KARACHI: Federation of Pakistan chambers of Commerce and Industry (FPCCI) has emphasized that the government’s priorities should be to ensure food security with stable prices, encourage domestic cultivation of items for import substitution, efficient water utilization plan, and most importantly to ensure climate resilience in agriculture l.
In their proposals for a ‘State of Pakistan Agriculture Economy’, it said Pakistan is a large agricultural country; this sector contributes around 40% of the country's GDP. Pakistan covers an area of 796,095 square kilometres. Around 87% of the land is mainly irrigated by canals and underground wells.
The main crops and cash crops are wheat, rice, cotton, sugarcane, and corn. Rice planting area is 2.8 million hectares, and output is about 7.2 million tons. Cotton planting area is 2.67 million hectares and lint output is 9.6 million tons. Maize production increased from 4.9 to 8.9 million tonnes in just last five years, 2016 – 2021.
The arable land area is about 22.63 million hectares. In 1961 per capita arable land availability was 0.66 hectares which has now reduced to 0.14 hectares while the population of Pakistan has increased manifold.
Our agriculture growth rate has remained stagnant over the years. In 2022 trade deficit of $5.5 billion in food and cotton imports was recorded; it further widens the current account deficit to over 17 billion USD.
According to an estimate Pakistan’s agriculture sector has the potential to overcome the current account deficit and balance-of-payment crisis within six years if it grows at 6% to achieve the necessary economic growth and job creation.
If we focus on enhancing yield and quality of major crops according to international standards, this will produce surplus crops for export.
Pakistan’s agriculture trade deficit can be eliminated as many of the imported agricultural products, such as pulses and cotton, can be produced domestically.
If the agriculture trade deficit can be brought down to zero over the next three years and turned into a surplus in the subsequent three years, Pakistan could overcome its current account deficit within six years. It may be noted that the agriculture sector’s sustainable growth rate directly impacts the GDP’s growth rate.
Pakistan GDP can register growth of 6% only if agriculture sector achieve growth rate of 6%. Pakistan with vast agriculture resources, is recording recurring shortages of key food items; it threatens food security and resulting in inflation at unbearable burden to the common man, whereas currently food products are not easily available in the international market.
Unfortunately, expansion in the country’s agriculture land could not match the population growth. Our poor growth in developing agriculture sector is one of the reasons that Pakistan ranks 92nd out of 116 nations on the global hunger index.
Our per capita food supply is growing slowly and is still at a low level in the world. It may be summarized that food security will no longer be an agriculture issue but a trade and macroeconomics challenge that needs to be addressed by a comprehensive agriculture policy. Therefore, FPCCI strongly suggests an “Agriculture Emergency.”
The agriculture economy is dominated by informal and unorganized labour as compared to industry sector. Now, the adverse impact of climate change is also impacting growth in agriculture besides low crop yield per acre.
The international scarcity of food and foreign currency issues has further worsened the situation. Pakistan must work on bringing its horticulture crops on shelves of international supermarkets and retail chain. We must develop quarantine for agriculture products at the airports.
Just to share that last year Vietnam Horticulture exports were around 2 billion USD. It is estimated that India horticulture produce is more than their field crops.
In 2023, it is projected that Pakistan will import around 10 million bales of cotton which is higher than last year and therefore the trade deficit may be over $6 billion USD.
It has been reported that Pakistan loses 12% -13% of wheat yields, which is about $200 million in value, due to a lack of mechanisation. In addition, the country loses about $500 million in post-harvest losses.
Central Cotton Research Institute in Multan has developed more than 200 varieties of cotton seeds, but their poor performance can be vouched that today the annual cotton output is reduced to half. If the quality of cotton seeds are up to the international standard, its production will increase by three times, i.e., at 21 million bales compared to 7-8 million bales annually at present. Pakistan’s annual needs stand at 15-16 million bales. Further, the country has only one laboratory and negligible cold storages.
We must target horticulture to boost exports. Pakistan has abundant resources, but they are not utilised efficiently. We have around 40 biotechnology institutions are in operation in Pakistan. However, yield improvement is now slowing down despite increase in its usage. Pakistan import bill of pulses is around 600 million USD, whereas in case of oil seeds it is around 4 billion USD, we have crushing capacity and approx. 50% of such capacity is idle.
Further, increase consumption of animal products require greater quantities of livestock and poultry feed; therefore, large areas of land areas are being used for this purpose, resulting in lower availability of land for crops.
Pakistan key priorities should be to increase the area of wheat as it is our major staple food. Attaining self-sufficiency in wheat results in saving foreign exchange. We should persuade farmers to sow wheat who are currently inclined towards oilseed crops, maize corn, and sugar cane, as they are more remunerative.
Pakistan should focus on implementation of near-term reforms as compared to long term initiatives which will take much longer time to give dividends. Some of the key areas of reform includes introduction of quality seeds, modern farming, correct economic incentives to farmers, as we have seen low tax rates did not yield nay benefit over the past decades, enhancing quality of education of young and adults for both male and female population.
Some of the key points are highlighted below:
Rice production can be increased by 40% in Pakistan if we focus on all aspects of cultivation. We have witnessed that export of maize crop increased by 100% this year primarily due to good quality seeds provided by the importers and improved process of cultivation.
It is important to note that world agriculture does not generate profit by getting subsidy; we must strike a balance of support prices and allocating funds to provide subsidized wheat to the people. Therefore, the process of giving incentives to farmers in terms of higher support prices to be reviewed.
Higher support price mechanism is also a self-destructive action. It may be noted that in the 2000s when Philippines and Indonesia had given higher support prices to their rice farmers mainly to alleviate their poverty, it affected the common man badly as number of poor and hungry persons are much higher than the growers and they are net buyers of rice.
Skills of farmers to be improved focusing on productivity for consumer and agriculture products. This will also help in increasing women in the paid work force. Its implementation in the agriculture sector is far easy and this will also help in managing urbanization.
Digital operations in this segment to be increased, it will create transparency in terms of maintaining its inventory and its movement.
Agriculture value chain to be improved, this will uplift a vast majority of the population residing in small towns and villages. It is possible through engagement of global players.
Quality of seeds should be improved, as it provides strength to the plant to withstand pesticide attack and help to increase yield and quality of the harvest.
Further, global players are not participating in this area due to our weak Intellectual Property regulations which should improvement.
It may be noted that China, India, and Brazil have an advantage in providing financial assistance to farmers for agricultural inputs, including seeds, fertilisers, pesticides, storage and warehouses, machinery, as they have public banks dedicated to agriculture financing.
In contrast, Pakistan has a predominantly privately-owned system, making it impossible to follow those countries’ approach. Therefore, Government needs to introduce new polices of public-private partnership to bridge the gap.
Deployment of modern technology and mechanization should be done to optimize yield and quality. The concept of renting farm equipment from service providers should be introduced.
The priority of new investments should be to introduce to bring products in the market or processing units during off-season specially fruits and vegetables, it includes all-year processing, bringing new seed varieties and upgrading the cold chain for the safe transportation of produce from farm/ storages to the factory gate.
Construction of warehouses operating under control environment for fresh produce at seaport and airports.
Along with Agriculture Emergency a package for farmers as given in the construction like real estate investment trusts (REITs) should be announced.
The FPCCI is recommending to the Government of Pakistan for announcing REIT rules and regulations for the agriculture sector.
We like to share that this concept has been around the world for quite a long time. This may be implemented within the framework of “Rules and Regulations” announced by the GOP in April 2015, related to “Real Estate Investment Trust Regulations, 2015”.
As Pakistan is an agriculture country; therefore, focus on agricultures should be of prime importance, it requires far more attention than before due to global food shortages.
Specially, we have witnessed the recent floods destroyed lot of agri land and its output; due to climate change people fear this may happen in future, as well.
Therefore, the government should announce strong and efficient agriculture polices and Agri REIT will be a positive step towards this direction.
Import of food items will drain our foreign exchange and the cost of imported food items will be increasing substantially over the years, resulting in inflation and number of people going below the poverty line will keep increasing.
As the world population keeps growing at an unprecedented rate and global warming continues unabated, people are gaining consciousness about preserving earth and its limited resources; efforts are being made by the international players to further increase yield.
In Pakistan, on one hand we our operating at a very low yield as compared to international standards on all our agriculture outputs, and on the other our population is increasing far more than other countries; to feed our people and to export we must increase the yield of all our output as the land will not increase. This requires huge investment which is difficult for individuals and small landowners.
Argo-REIT has the potential to significantly transform the Pakistan agricultural landscape. Land will be developed from large areas for the purposes of selling to individuals, or other legal entities to generate high yields and to implement modern technologies.
One of the advantages of Agri REIT is that the total cost of developing a property gets divided among the final owners of the land which is usually small as compared to buying the entire property. This cost of development includes sourcing water, laying roads, preparing the land, availing scientific farming techniques, and employing more staff for the upkeep and maintenance of land and output.
People make land investments in a way to leverage the benefits of growing different crops, fruits, and vegetables to supplement their income. It is a safe option for investing as the return on investment is usually higher than other forms of investments and provides safety to investors’ money.
Another aspect is that many produces use extensive amounts of chemicals to grow food, which is becoming worrisome, people are generally concerns for health, and therefore more people have started preferring organic food. As a result, there is a shift in consumer behaviour, many would now like to turn to organic farming, for which un-cultivated land has to brought under cultivation.
The global markets for organic food are substantially increasing on a yearly basis. Organic fruits and vegetables are together expected to constitute more than half of the market share.
The other advantages of Agri REIT is the lower price of land, since the development cost of the land gets divided among all investors, the price of the furnished land is much lower than what it would have cost to each owner singularly.
It also offers greater liquidity than does owning physical agriculture land, as shares in most of these REITs can be quickly sold on stock exchanges.
Further, it also decrease the amount of capital needed to invest in the land, as a minimum investment is just the price of one REIT share.
Agri REIT will generate big dividends and is more reliable for shareholders as compared to smaller or growth-oriented names that don't generate material profits. It gives high return on investment. Investing in Agri REIT involves making money with less efforts and nominal risk. The long-term return on investment is much higher compared to the returns earned on shares in the stock market or in mutual funds. The other important factor is that it is a Non-depreciable Asset, unlike residential properties such as residential plots, flats and apartments, agricultural lands do not depreciate with time.
The quality of agricultural land does not deteriorate and there are no major maintenance costs involved. Like current REIT, Agri REIT will also be an alternative asset class and will add depth to the capital market and will provide transparency in the form of comprehensive disclosures and accountability through a trust mechanism engrained in Agri REIT regulations.
Agri REIT will provide an additional product choice to retail investors and add flexibility to investors and to invest managers.
Copyright Business Recorder, 2023