Opportunities we need to capitalize on
China-Pakistan Economic Corridor (CPEC), the flagship project of multi-billion dollar Belt & Road Initiative (BRI), has emerged as a vivid manifestation of the strong strategic Sino-Pak cooperation. It has rekindled a hope about the revival of the dwindling economy of Pakistan through investment in infrastructure growth, power generation, industrial development and upgrade of Gwadar Port so as to make it a vital trans-shipment point for South and Central Asia, as well as for China’s western territories. CPEC was envisioned to be implemented in three phases: short-term, medium-term and long-term plans with their expected completion in 2020, 2025 and 2030, respectively. Early-harvest projects like development of transport and energy infrastructure were added in STP in order to provide for better logistics and energy security for the establishment of Special Economic Zones and resource and technology transfer in other sectors. Now that Pakistan is producing enough power to meet domestic demand and the road connectivity provided by western and eastern legs of CPEC has begun to provide logistics for across-the-country transport, it seems imperative now to discuss the impact of CPEC on agriculture, which remained a hugely under-invested and neglected sector during the previous political regimes.
Agriculture is a vital sector for developing, agri-based economies like Pakistan. It is the lifeline of Pakistan’s economy as it contributes 18.9 percent to GDP and absorbs 42.3 percent of the country’s 65-million-strong labour force, as per the Economic Survey of Pakistan 2017-18. The importance of agriculture is self-evident as a principal source of national income, a vehicle for poverty alleviation and an instrument for improving on rankings of Human Development Index (HDI). Features like being a direct as well as indirect source of employment in rural areas, huge potential for revenue-enhancement, vital contribution to exports, a major source of raw material for the industrial sector, provision of livelihood for rural communities, critical role in enlarging banking sector and massive market for agri industries like tractor and other farm-machine manufacturing units do indicate that this sector is a key to putting the economy on sustained and robust trajectory, thereby helping resolve the chronic problems of rapidly-declining foreign exchange reserves, widening trade deficit and ballooning fiscal deficit. In addition, agriculture plays a vital role in mitigation of climate change. Water and food security, pollution control, wastewater management and development of effective methods for optimal utilization of marginal land and water resources are some other areas inextricably linked with agriculture for improvement and development.
Before we analyze the impact of CPEC on agriculture, a brief overview of the issues plaguing this crucial sector is inevitable so as to better understand the relevance of CPEC-led investment in overcoming these hitherto insurmountable challenges. Less spending on agri-related research and development (R&D), lack of value addition, low and stagnant yield, price fluctuations, highly-deregulated agriculture produce Supply Chain Management, lack of certified seeds, scarcity of skilled labour, fast-deteriorating irrigation system, high energy tariffs on different farm operations, low farm mechanization, insufficient storage facilities, limited availability of capital, high cost of production, defective marketing strategy, post-harvest losses, insufficient access to agri-information for informed decision-making and poor nursery management are some of the issues that are hampering the role of agriculture in boosting the country’s economy.
Agriculture has huge untapped potential and CPEC has all the tools that can help us exploit this potential to the fullest. The resource and technological transfer, government-to-government, institution-to-institution and people-to-people contacts, availability of huge capital, improved infrastructure and energy security, etc. would benefit massively all sectors of agriculture: crop husbandry, livestock, fisheries and forestry.
The crop sub-sector, which accounted for 23.60 percent in the value addition of agriculture sector and 4.45 percent in GDP in 2017-18, consists of major crops (wheat, rice, sugarcane, maize and cotton) and minor crops (vegetables, fruit and oilseed crops). The sub-sector stands to benefit from CPEC in the areas of yield production, food and non-food exports, value addition, post-harvest management and cultivation of crops in marginal lands.
Read More: The Other Side of the CPEC
China is the world’s largest exporter of wheat, rice, maize and other major crops. At present, the yield per hectare in Pakistan for wheat, maize, rice and cotton, respectively is 2.93, 4.25, 2.67, 0.75 tonnes. A comparison with China in yield per hectare reveals that we have a yield gap of 45 percent, 30 percent, 43 percent and 48 percent in wheat, maize, rice and cotton respectively. With import of production technology (methods used to raise crops from sowing to harvesting) and better crop varieties from China, we can enhance our total production by 2025 up to 50 million tonnes (MT) from 25 MT in case of wheat, 13 MT from 6.4 MT in case of rice and 7.5 MT from 6.13 MT in case of maize while retaining same area under cultivation. The bridging yield gap is very critical to meeting the needs of a fast-burgeoning population which is increasing at a whopping growth rate of 2.1 percent, the highest in the region.
Another area which indicates a massive room for improvement is that of agri-exports to China. Rising population and gradual shift towards consumption, coupled with a tendency to transform conventional farming into high-value addition industry to offset the trade deficit in food commodities, have forced Chinese policymakers to adopt “going abroad” policy under which China is outsourcing the production of domestically required agri-commodities to BRI economies. It has invested heavily in processing and storage facilities across BRI countries to mitigate price fluctuation and increase supply for domestic markets. As earlier discussed, the increase in yield in major crops would help Pakistan to have 18.12, 9.44 and 1.32 million tonnes surplus of wheat, rice and maize, respectively, by 2025. The surplus would provide Pakistan a huge export capital and would also help boost the country’s forex reserves. Despite the fact that China is the world’s largest producer of major crops, a population of 1.3 billion individuals compels China to import food and non-food commodities to meet the domestic demand. This huge market would accord us a golden opportunity to increase our export to China. However, it would require reliable and tariff- and non-tariff-free access of Pakistani produce; otherwise, it is bound to create financial troubles for farming communities. Potato crisis that has become a recurring phenomenon in potato-growing districts in Punjab, particularly in Depalpur and adjoining areas, must be taken as an example. The total potato production was an estimated 4.6 million tonnes this year (2018-19) versus a domestic consumption of 3.1 million tonnes, leaving a huge surplus for export. The surplus is not only creating glut in the markets but is also pushing the selling price even below the cost of production. It is high time we renegotiated Free Trade Agreement with China so as to create an enabling environment for export of our current – in this case potatoes – and future commodities to the Chinese markets. It has been projected that exploitation of mere a 33 percent of bilateral trade potential in agriculture can help Pakistan increase its total export by $ 60 billion.
Value addition and post-harvest losses have become the Achilles’ heel for agriculture. Low technological level and meagre budgetary allocation for R&D are some of the underlying reasons for low value addition. Special Economic Zones (SEZs) can be expanded to include agri-processing units with close technological cooperation with China. Establishment of institutions for technical education and joint ventures in construction of on-farm storage facilities like silos would ensure limiting the post-harvest losses which range between 15 and 30 percent depending upon the crop. Currently, four out of nine proposed SEZs (ICT Industrial Zone, Islamabad; Allama Iqbal Industrial City, Faisalabad; Bostan Industrial Zone, Balochistan; and Rashakai Economic Zone, Mardan) would have food-processing units to minimize post-harvest losses. CPEC-provided framework can also be instrumental to development of heat-, saline-, drought- and water-logging-resistant crops for better climate change adaptation. China has well-advanced breeding programmes based upon both conventional and non-conventional methods (biotechnology-based procedures). Pakistan can strengthen its breeding programme through institutional collaboration in germ plasm collection, conservation and exploitation.
Livestock as a sub-sector of agriculture accounts for 58.33 percent share in agriculture value added and 11.4 percent to the overall GDP. Development in livestock is imperative to enhancing exports, alleviating rural poverty and ensuring nutritional security. This sector is suffering from structural constraints like abysmally low budgetary allocations, disproportionate policy and administrative favourtism to crop sector, dilapidated infrastructure for dairy and meat industries, insufficient research facilities for genetic improvement and conservation breeding programmes, and lack of finance and capital. China, being a developed country in livestock production and management, can help Pakistan under CPEC framework to bring about improvement in animal nutrition and feeding management, animal breeding, fodder system, grassland management, product processing and marketing areas of livestock through investment in research, infrastructure development, export of high yielding animal and semen and embryos for genetic improvement of indigenous diary animal. Joint ventures can be explored and offered in quick-earning businesses including veterinary biologics and vaccine production, donkey farming for hides, bones and other products and milk industries as there is huge unmet domestic demand in these areas. FDI would not only help improve livestock sector through skill development, but will also help strengthen forex reserves through export diversification and expansion.
Fisheries is another important sub-sector of agriculture. It plays an important role in Pakistan’s economy and is considered a source of livelihood for the coastal population. Although its share in total GDP is only 0.4 percent, it has a greater value addition in export earnings. Pakistan exports fish and fish preparations to China, Thailand, Malaysia, the Middle East and Sri Lanka and earned $ 276.26 million in 2016-17. Fisheries has huge potential in terms of providing revenue, socioeconomic advancement of coastal areas and development of allied industries like shipbuilding and net manufacturing. Pakistan has 1046-km-long coastline and our Exclusive Economic Zone covers an area of 196,600 sq. km. In addition to the vast opportunity, the provincial governments can enhance inland fishing by utilizing the lakes of dams and extensive networks of Indus Basin irrigation system for fish production. Potential investment, knowledge transfer and relocation of industrial units under CPEC would help fisheries in tremendous ways. The proposed establishment of fish feed production units and hatcheries would help meet the growing demands, and development of aquaculture in saline inland and coastal areas of Sindh and Balochistan on modern lines would ensure employment generation. Establishment of cold storage facilities is also a part of modernization being made under CPEC in fisheries sector. One such facility has been established near Khunjerab Pass. Seafood like squid, shrimp, pomfret and bonefish is exported to China. It has been estimated that with strengthened extension services, introduction of new fishing methodologies, value addition, deep-sea fishing and upgrade of socioeconomic conditions of the fishing community, Pakistan can enhance its exports of fish and fish preparations up to $1 billion.
Forests play a critical role in ecological protection and preservation. Forestry sub-sector contributed 2.09 percent in agriculture and 0.39 percent in GDP in 2017-18. Under the umbrella of CPEC, forestry stands to get massive advantages. Though the economic output of forests in Pakistan national income is minimal, the ecological and social services provided by forestry are unqualified and matchless. Now that the PTI-led government has launched its flagship project ‘Plant for Pakistan’ under which 10 billion trees will be planted across the country to mitigate the repercussions of climate change, there is a huge opportunity available to Chinese investors to capitalize on and construct natural parks, wildlife sanctuaries, biological reserves and forest resorts for commercial purposes. Joint ventures in sericulture (silk production via silkworms) and apiculture (honey production via honeybees) can also be helpful for increased production through modernization. The investment in these areas would be instrumental for biodiversity protection, environmental improvement, pollution control and ecological beautification and betterment.
CPEC has huge potential for boosting Pakistan’s agriculture by encouraging innovation, entrepreneurship and collaboration as Ministry of National Food Security & Research in its 2018 Food Security Policy has envisioned establishment of 9 Agriculture Development Zones along the CPEC. It is high time we began launching comprehensive reform package and addressed the issue of farmers’ illiteracy for the promotion of automation and mechanization. Besides enlargement of bank financing facilities; modernization of variety development and seed production; encouragement of cluster and cooperative farming and efficient water administration are some of the areas that pressingly need policy and administrative intervention on the part of provincial governments so as to enhance the capacity of agriculture for absorption of investment, competition and innovation under the umbrella of CPEC.
Did You Know?
Exclusive Economic Zone (EEZ) is a sea zone prescribed by the United Nations Convention on the Law of the Sea (UNCLOS) over which a state has special rights regarding the exploration and use of marine resources, including energy production from water and wind. It generally extends to the 200nm (370km) limit. The difference between the territorial sea and the EEZ is that the former confers full sovereignty over the waters whereas the latter is merely a “sovereign right” which refers to the coastal state’s rights below the surface of the sea while the surface waters are considered international waters.
Adopted in 1982, UNCLOS is the international agreement that resulted from the third United Nations Conference on the Law of the Sea (1973-82). The Law of the Sea Convention defines the rights and responsibilities of nations with respect to their use of the world’s oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources. It also defines the different maritime zones and regulates marine sovereignty rights and rights of use. Article 76 of UNCLOS defines the continental shelf of a coastal state as the seabed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin.