Exports of vegetables, fruits and the economy
Ziaul Haque Memon
Agriculture being the largest sector of Pakistan can help improve trade balance of payment. It's a large sector and requires to be analysed sectors wise especially few less touched areas. Therefore I have chosen fruits and vegetables sector.
Horticulture market: There is a large horticulture export market and Pakistan though an agricultural economy is only marginally present in this market. The size of the global horticulture market was worth $77 billion in 1998. Out of a total world horticulture import market of $77 billion in 1998, the fruit and vegetable segments constituted a $60 billion market while fruit and vegetable juices contributed $6 billion. Cut flowers market accounted for $5 billion; bulbs contributed $4 billion while spices had a share of $2 billion. Fruits had taken the lead with a 40 per cent share and vegetables followed this with a 38 per cent share while fruits and vegetable juices contributed another 8 per cent. Thus together fruits and vegetables make a major component (86 per cent then horticulture market. Flowers at 6 per cent then bulbs follow this at 59 per cent and finally smallest share of spices at 3 per cent. Nature has bestowed upon Pakistan a land and climate conducive to growth of a wide spectrum of fruits and vegetables. The produce of fruit and vegetable in Pakistan comes from approximately 811,800 hectares or about 4 per cent of the country's cultivated areas. The major fruits are citrus, mangoes, dates, bananas and guavas.
Out of total annual agriculture production of the country, the province of Punjab contributes 59.6 percent, Sindh 8.6 per cent, Balochistan 25.6 per cent and NWFP contributed 6.2 per cent. Pakistani fruit and vegetables are being demanded in almost all over the world. Presently Pakistan is exporting fruits and vegetables to the USA, the Europe, Middle East, Far East, India and Sri Lanka. Mango, kino, apple, dates, pine nuts, oranges and guava are few well exported fruits and among vegetables are potato, onion, mushroom, garlic, chilly etc. It is observed by looking at the data, Pakistan is heavily relying on one market for each item. For example, Dubai is the biggest market for Pakistani Mango following England and Saudi Arabia. Sri Lanka is the only biggest market for Pakistani fresh apple. In such situation, the buyer dictates his terms. There is a need to explore new markets for Pakistani fruits and vegetables to gain good prices. The Export Promotion Bureau is striving hard to explore new markets and assist interested exporters to increase exports. Kinoo is the most exportable fruit of Pakistan and 32.5 per cent of total exports is being exported to the Middle East alone, followed by Indonesia (22.5 per cent), The Philippines (16 per cent), Sri Lanka (11.6 per cent) and remaining 17.4 per cent to other markets of the world. Latest London based research (Dawn 1 1.11.2001) discovered citrus fruit is best to protect males against prostate cancer, which need to be capitalized by Pakistani exporters. Ninety-seven per cent of fresh apples exported to Sri Lanka only. In adverse conditions, there is no other market available for apple. Exporters must explore new markets to catch up with high prices.
Pakistan's ranking among the mango-producing nation's club has dropped to the fourth position from second one over the last 20 years after Mexico and China increased their production significantly through plant protection and orchard area expansion. According to a report of the National Coordinated Research Project, presently the annual production of mango in Pakistan stands at 884,000 metric tons against 1,000,000 tons in India, 1,362,000 tons in Mexico and 1,141,000 tons in China. Pakistani mango is well known for its taste and quality abroad approximately 47,602 kg of mango has been exported from Pakistan and earned $11.576 million in 1999-2000. Eighty-four per cent of mango is being exported to Middle East alone.
Large share of fresh dates are being exported to the USA (31.16 percent) followed by India (24.76%), Canada (13.3 per cent), UK (6.9 per cent), Denmark (5.6 per cent), Germany (4.7%), and remaining to other parts of the world. Fresh dates exports are not relying on one market.
In other words, we can say that market demand is evenly distributed. Pakistan must explore such markets for other fruits to avoid relying on only few countries. Fresh dates earned $3.330 million in 99-2000. Whereas, export of dry dates dependent on Indian market, as 92.6 per cent exports of total exports of dry dates goes to India. Here also we need to explore new markets and I believe EPB must be working on that.
Pine nuts earned $17.268 million in 99-2000 alone, which is 21.6 per cent of total fruit exports. I believe lot of potential available in this sub-sector and exporters will concentrate and will explore new markets to earn good price. At present Germany is main buyer from Pakistan (22.6 per cent) followed by France (21.6 per cent and Middle East (16.5 per cent). Pakistan earned $19.866 million by export of onion in year 1999-00 mainly to Middle East 44.8 per cent (57,760 thousand kg), followed by Sri Lanka 34.5 per cent, Singapore 6.35 per cent, Bangladesh 5.4 per cent and remaining 9 per cent to other countries. Though quantity wise exports increased by 89 per cent as compare to last year 98-99, but there is a sharp decline of 20.4 per cent value wise.
The reason is low international price, bumper crop in neighbouring countries etc. Exports declined sharply at about 48% during year 2000-01.
Potato consists of 25. 2 per cent of total exports value wise. It is mainly exported to Sri Lanka (83.6 per cent), Afghanistan (14.2 per cent). The remaining 2.2 per cent being exported to other near distant countries, like, Middle East, Hong Kong, Malaysia. Exports declined by 32 per cent during year 2000-01. This is because of bumper crops in neighbouring countries who provide same quality product at cheaper prices. Above statistics show that we are over-relying on Sri Lanka as the only market and being an only buyer, we are forced to sell at buyer terms.
Mushrooms earned $6.904 million foreign exchange for Pakistan and mainly exported to France, Switzerland, Germany, UK and New Zealand. Pakistani Mushroom earns good price ($71 per kg) in international market as it shows only 97,000 kg earned about $6.904 million. Almost 70 per cent decrease in exports has been recorded in year 2000-01. It shows that we cannot meet market demand consistently resulting loosing customers.
Dry chilly is being exported to Dubai, Saudi Arabia, Canada, USA, UK and other countries of the world. Out of 726,000 kg exports 61 % is exported to Middle East, followed by 24% to USA and remaining 12% to other countries. Whereas, Chilly powder can be considered as value added product, earned $1.217 million for Pakistan in 99-2000. Quantity wise exports of chilly powder in 99-00 increased by 39 per cent as compare to 99-00; whereas value wise increase is only 22.5 per cent. Middle East market is main buyers, which consists 46.7 per cent of total chilly powder exports of Pakistan. South Korea, the USA, Malaysia, China, the UK, are one of few importing countries from Pakistan.
The question arises why can't we get success to boost our exports. While meetings with different parties involved in whole case, let me first explain the characteristics of product, than constraints faced by growers, infrastructure providers and exporters.
A) Post-production losses: According to the statistics compiled by the Ministry of Food and Agriculture, because of lack of post- production care, the loss of fruit and vegetable yield suffered by grower's amounts to almost one-third of the total yield. During 1994-95 alone, the loss of fruit and vegetable production amounted to Rs16,765 million while the total value was Rs.47,892 million.
B) Perishability: Almost all related products are highly perishable in nature and have a very limited shelf life. They cannot be stored for a longer period unless they are properly harvested and kept in a temperature-controlled environment (cold storage). Cold storage facilities are not available in the country that results in very high post harvest losses ranging from 25 to 40 per cent.
C) Seasonality: Most of products are not available all year round rather are subject to specific availability seasons. The availability season of any one horticulture product varies among different varieties and different geographic locations.
D) Quality: Quality is a combination of agronomic practices, variety characteristics, grading, processing and finally packaging. The absence of even a single factor makes the product inferior in quality and thus less acceptable in international markets.
E) Small-scale production: Small and medium scale producers dominate production. In particular, vegetable farmers are mostly small-scale producers and among the orchard owners are both small-sized and medium-sized producers. Pakistan has not been to supply to buyers of fresh produce, looking for bulk purchases and uniform quality, as farmers are of small and medium scale.
F) Supply chain: The supply chain is divided in three exhaustive groups as:
(1) growers; (2) infrastructure providers (processing, grading, packing, storage, transportation) 3) exporters.
Nothing can be achieved unless stakeholders work in coordination with each other. So far, there has been no or very little coordination among the stakeholders.
a) Lack of infrastructure: Lack of storage and transportation infrastructure result in about 40 per cent post harvest losses that shrinks supply and put pressure on prices as lost quantities never reach consumers. The prevention of such losses can provide exportable surplus.
b) Lack of credit for farm inputs credit system for farmers is such that it does not cater to the needs of small farmers. Since there is very large number of small horticulture farmers, a major segment is deprived from agricultural credit. This fallacy of credit system forces small farmers to under-invest in farming inputs like pesticides and fertilizers that leads to lower yields and poor quality.
c) Advance sales: Due to financial constraints, the farmers are often forced to sell their produce in advance to the middlemen, commonly known as 'bhekars'. The price that they get is much lower than the price at which a 'bhekar' sells the produce in turn.
d) Low yields: Low yield is resulting from a combination of price insecurity (resulting from absence of buy back agreements), advance sales and seeds that do not meet international standards.
e) specialized research: Produce is not in line with the international standards and internationally demanded varieties. Dedicated research organizations to develop varieties that best meet the needs of the global market are not there. Any work done by agricultural research organizations has not reached the farmers due to weak extension services and absence of any coordination between the entities.
a) Absence of cold chain and limited cold storage facilities
The expensive cold storage facilities are not sufficient. Growers cannot store their output and processors can process only that much quantity which can be exported right away. The limited facilities available are not integrated with proper refrigerated transport. Lack of cold storage facilities near production areas, air and seaports result in enormous post harvest losses.
b) Cargo space: Pakistan International Airlines provides cargo space in its passenger planes and is not operating dedicated freighter plane flights. Due to highly perishable nature, mango can only be exported by air. So exports of mangoes and other perishable products with very little shelf life cannot be increased unless additional cargo space is provided.
c) Inland transport: Inland transportation is available without any temperature-control environment. Pakistan Railways (PR) is not providing any facility at all for inland transportation of refrigerated containers. PR is considered as a cheaper source for providing service for inland transportation of refrigerated containers as they have flat bed rolling stock and need to invest only in generators. Fruits and vegetable export companies involved in the business in Pakistan are mostly family run small concerns. The common problems of export sector include:
a) Highly-skewed production: Due to highly skewed production resulting from seasonality and perishability of produce, the exporter has very limited time to ship his products. He is forced to export whatever is available and within the limited time span. The exporters cannot adopt better marketing practices unless cold storage infrastructure is available to enhance the shelf life and varieties are developed which are suited for exports.
b) Processing and packing: Internationally accepted standards of processing and packing are required to be established. Processing of fresh fruits is limited to citrus fruit (kinno) and some facilities have recently started in case of apple. All the remaining fresh fruits and vegetables being exported are either unprocessed or have undergone sub-standard processing and packaging.
c) Weak marketing: No institutional support is available for marketing on an international level. The individual exporters are not large enough to run international marketing campaigns to promote a brand name. Moreover, due to absence of basic infrastructure, large orders cannot be entertained.
d) Working capital: Available export refinance is limited because of weaknesses in documentation. Many exporters are selling their produce on Documents Advance (DA) that does not qualify for refinance from banks. Export refinance serves as the working capital much needed to ensure liquidity to buy raw materials in sufficiently large volumes.
e) Ruthless competition: The competition among exporters is indiscriminate and ruthless. They often compromise on quality and price in order to grab market share from other exporters of Pakistan operating in the same limited markets available.
f) Standardization: There are no laid down procedures for standardization and quality specifications. In absence of brand names, the importer is not sure of the quality he will be getting that prevent the better quality to fetch a higher price in the international market.
Following recommendations are suggested to improve exports and reduce wastage:
1) Export financing is almost not available as banks often hesitate financing this trade being perishable in nature. It is recommended that finance facilities may be provided to small farmers who are interested in exports.
2) Owing to bulkiness and short shelf life of the products, freight is major component of the C&F cost. Freight from Pakistan is more as compared with our competitors in the region like India.
3) Absence of cool chain forces exporters to dump fresh fruits in export markets that results in low prices and huge trade debts due to unfavourable terms of trade.
4) Leasing facility may be provided to exporters who will establish cold storage houses near clusters of production. Refrigerated vehicles on lease terms are also recommended to strengthen transport network from clusters to airport/seaport.
5) Non-availability of cargo flights/space as per demands in the export markets is also one of the major problems. PIA is the only available carrier; there should be more capacity in cargo to export perishable products within minimum time.
6) It is also proposed to increase cold-storage capacity at Airports to preserve freshness of products.