Point to Ponder September 2023!

The country’s economy is based on agricultural production. In Pakistan, out of 79.61 million hectares about 23.70 million hectares are under cultivation, of which a majority of situated in the Punjab and Sindh provinces. According to Professor Dr Ismail Kumbhar, Agriculture of Sindh Agriculture University, agriculture contributes about 19.5 per cent to the national gross domestic product (GDP) while providing employment to 40 percent of the country’s labor force. It also provides food to 220 million people and a very large livestock herd, along with providing raw materials to large agro-based industries. About 65 percent of the population lives in rural areas and derives their livelihood from agriculture.

However, peasanty the bedrock of our economy, continues to face exploitation and ensuing poverty. The Sindh Abadgar Ittehad (SAI) has raised this issue along with continued impact of high prices for agricultural input and black-marketing. Even numerous laws that have been enacted in Sindh to safeguard the small and landless farmers, including women agricultural workers have not been able to protect them from the wrath of the feudal landlords, or bring any relief to the frontline producers in the province.

Along with remaining highly vulnerable to climate change, the economic indicters continued to be abysmal: fuel prices, inflation, Consumer Price and Sensitive Price Indices all continued to rise in this month. Pakistan Mazdoor Kisan Tehreek, an alliance of small and landless farmers has protested against the high fuel prices; there have been strikes against general sales tax as well as it continues to create intense strain on daily living for landless farmers as well as industrial workers leaving them no recourse but to come out on the streets and set up hunger camps. Tobacco farmers have been standing up against foreign cigarette manufacturing corporations for non-compensation of the tobacco rates settled with them. Similarly, the Haq Do Tehreek has been protesting, to the extent of hinting at ‘armed struggle,’ against trawlers that operate in the Balochistan waters, leading to loss in livelihood for local fishermen.

Apart from the continued exploitation pointed above, there are other issues at stake. About 25,000 fertilizer bags were seized from a goods train in Mirpukhas, Sindh. It’s believed that local fertilizer dealers were involved who wanted the fertilizer bags to be sold to landlords and farmers at higher rates than at the controlled prices. In Khairpur, police has arrested a food official for putting on fire the remaining 30,000 bags of 200,000 wheat sacks that had been pilfered and hidden at various government warehouses.

It is being reported that apart from increasing water tax, the federal government has hinted at revising tax on retail, agriculture and real estate. Though, there is absolutely no doubt that big landlords must be taxed but for the small farmers, and sharecroppers, additional taxes will push them further into debt, hunger and poverty.

The Sindh Chamber of Agriculture (SCA) has rejected the decision taken by the Rice Exporters Association of Pakistan (REAP) on weight deduction in transactions involving rice crop. The deduction is applied on the grounds of moisture in the rice and the percentage of broken grain. The decision allows exporters or buyers one-kilo deduction for 15 to 15.5 per cent moisture and two kilos for 15.5 to 16 per cent moisture. It is clear that though that the SCA is there to protect the interests of the rich farmers, who is there to protect the small farmers from policies which are made for the politically powerful and affluent class of the rural economy?

It may be worth noting that according to the World Bank, Pakistan’s current economic development model is no longer reducing poverty and provides few benefits to most citizens, as poverty increased from 34.2 percent in the fiscal year 2022 to 39.4 percent in the (current) fiscal year –pushing 12.5 million people below the poverty line.

The newly formed Special Investment Facilitation Council (SIFC) under the leadership of senior army officers has become quite active; army personnel have provided detailed information on the scope and investment potential in agriculture and livestock, mines and minerals, and information technology sectors. A number of initiatives seem to be on the table: the SIFC has directed the Ministry of Water Resources to collaborate with the Ministry of Planning, Development and Special Initiatives to develop a five-year plan on water resource development with financing plan for agriculture sector. According to the SIFC, the recently inaugurated Green Pakistan Initiative’s focus is on ‘large scale farming (that could be another name for corporate farming) in Bahawalpur, using irrigation pivot system which is on one hand is an efficient irrigation system saving water usage and on the other is also not labor intensive. It is believed that the new technology will result in a Green Cholistan. This initiative will provide ‘One Stop’ facilities for seeds, machinery, indigenous development of pivot system, as well as modernization in farming techniques. The impediment to the seed industry is the presence of large number of seed companies operating in Pakistan. Four Brothers, a seed corporation in Pakistan is advocating providing land to multinational seed corporations (without rent or charges) so that they could develop seeds according to Pakistan’s climate.

The executive committee of SIFC was informed that presently, Kingdom of Saudi Arabia (SKA) imports 1%, UAE imports 3% and China 2% of food items from Pakistan. These low volumes can be enhanced manifolds. It would, however, require efficiently managed flood water and excess rain water. Waste lands all over the country have to be converted green. Collaboration with a Spanish company has commenced in the irrigation sector. Further, improvement in livestock shrimp farming in saline water, and cage farming could bring improved dividends and create 3 million employment opportunities for small farmers, leading to enhanced exports.

A major thrust is to attract foreign investment in the country, with emphasis on privatization policy implementation. It’s reported that Saudi Arabia will invest about $25 billion in Pakistan over the next two to five years in various sectors, which would be the highest investment in the country by the Kingdom, if it comes through. Barrick Gold Corp, which had in the past year filed a case against Pakistan through the Investor-State Dispute Settlement (ISDS) mechanism in context to Reko Diq gold and copper mines, has stated that it was open to partnering with Saudi Arabia’s wealth fund; however some (unmentioned) hurdles have been pointed out by Saudi Arabia that need to be tackled first.

Pakistan and USA had earlier launched a five-year project named the Investment Promotion Activity (IPA) to be implemented by USAID. IPA aims to strengthen Pakistan’s business environment, build the capacity of institutions focused on investment promotion, attract FDI, and increase US-Pakistan bilateral trade and investment, and in general reduce barriers to investment and trade by improving Pakistan’s investment promotion capabilities. The USAID is facilitating $40 million in US-Pakistani diaspora investment that include four diaspora partners including funds from SERVINZ, Pakfoods LLC Group, Jaxeri Investment Corporation, as well as Global Semiconductors Group.

Not to be left behind, the International Finance Corporation (IFC), a commercial arm of the World Bank Group, announced that it would double its investments in Pakistan to $1.5 billion during the current fiscal year. In FY23, the IFC committed a record $43.7bn to private companies and financial institutions in developing countries, leveraging the power of the private sector to supposedly end extreme poverty and boost shared prosperity.

There is no dearth of propagation of modern technology for the agriculture sector. Preparations are underway for the International Livestock Agri-Fisheries Expo in Peshawar, which will be KP’s largest dairy, livestock, agriculture and fisheries exhibition. Pakistan has also organized a mango festival in Kuala Lumpur seeking new markets. The $3 trillion international halal market is also being hyped for potential exports.

While there are continuous efforts to increase production and production capacity, we face serious water scarcity in the country. With our water resources rapidly depleting, wastage of this precious resource is posing serious challenges by pushing us towards water-scarce status from the existing water-stressed nation status. Our present per capita water availability has declined below 1000 cubic meter from 5600 cubic meter in 1950s with fewer reservoirs constructed since Pakistan’s inception. A major chunk of water resources continue to flow to the Arabian Sea and a vast quantity is wasted due to an obsolete irrigation system. The Sindh Irrigation and Drainage Authority (SIDA) chairman, Kabool Khatian has urged to revise abiyana (water charges) to meet expenses for irrigation infrastructure. The corporate sector, like Nestle, is also active in water irrigation system, introducing projects such as drip irrigation and installing smart soil moisture sensors that would decrease water usage. At the same time, Dr Muhammad Ismail Kumbhar, an expert in rural development and agriculture pointed out that 85 percent of the groundwater is not fit for human consumption due to the extensive use of pesticides and fertilizers. Not only water, but also soil fertility is also affected, while cotton-pickers and vegetable-pickers and farmers in general suffer from various cancer, skin and liver diseases.

According to a study published in the journal BMJ Oncology, globally, the number of people under 50 years of age, diagnosed with cancer has surged worldwide in the last three decades though, reasons are not fully clear. The study points to the fact that cases of cancer among people aged 14 to 49 rose by nearly 80 percent, from 1.82 million to 3.26 million, between 1990 to 2019.

Climate crisis continues to have its impact felt. Even though this year there is an increase in cotton production, sudden increase in temperature has resulted in whitefly attack on the cotton crop in Rahimyar Khan; drones have been used to provide high pressure cluster spray.

According to a research study from Schroders and Cornell University, extreme heat and flooding could erase $65 billion in apparel export earnings from four Asian countries by 2030, as workers struggle under high temperatures and factories closure due to flooding; four countries studied — Bangladesh, Cambodia, Pakistan and Vietnam — would be impacted. The overall fall in productivity would lead to a $65 billion shortfall in projected earnings between 2025 and 2030 – equivalent to a 22 percent decline – and 950,000 fewer jobs being created.

Even with much evidence on the destruction and toxication of soil and water sources as well as climate crisis, there continues to be a push for agro-chemical farming. According to a senior official, Punjab Agriculture Department, at least 1.2 million certified wheat seed bags, each weighing 50kg, will be provided to the farmers at subsidized rate of PKR 1,500/bag. In addition, one million packs of weedicide at subsidized rates of PKR 500/pack will also be provided so as to minimize the risk of importing wheat grains later.

All of the above endeavors have to be examined in the context of not only productivity which is meant for increasing exports to pay off the IMF debt, but the impact on biodiversity, long term soil fertility, and of course nutrition and health of our people. Agro-chemical farming has been proved to be highly toxic to all living being on Earth as well as to ecosystems. At the same time, this mode of production pushes for adoption of modern technology which of course has to be imported, it is also capital extensive and hence we lose not only foreign exchange but also exacerbate joblessness in the country.

It also needs to be mentioned that a major source of foreign exchange earnings are from our migrant labor across the world. According to the Italian Ambassador to Pakistan, Andreas Ferrarese, remittances from Pakistanis living in Italy have increased to €1 billion, and according to the Malaysian High Commissioner, Mohammad Azhar Bin Mazlan more than 50,000 Pakistanis are working in Malaysia. However, there is hardly any information on their well-being, or policies to facilitate migrant workers or/and their families that provide such needed economic help through their remittances. It also points to a faultline in Pakistan’s economy that there is lack of job opportunities for our workforce, of which a majority are youth.

Being part of a region where the security situation as well unhealthy relationships with our neighbors leads to further export barriers. The closure of the Torkham border, Bolochistan has had a tremendous impact on trade between Afghanistan and Pakistan; it is estimated that Pakistan faced a cumulative loss of PKR240 million in imports, while export goods worth $8.16 million could not be sent across in just four days of border closing.

Where does Pakistani exports stand at the moment? On a month-to-month basis, from July ($1.637 billion) to August ($2.126 billion), 2023 Pakistan’s trade deficit widened by 29.86 percent. However, according to the Pakistan Bureau of Statistics (PBS), in comparison to date from last year, the country’s trade deficit narrowed by 40.29 per cent during the first two months (July-August) of the current fiscal year; it stood at $3.763 billion compared to $6.302 billion during the same period of last fiscal year.

In order to ensure food security of the country, India has put a ban on its rice exports; for Pakistan, with a bumper rice crop, this has provided opportunities for traders to find new export markets; a first time $3 billion mark by the end of the fiscal year (FY24) is expected while $2.5 billion rice exports were carried out in FY23. Recently, Qatar has lifted its ban on Pakistani rice export which will also provide markets for Pakistani rice. It is being reported that export to Middle-eastern countries have shown a growth of 20.82 per cent in July led by revival from Saudi Arabia, Qatar, Kuwait and Bahrain; interestingly that is not the case for UAE, where exports have decreased.

Textile exports, the mainstay of our economy do not show encouraging figures, which fell by six percent year-on-year in August to $1.48 billion. The reasons for the fall include high energy costs and a liquidity crunch in the country.

Based on data from the State Bank of Pakistan, in the first month of the current fiscal year, exports to nine regional countries fell by 14.55 per cent, which was mainly due to fall in shipments to China. However, Pakistan`s exports to Afghanistan posted a positive growth of 32.79 percent; the exports were $42.173 million in July from $31.757 million in the same month, last year.

The decline was not only in exports but also imports – from China there was a steep decline in July from a year ago. Other countries where our exports declined included Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives.

In the past months, Pakistan has been through a terrible debt crunch facing acute dearth in foreign exchange reserves. In order to overcome the situation, the government had imposed heavy time-bound regulatory duties; the government has been facing international pressure to rem­ove a complete ban on imp­orts. We need to remind ourselves that the under the World Trade Organization (WTO) rules, gov­ernment cannot indefini­t­ely ban imports and only reg­u­latory duties could be imp­osed based on different base lines. The WTO believes that all of its members are now able to trade equally; the highly skewed ability to trade in goods and services, where one country can only export primary commodities, while the others can export services such as in health, education and information technology, as well as capital intensive goods is not taken into consideration. And the endpoint of course then is the back-breaking debt like many countries across Asia and Africa are now facing.

Given the monster floods last year, and overall increase in production cost, the country is facing a shortfall of 2.45 million tons of wheat as per demand. According to reports, the market would need at least 3.5 million tons of wheat in the current year. The Economic Survey 2022-23 statistics show that the country produced over 27 million tons of wheat. The government had allowed the private sector to import wheat till March 15, 2024.

A private sector consortium of Pakistani traders have finalized import of 0.7 million metric tons of wheat to be brought from Russian and Romania. The import is expected to decrease wheat prices by PKR 5-7 per kg. However, consumers have not derived much benefit from the import of 2.7 million tons of wheat costing $1 billion during FY23 compared to 2.2 million tons amounting to $795 million in FY22.

At the same time, Pakistan’s economy is being hurt by the smuggled items that enter the country while goods are being taken to Afghanistan through the Afghanistan Transit Trade. The government is seeking measures to stop the ongoing smuggling.

The Asian Development Bank reports that the global trade finance gap grew to a record $2.5 trillion in 2022 from $1.7 trillion two years earlier, as rising interest rates, flagging economic prospects, inflation, and geopolitical volatility reduced the capacity of banks to deliver trade financing. (The trade finance gap is the difference between requests and approvals for financing to support imports and exports). Overall, the international growth and investment scenario for countries seem to be bleak. The pandemic and the war in Ukraine has raised the idea of ‘de-globalization,’ as there have been disruptions in trade and slow growth. It should be noticed that according to the IMF, total debt, which includes both public and private debt, stood at 238 percent of global gross domestic product (GDP) last year, 9 percentage points higher than it was in 2019.

At the same time, there is increasing struggle between major economic and military powers to create trade zones vying with each other to control trade routes and markets. Though there is much discussion on Saudi Arabia’s potential investment in Pakistan, there have been major developments happening between the US, Saudi Arabia and India at the Group of 20 leaders meeting, in New Delhi, India, this month. A memorandum of understanding is on the table to be signed by the European Union, India, Saudi Arabia, the United Arab Emirates, the US and other G20 partners. An economic corridor that includes multinational rail and ports stretching from India, to the Middle East, and then further to Europe is underway. The infrastructure project is considered to counter the China’s Belt and Road initiative. There is now further push for Saudi Arabia to recognize Israel, a process that has been undergoing in the Arab Islamic countries under the Abraham Accords. No doubt, Pakistan will also be pushed to join the Abraham Accords but will be highly contested by the people, of course.

There seems to be a disconnect in how the trade and investment is viewed by capitalist paradigms for achieving growth and economic development versus the ecological and environment debacle facing society at large. While scientists warn about mass extinction of species or extinction of ‘Tree of Life,’ and the UN maritime court seeks protection of the world oceans, the UN Secretary-General Antonio Guterres raises stark warning about the use of fossil fuel, the forces of monopoly capital seem entirely focused on pursuing a path of corporate super-profits unheeding the destruction caused by its industrial mode of production. Warning about global poverty, hunger, famine all seem words seem to fall on deaf ears. It seems that we are on the brink of a global disaster that may erupt at any moment. The struggle for sanity, for an equitable world, all seem to rest on the shoulders of the people, as our elite-run governments across the world seem to have crossed many red lines.

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