal supervision required for
ensuring systematic data collection, and
addressing inter-provincial concerns;
Need to include mechanisms for
participatory monitoring & evaluation
system & identifying institution/s in-
charge, & provide communication
system for regular information flow to
stakeholders
♦ Promotional policies (e.g., assess
use of “smart subsidies”) to encourage
public-private partnerships (PPPs) on
water saving techniques in cultivation of
different water terrains, & other
innovative designs of groundwater
recharge dams & water harvesting; and
common treatment facilities particularly
in areas with fresh groundwater
17
The policy would, among others: (i) revisit & prioritize planned investment in large storage infrastructure & groundwater use in light of macroeconomic instability
due to public budget deficit & conflicting demand uses; put equal emphasis on investments for institutional & governance reforms that lead to decentralization &
participatory-based integrated water management; provide capacity building for use of participatory-based & decentralized integrated water resource
management & efficient water use; provide system for improved knowledge base of & follow through information on water use, quality, & availability in relation
to environment & conflicting uses as well as consumer awareness on water & land degradation; (a) policies for improved financing of water use & operations &
maintenance (O&M); and (b) need for measures leading to formalization of water rights & entitlements
66
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
1.3.1c Labor Market ♦ Ministry of Food, Agriculture and ♦ Implement the road map
Livestock (MINFAL) to initiate & develop
18
a multi-stakeholder road map for
human resource development of rural
economy; Two levels are required for
skills upgrading: (i) “grassroots
technicians”,19 and (ii) farm enterprise
managers, especially for small-scale
producers20
1.3.2 Other Factor
Markets
1.3.2a ♦ Roadmap on Research and Development ♦ MINFAL with public research ♦ Re-enforce science and
Science and (R&D): Undertake independent/multi- institutes & private sector to address the technology-based R&D on
technology-based stakeholder assessment of service delivery of killer diseases affecting major development of indigenous crop
Research and public institutions21 to come up with agriculture products, such as: die back production technologies
Development (R&D) recommendations and develop a road map disease for mangos, bunchy top for
bananas, fusarium & phytum for & ♦ Review and amend intellectual
asperagilus flavus during postharvest property and patent laws on R&D for
stage of chilies, downy mildew for agriculture & RNF development- to
onions influence private gains to innovation
♦ For immediate R&D support &
more effective tri-media dissemination
to (i) address problems of mealy bug,
white fly, infestation, cotton leave curl
virus infestation affecting cotton; and (ii)
18
Input to road map would include: (i) Review of existing employment & labor skills development promotion measures affecting agri-based value chains through
assessment of technical & managerial gaps & involvement of private sector involved in value chains & provide policy/institutional/capacity building agenda for
action; and (ii) Human resource requirements that involve services to facilitate intra- & inter-value chain movements
19
On (i), the immediate requirements are ginning factory technicians, cool chain machinery operators & mechanics, cotton graders, grain silo operators, chemical
laboratory technicians, irrigation technicians for sprinkler & drip irrigation systems, harvesting machinery technicians, orchard maintenance technicians,
veterinary paramedics, semen production & artificial insemination technicians
20
Important skills enhancement for rural producers are financial management, resource optimization, credit management, and market intelligence through internet
access.
21
These include agriculture extension, agriculture research systems, demonstration farms, agriculture extension, federal seed certification & registration
departments, public corporations- PASSCO, Pakistan Horticulture Development and Export Board, Pakistan Dairy, PAMCO, etc.
67
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
institutional support for R&D to
expand/improve quality of products in
existing/potential value chains22
♦ Develop commodity grading &
quality standards that are internationally
recognized
♦ Rationalize duty/surcharges on the
imported machinery for driers, grading
units, cold storage chambers, drying &
dehydration equipment, agri-processing
equipment, greenhouses and other
market infrastructure
♦ Evaluate & introduce appropriate
low-cost processing technology that
minimizes damage rice grains
♦ Increase budget share of R&D to 3% of gross value added of agriculture
1.3.2b Extension ♦ Provide immediate actions on extension ♦ Promotional policy for technology transfer facilitation through strategic
for improved agronomic practices with active alliances with agriculture equipment supply and input companies
private sector participation through tri-media
♦ Promotional policy through strategic alliance with local radio, TV channels,
♦ Summit on R&D and Extension: Hold a mobile phone companies & print media on provision of advice to growers about
R&D& extension multi-sector summit on water application, irrigation timing & costs, fertilization, planting options,
agriculture value chains to come up with addressing plant & livestock diseases, new technologies, other good agronomic
strategy and action plan for R&D & practices, weather data, markets, climate change, etc.
extension/service delivery of key agri-based
value chains ♦ Promotional policy for introduction of sodic/saline water treatment
technologies like sulfuric acid generators through strategic alliances with
manufacturers
1.3.2c Rural Finance ♦ Rural Finance Strategy: Create a multi- ♦ Develop Warehousing Act & Warehouse receipt system for collateral
sector/participatory task force that will examine management, risk management, & access to credit
22
Cotton-textile industry, wheat, rice, horticulture, sugarcane, livestock, fisheries, edible oils.
68
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
the legal and regulatory framework on the rules
of trading & stock inventory for credit ♦ Develop commodity exchanges & hedge markets for forward trading
management,23 and will establish appropriate
infrastructure for innovative financial ♦ Explore crop insurance schemes
instruments24
♦ Explore feasibility of cotton hedge trading
♦ Review existing government-funded rural
finance programs/projects & other rural finance
schemes initiated by NGOs & private sector
with end-view of taking stock of what
worked/did not work & providing
policy/institutional reforms to the rural finance
strategy25
1.3.2d ♦ Review tariffs with end-view of ♦ Develop the standardization
Water-Conserving providing incentives PPP on regulations for agriculture machinery
26
Technologies & development of water saving & equipment, and internationally
Agriculture techniques in cultivation (e.g., drip accepted provisions for intellectual
Machinery irrigation, sprinkler irrigation or lay-flat property rights
hoses), water conservation of rain water
in rain-fed areas or on hilly slopes,
skimming wells, spate irrigation, flood
spreading, & other innovative designs of
groundwater recharge dams & water
harvesting, and common treatment
facilities particularly in areas with fresh
groundwater
♦ Rationalize duty/surcharges
1.3.2e Variable ♦ Review subsidy policies for phosphate & ♦ Review & revise Pesticide Act
Inputs potash fertilizers, urea, & feedstock gas (1971) & other laws relating to
23
Infrastructure includes warehouses, terminal collection centers & central hubs, information system, etc.
24
The include the warehouse receipt system, collateral management services, commodity exchange, forward contracts, hedge markets, & crop insurance.
25
These would include Zarkhaiz “one window operation” scheme, sada bahar revolving finance scheme, crop maximization project, white revolution credit scheme
for dairy/livestock, Sairab Pakistan scheme, red meat financing scheme, microfinance, etc.
26
The standardization of equipment may include safety features, dimensions, designs and materials used.
69
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
subsidy support to fertilizer manufactures in agriculture inputs & service providers to
context of rising global prices and fiscal ensure transparent, efficient, &
deficits; and develop agenda for accountable regulatory oversight
alternatives/options that rely on time-bound role/inspection functions on chemical
phase out of subsidy provisions residues of federal & provincial
governments
♦ Revise Seed Certification Laws to
ensure quality control and standards
consistent with WTO & provide
appropriate regulatory framework for
private sector company participation
♦ Review and reduce import duties
for good quality wax used by
fruit/vegetable exporters
1.3.2f ♦ MINFAL & Provincial/Local Governments ♦ See horticulture market
Market Infrastructure to host multi-stakeholder consultations with infrastructure policy requirements
end-view of identifying & developing market
infrastructure action plan27 ♦ Reduce import duties of re-
conditioned vehicles with cooling
facilities for transportation of perishable
commodities
♦ Review viability & develop “special
purpose corporate vehicles” instruments
for PPPs of market infrastructure for
agri-based value chains
♦ Streamline export procedures at
airport & sea terminals for perishable
goods & consolidate functions of 4
checking; Install scanning machines
27
See section 3 below for some examples of market infrastructure for PPP on private sector investments.
70
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
♦ Promotional policies that attract
private-run carriers (air/sea/land) that
provide refrigerated transport & provide
guarantees of compliance to
temperature standards
2. Institutional Reforms and Capacity Building
MINFAL & Inter-federal MINFAL to facilitate private sector-run networks, partnerships, & alliances to
meet stakeholders’ needs for supply chains & to maximize market outreach.
MINFAL-provincial-district Suggested areas are:
MINFAL & private sector (i) Consumer needs & protection- setting & monitoring national food safety
(from farmers, to corporate standards for all food products consumed or exported from Pakistan consistent
entities to NGOs) with WTO guidelines
Multi-lateral, bilateral (ii) Development of comprehensive distribution infrastructure through PPPs for
cooperation (e.g., South Asia all food related/agri-based products
Free Trade area, South Asian
Association for Regional (iii) Facilitation of food, beverage, & other agri-based processing through
Cooperation) provision of appropriate information & an enabling investment legal regulatory
framework
(iv) Support to develop primary agriculture through increased R&D
(innovations in agriculture), quality assurance & standards, MIS & market
intelligence
(v) Regulatory oversight of inputs & service providers
(vi) Regulatory capacity to develop standards to govern food safety in agri-
food industries & mitigate food safety risks to protect consumers from
contaminated food imports, deliberate sale of adulterated, mislabeled & expired
branded food products
♦ MINFAL to develop skills on regulatory harmonization, antitrust policy
cooperation & regional competition through international laws & multilateral
policy agreements on matters on governance of food safety, food quality
71
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
standards, & other agri-related policy matters
♦ MINFAL/PROVINCIAL governments to promote strategic alliances with
international supermarket/food chains, agribusiness firms, & active participation
in international food-based trade missions/fairs
♦ MINFAL to work with trade attaches & private sector in Pakistan for the
promotional activities of agri-based products
♦ MINFAL to work with other ministerial agencies to rationalize duplicating
agriculture/rural economy functions
♦ MINFAL and provincial to delineate clearly roles in rural economy
development
28
Federal agencies relating to (i) Integrated water resource management capacity building action plan, resource requirements, & sources of funds
water:
(ii) Implementation of capacity building plan
Water & Power Development
Authority (WAPDA), Ministry (iii) Formation & capacity strengthening of area water boards, water users’ associations/farmers’ organizations on integrated
of Water & Power (MOWP), water resource management, support for monitoring & enforcement for water quality
Indus River System Authority,
Federal Flood Commission,
as well as environment-
related agencies & their
relation with Provincial
Irrigation Development
Authorities (PIDAs)
Federal & provincial water-
related agencies & their
relation with the area water
boards (AWBs), water users’
associations (WUAs), &
farmers’ organizations
28
Capacity building to focus on planning & development, decentralization, transparency, accountability, improved economic incentives, O&M management,
strengthening knowledge base on groundwater management & sector coordination as well as active participation of WUAs, AWBs, & FOs
72
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
From subsistence to ♦ Initiate policy dialogues of existing & prospective supply chain network
commercial farms stakeholders for various commodities with end-view of coming up with
institutional arrangements for upgrading subsistence farming into
Development of commercially commercial enterprises & agglomerating subsistence farms to viable farm
viable RNFE production blocs/clusters such as contract farming arrangements
♦ Training needs:
(i) ISO & Codex Best Practices for Good Agriculture Practices (GAP) for
animal livestock & crop production,
(ii) Good Animal Feed Practices,
(iii) Good Manufacturing Practices (GMP),
(iv) Good Hygienic Practices (GHP),
(v) Hazard Analysis Critical Control Points (HACCP) food safety points,
traceability (according to ISO 90001:2000 standards),
(vi) WTO agreement on application of sanitary & phsytosanitary measures
(SPS),
(vii) agreements on technical barriers to trade, Codex Alimentarius,
(viii) Good Retail & Distribution Practices
♦ Farmer organization development as legal entities that access tax
incentives for collective marketing, access to inputs & financial services, &
73
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
conduct management contracts
♦ Livestock: Policies that will encourage institutional innovations for corporate
livestock farmers to organize small livestock holders &/or serve as anchors for
development of integrated value chains for meat & dairy products
♦ Develop time-bound safety net measures of rural nonfarm
entities/intermediaries who will not cope with integration requirements of supply
chains
Public-private partnerships for ♦ Livestock: Multi-stakeholder to develop a ♦ Rice: Quality control measures for
strategic value chain strategy and a 5-year action plan for the sheller driers (aflatoxin watch), millers,
development & capacity development of a feed-livestock-products and trader-exporters & awareness of
building value chain quality control needs from farmers to
processors & traders/exporters
♦ Multi-stakeholder to develop a strategy
and 10-year action plan on bio-fuel energy ♦ Livestock: Training activities for
development for rural & agricultural purposes middlemen, farmers, milk dealers on
through local innovations & entrepreneurship basic hygiene practices & strengthening
capacity in procuring quality milk
♦ Government to access technical
assistance for business capacity
development & value chain
management of farmers’ groups,
traders’ associations, & other groups
involved in the value chains
♦ Extension: Implement action agenda
for improved development of agronomic
practices of small-scale farmers &
livestock producers w/ private sector
participation
Enhance capacity of Federal Seed
Certification & Registration Department
for collecting samples, testing &
certification of seeds
74
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
Consumer awareness on ♦ Livestock: Public awareness campaigns on health hazards of adulterated
safety & protection, water use milk & meat products
& environment
♦ Public awareness & community education programs especially among
women, youth & farmer groups on the finite nature & economic value of water,
local aquifer conditions, risk of exploitation, water conservation & need for
prudent management; understand the linkages between water, sanitation,
health & productivity, & need for water quality enforcement measures
♦ Social mobilization to develop local groundwater regulation focused on
participatory hydrological monitoring & micro planning
♦ Through tri-media public awareness on adaptation and mitigation measures
for climate change
3. Infrastructure Investments
Productive infrastructure ♦ Seek PPP for one stop processing of ♦ Land:
basmati rice (to include drying, shelling, (i) Set up task forces at provincial Board of Revenue for the updating of land
milling, quality control measures, & export) records, possibly through remote sensing/GIS: identify financing requirements,
time frame, funding sources, & oversight institutions;
(ii) Invest on computerization of land records;
(iii) Invest on conferring conclusive titles of land;
(iv) Invest on institutional infrastructure for dispute resolution; and
(v) Massive campaign on computerization, land record data updating, and titling
procedures & rights especially for small-scale farmers
♦ Rehabilitation of irrigation system & lining of canals (e.g., National Program for watercourses improvement in Pakistan and
Flood protection program)
♦ Timely start up & completion of irrigation construction of major dams & other foreign-funded irrigation projects
75
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
Food safety, quality ♦ Laboratories, food quality inspection facilities
standards, Certification
facilities, and Agro- ♦ Public health infrastructure for food safety & consumer protection
meteorology
♦ Plant health inspection infrastructure for prevention, identification
management & eradication of plant pests & dangerous fungal contaminants
(e.g., mycotoxins)
♦ Certification facilities for fruit nurseries and vegetable seeds especially for
horticulture
♦ Modern weather collection equipment at research stations & in every cluster
of villages that share common weather conditions
Market infrastructure for PPP Livestock: Need for small-scale livestock ♦ Develop market infrastructure and ♦ Develop Pakistan as central
or private sector investments farmers and middlemen to access basic logistics centers, strategy and plan with commodity exchanges of products
testing equipment29 multi-stakeholders of agri-based value for Central Asian and Gulf state
chains (see 1.3.2f): These would countries
include- farm service centers, wholesale
markets, pack houses, cold stores in ♦ Establish market information
airports/seaports, reefer containers, portals
30
fruit/vegetable dehydration
♦ Develop proposals for trade
promotion activities of market
infrastructure
♦ PPP on implementation of universal
cotton grading standards with
internationally qualified cotton grading
companies
♦ Promote bulk storage facilities, e.g.,
silos, with modern testing & certification
facilities as integral parts of facilities
29
Explore private sector/financial sector participation for providing the equipment on a pay later scheme or other financing options.
76
Immediate Term Short Term Medium Term
Areas of Change Actions
(within one year) (between 1 and 3 years) (between 3 and 5 years)
Divestment of public-owned ♦ Wheat: Inventory & audit of state- ♦ Divestment process
facilities owned purchase centers, godowns,
storage facilities owned by PASSCO,
provincial food departments, & markets
owned by Government for divestment;
Develop implementation plan including
PPPs with private sector, NGOs of
these ancillary facilities
♦ Action plan for consolidation and/or
31
phase out of numerous mills.
Livestock: Inventory & audit of public-
owned (federal & provincial) livestock &
poultry farms, veterinary
hospitals/dispensaries, artificial
insemination centers, veterinary
laboratories; Develop implementation
plan for divestment including PPPs with
private sector, NGOs of these ancillary
facilities
30
These could be developed using cluster approach along the national trade corridor.
31
With move to market-based pricing of wheat & wheat flour, there will be dislocations of mini flours (> 8,000 in rural areas w/ capacity of 5 tons/day), > 70 small & medium flour mills
of 5-20 tons/day capacity, & 950 commercial mills whose capacity is 4 times greater than country’s wheat flour requirements; Need for time-based development plan
77
