AGRICULTURE IN PUNJAB: MODERN AGRI-BUSINESS CAN LEAD

UNCLAS SECTION 01 OF 02 LAHORE 000179 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EAGR EAID ECIN EINV ETRD PGOV PREL PK SUBJECT: AGRICULTURE IN PUNJAB: MODERN AGRI-BUSINESS CAN LEAD DEVELOPMENT ¶1. (SBU) Summary: A key strategy for enhancing agricultural production in Punjab is to leverage private sector connections to export markets, and to use supply chain development to drive broader improvements in agricultural practices, according to many researchers in the field. Ten years of small farm oriented yield improvement interventions by the government have failed to produce meaningful change in farming practices or productivity. Projects to support more sophisticated Pakistani agri-businesses that connect to large buyers in the global market and who work with smaller farmers in their supply chain should be continued as an effective use of international assistance to improve farm productivity, and Pakistan's food security. End Summary. - - - DECLINING EFFICIENCY OF FARM LABOR - - - ¶2. (SBU) The overwhelming driver of improvements in small farm output in Pakistan over the last 30 years was labor input, but that increased labor was inefficient and hindered the adoption of better farming practices. Independent academic research and studies by the World Bank, Asian Development Bank, and the Government of Punjab have all noted the failure of Punjab's non-farm sector employment to keep up with the growing labor supply since at least 1990. This resulted in a dramatic rise in rural poverty, a decline in real rural wages, and increasingly labor-intensive cropping. Although extra labor did enhance total agricultural output, the volume of additional farm labor significantly outweighed yield improvements, marking a prolonged decline in farm labor productivity in spite of a decade long agriculture development program by the Government of Pakistan in partnership with the United Nations. Labor intensive cropping has become part of a debilitating cycle of poverty in rural Punjab. - - - "GROW FOR EXPORT... THERE IS NO OTHER WAY" - - - ¶3. (SBU) Several agricultural development experts made the same recommendations for improving agriculture in Punjab: focus on private sector rather than government delivery of farming knowledge; use international export standards to determine appropriate practices; and allow market-driven supply chain development to improve techniques employed by individual small farmers, rather than using model farms in a passive demonstration of better methods. The government should be a facilitator, not the primary supplier of techniques, seed, machinery, and marketing. ¶4. (SBU) Main Shoukat Ali, CEO of the Punjab AgriMarketing Company (PAMCO),is among the most progressive horticulturalists in the country. In a meeting with Econoff, he said he tells farmers to "grow for export if you want to raise your economic level. There is no other way." He added that the connection to export markets must start with a more advanced farmer. Adnan Ali, Manager of Dairy and Livestock Sector Development at the Small & Medium Enterprise Development Authority (SMEDA) likewise said he focuses on partnerships with agri-businesses looking to expand their own market or their supply chains. On the other end of this relationship must be a reasonably well-educated farmer or producer organization willing and able to adopt new techniques, Adnan said, not your typical village farmer. ¶5. (SBU) SMEDA recently joined PAMCO, the Pakistan Horticultural Development and Export Board (PHDEB),and the two largest mango producers' associations to develop a four-year mango strategy with technical assistance from USAID's Empower Pakistan: Firms project. Other growers are providing matching funds to the USAID/GOP joint Competitiveness Support Fund for the construction of a mango processing facility. ¶6. (SBU) Dr. David Picha of the USAID Pakistan Firms project and Louisiana State University told Econoff that high value horticulture holds tremendous potential for Pakistan, especially in Punjab, but it needs to be driven by export-oriented, sophisticated agri-businesses, not an inherently patchy LAHORE 00000179 002 OF 002 government effort to introduce horticulture to your average small farmer. Common horticulture practices in Pakistan frequently result in 30 to 40 percent post-harvest loss. The solutions, he said, have "got to be market-driven." Picha argued that exporting producers would not only have higher production standards, but they would also need to comply with international operating standards like GLOBALGAP, which requires larger, more progressive agricultural producers to bring smaller, less sophisticated neighbors into their supply chain. Profit-oriented, market-driven links would spread faster and more effectively, Picha said, than any government program of farm by farm interventions. - - - COMMENT: USE THE PRIVATE SECTOR TO PROPAGATE BETTER PRACTICES - - - ¶7. (SBU) Comment: U.S. assistance to the targeted districts in Pakistan must include a foundation of bottom up, rural community development programs, but the infusion of substantial additional funding offers a unique opportunity to expand existing top down efforts as well. Many experts and policy makers suggest focusing supplemental agricultural aid on better educated and more ambitious farmers, and providing them with sophisticated private sector partners for technical assistance and marketing support, developing infrastructure projects related to shipping and handling, and sponsoring supply chain development activities. Public-private partnerships like USAID's mango export project point the way forward and should be continued and expanded. This approach would require significant USG effort to bring American agri-businesses to the Pakistan market, but in the end, the impact could boost the economies of both Pakistan and the United States. CONROY