Checkmated in wheat imports

Despite two transparent transactions conducted by the Trading Corporation of Pakistan (TCP) for the import of one million tons of wheat, the matter continues to be dogged by controversy.
The problem is not whether contracts have been awarded to the lowest bidders but why other bidders were prohibited from quoting for supplies from sources where the prices were known to be lower.
Doubts linger also in regard to the choice of Australia as a supply source and the question of GMO, both of these having a negative bearing on Pakistan's future wheat production and import profile.
When a Food Ministry (MINFAL) spokesman on 1st September announced that it would cost the Government Rs 110 per 40 kg (a total of Rs 3.0 billion on the present imports) to subsidise the imported wheat for supply to the millers, the only surprise was why this had not been realised earlier.
As a result, to partially offset this subsidy, the government has had to raise the issue price of wheat to flour millers, and consequently the retail price, by Rs1.00 per kg. Ironically, there would have been no need for this if government had had the foresight to allow import from sources other than the USA, Canada and Australia.
MINFAL's spokesman could provide no reason to explain the sourcing restriction, except to say that the decision was taken "keeping in mind the suitability of the commodity for the country."
This claim of suitability is debatable. Firstly, apart from being more expensive, the time-lag in shipment from these far-away sources means that those manipulating wheat stocks have been given an extra six weeks to control the market; secondly there is no survey to confirm that the consumer would prefer to Rs 1.00 per kilo more simply for the colour of the wheat.
In terms of the key nutritional factor of protein and bake-friendly factors of moisture and gluten, wheat from the US (or Canada and Australia) is no better than wheat originating from Western Europe.
Both are, of course, better than the wheat available from the Black Sea region (the Ukranians themselves admit the need to upgrade their wheat to international export standards, Kazakhastan cannot interest next-door China to buy its produce and even the Russians must have been surprised at the price they sold their wheat in Pakistan.)
If in the past the country was importing "white" wheat from the US, it was because the commodity was made easily available under a US arrangement known as "Public Law-480" that allowed Pakistan to pay in its own currency for such imports. But when wheat import was opened to the private sector in the 1990s, cost factors saw the extensive import of "red" wheat from sources such as Turkey, France, Rumania, even Saudi Arabia; its successful blending with indigenous wheat by domestic flour millers, and no resistance from consumers to this wheat.
At the present time, however, the price and colour of the wheat appear to be less problematical than Pakistan's decision to source a large quantity of the commodity from Australia. A few days before the opening of TCP's second tender, the Federal Food Minister, addressing a meeting of agricultural researchers and scientists, stated that "the government had acted with prudence in rejecting (earlier this year) the Australian wheat which could otherwise have had devastating effects on our own cultivation."
The Minister was referring to action taken by a Committee, headed by Dr Ataur Rehman, Minister of State for Science and Technology, which had additionally tested the Australian cargo and had justified its rejection on the grounds stated by the importing agency, PASSCO.
The Australians made a lot of noise at the time but were unable to produce any test report to contradict the committee's findings. Some months later, they did come up with an "independent" test which revealed that, although the shipped wheat did not contain the fungus identified by the Dr Ataur Rahman Committee, it was in fact, infected with another fungus, "Tilletia Walkeri."
This fact of fungus-carrying Australian wheat being unsuitable for import is Pakistan's known official position, which is why TCP's first set of Tender documents, issued in July 2004, required bidders to certify that the offered wheat was free of the fungus "Tilletia Walkeri."
Such a condition would have excluded, quite correctly, Australian origin wheat from the bidding (as is Indian wheat, on the basis of being infected with "Karnal Bunt.") But events moved inexplicably in another direction.
TCP's tender conditions were modified to remove the requirement in re: "Tilletia Walkeri" certification, as a result of which Pakistan finds itself importing half a million tons of wheat described by its Food Minister as having the potential to "damage" the country's existing cultivation.
This is not all. Dr Ataur Rahman, in co-operation with experts from Australia and the Australian High Commission, is reported to be again heading a committee that is re-examining the wheat it rejected earlier this year.
The reason given for the re-examination is that "Australia's reputation has suffered, it is a major exporter".
This is a regrettable and supine capitulation. Since when has it become Pakistan's duty to protect Australia's reputation? Who would be the loser if Pakistan did not buy Australian wheat? (With more than 70% of its wheat produced for export, it is Australia that needs major importing customers.) And what will happen to Pakistan's own reputation if Dr Ata reverses his earlier findings? As things stand, Dr Ata's opinion does not appear to carry much weight with the Australians who, without even waiting for the re-testing results, have announced that "with the award (to it) of 300.000 tons of wheat from the second Tender, our trade dispute with Pakistan has ended."
One could sympathise if, for instance, such concessions had been made to the USA, with which Pakistan's multi-level economic engagements and security ties might justify special treatment.
It would be an unwelcome, but necessary, price to pay for the upkeep of a strategically valuable friendship. But why succumb to pressure from Australia?
There is no economic benefit in it, except for Australia, in whose favour the trade balance is already heavily tilted. Nor is there any diplomatic benefit, considering that Australia is not supportive of most matters of regional and international importance to Pakistan.
Moreover, favouring Australia is unlikely to be welcomed by Saudi Arabia, to whom less than a year ago the Australians attempted unsuccessfully to ship infected sheep during the Haj season.
Or with the new Iraqi government, considering Australia's admission that it paid bribes to the Saddam regime and jacked up the price of the wheat it sold under the UN's Oil-for-Food programme.
The other issue arising from this tender is GMO. From this winter both the US and Canada will begin commercial production of GMO wheat. Bearing in mind that Pakistan's stated policy is to import only non-GMO wheat, it is not clear what course MINFAL will adopt for the future.
Will it then import "red" wheat also, or will it specify Australia as the only origin for future imports of non-GMO "white" wheat?"
This question becomes important in the light of the irrigation water situation for the winter crop that suggests there will be more imports of wheat early next year. If Pakistan will eventually have to import "red" wheat, why not now when prices are favourable?
No doubt GMO crops represent the future of food production; but bio-technology is a complex science and so far the side effects of GMO crops are not fully understood.
Most countries with an agro-production base are conducting extensive tests to determine how to protect their natural crops from pollination by "trans-genic" varieties before they allow the import or indigenous production of crops from GMO seeds. Pakistan, unfortunately, lags well behind in this very important area.
The TCP tender requires shippers to provide certification that "there are no transgenic (GMO) wheat varieties for sale or in commercial production in (the country of origin) at this time."
The US decision to begin GMO wheat production has come about as a result of extensive field trials. It is not clear whether the trials also included "soft white" wheat cultivated in the North-West USA and whether the trial crops, which do not classify as commercial production, are destroyed or retained.
It is a well-documented fact that genes from GMO crops transfer themselves multi-modally to non-GMO standing crops. Pakistan lacks the sophisticated technology needed to trace out GMO strains.
Consequently, it would appear that the planners have checkmated themselves. On the one hand, the country's food security has been made dependent on badly-worded certifications that could negatively impact our production and make Pakistan an increasingly large importer.
(Just four North African countries, Egypt, Algeria, Tunisia and Morocco account for almost 20% of global wheat imports. Their combined population is less than that of Pakistan. Fear of food riots keeps their foreign policies compatible with those of their wheat supplier countries).
On the other hand, by changing our stated position on Australian wheat, we are signalling (a) that the earlier rejection was based on other than genuine quality considerations and (b) that we do not have confidence in our own official testing agencies.
If we are perceived as a commercially unreliable buyer, suppliers will always charge us higher prices, whether for white wheat or red wheat. And if we do detect GMO or fungus-infection in the cargoes being delivered to us, who is going to believe us?