Sino-isation of farming sector

Continuing this columns recent discussion on the need to attract FDI in unconventional sectors, todays piece would focus on the agriculture sector at large.

Recall that earlier this year this column highlighted how the farming sector has been the step-child of successive governments since the last two and half decades leading to continuous decline in farming GDP growth over the decades (See for instance: Pakistans forgotten lot published June 3, 2016).

A recent study by IFPRI, launched at PIDEs 32^nd AGM held a few weeks ago, highlights that one of the reasons behind slow farming growth is low productivity. Total factor productivity in agriculture sector has in fact remained flat since 1990, where growth has been driven by input intensification rather than technical change.

As a consequence food security has been persistently high, and consumption patterns remain skewed to cheaper calorie sources. Highlighting that farming growth is critical to reduce rural poverty, Abid Burki, Professor of Economics at LUMS, stressed that commercialisation can increase the scales of production in agriculture sector, examples of which are already quite visible in poultry, livestock and dairy sectors. Burki maintains that advanced technology in feeds and breeds is critical to the success stories, much of which is tech transferable at larger scales.

In this backdrop, Pakistan could make good use of Chinas farming sector skilled labour and as well as farming technology. Global media reports suggest that China is fast approaching the maximum production of food that can be obtained from its land. Its total arable land and permanent cropland actually fell between 1991 and 2009. In his presentation at PIDEs moot, Burki highlighted that China has 20 percent of worlds population and just 8 percent of worlds arable land.

Moreover, with incomes rising in China, the Asian dragons middle class is expected to grow from 10 percent of population in 2013 to 40 percent of population in 2020. This is driving, and will continue to drive, lifestyle changes creating pressures for imported meat, dairy, cereal, fruits and vegetables. Little wonder then that agriculture is one of the pillars of the China Pakistan Economic Corridor, whereas China is already investing Central Asia and Europe to develop farm land for food production.

Be that as it may, however, Pakistan needs to critically evaluate the options and conditions under which Chinese investments whether direct or via contract farming could be allowed in Pakistan since this country has plenty of hungry mouths to fill on its own. Plus, Pakistans overall population growth, including the growth of its middle class, also has to be reckoned with.

There would be of course medium benefits of Chinese investments in Pakistan agriculture sector. These benefits include tech and skill transfer, leading to increases in yields and productivity. But there may also be some untoward consequences, especially if FDI in farming sector is not well thought out.

For instance, contracts under contract farming have often been found to be inequitable because of power and information asymmetry between the foreign investors and local farmer, leaving the latter with bad deals. Then there are concerns of food security, which in part stems from the fact that investors in farming sector are included to investing cash crops rather than food crops.

Also, overspecialisation of farming lands, often a characteristic feature of farming sector FDI, also has negative consequences for human health and the soil itself. Ergo, the government should be cognizant of these kinds of risks, and instead of blindly opening up the sector for the Chinese in the farming sector, it must tread with caution and thoughtful planning.