In a seminal initiative, the government is planning to carve out an agribusiness zone in Northern Areas, preferably near Gilgit, as part of a larger effort to exploit agriculture sector's immense potential. The proposed zone will play a crucial role in attracting Chinese investment in Pakistan's agriculture sector, which contributes 20.9 percent to the GDP, and employs 43.4 percent of the country's total workforce.
A Recorder Report quoting official sources has said that the issue recently came under detailed discussion at a meeting of Agriculture Advisory Board (AAB). Although Pakistan-China cooperation has diversified into all sectors of the economy, agriculture remains the major focus under the Free Trade Agreement.
A USDA-FAO outlook has predicted rise in agriculture commodity prices globally, in response to this phenomenon agriculture subsidies by the developed countries will be curtailed by the year 2013. This would put Pakistan in a favourable position, because no subsidies are at present being offered in its agriculture sector.
Pakistani companies will, therefore, have to develop greater competitiveness to be able to capture a sizeable chunk of international market by 2013, when the scenario will have changed. As argued by private sector representatives at the AAB meeting, there is an urgent need to establish an investment-focused agency to facilitate more joint ventures in the agribusiness domain.
Private sector representatives have, meanwhile, requested for a tax holiday, and proposed that the current scheme of TDAP should have maximum annual subsidy limit of Rs 5 million, excluding mangoes, and should provide 25 percent freight subsidy in selected countries.
They have also demanded that subsidy be made applicable to all horticulture and processed food products. Minfal representatives have, meanwhile, discussed setting up an Agribusiness Investment Fund, which is a new concept in Pakistan.
The proposed fund should establish an information base for providing technical advice to both government and private sector investors, prepare company profiles and undertake pre-feasibility studies, aside from mobilising domestic and international investment through promotional campaigns.
Establishment of the proposed Agribusiness Zone near Gilgit, the poverty-ridden backyard of Pakistan, can serve as a pilot project, to be replicated in other underdeveloped parts of the country. Although agriculture sector's contribution to Pakistan's GDP has declined from 53.2 percent in 1950 to only 20.9 percent at present, due largely to inadequate focus on developing new seed varieties, the sector retains vast development potential.
The most neglected part of our agriculture has, in fact, been the value addition, which is mainly due to inadequate investment in infrastructure and processing plants, which has in turn restricted our capacity to fully realise the potential of this neglected sector. Although Pakistan is the world's fifth largest producer of milk (37.35 million tons), only 5 percent of the commodity is processed.
Further, despite being the fourth largest exporter of date, the country exports only 13 percent of its total produce. These Minfal figures give a clear idea of untapped potential of Pakistan's agriculture. According to one estimate, the annual growth of agriculture sector in Pakistan has averaged around 4.5 percent over the last three years.
A significant indicator of the trend has been the steep decline in the share of labour force in agriculture - from 65 percent in 1950 to 48 percent at present - though it remains the largest sector in terms of employment. Consequently agriculture's role in poverty alleviation and employment generation has considerably shrunk.
Changes in agriculture productivity have been found to have important implications for poverty alleviation both in rural and urban areas. The declines significantly when household consumption registers an increase due to rising rural incomes.
An important channel of reduction in urban poverty has been the lower food prices as a result of growth in food production. Analysts maintain that diversification in agriculture is associated with commercialisation of agriculture, as high opportunity cost of labour on large farms induces them to substitute machines and modern.
The establishment of the proposed agribusiness zone will probably be the most significant diversification in our agriculture sector. It will also help ensure food security to the local population. While giving liberal incentives, including tax holidays, has become a part of the government's larger strategy to attract investment, the cost-effectiveness of such measures should be kept in mind.
Secondly, there is a need to capitalise on our competitive advantages by investing in developing better seed varieties and increasing the per-acre farm yield to ensure that we retain cost-competitiveness and also improve the quality of agricultural products.
Pakistan ranks among the top 20 producers of rice, mangoes, dates, sugarcane and a vast array of vegetables. However, our export figures depict a depressing picture despite our rich resources. Let us hope agribusiness zones will bring about the desire change and provide a powerful fillip to our agriculture sector.