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Pakistan Increasing Agricultural Productivity for Inclusive Growth
1. PAKISTAN
Increasing Agricultural Productivity for
Inclusive Growth
Madhur Gautam
Agriculture Global Practice
The World Bank
(Based on Ahmed and Gautam 2013: “Agriculture and Water Policy: Toward
Sustainable Inclusive Growth.” The World Bank)
1
2. Structural Transformation
Declining share of ag. in GDP: 46% in 1960 => 26% in 2000 => 21% in 2010
Socio-economically and politically important: employment; exports
2
0.8
0.75
0.7
0.65
0.6
0.55
0.5
0.45
0.4
0.35
0.3
Labor Employment Patterns Distribution of Poverty
Predicted cross-country path
2006
1980
1980
Pakistan
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
Share of employment in agriculture
GDP per capita (constant PPP)
Large,
med. farm
1.9%
Small farm
20.1%
Landless
farmers
9.7%
Rural agric
laborer
11.8%
Urban
17.5%
Rural non-farm
39.0%
Source: Hazell et al (2011) Source: IFPRI (2012)
3. 3
3
2.5
2
1.5
1
0.5
0
-0.5
-1
-1.5
-2
-2.5
Source of Growth Matters for Poverty
Impact of Alternative Growth Scenarios on Per Capita Incomes by Household Category
Urban Poor
(37.0)
Non-Farm Poor
(38.0)
Ag Wage Labor
(48.0)
Non-Farm Non-
Poor (66.2)
Small-Dry
Farms (67.0)
Urban Non-
Poor (158.8)
Med-Large
Farms (241.7)
Livestock Industry Services Crop
Note: Figures in parentheses are base year level of per capita household income in thousands of Rupees.
Source: Ahmed and Gautam (2013), using IFPRI (2012) model simulation results
4. Sub-par Agricultural Performance
4
•Focus on crops, not livestock/fisheries (55% Sector GDP).
•Concern: decelerating growth in agricultural output since 1990s
•Notably though volatility has reduced
•Significant unexploited potential for further gains
•Substantial yield gaps for major crops
Agricultural Growth and Volatility Yield Gaps
2.6 T/ha
1.8 T/ha
55 T/ha
50 T/ha
2.9 T/ha
2.1 T/ha
2 T/ha
0.8 T/ha
145 T/ha
80 T/ha
4 T/ha
1.7 T/ha
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Wheat Cotton Sugarcane
(Sindh)
Sugarcane
(Punjab)
Maize Rice
National Average Gap
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
10 Yr Trend Growth Rate Growth Volatility
Source: Planning Commission (2009) Source: IFPRI (2012)
5. Issue 1: Sluggish Productivity Growth
6
5
4
3
2
1
0
Output Decomposition
Irrig New land Input/Area TFP
• Limited land with declining TFP growth rate
– Currently lowest TFP growth rate among comparators such as BD, CH, IN, SL
• Impressive historical growth in crop yields due to investment in
research (NARS)
– Estimated IRR on research investments range 57 - 65%, in form of GR techs
• Reviving TFP growth requires re-invigorating agric. Research system
5
-1
1961-1970 1971-1980 1981-1990 1991-2000 2001-2009
Source: Fuglie (2012)
6. Declining Intensity of R&D Expenditures
6
0.6
0.55
0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
1996
1997
Agricultural R&D Spending as Share of GDP
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Bangladesh India Nepal Pakistan Sri Lanka
Source: ASTI (2012)
• Severe technical and human capacity constraints
– Public investment in research has been on the decline (0.21% Ag GDP)
– Insufficient qualified staff, inadequate incentives
• Inefficiencies generated by the complex institutional environment
• 111 agencies involved in ag R&D, of which, 37 were federal agencies, 98
were provincial agencies, and 13 private sector entities.
7. Issue 2: Water Use Inefficiencies
7
Irr. Area as Share of Cropped and Harvested Area
1.00
0.95
0.90
0.85
0.80
0.75
0.70
0.65
0.60
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Pakistan - Irrigated Area/Cropland Pakistan - Irrigated Area/Harvested Area
Source: Ahmed and Gautam (2013) using data from Fuglie (2012)
Seepage Losses in Irrigation System
106
16
7
90 83
Loss: 61%
25
58
17
41
120
100
80
60
40
20
0
Main and
branch canals
Distributaries
and Minors
Watercourses Fields Crop Use
MAF
Source: Yu et al (2012)
• Semi-arid conditions make water absolutely essential for agric.
– 95% area irrigated, highest irrigation intensity in the world
• Convergence of IA/CA with IA/HA important for successful
harvests – reduction in output growth volatility
• But huge inefficiencies threaten continuing contributions to growth
8. Climate Change: Raises Threats to Sustainability
8
Impact of Investments to Mitigate Climate Change Impacts
Source: Yu et al (2012)
• Biggest impacts on households outside agriculture (higher prices)
• Canal Efficiency will help mitigate impacts, but new storage largely helps
in energy supply
• Best bet to mitigate impact of climate change: yield increases
9. Main Constraints: Institutional Issues
• Water availability & irrigation access critical for agricultural
productivity growth
• Average farmers’ access to water limited by constraints of water
allocation system.
– Access is determined by warabandi system and contingent on land
access/location => often insufficient water by the time it gets to users at the tail
end of distributaries/watercourses.
• The irrigation system is highly inefficient: both in delivery and on-farm
use
– Important to mitigate the potentially large negative climate change impacts
• Financially unsustainable water management system
– Only a quarter of annual O&M costs recovered, with shortfall expected to
increase with rising costs and stagnant Abiana .
– Low collection rate of assessed Abiana low (only 60% of assessed values).
9
10. Issue 3: Policy Distortions to Trade
10
0.2
0.1
0
-0.1
-0.2
-0.3
-0.4
-0.5
-0.6
Nominal and Relative Rates of Assistance to Agriculture
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
RRA NRA Agriculture
Source: Anderson and Nelgen (2012): World Bank Agricultural Distortions website
• Policy reforms introduced in 1996 reversed starting in 2006
• Continued anti-agricultural domestic policy bias
• Major crops like wheat, rice, sugar and cotton implicitly taxed
11. Emerging HVA Exports
11
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0
Growth in High-Value Agricultural Products from Pakistan
Dairy and Eggs Fruits, Vegetables and
Oilseeds
Fishery Products Meat and Livestock
Millions of USD (real 2000)
2008 2009 2010 2011
Source: Ahmed and Gautam (2013) using UN COMTRADE data
• Wheat procurement policies create price distortions
• Negative impact on consumers, heavy fiscal burden
• HVA growing but diversification slow and threatened by protection of LVA
• Acreage share of grains (esp. wheat), increased over time to 60% (40)
• Seed sector weakness also a constraining factor
• Need for reform in the regulatory environment
12. Refocus on Policy Reforms
• Agric. exports account for 11% of exports revenues;
downstream industries account for another 40%
• Policy induced price distortions limit diversification,
exports and growth
• Reversals on trade liberalization since 2006 =>
discretionary & uncertain trade regime => highly variable
output and input prices
– Several reforms reversed for wheat, sugar & fertilizer.
– Expanded use of SROs & new regulatory duties to provide ad
hoc and arbitrary exemptions to products/entities
• Wheat procurement policies fiscally unsustainable and
contribute to unexpected outcomes (e.g. subsidized
exports) with ambiguous welfare impacts
12
13. Policy Action 1: Improve agricultural productivity
Focus: National agricultural research system reform
Short Run Long Run
• Initiate NARS reform to
improve efficiency &
effectiveness
• Undertake an institutional
audit and clearly delineate
roles/functions/mandates of
fed and prov bodies
o Private R&D
o Agri-businesses
13
• Implement the shift from
federal to provincial levels
o Staffing levels and
composition
o HR reforms
• Increase budget for
agricultural research
• Plan & implement long run
capacity building program for
scientific research capacity
14. Policy Action 2: Improve water use efficiency
Focus: Institutional reforms
• Identify the current state of
mechanisms for the water
management system
o Develop a plan for
devolution of authority
to the relevant scale
(provincial, FO, WUAs)
o Clarify roles and
mandates of each
authority
14
Short Run Long Run
• Implement institutional
reform – devolve authority to
relevant scale
• Provide sufficient federal and
provincial resources for
transition and capacity
building
• Establish third party
watchdog to evaluate the
reform process and monitor
for rent seeking behavior
15. Policy Action 3: Remove protection variability &
bias against agricultural exports
Focus: SRO phase out and trade policy simplification
• Identify timetable for
removal of SROs, tariff
reduction and uniformity/
harmonization, and removal
of alternative instruments
(e.g., export taxes)
• Identify WTO compliant
instruments that may be
appropriate to use, e.g.
special safeguard
mechanisms
15
Short Run Long Run
• Implement the reforms:
remove of SROs, reduce and
harmonize tariffs, and
dismantle export barriers
16. Policy Action 4:
Reduce distortions in domestic grains markets
Focus: Wheat procurement policy
• Identify minimum volume of
public wheat procurement,
accounting for both federal &
provincial programs.
• Identify floor/ceiling prices to
follow world prices
• Identify food insecure groups
for social protection
programs
16
Short Run Long Run
• Implement rules-based
adjustable tariffs to maintain
price bands
• Develop & roll out social
protection programs for food
security with
o clear triggers
o graduation requirements