Preamble
Keeping in mind the challenges faced by the agriculture of Pakistan and the opportunities for growth in the sector, the Iqbal Institute of Policy Studies organised a webinar on the topic “Revitalising the Agriculture Sector of Pakistan”. This blog presents the findings of the discussion on the topic.
Research Questions
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What is the role of Agriculture in the Resuscitation of the economy of Pakistan?
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What are the challenges of farmers in Pakistan?
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What are the impacts of technology in the agricultural sector?
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What can be the minimum reform agenda for the agriculture sector of Pakistan?
Introduction
The agriculture sector is considered an indispensable part of Pakistan’s economy. Apart from contributing 19% to the national GDP, the sector absorbs 42 percent of the country’s labour force. However, the agricultural sector, mainly the farmers, are faced with various issues, which have slowed down the sector’s growth and performance. Keeping in mind the challenges faced by the agriculture of Pakistan and the opportunities for growth in the sector, a minimum national agenda for reform in the agricultural sector is needed on an urgent basis.
Role of Agriculture in the Resuscitation of the Economy of Pakistan
According to Dr Shujat Ali, Member IIPS Advisory Board, agriculture in Pakistan is nearing collapse. Agriculture remains an important pillar of Pakistan’s economy, but its contribution to the GDP has fallen from 53 percent in 1947 to just 19 percent at present while staying at an average of 20 percent over the last three decades. The decade of 1960 saw great advancement in agriculture due to the green revolution, where agriculture grew by a rate of 5.1 percent. The following decade of 1970 saw a decline in agricultural growth to less than 3 percent. In the 1980s, due to the commissioning of the Tarbela Dam and a breakthrough in cotton variety which doubled the productivity of the crop, agriculture again saw a growth rate of 5.4 percent. Lastly, the decade of 90s also remained favourable to agriculture from a policy perspective. But since the beginning of the millennium, agriculture has been in a state of neglect. The first decade saw a growth rate of around 2.6 to 3 percent, while the growth rate remained fixed at 2.2 percent in the second decade, the lowest decadal growth in Pakistan’s history. Considering that the population growth rate in Pakistan stands at 2.4 percent and the agricultural growth rate at 2.2 percent, Pakistan is no longer a food sustainable country. If steps are not taken to change this scenario, then Pakistan cannot sustain its population, and a crisis of food security is looming in the future.
Agriculture also remains an important source of input and raw materials to other sectors of the economy with huge backward and forward linkages in the textile, sugar, tobacco, food, and beverage industry. Based on Pakistan’s performance over the last ten years, Pakistan has become a net import country. For the first time in Pakistan’s history, the country will be simultaneously importing sizable chunks of three major crops, including sugar, wheat, and cotton, at the cost of 2.5 billion dollars. That is in itself a massive burden on the already depleted foreign exchange resources. The reason for this dismal situation is greatly attributable to policy neglect of the agriculture sector and not realising its role and potential in the overall function of the economy. The policy framework of Pakistan prioritised the services sector in the first decade of this century, with growth and performance increases in the telecommunications, finance, and industry sector. In the following decade, high priority was placed on infrastructural development by building highways, metro busses, and electricity generation plants. It is not to say that development in these sectors was not important, but agriculture seemed to take a back seat in efforts aimed at building institutions and developing a robust policy framework for the future.
Challenges of the Farmers
According to Rabia Sultan, a progressive farmer and agricultural expert, successive governments over the past three decades have neglected the agriculture sector. Taking a look at Pakistan, a land blessed with fertile alluvium plains, the Indus basin, four seasons, and every type of land from deserts to mountains, it is not understandable how such a country lost focus on its agricultural policy. Farming infrastructure has also remained stagnant over the decades, hampering the ability of farmers to grow and store their produce. Due to this, farmers are forced to distress sell their crops at peak times. In the horticulture sector, the farmer is forced to sell his produce at a meagre price because no value chain exists for horticultural products. Countries that developed these value chains have achieved significant contributions from their agricultural sector. In 1988, under the national agricultural commission, a comprehensive agricultural policy was drafted, but its implementation remained problematic. Successive policies of 1991 and 2004 were also treated the same, and no proper implementation could be seen. Unless action is taken to mitigate the crisis looming over the agriculture of Pakistan, the sector will experience further decline.
Another challenge that has plagued Pakistan over the last 20 years is an institutional failure. There are many institutions that conduct research on agriculture, but they don’t have financial support. Cotton production has dropped from 14 million bales to just 6 million bales. Our whole economy is dependent upon cotton, and the Central Cotton Research Institute (CCRI) is struggling due to financial constraints. Performance of the agriculture sector declined, particularly after the 18th amendment, because of lack of uniformity in policies, funding, and expertise among the provinces. The private sector offered to take over this sector, but subsequently, in 2016, the textile industry stopped paying tax on cotton bales which led to a slash in the funding of the CCRI. This resulted in the halting of all research projects. Another major factor that impedes agricultural growth in Pakistan is the serious disconnect between academia, research, and the extension of that research to the farmers.
While looking at the national and progressive farmer yield, it can be seen that progressive farmers obtain an average of 4.6 tons per hectare compared with the national average of 2.6 tons per hectare. The national average also contains a high yield of progressive farmers, which means the actual average of small farmers remains even lower. Pakistan does not have the fiscal space to borrow cotton. The green revolution has ended, and post-green revolution challenges have started. The excessive use of chemical fertiliser has ruined the quality of land, and something needs to be done to increase the organic matter in the soil. There is also a serious need to introduce greater mechanisation. Billions of rupees are spent on importing inferior quality palm oil because the duty structure has impacted oilseed production negatively. Pakistan also lacks diverse machinery for different stages of farming. Farmers also lack training, and there is an urgent need to develop employable education for the rural youth population. By bringing entrepreneurs to rural areas, Pakistan can restart its agricultural development. Lastly, special districts need to be created for each crop to focus on research and resources. The credit requirement for the agriculture sector is nearly Rs 1 trillion, but the formal sector does not have the capacity and off-market loans have a high markup rate of 13 to 15 per cent. The middleman who provides finance to these farmers knows the potential of each farmer according to his crop and later buys the crop at a discounted rate leading to distress selling and financial burden of loan.
Impacts of Technology on the Agriculture Sector
Dr Yusuf Mirza, former chairman of PARC, highlighted that food security is as important as our strategic security, water security, and health security. The mechanisation of the agriculture sector started after the green revolution with the introduction of tractors and thrashers, but it is important to reflect on the impact of technology on the agriculture sector of Pakistan. During the green revolution, there was no barrier to technological advancement, and the World Bank, along with USAID, helped procure 40000 tons of maxipak seeds developed in Mexico. Experts related to different fields of agriculture also visited Pakistan frequently. As a result, there was strong ownership by the ruling elites and the leadership of the country became greatly involved in the process on a daily basis. It was a success story for Pakistan as new seeds, fertilisers, and pesticides were adopted, and new irrigation systems were introduced. Pakistani agriculture became an opportunity for international donors, and support came from the International Food Policy Research Institute and the Bill and Melinda Gates Foundation. But the green revolution remained focused on two crops, namely, wheat and rice.
Pakistan only invests 0.18 percent of its agriculture GDP on agricultural research, which is the second-lowest even in the SAARC countries. The lowest is Bhutan, with a population of only 400k. India stands at 0.4 percent, and China invests an impressive 2 percent in agricultural research. Pakistan cannot continue to depend on foreign funding for agricultural research. All educational institutions related to agriculture in Pakistan were built by USAID and not the Government of Pakistan. The funds given by USAID do not come without restrictions, as currently, no research can be carried out on soya bean and canola plant. Despite all this, Pakistan introduced poultry farming which is a part of agriculture. Presently, the poultry industry has surpassed the sugar cane industry, which itself is the largest industry after textile. Pakistan saw a production of 16 billion eggs in the last year alone. The investment in poultry farming is massive, at around Rs 1200 billion, but despite this massive cost, poultry remains the cheapest form of meat in comparison to mutton, beef, and fish.
The Atomic Energy Commission developed the first laser and land leveller technology in Pakistan, and the Punjab government deployed it through service providers. Now, this laser technology has become a very important tool in the agriculture of Pakistan and also helps save a lot of water for irrigation. In the early 70s, Pakistan imported honey bees through PARC and as a result, Pakistan became self-sufficient in honey and also exported it to different countries, including Saudi Arabia, Oman, Qatar, and the Middle East. Also, crops that have previously not been possible to harvest in winters, like cucumber, are now easily being farmed due to technological advancements. Seed import of Pakistan has seen a sharp increase from 800 million to 16 billion, mainly due to private sector interest in this area. There are now plants that manufacture seeds for exports. The Potohar valley is now being transformed into an olive valley with Rs 2.2 billion worth of projects being carried out by the Punjab government in the area. Fifty thousand acres is projected to become olive gardens with the Government importing machinery from Italy for oil extraction. Pakistan currently imports 1200 tons of olive oil from Spain and Morocco, and with ripe olive fields in Baluchistan and Chakwal district of Punjab, it is hoped that Pakistan will one day become an exporter of Olive oil.
The world is changing at a very fast pace. After the green revolution, Pakistan missed a number of technological revolutions, such as the biotech revolution and the IT revolution. Pakistan remains a founding member of the World Trade Organisation (WTO), and as agriculture is considered a tradeable commodity, there are intellectual property rights associated with it. Pakistan became restricted by global standards of trade in its agricultural sector. Although a ten year grace period was given to Pakistan to achieve compliance with international standards, the infrastructure and machinery required to comply could not be developed. In 2005, it became known that Pakistan could not use BT cotton due to the signing of the WTO agreement, placing a barrier for future technological innovation. The Government of Pakistan does not take ownership of the agriculture sector, and whatever development can be seen is due to private sector investment.
Minimum Reform Agenda for Agriculture Sector of Pakistan
According to Dr Khaqan Hassan Najeeb, Senior Economist and Public Policy expert, agriculture is more important than fiscal or energy policies. If Pakistan is to grow its economy, then agriculture has to provide the impetus to our manufacturing sector in order to excel internationally and domestically. Stability in prices can only be achieved through agriculture. The world has witnessed three types of agriculture revolutions, namely, the green revolution, gene revolution, and precision agricultural reform. Since Pakistan only benefitted from the green revolution, the most important task is to increase agricultural productivity. Pakistan has agricultural productivity of less than 50 percent in five staple crops. Due to this decreased productivity, Pakistan imported $4 billion worth of cotton, wheat, and sugar cane. Therefore, Pakistan should focus on the productivity of agriculture for reform in the policy agenda. Another important aspect of agriculture is the availability of water. Canal water intake stands at 104 MAF, whereas the output is at 52 MAF. This means that half of the water used in agriculture is wasted, and, in a country, which is considered water-scarce by experts, it is indeed an alarming situation.
Thirty-seven percent of the people of Pakistan are food insecure at the moment, while food availability and nutrition content also remain low. This translates into weakness in population development and impact on the minds of the nation. Pakistan is poised to become the fifth most populous country in the world, with a population growth rate of 2.4 percent. Therefore, the value of agriculture cannot be ignored, and competence and productivity have to become the foundation steps for future endeavours in reviving agriculture. Pakistan also experiences a strong government role in the agricultural sector trade, and this has hurt the import and export of wheat and sugar. There is a need to liberalise the market so that farmers can export their products easily. The Government should not busy itself with such level of details, and a market should be formed to determine prices for crops. The Government should also make a targeted subsidy scheme which should be used to reduce the cost of doing business. Be it giving fertilisers, help in mechanisation, or watercourse lining, everything should be focused on increasing productivity.
Supply chains have always remained an issue, and bigger interventions are now needed. Experts in logistics are needed to create synergy between the federation and the provinces. Although agriculture remains a devolved subject after the 18th amendment, the Federal Government should play its role in empowering the sector’s growth. The world is also experiencing an IT revolution. Artificial intelligence is rapidly changing the agricultural landscape, and the cost of input is going down due to better planning. China Pakistan Economic Corridor (CPEC) also presents a massive opportunity for the agricultural sector as it includes making agricultural development zones. These zones are linked to the next phase of Pakistan’s agriculture. It is the export surplus, given Pakistan meets the WTO regulations, that will allow Pakistan to enter the food processing phase.
Key Takeaways
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Agriculture remains an important pillar of Pakistan’s economy, but its contribution to the GDP has fallen from 53 percent in 1947 to just 19 percent at present while staying at an average of 20 percent over the last three decades.
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The policy framework of Pakistan prioritised the services sector in the first decade of this century, with growth and performance increasing in the telecommunications, finance, and industry sector.
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Farmers are forced to sell his produce at a meagre price because no value chain exists for horticultural products.
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Unless action is taken to mitigate the crisis looming over the agriculture of Pakistan, no real progress can be achieved.
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While looking at the national and progressive farmer yield, it can be seen that progressive farmers obtain an average of 4.6 tons per hectare compared with the national average of 2.6 tons per hectare. The national average also contains a high yield of progressive farmers, which means the actual average of small farmers remains even lower.
Bibliography
Iqbal Institute of Policy Studies. (2020). Revitalising the Agriculture Sector of Pakistan. Islamabad: IIPS. Available at https://www.facebook.com/iipstudies/videos/739694333350276
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