The Asian Development Bank (ADB) will sign a $31 million loan agreement with Pakistan for "Agribusiness Development Project" this month to help in developing a competitive and sustainable agribusiness sector. A well-placed source told Business Recorder here on Thursday that negotiations about the loan with the ADB have been completed and now the Economic Affairs Division was preparing to sign the agreement.
The loan will be provided from special funds resources of the Asian Development Fund (ADF) of the bank, he added.
The project will establish market-based approaches to agribusiness development and enhance technical and managerial capacity in the sub-sector. It will also dismantle barriers to entry for new enterprises and promote the expansion of existing ones into new markets.
The source said that the main interventions focused on removing constraints, facing the agribusiness, from production by small growers to marketing and finally export of the product. Besides, the project aims at increasing the productivity and quality of the agribusiness sector.
The main focus of the project would be on horticulture business, livestock and preparedness after full implementation of the WTO regime, actions to improve the livestock and dairy institutional framework and support for selected enterprises, he added.
The ADB realises that Pakistan's agriculture sector accounts for 25 percent of the GDP, almost half of jobs, and about 70 percent of exports. However, the sector's growth has been on the decline since 1990 and yields of major crops have stagnated in the last decade.
According to the bank, commercial agriculture and agribusiness development is constrained by poor infrastructure, sector institutions and policies and governance practices. Limited access to modern technology and to financial and business development services further hampers development.
About the objectives of the project, he said that it would support economic growth and employment generation. Besides, it will also focus on the development of competitive and sustainable agribusiness sector, improving agribusiness enterprise access to Business Development Services (BDS), strengthening BDS providers to enhance skills throughout the agribusiness sector, expanding access to agribusiness finance and developing institutional capacity.
The source said the project comprises provision of agribusiness service, finance development, capacity building and enabling environment for project management.
Being the executing agency of the project, the Ministry of Food, Agriculture and Livestock (Minfal) would establish a task force in order to develop a national policy for promotion of agribusiness in the country. He also said that the provincial task forces would also support in formulation of policies.
The Finance Ministry would oversee the establishment of Agriculture Support Fund (ASF), which would operate as an autonomous private sector company responsible for channelling project funds.
The bank says that constraints facing the agribusiness sector are present throughout the production chain from input supply to processing and exports, leading to low productivity and value.
To remove these constraints and to tap huge potential growth opportunities provided by both domestic and international markets, a comprehensive and systemic approach was needed.
During the designing of the project five major components were included to tackle these constraints.
Firstly, through the project an Agribusiness Support Fund would be established to provide farmers, farmer groups and entrepreneurs with demand-driven technical and managerial services on a matching grant basis to improve their productivity, competitiveness.
Secondly, It will increase access to agribusiness finance available from the financial institutions to agro-enterprises.
Thirdly, it will ensure provision of capacity building for horticulture and agribusiness; streamlining the collection and dissemination of market information; strengthening agribusiness technical training capacity; upgrading testing and certification facilities for seeds, nurseries and crops and to build awareness of the need to comply with the international agricultural product standards and practices.
Fourthly, the project would help in revising and updating the agribusiness regulatory framework and formulate a national agribusiness policy and provincial horticulture policies and lastly it would provide project management support.
Through this concessional financing, the source said, it would directly contribute to poverty alleviation. He also said that the loan has a term of 32 years maturity, including a grace period of eight years with an interest rate of one percent per year during the grace period and 1.5 percent per year thereafter. The estimated project completion date is September 30, 2010, he added.