Urban bias in policymaking responsible for decline in agri-productivity

Malik Afaq Ahmed Tiwana is the CEO of Farmers Associates Pakistan (FAP), a not-for-profit organization that identifies itself as a think tank for agriculture policymaking. FAP is a representative body of progressive, large landholders of the country, whose chairman is the incumbent federal foreign minister, himself a leading agriculturalist from southern Punjab.

Agriculture sector has received highlight in the media over the past two years - as major crops such as wheat, cotton and sugarcane have missed their targets. Intermittent water shortage and increasing vulnerability to volatility in weather patterns has helped bring farming sector to the centre stage, as policy makers struggle to figure out the causes behind poor agricultural productivity.

To this end, BR Research sat down with Malik Afaq Tiwana in Lahore recently, to identify the structural challenges facing the sector, and the ways out of it. Following are the edited excerpts of the conversation:

BR Research: For the benefit of readers, briefly describe the mandate of your organization, FAP?

Malik Afaq Tiwana: Unlike other representative bodies/associations of farming communities, FAP is not a lobbying group. Over the years, the area of focus of FAP’s activities has shifted away from operational issues and evolved more towards policy-based advocacy.

It is very important to highlight that farm-related activism and agriculture policy are equally important yet two very different agendas. Policy advocacy is geared towards implementing structural changes that makes the sector more productive, such as product markets, regulation, supply-chain logistics, and export competitiveness.

To that end, FAP members have unmatched experience thanks to careers spent working in governmental institutions. Unfortunately, other farming bodies in the country lack that expertise as they are more focused towards operational side of things, such as focusing simply on timely input availability during the season, or negotiating with the government for better prices post-harvest.

BRR: Despite being an arid country with high population growth rate, intermittent political turmoil, and weak macroeconomic indicators, Pakistan successfully managed to become a food secure country early on. Yet, since then agriculture sector has been on a secular decline. Which decade in your opinion marks the inflection point when the sector lost its growth momentum?

MAT: Back in 1960s, Pakistan’s agriculture policy was very much in line with the developments taking place globally at the time. For example, Pakistan was riding the green revolution wave as new seed varieties for rice and wheat were commercially introduced early on. Then in 1970s, chemical fertilizers were introduced, followed by marketing of agri-chemicals such as pesticides and insecticides during the 1980s. Finally, the 1990s decade saw success in the realm of mechanization of farming methods.

Things took a turn for worse in 2000s, when the genetic and biotech revolution took place all over the world, with the commercialization of bt. crops. But back home, we missed out on that opportunity because our regulation was not ready. And ever since, the sector remains neglected in policymaking circles, irrespective of the political regime in power.

Consider that while farming communities world over are switching over to precision agriculture tools, the goal remains remote in this country. For example, to date use of drones remain banned for commercial purposes. Unless the regulatory house is put to order and manages to keep up with the latest innovations, domestic agriculture will struggle to compete in export markets in term of per unit cost of production.

BRR: You noted that Pakistan was unable to keep up pace with changes that took place in agricultural practices globally during the last 20 years. Which forces do you blame that have led to a point where long term sectoral growth rate has dropped close to zero?

MAT: The regulation did not keep up with the technological changes. But that is only a symptom of the underlying challenge which was the lack of understanding of the sectoral dynamics among the policymakers that ran the show during the last twenty years.

To some extent, this was further compounded by a level of indifference, as subsequent regimes became increasingly urban-centric. Even when there was political will, the ruling parties were unable to provide the regulatory backup needed because they lacked appreciation for nuances that dominate the landscape of agricultural markets.

BRR: Large landholding agriculturalists, especially those from Punjab and Sindh, have been part of subsequent governments through the last 20 years. Many members of both past and current federal and provincial cabinets, for example, belong to agricultural families; some even identify themselves as progressive farmers. Why has political representation not translated into reform-oriented policymaking?

MAT: That impression is misplaced, at least to the extent of Punjab. If you look closely at the movers and shakers that constituted the previous government, none of them were agriculturalists. This creates a challenge of capacity even where political will to create positive change is present.

For example, FAP has been arguing for deregulating the wheat market for over 15 years, but because of the disconnect between the political players and the sector, subsequent governments have been hesitant in taking any action on their own. Instead, they relied on donor agencies such as World Bank and Asian Development Bank to come and teach them how to do their job.

And while the policy frameworks advocated by donors have a high moral ground, they are often incomplete and rarely customized to the dynamics of domestic market. Naturally, as financial institutions and lenders their immediate objective is to ensure protection of their principal. Thus, the reform package is seldom wholesome, and struggles to create the transformative changes required.

BRR: Could you point to major policy-level causes taken up by FAP in recent years?

MAT: FAP’s initiatives include successful advocacy for removal of minimum export price, and other such similar initiatives to deregulate the sector. One of the focus areas for our organization is getting reforms implemented to incentivize corporate agriculture. This has met with limited success due to the red tape in land acquisition. Although FAP has written several working papers to this end, agricultural land markets are very opaque, and hindrances such in transfer of title, and fragmented land ownership make it a tough sell for corporate agriculturalists. Not to mention that productive land is also very expensive.

Nevertheless, while land availability remains a bottleneck for corporate agriculture initiatives in grain production, land requirement for high value perishables such as vegetables, and fruit orchards is comparably lower. Thus, several firms have already began to explore this area. Similarly, the mushroom growth in private dairy farming by big corporates is another example, although the bulk and perishable nature of the commodity has created hindrances in enabling it to become a transformative force thus far.

BRR: To what extent has absence of reliable data to flawed policymaking for the sector?

MAT: There is no comprehensive database for agriculture sector in the country, without which it is virtually impossible to successfully legislate reform-oriented policy. In cases where data collection standards are adequate, governmental organizations are unwilling to share it with private parties. IRSA is one such example. Little do they realize that the future of agriculture belongs to big data.

By absence of data, I am pointing towards relational databases that allow researchers to identify causalities between output, input & resource availability such as water supply, meteorological & ecological survey, and market prices. In modern times, creating algorithms based on these inputs should not be an insurmountable challenge. On the other hand, the transformative value of these relational databases is immeasurable, as they will allow predictive analyses that can then feed into policymaking.

BRR: What is FAP’s position on government intervention in agricultural markets by setting minimum price guarantees?

Take the case of sugarcane. The support price announced is – to a large extent – a whitewash. What mechanism is available at the disposal of federal or provincial governments to implement the so-called minimum floor price. It is just a notional rate to incentive growers to expand acreage. Except that the market functions on the principles of supply and demand. In previous seasons when the supply was on the higher side, several mills procured cane for as low as half the government notified rate.

Moreover, the bargaining power of buyers allows them to corner the market. For example, mills create demand-side shocks to depress raw material prices by shutting down operations for several days. In addition, cash payments are delayed; where post-dated cheques are issued, they are bought-back at discounted rates by market players against immediate cash payment. But mills are smart enough to keep the farmer interest piqued by paying higher rates once every three season, so that growers do not shift away from the crop permanently. In addition, due to ratoon crop, it is very difficult for growers to switch between crops.

Mill’s output on the other hand is protected from competition due to high tariffs on import, which allows them to charge higher prices than they could if it were a free market. Finally, the story of subsidies on export of surplus are already well-known.