Potential role of
agriculture and agro-industry
By Dr. Mahmood Ahmad
is so much talk of possible large-scale Chinese investment
being planned to support developing national economic
corridor that would open door of economic fortunes for the
Yes it might be an
economic game changer if we position ourselves with
appropriate investment decisions to make most out of these
opportunities if and when they come.
In the past our record has
been so poor to miss these opportunities by promoting either
self-interest or regional political economy than that of
what is good for the national.
Of many examples, two are
Firstly, we missed the
opportunities to produce cheap and environmentally friendly
energy by not investing in medium to large size dams and
store extra water during peak flows. India increased its
total dam capacity from 166 in 1990 to 224 Km^3 in 2005 and
during the same period Pakistan capacity remained at 27
Secondly during post-WTO
quota abolition regime for cotton exports, we did not bring
the needed reforms to prepare the sector for new competitive
regime with the result we failed not only to produce sizable
raw cotton, but also to add value in comparison to
Bangladesh and India.
The available data indicates
that in year 1990 India and Pakistan were producing almost
equal amount of seed cotton around 33 million tons, in the
year 2013 Pakistan is producing around 40 million ton and
India production has increased to 122 million tons, three
times more than us.
Further, we produce this
cotton using valuable irrigation water where in India most
of it is produced under rained conditions. Again we missed
the opportunity of providing the right policy environments
for strategic commodity like cotton.
The new economic opportunity
or so-called new growth trigger is being discussed without
profound research or facts as to which sectors or
sub-sectors provide better returns on investments and to
address the problems of poverty alleviation and improved
livelihood for large section of population living in the
rural areas and in the past neglected provinces.
A case is being made in this
brief note that developing agriculture and ago-based
industry through identification of potential areas and
adopting a cluster approach in the proposed corridors
provides a prudent investment options and opportunities.
The prospects for continued
growth in demand for value-added food and agricultural
products provides an incentive for increased focus on
agro-industries development within the context of economic
growth, food security and poverty-fighting strategies.
The corridor development should not be looked as a passage
provided to those economies that are well developed and are
quite competitive to trade and take larger share of the
Rather it also is looked as
an opportunity to provide backbone and supporting
infrastructure to Pakistan's agriculture and agro-processing
industry, which has the potential to grow.
Promoting rural economy in
high potential areas would result in fast track rural
economic growth as it carries forward and backward linkages,
have high multiplier effects in terms of job creation and
Because of the generally
perishable and bulky characteristics of agricultural
products, many agro-industrial plants and smaller-scale
agro-processing enterprises tend to be located close to
their major sources of raw materials.
Consequently, their immediate
socioeconomic impacts tend to be exerted in rural areas (FAO).
Further it is suggested to equally direct these efforts to
rural economies especially in Balochistan and KPK for a
If we look at successful agriculture and rural development
growth models - four common features are present.
countries/regions have to carry natural comparative
advantage with suitable land and soils, appropriate climatic
conditions and a reliable supply of water.
All four provinces provide
natural resource base to support a very diversified
production base with seasonal window of opportunity.
Secondly, agriculture and
rural development needs an adequate access to
agriculture-supporting infrastructure, among others, two are
important, linking farm and non-farmer sector to markets
through agriculture or feeder roads and, in drier climates
like Pakistan, irrigation powered by reliable energy sources
(grid electricity) at competitive prices.
The case is made that sizable
investment have been made on mega projects for developing
backbone infrastructure but investment on last mile
infrastructure (feeder roads, irrigation management) has to
be given equal priority.
Thirdly, in order to translate above comparative to
competitive advantage, there is need to develop clusters of
commercially viable farming, processing and service firms
located in specific geographical areas.
By achieving economies of
scale the clusters can help to drive down production and
marketing costs for all actors in the value chain.
As mentioned above the rural
economies carry huge comparative advantage in producing high
value commodities but this comparative advantage has not
fully being translated into competitive advantage due to
lack of good farming and marketing practices meeting
To address the issue an
innovative approach is needed in developing appropriate
infrastructure and its financing to spur the rural growth.
Finally, there is a clear and specific government policy
dedicated to actively supporting sustainable agriculture and
recognizing the important role the private sector has to
play to implement such a policy.
The agriculture and rural growth centers and corridor model
is a way of addressing and channeling large volumes of
private investment and enabling high potential agricultural
regions to become internationally competitive. The most
common way to achieve this is through:
-- Identification of areas with high agricultural potential
and reasonable access to existing backbone infrastructure
such as ports, roads, railways and inland waterways.
-- Analysis of the constraints on commercial agriculture and
how these can be ad dressed. A value chain approach is often
proposed to look at the constraints all along the value
-- Making small farmers and enterprises inclusive, provision
of support to the commercial agriculture sector through new
types of financing mechanism, on the condition that
smallholder and emergent farmers/entrepreneur are included
and benefits from potential increase in income and
-- Designing an appropriate business model to develop
reforms in our outdated markets. Global experience indicates
that nucleus plus out grower model ensures better incentive
to small farmers than our traditional model which revolves
around middle man (arhti) and processors who dominate
financing the small farmers at very high cost, and this
model does carry any demonstration effects.
-- Realizing that role of public sector is important,
recognition of the important roles of different public- and
private sector players in successful implementation of the
Agricultural Growth Centers and Corridor development.
The proposed corridor development -- elements of possible
actions needed as we move along
-- Logistic of supply chain: that plans, implements and
controls efficient and effective flow and storage of goods,
services and related information from the point-of-origin to
the point-of-consumption in order to meet customer
-- Cool Chain System including pack houses, cold storage and
refers: especially to market and transport perishable goods
like horticulture, dairy, fishery and pharmaceutical
-- Feeder roads and markets: in the past larger emphasis
placed on building costly motorways and ring roads, whereas
the rural feeder road network away from the main road are
often in a very poor shape and a major constraint in
providing market access to small farmers and rural
-- Energy and Water availability: Reliable water and energy
supply is critical for agriculture and rural development to
run irrigation systems, processing facilities, cold storage
units and so on. A conducive water and energy and investment
policy need to put in place to provide sustainable supply at
-- Policy Environments: The goal of a rural and agriculture
growth strategy/policy may not necessarily to maximize the
growth of production in any particular sub-sector/commodity
but to create the necessary, and sufficient conditions for
the rural economy to adjust to a more competitive
Rural development and agriculture corridor - a broader
In Pakistan, the idea of developing economic corridor is at
the conceptual levels. A strategy needs to be put in place
to develop an indicative program of development to
sequencing and coordination. At this stage the need is to:
1. Developing a consensus on alternative routes being
planned, with clear and transparent priorities and time
lines. At this stage little details are available on the mix
of intended investment plan. Make sure the proposal is
inclusive of areas deprived of past investment opportunities
to uplift social and economic development.
2. Picking first the "low-hanging fruit" in order to achieve
quick paybacks by improving local rural economies in these
potential economic corridors (see figure below). Pakistan
being agriculture-based economy is well placed to position
itself to improve the competitive of the sector in
developing a modern and commercial agriculture. Picture
based on rural growth model highlighting the needed building
blocks in developing at selected points agriculture and
rural growth centers/ corridor in Pakistan.
3. Once backbone and supportive infrastructure being
developed, stage is set to establish special economic zones
investment from private sector from local and Chinese firms
can develop a competitive industry.
Such a strategy would not
only support developing a competitive and sustainable
commercial agriculture but also create a sound industrial
base operating under low labor costs, a factor to be
instrumental in bringing FDI from manufacturers looking for
a low-cost locations to build products for exports to
emerging markets in the region and beyond.
4. Propose to organize a series of workshops at national and
provincial levels to educate the decision makers and society
at large and to bringing awareness about the benefits of
agriculture and rural growth corridor within the umbrella of