• Embedding Agriculture in the Business Portfolio
• Disrupting Agriculture’s Fiscal Model
• The Ascendancy of Corn
• Incentivising Agri-Financing
• Biting the Growth Bullet
• “The farmer community desperately needs social protection”
• A New Look at Agriculture
• The Kachelo Mission
• Fighting Pakistan’s Growing Food Insecurity Crisis
• Agriculture’s Weakest Link
• “There is still tremendous space for growth in the tractor sector”
• Understanding What We Eat

Embedding Agriculture in the Business Portfolio

Kazim Saeed discusses the business case for private sector investment in agriculture.

Jensen Huang, the CEO of Nvidia, the world’s hottest tech company, used to start staff meetings in the early years with the words, “Our company is 30 days from going out of business.” Tech folklore has it that this did wonders for concentrating everyone’s minds. Today, the Jensen Huangs of Pakistan are saying that this country is in the economic ICU and agriculture can help us out of it. The question is: how?

Simply put, Pakistan desperately needs to increase its exports and reduce its imports. So, the prime prospect is that private businesses that are already exporting or importing should invest in agriculture to secure their supplies or engage in backward integration with farmers. But companies typically act on corporate (not national) priorities. To respond to national priorities, they need a compelling business reason! Here are some reasons why corporate goals are aligning with national goals for growth in agriculture.

The most compelling reason for Pakistan’s business groups to enter agriculture is the genuine business needs of exporters. In our export-oriented textile sector, this reason is found in developments like the Fashion Act introduced in 2022 in the state of New York. Legislations of this kind demand that fashion brands be more responsible about the value chain they rely on. Traditionally, a global brand selling a shirt in the state of New York would ask its Pakistani supplier to identify the garment facility in Lahore where the shirt was stitched, the spinning and weaving mills in Faisalabad that spun the yarn and produced the cloth, and the ginning facility in Multan where the cotton lint used to make that yarn was pressed into bales. With the Fashion Act, Pakistani exporters have to identify the farms in Vehari that grew the cotton that finally became that shirt. With this level of traceability, the exporter would have to confirm that the cotton in question was grown sustainably, avoiding excessive use of water and agrochemicals, paying the minimum wage to workers, etc.

These traceability and sustainability requirements mean that textile players, particularly those directly facing global brands, have begun to invest in cotton cultivation projects. Such requirements are now arising for most agro-commodities in the world’s premium destinations (the US, the EU, East Asia, etc.) and they have also presented an opportunity for Pakistan’s rice exporters to increase market share in these premium markets rather than in African markets, which are not as insistent on quality, traceability and sustainability. To be noted, projects to capitalise on Pakistan’s meat exports have seen some casualties due to the lack of traceability of the animals, although some meat export projects are performing better on this count.

About a decade ago, Pakistani rice exporters understood that although global markets have more room for Pakistani rice, our rural areas are not able to produce more of it. As a result, they became the representatives of the manufacturers of hybrid rice seeds from China and started to sell seeds for rice varieties in demand in East Asia to Pakistani farmers. Next, they invested in machinery-based services for rice farmers to increase yields and decrease farm-level losses. Today, they are looking to team up with other farm machinery service providers to build a farm mechanisation ecosystem that can lead to the manufacture of modern farm machinery in Pakistan.

One of Pakistan’s leading private banks has launched an end-to-end service to facilitate farmers’ ability to obtain quality farm inputs, deliver on-farm services and provide advice, data, post-harvest storage and marketing support. Many of these services are linked to the bank’s core business of lending, and farmers can borrow on much better terms than those offered by middlemen. In the wake of more frequent climate impacts, Pakistan’s most aggressive insurance companies have been developing insurance solutions for crops and livestock.

Some leading groups have understood that they need to diversify to embrace agriculture as part of their business portfolios. A leading textile-based conglomerate has started a drone services business, offering drone-based spraying of crop protection chemicals, drone-based fertiliser applications, and drone-based data captures for more accurate farm management. A consortium of rice exporters and a leading input supplier have invested in shrimp production with an end-to-end vision for developing an ecosystem similar to the poultry sector. Similarly, a leading engineering and infrastructure group has embarked on an agro-warehousing business. This is a much-neglected space that is critical to food security – you can’t store wheat in cupboards!

Agri-logistics investments are needed to reduce loss of quality and quantity after harvest. These investments can be scaled up through the electronic warehouse receipts regime developed by Pakistan’s leading private sector players in collaboration with the Securities and Exchange Commission of Pakistan, the State Bank, and the International Finance Corporation. This regime has seen strong proof of concept and is ready for scale-up. There are plenty of other opportunities in this space. For example, a leading packaging company has developed crates for reducing post-harvest losses in fruit and vegetables.

The biggest affliction that has created a plethora of opportunities for agriculture and related businesses is the depreciation of the Pakistani rupee and the increasing pressure on companies that import key ingredients for use in their major products. The end consumer can no longer afford the end product if the full cost increase is passed on to the price paid by the end consumer. For example, Pakistan’s leading ketchup brand has put together a consortium for a large programme with tomato farmers to cultivate tomato varieties suitable for producing paste.

The ketchup brand guarantees offtake from farmers if their tomatoes meet the agreed upon quality standards. 

Another opportunity has emerged due to the depreciation of the rupee, complemented by the enormous increase in Pakistan’s maize output. This is the production of corn sugar, which is used in the food and beverage industry and is also exported. One of Pakistan’s premier rice exporters has branched out into this area, and others are making similar investments in this space.

The ultimate opportunity is the agricultural land being given out under the SIFC. Some see this as an opportunity similar to the one for independent power producers (IPPs) in the nineties and the privatisation of banks in the 2000s. If you got in when these opportunities were being offered, you have benefited since then. The SIFC aims to solve the first problem faced by large-scale investors interested in agriculture: there is hardly any reliable availability of large tracts of land for long periods of time. The SIFC is offering blocks of a thousand acres each in south-eastern Punjab (and other locations in Punjab and Sindh) under long-term rights to cultivate. These blocks make sense because many modern farm machines are sized for servicing 4,000-5,000 acres, while some machines may only be viable on a minimum of 10,000 acres. Such acreages are hard to come by in Pakistan’s mainstream agricultural areas. Every leading business group worth its name is trying to get some piece of the action before the land on offer runs out.

However, some issues remain to be addressed. There isn’t enough water to irrigate the lands offered in south-eastern Punjab, and access roads and other infrastructure are not complete. The prospect of becoming a joint venture partner with the government may not be every business group’s cup of tea, but large-scale precision agriculture can be a real game-changer. This programme is a great driver of private investment in agriculture, but it has to be chaperoned for years to meet success. And, if chaperoned right, this programme also has the potential to solve the problems plaguing Pakistan’s farmers for decades, such as quality seed, unadulterated farm inputs, mechanisation, storage, etc.

A wave is rising in Pakistan’s industrial and financial sector regarding investment in agriculture, and many real drivers of private investment are drawing individual companies to make breakthroughs in agro-investment. While corporate goals are aligning with national goals for growth in agriculture, the government needs to bring policy focus to agro-investment while ensuring this wave does not crash without taking Pakistan to the next level of agro-performance. The new government has its work cut out.

Kazim Saeed is co-Founder and Strategy Advisor, Pakistan Agricultural Coalition. His book Dou Pakistan: Har Pakistani Gharanay Tak Khushhaali presents a strategy for delivering prosperity to every Pakistani household.
kazimsaeed0817@gmail.com

• Embedding Agriculture in the Business Portfolio
• Disrupting Agriculture’s Fiscal Model
• The Ascendancy of Corn
• Incentivising Agri-Financing
• Biting the Growth Bullet
• “The farmer community desperately needs social protection”
• A New Look at Agriculture
• The Kachelo Mission
• Fighting Pakistan’s Growing Food Insecurity Crisis
• Agriculture’s Weakest Link
• “There is still tremendous space for growth in the tractor sector”
• Understanding What We Eat

Disrupting Agriculture’s Fiscal Model

If Pakistan is to ever open up the economic potential of its agricultural sector, it will have to substitute outdated and ineffective financing methods in favour of ‘an enabling capitalist model’, argues Aijaz A. Nizamani.

The Industrial Revolution changed the world when governments began to prioritise industries over agriculture. The process led to rapid economic growth in western Europe, North America and parts of Asia, mainly north Asia. The Industrial Revolution was run on fossil fuels and although it massively improved living standards, it led to an existential crisis in the form of carbon emissions, now totalling over 35 billion tons a year.

Humanity is now at a crossroads where we have to heal the planet and, at the same time, develop a sustainable path of economic growth and a system of global governance that will develop markets in parts of the world that were left behind by the Industrial Revolution. The world needs a new and enabling form of capitalism that will rapidly bring in sustainable growth and benefit the agro markets of the developing world.

Globally, there are approximately 570 million farms, and they can be largely categorised as those falling in the developed and developing (or underdeveloped) parts of the world.

The agriculture sectors in the US and the EU receive massive government funding and subsidies, mainly as direct fiscal transfers to farmers. These countries have smaller populations engaged in agriculture (1.3% and four percent in the US and the EU, respectively), and their governments have ample fiscal space to support and subsidise agro producers. In developing countries, a far larger proportion of their population is engaged in agriculture (in India and Pakistan, over 40% of the respective population is engaged in agriculture, and the figure for rural labour is even higher), and governments do not have the fiscal space to provide support to the people engaged in agriculture. In fact, in much of the developing world, government policies are focused on providing cheap food, mainly by controlling food prices. The consequences of this extractive nature of macroeconomics are manifested by the rural population migrating to urban centres in search of jobs.

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The question is, what can be done at the macro and operational levels to stem the tide of rural migration and protect our planet? Much depends on the vision and political will of those who have the power to make such decisions.

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The challenge is: how can the developing world produce enough food to feed its local population and then have enough to export to developed countries? Globally, we have the technology to gather data on every farm in the world, and in the last two decades, we have acquired two significant tech capabilities: satellite imaging and digital payment systems – they have the potential to transform rural businesses in the developing world. It is this kind of enabling capitalism that is needed in countries like Pakistan, especially in sectors where there is a lack of business and economic opportunities.

The question is, how to introduce the kind of capitalism that brought rapid development in agriculture in the developed world, and in this respect, the first reality that has to be acknowledged is that stakeholders have to agree that these countries cannot provide the kind of fiscal support richer countries can give their farming community. The best that developing countries can do is provide their farming and rural communities with a level playing field, aided by enabling capitalism. The most obvious step is to stop suppressing food prices. In most developing countries, the availability of cheap food is ensured through different means, but the bottom line remains the same. In India, the government procures food at a minimum price and it is then provided free or at subsidised rates to poorer households, effectively raising the price for the producer. In Pakistan, food prices are suppressed through administrative measures and export controls – sugar is a case in point. Instead, governments should ensure food availability by purchasing the produce at market rates and then providing it to vulnerable households in both rural and urban areas. For example, the US government supports farmers with nearly $50 billion worth of fiscal transfers and subsidies and provides $87 billion to augment the agro produce market. This is an important lesson that our economic policymakers should learn: it is possible to support food producers without suppressing the market for agro produce.

Finance is to business what air is to our lungs, and agricultural and rural businesses in the developing world are starved of competitive sources of finance. In countries where agriculture is massively subsidised, detailed data collection is essential to understanding issues and opportunities. It helps governments respond and support farmers in managing risks and seizing opportunities. In the EU, every farmer receiving a minimum of 200 euros per acre must apply every year, and it is this mechanism that allows governments to gain a full picture of the agricultural sector.

In Pakistan, there is a dearth of reliable data for the agriculture sector, and at times, it seems that we are happy to apply faulty data to policy decisions. For example, every year, the State Bank of Pakistan (SBP) fixes the agro credit target to the tune of trillions of rupees (the current year’s target is Rs 2.250 trillion). However, according to Salim Raza, a former governor of the SBP, agro-lending stands at only three percent of the banking sector’s lending portfolio, while the figure in India is 19% and in Bangladesh it is 21%.

So how does one motivate the banks to increase their agro-credit, especially given the sector is vital for Pakistan’s wider economy, as well as being a good market for banks? Experience has shown that banks are the last among stakeholders to extend credit to farms and livestock enterprises because of a fear of agro markets – a fear that is not restricted to Pakistan but is present across the developing world. In Pakistan, bankers fail to differentiate between their fears and legitimate business risks. The result of this mindset is that despite celebrations about ‘achieving agro-credit targets’, institutional sources of finance for farmers in Pakistan are almost non-existent.

Policymakers need to look beyond bankers towards alternative sources of finance and tap into peer-to-peer lending options. Peer-to-peer lending has been prevalent in the region for a century and has now gone global, with tech platforms extending this concept on a massive scale. In 2022, Pakistan formalised peer-to-peer lending (rather, they killed it) and the government permitted a maximum limit of rupees one million to a borrower, funded by at least two investors. It was a classic case of how not to do things.

As a highly regulated industry, banks need to be disrupted before they are ready to enter the rural finance market as a business opportunity, rather than being coerced by the SBP or because the government has set a target. Livestock and dairy account for over 50% of agriculture’s GDP, yet farm credit data hardly shows up on the credit assets of most bank balance sheets. The consequences of such low financing are reflected in lower farm productivity, with farmers depending on money lenders and arthis for their running finance and asset acquisition needs. Pakistan’s agricultural transformation will not be possible with the kind of mediaeval financing options available to farmers.

Infrastructure is a major handicap throttling the transformation of Pakistan’s agriculture sector, and in this context, the irrigation network is the most important. Drainage is the other side of the irrigation coin and functionally does not exist in Pakistan, resulting in salt accumulation in the soil at the rate of one ton per acre per year. The problem is that for most world policy gurus, infrastructure largely means roads, bridges, ports and power stations, and does not include irrigation installations such as barrages and canal networks. Although no formal asset valuation of Pakistan’s irrigation system exists, (comprising three large dams, 19 barrages, 43 main canals, hundreds of branch canals and over a million water courses in the Indus Basin), its asset value must be in the hundreds of trillions of rupees. Given the government’s lack of fiscal space, these assets should be used to raise international finance, including government, private sector and hybrid finance, if Pakistan is to reduce its climate change vulnerability.

Despite the rain damage in Sindh and Balochistan and the devastation caused by the 2022 floods, policy planners have done absolutely nothing and we continue to wait for calamities to strike. There is enough evidence to show that borrowing for water in the name of climate change has made matters worse. Both the Left Bank Outfall Drainage (LBOD) and Right Bank Outfall Drainage (RBOD) projects have proved worse than useless. The severity of the 2022 monsoon rains was caused by climate change (as confirmed by Imperial College’s World Weather Attribution), but the damage was exacerbated by faulty irrigation and drainage infrastructure. The Geneva Conference in January 2023 pledged more than what Pakistan requested, yet we have failed to submit quality and investment plans, while we wait for yet another rain disaster.

In Pakistan’s agricultural context, nothing is more important than drainage technology. Tile drainage is a Dutch invention dating to the Middle Ages and is used to control the rise of the subsurface water table caused by supplementary irrigation. In Pakistan, particularly in Sindh, where the groundwater is saline and where options to use groundwater for irrigation and lower the water table are limited, farmlands continue to suffer and efforts have to be made to develop tile drainage commercially.

Any sort of meaningful commercial enterprise in irrigated areas will not be sustainable without a salt removal mechanism – in other words, drainage – and it is sad that despite borrowing billions of dollars from international lenders and investing them in public sector entities, Pakistan’s irrigation system is more vulnerable than ever. What is needed is a revamping of the irrigation and drainage technology options, along with smart policies aimed at making the agricultural sector sustainable. In this context, the private sector, mainly fertiliser companies, must enhance its capacity to respond to the needs of Pakistan’s agriculture. If necessary, they can tap concessionary international finance.

There is a huge need and potential for commodity and agricultural produce processing, based on modern-day financing. Here again, funding has become an almost insurmountable constraint given the lack of understanding by formal (and urban-based) financial houses in Pakistan. China has a $400 billion meat market, from which Pakistani farmers and exporters can benefit. However, the availability of the right technology and funding remains an issue.

Marketing agro products is limited since Pakistan faces a hostile neighbourhood. Pakistan has no trade links with India; there is a war-like situation in Afghanistan; and border trade with Iran has almost dried up. Vietnam and Thailand have agro exports worth $53 and $38 billion respectively, due to their free trade agreements (FTA). Pakistan signed an FTA with China in 2006, but the benefits of this have yet to be seen. Pakistan’s foreign policy has to pivot to economic issues if agriculture is to become a source of foreign exchange earnings.

All these issues, related to finance, technology, marketing and infrastructure, affect Pakistan’s agricultural productivity and require a thorough understanding of the needs and how to match them to opportunities arising in global markets. This is the single most important challenge. Sadly, agro investment has historically been seen through the lens of aid dollars and executed by unaccountable and agri-illiterate bureaucrats. The time has come to change this.

Aijaz Nizamani is a hands-on farmer and agri entrepreneur.
aijazniz@gmail.com

The Ascendancy of Corn

Fatima S. Attarwala looks at reasons why corn has become a success story.

Most school day memories have echoes of corn in them in some shape or form. In a van shared with friends or with mom in the back of the car, kids often munch on corn of some variety – as makai (kernels cooked in ashes), bhutta (corn on the cob cooked over charcoal), steamed and sprinkled with cheese or the evergreen popcorn. Therein lies corn’s superpower – its diversity of use – and its attraction both on the agricultural as well as on the corporate front.

Also known as maize, corn’s success story has, to a large extent, been buried under the media attention that the politics of sugar and wheat usually garner. Yet, maize yields have tripled over the last two decades and according to a report by the Pakistan Business Council (PBC), production has surged over six times – going from 1.6 million tons to 10.6 million tons – a growth that stems from private sector investment, particularly in the form of the import of hybrid seeds and significantly by the absence of government intervention.

For context, about two-thirds of Pakistan’s total corn production of approximately 10 million tons is used for poultry feed, and the remaining is for livestock fodder and other commercial purposes as well as human consumption. While demand is mainly driven by the poultry feed and the dairy sector, corn has myriad applications for consumer goods as well as intermediate goods in the manufacturing sector. In fact, every part of the corn kernel finds a use; the oil is extracted from the germ, starch goes to industry for various products, protein is dried for poultry feed, and fibre is dried for cattle feed.

Pakistan also has the seventh largest livestock population in the world – and where there are cattle, there will be high demand for fodder; corn silage is also a popular cattle feed used in dairy farms along with some beef operations. Some call it a ‘superfood’ for farm animals because of its high protein content. In Pakistan, corn silage is of a relatively better quality because of suitable weather conditions, allowing for exports as well.

While poultry and livestock consume the lion’s share of maize production, corn derivatives have a multitude of uses for a variety of industries. For example, Rafhan Maize, an affiliate of Ingredion Inc., is one of the biggest corn refiners in the world. The company processes hundreds of thousands of tons of maize each year to produce food and industrial products. Derivatives such as cornstarch are used in the manufacturing of food items such as custard, while refining processes create flour and oil. Cornstarch is used in a range of industries and there is a growing domestic market for corn derivatives in textiles, paper, corrugated cardboard, food, pharma and detergents. For example, in textiles, starch is used as a binding and strengthening agent and is a prerequisite for weaving as it ensures that the threads do not break. On a more microscopic level, waste from the maize industry can create microbes, plants and fungi. These produce molecules with properties that go into the manufacture of household cleaning products, such as dishwashing soap and laundry detergent powder, by brands such as Unilever.

Corn’s success in Pakistan is a testament to what the private sector can achieve without government interference and with the availability of good-quality seeds.

Fatima S. Attarwala heads Dawn’s Business & Finance desk.fatima.attarwala@dawn.com

Incentivising Agri-Financing

Data and digitisation are creating conditions conducive to agricultural financing, writes Ammar H. Khan. 

As other economies have enhanced yields and increased production, consequently improving household incomes, agriculture in Pakistan is plagued by low productivity and a dismal capital-output ratio, resulting in mediocre yields and a largely flat output over the years. Despite making up 23% of the annual output, financing extended to agriculture makes up less than three percent of the total asset base of banks in the country.

Financial institutions deem agriculture to be a high-risk segment given the extended repayment cycles (heavily dependent on crop cycles), susceptibility to external factors (climate, diseases, etc.), and a largely informal cash-oriented economy. Furthermore, intervention by the government in setting prices of key crops further distorts the market, resulting in an inefficient allocation of land and capital. Due to such inefficient allocation, there is little incentive for farmers and investors alike to invest in crops other than wheat and sugarcane. In the absence of such incentives, financial institutions also stay wary of financing other crops and do not take any serious interest in developing the necessary storage and logistics infrastructure required to support movement and storage. Myriad factors affect agricultural productivity, and there is a lack of financing for the same, but technology is bringing about some necessary changes.

The biggest problem with agricultural finance has been the availability of data and a network to carry out due diligence and credit assessments. However, there are now datasets available that utilise the geographic information system (GIS) to accurately identify what area is suitable for a particular crop, how yields have changed in a particular area, and how much output can be generated from a particular area. The same information is available at a granular level. If the same datasets are used, it can be easily inferred what the relatively safer agricultural areas are that can be targeted by financial institutions for financing in a particular season or in a crop cycle. Similarly, by collating high-frequency data on market prices (now available through various sources), it is also possible to assess, with a high degree of accuracy, potential crop yields and outputs in a particular area. Similar datasets are available for water availability, which, when collated with land utilisation data, can provide insights into potential yield changes and outputs based on historical data.

Using GIS data, it is possible to map out credit risk for various agricultural areas. The data can be used to create customised agriculture-specific credit scorecards based on what type of agri-finance can be done in a more granular and data-driven manner.

The financial landscape in rural areas has significantly changed. The number of 3G and 4G connections has exploded, as has the utilisation of mobile wallets; effectively, a large percentage of the rural population can be deemed as banked due to their access to mobile wallets, although more needs to be done to convert mobile wallets into more accessible banking accounts and eventually move towards financing. The first step has been taken, but the second step requires a more granular assessment of individual and land data to understand which areas can be more credit-worthy, eventually leading to a transition to greater financing in that area.

Before any financing can be done, it is essential to understand the flow of money in a particular commodity or sub-economy. As most transactions are done on a cash basis, it is difficult to understand how cash moves, thereby making it difficult to validate information. The digitisation of the agricultural value chain remains crucial, and financing cannot take off without the digitisation of the payment value chain. A key role the government can play here is transitioning from providing subsidies to fertiliser producers to providing direct cash transfers to farmers for the procurement of fertilisers. This will effectively redistribute capital in a way that benefits the farmer directly. The transmission of such subsidies would be conducted through formal banking channels, similar to the Benazir Income Support Programme. The same transmission mechanism can be used to understand payments that are received by a farmer and to incentivise more purchases through the same account rather than cash. As more data is collected, it will be possible to create farmer profiles and clusters, which, when combined with GIS-driven land and water data, will make it possible to identify eligible borrowers through a straightforward algorithm.

Another dataset that can be used is the Relative Wealth Index, updated by Meta. This dataset takes into consideration the relative wealth of a particular area, with granularity as low as two miles. It takes into consideration access to network connectivity, the nature of mobile devices, usage of mobile devices, etc., to ascertain the relative wealth of an area. The same dataset can be used to supplement farmer profiles, which, when reviewed in conjunction with land and water data, can yield unknown insights and make credit scoring a more data-driven process. As credit scoring becomes more data-driven and granular, it will be possible to de-risk agricultural financing, eventually leading to more widespread utilisation of agricultural finance to finance inputs or bridge receivables, resulting in better outcomes.

There exists a strong case to scale up agricultural finance in Pakistan by utilising publicly available datasets and existing digital infrastructure, but the incentive to do this is missing, as agricultural financing is often deemed something that financial institutions have to do to appease the regulator rather than something that generates economic returns. Through the application of advanced credit scoring models, it is possible to generate positive economic returns as well. This is a scenario whereby the financial institution takes the first leap forward and creates a market, which will eventually drive greater adoption and availability of financing in unbanked and unfinanced areas.

Ammar H. Khan is a macroeconomist.
ammar.habib@gmail.com

Biting the Growth Bullet

Despite agriculture remaining crucial to Pakistan’s economic progress, governments are still not giving the sector the attention it deserves, argues S.H. Irtiza Kazmi.

‘Pakistan is an agrarian economy’. This statement has been repeated time and again for the past half a century. Perhaps 50 years ago it held true, but the fact is that the direct contribution of agriculture to Pakistan’s GDP has declined since the sixties. Nevertheless, Pakistan’s agriculture sector still plays a crucial role in the country’s economy, contributing approximately 23% to the GDP and employing over one-third of the national labour force. Agriculture is the second-largest sector in Pakistan’s economy, following the service sector.

Major crops include wheat, cotton, rice, sugarcane and maize. Contrary to popular belief, the agriculture sector doesn’t only include crops, and livestock is particularly dominant within this sector, accounting for 62% of the total share, making Pakistan the fifth-largest milk producer and the fourth-largest leather apparel exporter. Agriculture is also one of the largest sources of foreign exchange earnings, with about 70% of our exports linked to it. Textiles account for the highest export revenue and Pakistan is also the fourth-largest rice exporter globally.

Around 82% of the cultivated land is irrigated through traditional means, and the remaining 18% relies on rainfall. Out of the five major crops grown, wheat and rice are the primary staples and play an essential role in both the domestic food supply and the country’s economic development, with Pakistan being the world’s 10th-largest producer of rice and the seventh-largest producer of wheat.

Despite its significance, the sector faces challenges such as slow growth (compared to previous decades), poorly functioning agricultural markets, and ineffective subsidy programmes. Urbanisation and changes in food consumption patterns are putting pressure on the sector to adapt and increase production. Moreover, climate change has further aggravated the pressure on the sector’s ability to perform consistently.

The global average GDP per capita currently stands at around $11K, with the US at over $65K, South Korea at $30K and Turkey at around $10K. Within our region, Pakistan is at $1.5K, while Bangladesh is at $2.5K and India is at $2.85K. Pakistan should aim to reach and exceed the global average GDP per capita as a policy benchmark. Moreover, as per rough estimates, Pakistan needs to achieve a consistent GDP growth of over seven per cent over 25 years to eliminate poverty and reach global average levels. In this regard, the key is education, job creation, healthcare and, above all, longevity in policy decisions.

The laws, regulations and rules framed by successive governments in the sixties and seventies facilitated growth in major cash crops, (wheat, cotton, rice, sugarcane and maize), and these five major crops are still considered strategic crops in Pakistan. In those days, the private sector was not as active in Pakistan’s agriculture economy; as a result, governments took various supportive initiatives to boost agriculture, including the Seed Act of 1976. The objectives of these policies were to make Pakistan self-sufficient and they worked. By the eighties and nineties, Pakistan had become self-sufficient in these commodities. However, these policies were neither updated nor tweaked to meet changing business dynamics. Furthermore, the rules and regulations governing these policies are not private sector-friendly, primarily due to the red tape and inefficiencies that exist within the government sector, in contrast to the business dynamics of today’s private sector.

The required pace and scale of R&D in agriculture are broadly missing. On the other hand, following a thorough ground reconnaissance in 2014, a consortium of private sector investors comprising the Sapphire, Nishat, and Fatima groups (SANIFA in short), set up a seed company that was able to produce a cotton seed variety with a much higher yield, both in terms of quantity and quality. The sale of these seeds funds the research for this company.

Another important requirement for the agriculture sector is large-scale mechanised farming, and this calls for scale in deployment. For example, a six-row cotton picker is viable for 10,000 acres, but in Pakistan, 88% of the farms are considered small by acreage (less than 12.5 acres). Yet, these farmers hold about 55% of the total cultivated area, leaving only a small proportion of large landowners who can deploy mechanised farming methods.

There are also inhibitions to agriculture mechanisation. For example, it is believed that if farming were mechanised, many people would lose their jobs. Now, this is where the debate becomes interesting. Why do we think we can achieve economic progress and alleviate poverty without changing anything? Diverting and deploying human resources towards higher-value tasks and jobs is inevitable to achieve national progress. Other related sectors within the agriculture landscape require skilled people; hence, such redeployments are essential. In China and South Korea, menial farm workers were moved to low-productivity industry jobs. In fact, this phenomenal shift in China is celebrated. The relocation of agricultural workers, between 1980 and 2000, to low-productivity industry jobs in the eastern seaboard of China is considered to have been the biggest peacetime migration in human history.

This is something that every country must go through on a varied scale.

Several factors have contributed to this, including the adoption of high-yielding varieties and hybrids, leading to higher yields per unit area, as well as the expansion in maize cultivation, particularly in Punjab and KP. There has also been growing demand for maize in the poultry industry, which currently consumes nearly 65% of Pakistan’s maize production. Other factors that have contributed to making maize the third most important cereal crop, after wheat and rice, are improved irrigation infrastructure and techniques, better water management, enhanced credit facilities for farmers, government programmes aimed at improving agricultural extension services, and the establishment of research institutions focused on maize improvement and development.

The demand-growth trajectory of maize cultivation in Pakistan, primarily on the back of growth in the local poultry sector, suggests that this success can be replicated with other crops. For example, local production of world-class dairy-based products, including cheese, would contribute substantially to promoting import substitution, as well as promoting exports.

Agriculture remains a critical component of Pakistan’s economy due to its importance in food security, job creation, and foreign exchange generation. However, the required efforts to prioritise it through policy dialogue and a national narrative are missing. The velocity of change in global economics warrants seeking specialised assistance in agriculture and related sectors in Pakistan. It is time agriculture received the attention it needs to drive Pakistan’s growth.

S.H. Irtiza Kazmi has three decades of experience in corporate and investment banking and financial advisory services. irtiza.kazmi@gmail.com

“The farmer community desperately needs social protection”

Rizwan Hussain, MD & CEO, Salaam Takaful, speaks to Mariam Ali Baig about his mission to provide insurance coverage to Pakistan’s farming community.MARIAM ALI BAIG: Let’s start with a brief overview of Salaam Takaful.

RIZWAN HUSSAIN: I have been in this industry for 34 years. I worked with EFU, one of the largest insurance companies in Pakistan, for 27 years. In 2018, my partner and I and our families bought this company, which was then known as Takaful Pakistan Limited. At the time, it was not doing well, so we started to rebuild the image and the business. Today, Alhamdulillah, despite Covid-19 and recent economic stresses, we have become the largest Islamic non-life insurance company in Pakistan. It was a tough and challenging journey.

MAB: Why did you decide to buy this company?

RH: I was fed up. We have the lowest insurance penetration in the region, and this has been the case for the last 30 to 40 years.

MAB: Why is that so?

RH: One, people’s beliefs; halal versus haram; Islamic versus non-Islamic; two, the perceived value of the product for the customer.

MAB: What prompted you to put a significant emphasis on agriculture?

RH: Because I believe people in Pakistan should have the benefit of insurance and social protection.

Crop insurance in different forms has existed for donkey’s years in Pakistan, predominantly pushed by the State Bank of Pakistan through a product known as the Crop Loan Insurance Scheme. However, in our view, the pricing mechanism of this scheme is not beneficial for the farmer and that is why we stepped in and introduced our own product, which is a parametric crop product.

MAB: What is a parametric product?

RH: It is a relatively new concept in the insurance market, and although it has been around for about 10 years, it is only now gaining traction globally, particularly within the social impact space. The companies engaged in parametric products are those that provide coverage for crop damage or damages caused by natural calamities to middle- and low-income people who cannot put themselves back together unless they have some kind of coverage. In this regard, the likes of the Insurance Development Forum, the World Bank and the UN are all engaged in these kinds of initiatives and we believe that if introduced in Pakistan, we could give our farmers the support they need.

MAB: How does this work?

RH: We sell them a product based on a pre-agreed set of parameters, which include excessive rainfall or heat, drought or earthquake, floods and so on. All the parameters are pre-defined. For example, if the heat index hits 50 degrees Celsius over a farmer’s acreage, we will compensate him, no questions asked, and his agreed compensation will automatically go into his bank account. We can do this because we have access to the temperature on his farm on a daily basis through our app. The app also provides farmers with crop advisories, including what to do if the temperature is rising. The beauty of this product is that it requires no human intervention. We do not want to bring in loss adjusters, as this usually creates conflict between the insured and the insurance company. A parametric product may be slightly expensive, but the compensation and coverage it provides are far superior to any product available in Pakistan.

MAB: Do you work with individual as well as corporate farmers?

RH: Yes.

MAB: What is the split percentage-wise?

RH: It would be 95% corporate and five percent individual farmers. The inherent challenge with individual farmers is the lack of penetration, although we have invested a lot in reaching out to them. We have also set up a framework to enable us to go to the farmers directly through NGOs because they trust them. The challenge is the lack of awareness and money. Individual farmers do not have enough money to buy inputs, let alone insurance.

MAB: Do you think a shift to corporate farming would be beneficial to farmers?

RH: It would be because, from the farmer’s perspective, his crop is actually being bought. All he has to do is work with the corporate farming community to produce the required output.

MAB: How technology-driven is your product?

RH: It is all technology-driven. For example, it requires 50 to 60 years’ worth of weather data to even start thinking about it.

MAB: From where do you access your data?

RH: Through local and international sources. Irriwatch in the Netherlands is one of our weather data providers. We are on the verge of signing up for IBM’s data intelligence suite, the GIS system and we are also exploring local solutions, and in this respect, the Space and Upper Atmosphere Research Commission provides an excellent level of data.

MAB: Who crunches the data?

RH: Our in-house team does the data punching and data calibration. This is how we come up with a product that defines the maximum and minimum scope of coverage for the temperature in a particular region based on historical data and trends over the last 10 to 15 years.

MAB: Who manages your app?

RH: Our IT team and Infarmer, our local partner, manage this. After the farmer has mapped his farm, the app will provide him with climate-smart agriculture notifications. The advisory is customised which is why it is important that each farm is mapped because conditions can change every 0.25 kilometres.

MAB: How sophisticated is the farmer?

RH: Farmers are very smart. We send out our field officers to meet them or the communities and train them on using the app; we also provide videos in the local language.

There are almost eight million farmers in Pakistan and only a fraction of them are getting insurance coverage. Yet, the farmer community desperately needs this social protection. For this to work, the community needs to be engaged. We have established almost 25+ partnerships within the ecosystem, including seed and fertiliser companies, NGOs, weather and actuarial modelling companies and banks. There has to be an ecosystem, because only then can we create the required social impact. As an insurance company, I cannot do this alone. I have to create that ecosystem and this takes time. Enabling the technology takes time as well. We have been investing in this product for the last three years.

MAB: Based on what you are saying, the market penetration for this product is very low.

RH: It is almost non-existent. It is only the tip of the iceberg. Farmers don’t have the money. They subsist on a cycle of debt. They buy seeds and fertiliser; they sell the output; and the cycle continues.

On top of that, we don’t have a unified agriculture policy. Since the 18th Amendment was passed, the provinces have a lot more control over how things are run, and the regulatory requirements for each province are different. There has to be a unified push in terms of agricultural policy and how we protect our produce. Unlike Bangladesh, India or Indonesia, where crop insurance is mandatory, in Pakistan it is not. There has to be a fundamental shift so that we look at our produce as providing the country with the food security it needs and you do this by ensuring farmers have access to the facilities they need and by providing them with adequate insurance protection.

Even if the government makes insurance protection compulsory, the farmer doesn’t have the money to buy it.

MAB: What is the solution?

RH: It has to be subsidised. Globally, wherever these schemes have worked, they have been subsidised.

The seed and fertiliser companies and the whole ecosystem should be incentivised so that the cost of the insurance is absorbed by all the stakeholders, including the government and the insurance companies.

For feedback: aurora@dawn.com

A New Look at Agriculture

To progress effectively, agricultural practices need to adopt new frameworks and, most of all, new mindsets. Shoaib Siddiqui has a few ideas.

Agriculture forms the backbone of Pakistan’s economy and any significant upheaval that could negatively impact farmer economics can potentially lead to food insecurity, environmental degradation and social unrest. Although concern for the environment is a global matter, the social unrest aspect is unique to Pakistan. Pakistan is the fifth-most populous country in the world and 75-80% of its population resides in the Indus River Valley, which in turn comprises just 25-30% of the country’s total land area. In these circumstances, any decline in agricultural output could exacerbate social tensions, giving rise to instability in rural areas and leading to further urbanisation in cities that are already stretched beyond their original design capacity. There is therefore, an urgent need to invest in Pakistan’s agriculture practices, which require more political will than money.

Pakistan’s irrigation system is outdated and in need of significant investment. We have grossly undervalued the importance of maintaining and incrementally building upon the irrigation system we inherited from the British. A way forward would be to set up WUAs at the community level. These associations would be responsible for maintaining the irrigation and drainage infrastructure, resolving water-related conflicts and promoting water-saving practices among farmers. Their capacity-building skills would be needed in areas such as water management, infrastructure maintenance, fiscal responsibility and conflict resolution. This, in turn, requires a legal framework that transfers the responsibility for the irrigation and drainage networks from a centralised bureaucracy to community WUAs. The WUAs would be allowed to function and gain experience in a supportive environment facilitated by the government. In this respect, the installation of early warning systems would prevent the flood disasters we have been facing recently. There has been a lot of focus on promoting drought-resistant and water-efficient crops, but there are several challenges. The biggest one is changing mindsets and adopting new irrigation practices, all of which require the presence of agriculture extension services.

A three-tier approach consisting of conservation agriculture, agroforestry, and water-efficient irrigation techniques would help improve the soil’s health, fertility and water retention capabilities, leading to reduced erosion and better resilience against extreme weather events. Although CSA is not as capital-intensive as other initiatives, it does require a change in farming practices and mindsets, as it calls for an integrated approach to managing crops, livestock and forests. This approach leads to enhanced biodiversity as well as a diversified income for farmers.

A number of foreign private companies are currently engaged in providing extension services aimed at securing a reliable harvest to trade with their home countries. These companies provide farmers with precision farming technologies, crop-specific advisories and advice about market-oriented value addition. They also have access to cutting-edge technologies and international best practices. The government of Pakistan provides extension services that, on the other hand, have a long-term and public good orientation and therefore should have a broader agricultural community appeal as they are willing to operate in geographies that are not necessarily commercially viable. These contrasting approaches between foreign private companies and government-provided extension services reflect their divergent priorities and motivations.

Despite mounting disinterest within farming families to pursue this occupation, a white space is emerging, made up of a new breed of ecologically minded entrepreneurs willing to work on a more collaborative basis. In this scenario, large tracts of land are procured and managed as a single administrative unit. The upside of this is improved farmer economics and efficiencies due to larger field operations, bulk procurement of inputs, competitive financing, cooperative mechanisation and better marketing. By collectively negotiating pricing based on aggregated produce, market barriers could be overcome, especially by reducing the dependency on middlemen while facilitating access to higher-value markets. It would also give farmers access to risk mitigation products through takaful or conventional insurance companies. The other advantages of such farming would be collaborative learning in terms of upskilling and productivity-enhancing techniques to address challenges such as climate change and water scarcity. There would also be possibilities for shared infrastructure arrangements by participating in WUAs, as well as by sharing processing facilities, while extension support services would be available at a better cost.

These are based on geographical proximity, where women can come together to exchange information and address common issues related to farming, livestock and agribusiness. Investments could be made in creating awareness and capacity-building for sustainable farming and providing learning about finances, market linkages and farming operational skills. WAGs can eventually morph into a women-led version of farmers’ cooperatives.

Dispute resolution is an important aspect of improving the quality of delivery. This involves creating spaces for amicable community-inclusive dispute resolutions on matters such as land tenancy, partnership disputes, compulsory purchase compensation, or general contractual noncompliance, to name a few. Community involvement has proven far more effective than traditional methods. This framework should leverage established local customs and tribal knowledge, thereby providing a version of justice already known to the local community. By giving space to grievances and understanding, reconciling and ultimately resolving them, a more cohesive and resilient agricultural community can emerge, contributing to the well-being of farming communities and agriculture as a whole.

The writer invites feedback and can be contacted atsiddiquishoaib1@gmail.com

The Kachelo Mission

Sadia Kamran reports on the efforts made by Kachelo Fruit Farms to bring A-grade quality produce to Pakistan’s domestic market.

Although Pakistan’s annual mango production is approximately 2.3 million tons, only five percent of the production is of A-grade quality as per the standards set by the International Trade Centre (ITC) for export (source: Profit Magazine). The remaining produce falls into the B-grade category due to poor harvesting and handling techniques and is sold domestically. Kachelo Fruit Farms (KFF) also operates within this domestic market and their goal is to bring A-grade quality mangoes to local consumers. In this way, they have become a pioneering brand in premium-packaged mangoes.

The Kachelo legacy dates to Haji Mohammed Kachelo, who established his mango farms in Sindh in the 19th century. After his death, the farmlands were divided amongst his descendants and today, KFF is run by Zulfiqar Ali Kachelo and his wife, Nadine Kachelo, who is the managing director and handles all the marketing, sales and operations of the business.

In a country where mangoes are considered an open market fruit sold by vendors on fruit carts, KFF has set their mangoes apart by guaranteeing pure breed mangoes as opposed to the hybrid varieties commonly available. With a farmland area of 30 acres, KFF’s annual produce amounts to approximately 1,500 tons.

According to Zulfiqar Ali Kachelo, “the branded mango category has very few players – namely Sindh Mango Growers & Exporters, Rahuki Farms and Gardezi Farms – and the differences in our geographical spread and mango varieties mean that none are a direct competitor to KFF. The branded mango category is at its nascent stage and claims a mere 0.001% of the total market.” Branded mangoes, as per the KFF formula, are preservative and chemical-free and grown from seeds collected by Kachelo’s forefathers from various regions in India at the end of the Mughal period.

To this end, KFF has introduced what they consider to be a more efficient and modernised form of mango agriculture based on improved technologies and techniques.

KFF has also diversified into other fruit and vegetables, such as strawberries, onions, tomatoes and “guava breeds sourced from several countries are under research and we hope to introduce them to the market very soon.” In 2021, KFF introduced their gelato line under the banner of Kachelo Foods.

The rationale for diversification comes from KFF’s approach to minimise waste and a question of boxes. Kachelo noticed that when it came to packing, only the bigger and pulpier mangoes made it into the boxes, while the smaller (yet very sweet) mangoes were left out due to their size. This led to the idea of using the pulp of the smaller mangoes to make gelato without adding any artificial flavouring, colours or stabilisers. To this end, Nadine Kachelo took a gelato-making course in Paris, where the required equipment was also procured. Today, Kachelo Foods offers 12 flavours, including mango, strawberry, cookies and cream, vanilla cinnamon and coffee.

As for individually wrapping each mango and putting them in a box, the idea came from Kachelo’s grandfather, Abdul Samad Kachelo, who sent a box of his mangoes to Queen Elizabeth for her coronation. Today, KFF partners with corporate clients to create gift boxes and since 2016, their mangoes and strawberries have also been available online through the KFF website and several e-commerce platforms.

KFF products are sold at premium prices and according to Zulfiqar Ali Kachelo, “our customers are willing to pay a premium for the guarantee that they are buying ethically and sustainably grown products using controlled quantities of fertilisers and pesticides, from original rootstocks and generations of acclimatised varieties that are hand-picked.” An example of sustainable agricultural practices at the farm includes biological interventions such as fruit-fly traps instead of pesticides to deter insect attacks.

Kachelo’s vision supports modern and environmentally friendly farming practices. He says all KFF farmers are compensated with fair wages, a non-deductible income and insurance coverage.

In terms of sustainable practices, several innovations have been introduced, including a periodic harvesting system. Previously, all mangoes were picked on a pre-decided harvesting date. Now, KFF farmers are asked to pick the larger, plump fruit first; this frees up the tree’s nourishment resources so that the smaller fruit has a chance to grow in size and taste. Another innovation is the installation of drip irrigation systems, which have reduced water intake by 20-30%.

Mango farming, like every other crop, is heavily dependent on climatic and environmental factors; heat waves, droughts, and floods can affect the year’s produce. Speaking about other significant challenges, Nadine Kachelo points to the lack of standardisation in agricultural practices. In her view, “bringing technology and knowledge to the farmer and involving him in the process is an important way to overcome the quality barriers our produce faces in the international market.”

Looking to the future, Kachelo is looking towards adding more fruit and vegetable varieties, but only if he can introduce original variety seeds and ensure a quality product. He also wants to make product traceability achievable (knowing the origin tree of each mango sold).

Sadia Kamran is Marketing Manager and an English language instructor, Anees Hussain.sadiaazam@yahoo.com

Fighting Pakistan’s Growing Food Insecurity Crisis

Unless something is done now, climate change will exacerbate Pakistan’s lethargic agricultural growth and lead to further food insecurity, warns Aisha Khan.

The year 2023 ended with a climate conference in Dubai to mark the 28th convening of the Conference of Parties. The meeting was the first Global Stocktake, after the Paris Agreement of 2015, to assess the state of global climate and its impact on present and future life systems on planet Earth.

The vision for a universal and liveable planet is not possible without ensuring a sustainable food production and distribution system that is just, equitable and orderly, as well as affordable and accessible to all.

Currently, the world is embroiled in a rolling food crisis where 2.4 billion people (nearly a third of humanity) are moderately or severely food insecure, with women and girls bearing the brunt, accounting for almost 60% of the hunger-stricken population. Hunger is on the rise, affecting 800 million people worldwide, with challenges to agricultural productivity also increasing. Each day that delays emission reductions means exposing more people to food insecurity. As the planet continues to warm, food systems will come under increasing stress, setting in motion a chain of events that will reinforce a negative feedback loop.

Current farming practices are responsible for a third of all greenhouse gases (GHG). They are also responsible for eroding natural resources (water, soil and pollinator populations) and increasing risks from zoonosis and antimicrobial resistance. Meanwhile, family farms and smallholders (608 million globally) receive a fraction of the sector’s profits.

Standing at this critical juncture, it is important to put things into perspective and look for solutions that reduce GHG emissions from the agriculture sector and, at the same time, keep production levels adequate to meet people’s dietary needs. This challenge will require an approach that combines healthy, affordable and sustainable diets with systems in place that tackle food waste, restore natural systems, boost investment in ecologically beneficial and regenerative agriculture practices, and include agroecology as an integral part of managing all future food systems. Farmers need to be rewarded more fairly and their skills harnessed to transform food systems. An equitable approach can help improve livelihoods, tackle environmental degradation and provide food security. However, achieving these outcomes requires a massive uplift in investments from the public and private sectors, including smallholder farmers, who receive only 1.7% of total global climate finance. The world’s biggest emitters of agricultural methane and users of mineral fertilisers should lead by agreeing to cuts in the amount of methane emitted by their farming systems by 2030 and reducing losses of reaction nitrogen by 50% by the same date.

Agriculture is hugely dependent on weather patterns and climatic conditions. Crops that rely heavily on seasonal precipitation, specific temperature ranges and soil conditions will be affected more severely by stark variations and sudden changes in the climate. Similarly, heat-sensitive and water-intensive crops will suffer a setback due to sudden changes in factors that determine the quality and quantity of yield.

For Pakistan, the challenge is amplified by many other factors that contribute to the emerging crisis. Each has its unique constraints that need to be addressed separately but simultaneously to avoid a polycrisis.

The unsustainable population growth rate of 2.55% is the biggest obstacle to food security. It throws a spanner in the attempt to balance supply with demand. In 1981, wheat production in Pakistan was 12 million tons, with a population of 84 million. Today, production is 28 million tons, but an increase in population by 187% (241 million) has rendered the 133% increase in yield redundant. The rampant use of agricultural land without any agroecological studies to guide practices has resulted in suboptimal productivity and the waste of natural resources. Under the ‘business-as-usual’ scenario, low yields will become lower under a changing climate, with serious implications for food security.

As a lower-riparian, single-basin country, Pakistan relies heavily on the flows of the River Indus for irrigated agriculture. The quantity and quality of water are both under increasing threat from global warming. The Indus derives over 40% of its water from snow and glacial melt, making its flow more susceptible to climate change. The abundance of water that results from accelerated melting will result in flooding, while water scarcity will lead to drought and desertification. Both are detrimental to agriculture and will contribute to the food crisis. Mountain communities that rely on melted glacier water for agriculture are already witnessing the impact of changes in the timing and quantity of water. As the phenomenon hits country agriculture, the threat to food security will mount.

Reports by experts, including modelling projections by the Intergovernmental Panel on Climate Change, warn of stark changes in the Hindukush, Himalaya and Karakoram mountains. South Asia warming more rapidly than the rest of the world will put 250 million people who rely directly on the Hindukush, Himalaya and Karakoram mountain system at risk and indirectly impact another 1.8 million.

In Pakistan, the increase in population and the decrease in water flow will have serious consequences for food production. Agriculture in arid and semi-arid geographies requires very careful planning to ensure that food systems remain sustainable. Pakistan needs to be mindful and plan carefully.

The Country Climate and Development Reports prepared by the World Bank provide a roadmap for transforming the agriculture-food system. The recommendations include delinking agriculture from practices that push water and land resources beyond safe thresholds, causing the degradation of ecosystems across landscapes; managing and equipping irrigation and drainage systems to cope with climate extremes; removing inefficient and inequitable subsidies; improving services essential for increasing productivity – research, extension and the development of markets; and finally, removing impediments such as skewed ownership and tenure insecurity.

As we move forward, it is important to connect the dots between food, water and population to create a sustainable model. Maladaptation in agriculture is not a stand-alone issue. It is closely linked to peace, stability and security. The rising cost of food will increase already high rates of stunting in the country, trigger displacements due to climate-induced disasters, result in demographic shifts with enhanced pressure on cities, increase poverty, and create conditions for conflict in society. It is in Pakistan’s interest to take corrective measures before it is too late. The new government has the opportunity to leverage the Special Investment Facilitation Council (SIFC) to reform the agriculture and livestock sectors and make them more robust and resilient.

Notwithstanding the challenges faced by the agri food sector, it still presents a strong case for catalysing growth in the rural economy and boosting productivity and exports. With calibrated management and the right mix of policies, partnerships and implementation strategies, the agriculture sector offers Pakistan the best opportunity to achieve its Nationally Determined Contribution (NDC) for 2030 and develop the macro-fiscal stability it needs to cope with climate shocks.

Aisha Khan is CE, Civil Society Coalition for Climate Change.
aisha@csccc.org.pk

Agriculture’s Weakest Link

Agriculture is a key contributor to Pakistan’s economy, but its growth is declining. Nationally, agriculture accounts for 22.7% of Pakistan’s GDP, employs 37.4% of the labour force, and directly and indirectly accounts for nearly 80% of the total value of Pakistan’s exports. Yet, the sector’s growth has declined from 3.3% during 2001-2010 to 2.4% in 2011-2022.

Growth in any economic sector depends largely on the strength of its research and innovation (R&I) system. This article highlights agricultural R&I’s main achievements as well as the gaps that are hindering its ability to deliver faster growth, create resilience for climate change and deliver food and nutritional security.

Established in the late 19th century, Pakistan’s R&I system is one of the oldest in the Subcontinent, and although it has expanded horizontally over the years to cover almost all agricultural commodities, ecoregions and disciplines, there has been little integration within and across research institutes and universities. Both provincial research institutes and extensions come under the provincial agriculture departments, but they work almost independently. Similarly, the federal research institutes on agriculture and water, which work on high-end strategic issues, have little integration with the relevant provincial institutes. Furthermore, agricultural universities have hardly any links with either federal or provincial research institutes, while the private sector focuses mainly on promoting their own products and has few opportunities to collaborate with the public sector R&I system.

According to a survey conducted in 2020, over 43,000 professionals and support staff are engaged in public sector agriculture R&I in Punjab and Sindh. About 31% are engaged in research and the remaining 69% are in agricultural extension (taking technologies to the relevant stakeholders); 61% of these resources are employed in crops and 39% in livestock, even though the contribution of the two sectors in GDP is the reverse. The R&I system is highly bureaucratic, as all scientific staff are supported by six non-professional and administrative staff members. The female strength is less than 10%. Estimates for 2018 suggest that Rs 10.8 billion were spent on crop R&I in Punjab and Sindh. Investments by the private sector in research is relatively small compared to other developing countries; although lately it has released some useful varieties of cotton and potato.

Pakistan’s R&I system has been successful in generating new crop varieties, developing vaccines and diagnostic kits for major animal diseases, and producing and disseminating information and knowledge with respect to crop varieties and animal vaccines. Between 1947 and 2020, 923 crop varieties were developed, although most remained on the shelf and only a few reached the farmers’ fields. About 95% of these varieties were developed by the public sector. Although some varieties were developed for high-value crops like fruits, vegetables, pulses, oilseeds and floriculture, little emphasis was put on promoting these varieties to the farmer.

The release of crop varieties with higher-yield potential and new sources of pest resistance and tolerance has increased per-hectare farm yields for major crops by over three times since 1947. This has not only contributed to improving agriculture’s GDP; it has also helped farmers adapt to emerging climate stresses, enhance the nutrient content of food and prevent the widespread outbreaks of various diseases. It has also enhanced the per capita availability of food. For example, the annual per capita availability of wheat from domestic production has gone from 85 kilos in 1960 to 115 kilos in 2021. In other words, since 1947, the R&I system has not only fed five times more people; it has also fed them better.

During this period, the government built dams, installed tube wells, provided incentives for the purchase of tractors and promoted the local fertiliser industry, inducing higher land-use intensity and increasing crop production, especially in Punjab and Sindh.

A recent success of the R&I system has been the phenomenal increase in maize production, a development attributed to the introduction of hybrid seeds along with improved management practices by the private sector. The spectacular growth in the poultry sector during the last three decades has also been a great achievement of the system, replacing the consumption of expensive red meat and helping overcome protein deficiency in the population. This is mainly attributed to the introduction of new poultry breeds (PIA-Shaver), the promotion of state-of-the-art poultry sheds, the wider availability of poultry feeds, an improved regulatory framework, the availability of poultry vaccines, and the promotion of associated management practices.

There have been some recent successes in fruit, vegetable and oilseed production, although it is still not certain whether these yields will be sustainable over a longer period of time. For example, a 100% increase in potato production and a 133% increase in potato exports between 2016 and 2022 are attributed to the introduction of hybrid potato seeds suitable for processing, associated management practices and the presence of a small-scale processing industry in the private sector. Yields for peaches and guavas increased by 80% and 70%, respectively, between 2017 and 2021. The production of fodder crops has quadrupled, while that of rapeseed and mustard, especially canola, has increased by 150% during the same period. However, crops like cotton remained in crisis, while the per-hectare and per-animal yields of major crops like wheat and rice remained stagnant over the period.

Although the system did bring about significant positive outcomes in terms of meeting Pakistan’s growing food requirements, it has failed to make the agri sector market competitive by enabling its stakeholders to respond to changing demands in the quality of agriculture products. Pakistan is losing big opportunities by not participating in the fast-expanding international fruit and vegetable market, which totals over $275 billion, while Pakistan’s share of it is about 0.1%.

This situation has been partly due to a lack of resources and partly to poor management in the R&I system. Only approximately 0.23% of the GDP from the crop sector is invested in R&I (the norm is 1.0%), compared to 0.35% in Bangladesh, 0.6% in China and 0.45% in India. More important than the lack of funds is the failure of R&I to develop effective planning and inter- and intra-institution coordination mechanisms that would involve private sector stakeholders, including producers, thereby ensuring an efficient use of scarce resources to meet market demands. As a result, R&I is a supply-driven, rather than demand-oriented, system in terms of addressing issues. For example, despite the increasing demand for value-added and processed products, R&I activities are mostly confined to farm production issues without sufficient emphasis on value chain development.

R&I is tightly controlled administratively and financially by federal and provincial bureaucracies and has little autonomy to mobilise or allocate human or financial resources on a need basis. Over 90% of the budget goes into paying salaries, with very little left to carry out research. Training opportunities are few and international collaborations have almost dried out. There are no incentives for researchers to develop patented products, as they have no share in the proceeds. Agriculture extension is still largely based on personal contacts and it is almost impossible to individually reach the growing number of small farmers. Modern approaches to extension that involve the private sector and reaching out to farmers are either missing or ineffective. It is worth noting that the most successful R&I systems in the world have been largely made autonomous by involving stakeholders and the private sector in research planning, funding and product dissemination.

Due to the lack of reform in agricultural R&I over the last three decades, performance is at a low ebb. Although the system is still as good as similar systems in, for example, Brazil, India or Mexico, when it comes to generating outputs like research papers and varieties, the outcomes are poor because they are either not relevant or not communicated to the stakeholders.

The consequences of this disconnect are serious. Firstly, despite the introduction of new varieties and technologies, the per-hectare and per-animal yields of most crops and livestock are lower than the world average, despite the fact that Pakistan has one of the best alluvial soils and irrigation systems in the world. As a consequence, agricultural commodities have lost their competitiveness. It is estimated that if farm-level yields were brought to par with world-average levels, this would add $10 billion annually to our agriculture sector. Secondly, R&I has failed to diversify to meet national and international demands for nutrition-rich and high-value products. The focus has been on major crops, with little emphasis on fruit, vegetables, oilseeds, and pulses.

As a result, Pakistan is spending $7.3 billion annually on importing food items, including $3.2 billion on edible oil, $0.75 billion on pulses, and $0.5 billion on tea. Thirdly, we have lost competitiveness at the secondary level because of the lack of investment in improving the value chain of primary farm products. The R&I system has been unable to introduce economically viable technologies for the value addition of local products, with the result that the quality of Pakistan’s produce does not match the demand from national and international markets. This is reflected in the fact that almost all exportable agricultural commodities fetch prices that are lower than the world average. Fourthly, little agricultural produce goes into processing. Unlike in China, Vietnam, and many other countries, we have largely failed to bring about a ‘small-scale’ industrial revolution, thus unable to generate new job and income opportunities for the rural poor. Overall, the inefficient and irrelevant R&I system has failed to tackle poverty, overcome nutrient deficiencies, and handle climate change impacts.

It is estimated that if the quality of Pakistan’s agricultural products is on par with the world average, Pakistan would be earning an additional $10 billion annually and creating millions of new jobs in rural and peri-urban areas.

There is significant potential in the agriculture sector to enable the creation of new jobs, enhance incomes and foreign exchange earnings, and support the industry. However, to do so, the R&I system has to abandon its archaic, traditional system and move towards meeting the demand for ‘knowledge-based’ agricultural growth that responds to and fosters interaction among all stakeholders – universities, research, extension, producers, traders, and value-chain managers – in the public and private sectors, as well as keeping abreast of advances in modern research and management systems and changing demands. The immediate issue is not funding. It is about improving R&I planning, coordination and monitoring mechanisms in order to better utilise the available resources in high-impact areas.

Develop partnerships with different players, including the private sector.

Address value chain issues and include agribusinesses, the food industry, policymakers, environmental groups and consumers.

Engage with stakeholders to identify, design, fund, implement and monitor R&I activities.

Measure results through outputs and outcomes in the farm and agro-industry sectors rather than on the completion of research.

For both public institutions and scientists working in research institutes, combined with increased accountability.

Define career paths and provide competitive salaries to attract qualified scientists and extension advisers on merit. Link rewards to defined, output-based incentives.

Flexibility and openness to interact with other institutions, universities, and the private sector in Pakistan and abroad.

Increase the amount and sustainability of funding, as well as empower a range of stakeholders; separate funding from service providers (currently both functions are performed by the government).

This includes intellectual property rights and incentivising a role for private sector R&I.

Reports referenced:
Agricultural and Livestock Innovation System: Achievements, Constraints, and Ways Forward

Diagnostic Analysis of the Sindh Agriculture Innovation System

Dr Mubarik Ali is former Member (Food and Agriculture), Planning Commission of Pakistan. He is currently a consultant on agriculture, food and nutrition policy, rural poverty and value chain development. mubarik520@yahoo.com

“There is still tremendous space for growth in the tractor sector”

Sakib Eltaff, CEO, Al-Ghazi Tractors, speaks to Uzma Khateeb-Nawaz about his organisation’s evolution over the years and the potential for growth in the agricultural equipment sector.UZMA KHATEEB-NAWAZ: What is the story behind Al-Ghazi Tractors?

SAKIB ELTAFF: Al-Ghazi Tractors is a Pakistan Stock Exchange-listed company that was established in 1983. It was privatised in 1991 when the Dubai-based Al-Futtaim Group, along with Case New Holland and several other investors, took over the management of the company. It is now over 93% foreign-owned. We have a manufacturing facility in Dera Ghazi Khan and we produce New Holland tractors using technology from Case New Holland, which is one of the leading equipment and services companies in the world. We also produce an array of agricultural equipment, such as diggers, hoes, forklift sprayers, front-end loaders and hydraulic tipping trolleys.

UKN: How important is localisation for Al-Ghazi?

SE: Ninety-two percent of our manufacturing processes and spare parts are localised, and it took us decades to reach this point. Today, we collaborate with local vendors to ensure we use locally procured equipment with the right quality standards. We are looking for ways to increase localisation further in order to manage costs better. The fact that we are mostly localised gives us an advantage because fluctuations in exchange rates do not affect us as much as they do other companies.

UKN: Are your products priced competitively?

SE: Compared to the global tractor industry, Pakistan has some of the most affordable farm equipment and we are quite competitive in that arena.

UKN: Who is your target audience?

SE: Mostly farmers, although our equipment (tractors, for example) is also used in the construction and haulage sectors.

UKN: How do you market to farmers?

SE: Although we use conventional media such as newspapers and radio, our primary means to reach farmers is by arranging demonstrations. Most of our activities centre on product awareness, educating our customers on the most efficient way to use our equipment, advancements in our existing products and how their longevity can be increased. Recently, we introduced free clinics to provide health checks on equipment and conduct repairs when required. Such complimentary services allow us to engage with farmers while ensuring that their equipment is working at peak efficiency.

UKN: Do these free-service clinics operate throughout Pakistan?

SE: Yes, but they are not held simultaneously; we move from one region to another.

UKN: What challenges do you face in connecting with your TG?

SE: The biggest challenge is reaching out to the farmers and making them aware of our product range because of the travel needed to do so. Another challenge is understanding the needs of farmers within their particular locality. We can run a lot of campaigns and ads on social media and other platforms, but they do not always connect with our target customers because they may not meet their requirements. The challenge is to fully understand their needs and we are doing this via our free clinics and events.

UKN: Who are your main competitors?

SE: Pakistan has two major tractor manufacturers: Al-Ghazi and Millat Tractors and between the two of us, we meet the expectations of the agricultural sector, which has grown significantly in recent years. Our market share ranges between 35 and 40%.

UKN: What is the market size for tractors in Pakistan?

SE: The annual market size varies between 30,000 and 35,000 tractors. When you look at past trends, you see that the market has gone up and down. The crucial part to remember is that there is still tremendous space for growth in the tractor sector, especially because Pakistan’s farm mechanisation rate is currently 0.9 horsepower per acre and the government’s aim is 1.4 horsepower per acre. Furthermore, agriculture accounts for approximately 22% of Pakistan’s GDP and is expected to increase by at least 3.5% this year. Corporate farming is also on the rise, and these factors will drive up the market size for tractors and other agricultural equipment.

UKN: Does Al-Ghazi provide training to farmers?

SE: I don’t think we do enough to educate our farmers. Some of them are following the same farming practices their forefathers followed. Therefore, there is a significant opportunity for companies like ours to engage with farmers and showcase our equipment, as well as educate them about practices such as sustainable farming. However, this is only part of the process. We need to collaborate with other organisations and encourage farmers to adopt sustainable agricultural practices.

UKN: For example?

SE: Many farmers use cows to plough their fields, even if this reduces the soil’s water content. Using a ripper to perform the same task causes the overall soil health and therefore, farm output, to improve because the water content is maintained in the soil. This is just one example. Farmers need to be engaged on a larger scale, and this will require more organisations to step in.

UKN: Are other stakeholders making similar efforts to improve the agricultural sector?

SE: Some of them include banks, service providers and NGOs. The government recently launched two schemes – the Prime Minister Youth Scheme and the Farm Mechanisation Scheme – aimed at providing capital to farmers to purchase equipment at low-interest rates. These are important initiatives because, apart from helping farmers financially, they increase the pace of mechanisation. Used in the right way, these schemes will have a long-lasting impact on improving mechanisation levels and the adoption of machinery in farming practices. We also need initiatives that encourage sustainable farming practices and the use of techniques that can improve outputs and yields.

UKN: Are there any universities offering agriculture-related education programmes?

SE: I believe several universities do, but I’m not sure what programmes they offer. This year, we are hoping to start an initiative aimed at bringing people working in agriculture to our factories to train as apprentices, and this will require collaborating with the universities. The goal is to transfer knowledge so that we can teach farmers as well as the larger community of mechanics, dealers and support structures about best practices in mechanisation.

For feedback: aurora@dawn.com

Understanding What We Eat

Tamoor Mir makes the case about why the agri sector needs to leverage the power of advertising to highlight its potential and benefits.

Growing up in the nineties in Pakistan, a big part of my childhood was listening to ads on PTV. When I think back to those ads, a large part of my memory is taken up by classics such as ’Aye khuda mere abu salamat rahain’, the Dentonic animated commercial, the Don Carlos experience and of course, the ‘Rhythm of Unity’ campaign. However, a large part of it was also occupied by watching agri-focused ads about pesticides and fertilisers. I swear, chitkabri sundi pops up in my head every few weeks because of those commercials and Amreekan sundi is still perhaps my favourite nickname for an annoying classmate. This got me thinking: apart from occupying a large part of my childhood, does advertising actually have an impact on the agriculture sector?

It seems like an obvious answer, as advertising has benefited every sector across the board, so why would agriculture be the exception? Ultimately, agriculture in Pakistan seems more like a sector that is being advertised to, rather than advertising its own produce. Whereas we are not surprised to see cars or washing powder sold under a brand name. In Pakistan, we would be shocked to see branded apples or mangoes. I would argue that this is a missed opportunity, although there are more indirect ways that advertising can affect the sale of agricultural products without resorting to direct branding.

Ultimately, at the heart of effective advertising lies the ability to bridge the gap between the world of agriculture and the daily lives of consumers. Through compelling narratives, captivating imagery and persuasive messaging, ads can serve as windows into the stories behind the food on our table and the hands that cultivate it. By showcasing the dedication, resilience and ingenuity of farmers and producers, advertising humanises the sector, fostering empathy among consumers.

Whether through TVCs, social media or digital campaigns, ads bring the essence of a farm directly to consumers, transforming abstract farming concepts into tangible narratives that resonate with audiences of all backgrounds.

At its core, advertising serves as a catalyst for a demanding generation, igniting consumer interest and driving sales. By highlighting the quality, freshness and nutritional value of farm-fresh produce, advertising stimulates consumer demand for locally sourced and sustainably-grown foods. Through targeted marketing efforts, farmers and agricultural enterprises can reach new markets, expand their customer base, enhance brand visibility, and in the process, build habits for customers that ultimately benefit farmers.

Moreover, advertising empowers farmers to differentiate their products in a crowded marketplace, accentuating unique selling propositions such as organic certifications, fair trade practices, or farm-to-table freshness. Through strategic branding and messaging, advertising enables farmers to carve out a distinct identity in the minds of consumers, fostering brand loyalty and trust that transcends mere transactions.

Through sustainability-focused campaigns and initiatives, advertisers educate consumers about the importance of responsible stewardship of natural resources, regenerative farming practices, and ecosystem conservation.

By showcasing the efforts of farmers and agricultural innovators to minimise environmental impact, reduce carbon footprint and promote biodiversity, advertising amplifies the message of sustainability and inspires consumers to make informed choices that support eco-friendly agriculture. From promoting renewable energy initiatives to advocating for water conservation and soil health, ads highlight the collective commitment of the agricultural community to building a sustainable future for generations to come.

Advertising also plays a crucial role in fostering innovation and research. By highlighting cutting-edge technologies, scientific advancements and agronomic breakthroughs, ads inspire investment in research and development, driving continuous improvement and technological innovation across the value chain.

Through partnerships with research institutions, government agencies and industry stakeholders, advertisers can leverage their platforms to disseminate knowledge, share best practices and catalyse collaborative efforts aimed at addressing pressing challenges such as climate change, food security and resource scarcity. By showcasing the transformative potential of innovation, advertising encourages stakeholders to embrace change, adopt new technologies, and embrace sustainable practices that optimise productivity while safeguarding the environment.

While advertising offers myriad benefits to the agricultural sector, it also presents its own set of challenges. In an age of information overload and fragmented media landscapes, farmers and agricultural enterprises must navigate a crowded marketplace, competing for consumers’ attention amidst a deluge of messages, all vying for their allegiance.

We have seen this with services such as BaKhabar Kissan, which leverage digital technologies to distribute crucial information to farmers about agriculture and livestock best practices, weather information, agri-shops and more. At the same time, companies like Tazah Technologies are looking to address the agri-supply chain. Of course, with new technologies offering so much, there is the challenge of moving against the inertia of the status quo.

This is where the advertising industry can come to the rescue. Behavioural change has always been at the forefront of advertising by using smart messaging, communicating clearly and finding the right media to approach farmers while stating the benefits of upgrading to agri-tech services.

Furthermore, the rise of digital advertising platforms and social media influencers has reshaped the advertising landscape, offering both opportunities and pitfalls for agricultural advertisers. While digital platforms offer reach and targeting capabilities, they also pose challenges in terms of ad fatigue, consumer scepticism and algorithmic unpredictability.

In this regard, we know that with smartphones and telecom penetration in the rural population, the time is ripe for the dissemination of such messages, as farmers today are much more versed in digital technologies and open to using the digital world to assist and inform them.

In response, agricultural advertisers must embrace a multifaceted approach that combines traditional advertising channels with digital strategies, tailored to the unique characteristics and preferences of their target audience. By leveraging data analytics, consumer insights, and emerging technologies, advertisers can craft personalised messages that resonate with consumers, foster engagement and drive meaningful interactions.

As we navigate the complexities of a rapidly evolving agricultural landscape, the transformative power of advertising continues to inspire, educate, and unite stakeholders across the food value chain by harnessing the creative potential of advertising, farmers, agricultural enterprises and industry.

Tamoor Mir is ECD, The D’Hamidi Partnership.
www.linkedin.com/in/tamoormir/