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.

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DECLINING EFFICIENCY OF FARM LABOR
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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.

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"GROW FOR EXPORT... THERE IS NO OTHER WAY"
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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

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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.

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COMMENT: USE THE PRIVATE SECTOR TO PROPAGATE BETTER PRACTICES
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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