Incentives announced in the federal budget and increased cooperation of Chinese companies in the modernisation of agriculture and production of value-added food products should give our food exports a real boost.
A Chinese working group may visit Pakistan in mid-August to evaluate the work done under the Pak-China joint working group on agriculture for development of seed sector, drip irrigation, horticulture and meat industry.
After that visit, we can expect activity in each of these areas, greater involvement of Chinese companies in agriculture and foreign direct investment in this sector, officials say.
According to the Pakistan Bureau of Statistics (PBS), in nine months of fiscal year 2018, food exports grew 28pc to $3.43bn from $2.68bn a year ago. Rice, wheat and sugar were the three main export drivers responsible for the volumetric increase of $750m during this period.
Vegetables’ exports showed a big 53pc growth in earnings; fruits’ exports grew a modest 4pc in value terms. (See tables below).
In the next fiscal year’s budget, the outgoing government has proposed setting up an agriculture research support fund and an agriculture technology fund, each with an initial allocation of Rs5 billion.
Senior officials of the Ministry of National Food Security and Research (MNFSR) say that both projects are expected to operate with the inputs of Pak-China joint working group on agriculture.
Budgetary incentives such as import duty cuts on agriculture machinery and a reduced uniform GST on fertiliser, as well as an allocation of Rs5bn to set up an agriculture research support fund and agriculture technology fund can create larger food export surplus
The first fund will be used for providing financial grants for promotion of research on high-yielding seed varieties of crops and for development of modern dairy plants. The second fund will be utilised for subsidising acquisition of modern technologies in all sub-sectors of agriculture.
“The process may start after a few months,” claims a senior official of the MNFSR, adding that research institutes focusing on key food crops might undergo the revamping process first.
The above mentioned measures and some others including cut in import duty on agriculture machinery and application of a reduced uniform general sales tax on fertiliser can potentially help in creation of a larger exportable surplus of grains.
Officials insist that a mere beginning of materialisation of the goals behind these moves would send a positive signal to our food export markets, creating room for some immediate gains.
In the short-term, food exports can draw support from such measures as reduced tariff on agriculture tube-wells, freight subsidy on fruits’ exports, removal of an existing 10pc duty on the sales tax on fish feed, and some concessions accorded to the livestock sector.
The livestock concessions include withdrawal of 3pc customs duty on imports of bulls meant for breeding purposes, a reduction in concessionary customs duty on imports of feed meant for livestock from 10pc to 5pc, permission for the import of fans for use in dairy farms at a concessionary duty of 3pc to members of the Corporate Dairy Association, and exemption from sales tax currently charged on animal feed of dairy farms.
Exports of meat and meat preparations that have so far remained faltering, as well as exports of all dairy products can expectedly start growing from next fiscal year on the back of this incentive package, officials of the Pakistan Trade Development Authority (PTDA) say.
Furthermore, planned increase in agricultural lending for the next fiscal year, plus the emphasis on promotion of the small and medium sector can be helpful in boosting food exports. Some good news for food exporters may come shortly through agricultural development incentives of provincial budgets.
What seems missing from the federal budget, though, is the acknowledgement of changing realities in export markets and factoring them in taxation policies. For example, when the duty and taxes refunds regime of exports of cooking oil and ghee was limited to Afghanistan some time ago, the situation was different.
“Now because of increase in the cost of production in the UAE, our brands of cooking oil and ghee have become quite competitive there and for that matter in the entire Gulf Cooperation Council (GCC) region,” says Sheikh Amjad Rashid, a leading exporter of processed food and chairman of the International Multi Group of Companies (IMCG).
“By allowing extending DTR regime for exporters of cooking oil and ghee to GCC and to African countries where demand is rising we can be more competitive now as UAE-based food manufacturing has become expensive, we can boost our value-added food exports,” he insists.
Sustaining food e
xports’ growth of this fiscal year in the future requires taking several measures, and keeping an eye on the changing export market dynamic is just one of them. PTDA officials claim they have a system in place for analysing sub-sectoral growth patterns of food exports.
On the basis of their latest analysis, they point out that in future there is definitely a need to promote exports of fish and fish preparation, fruits and vegetables, meat and meat preparations, spices and oilseeds, and nuts and kernels.
These are the categories wherein volumetric increase in export earnings remains far below than that of rice- the number one food export item- and sugar and wheat.
“The present government, with input from stakeholders including PTDA, will shortly announce an export incentive package and that may hopefully include measures to push food exports, too,” says a senior PTDA official.
Already, in his budget speech, Finance Minister Miftah Ismail unveiled some incentives for promotion of fisheries and livestock. Materialisation of those incentives should have a positive impact on food exports, he hopes.