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Pakistan’s unsafe water

By Hina Shaikh and Ijaz Nabi
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Safe drinking water is a central plank of a country’s health strategy as it affects nutrition intake and therefore infant mortality, child growth, and the ability of adults to be productive. Exposure to unsafe water also leads to skin-related disease. For these reasons, access to safe drinking water is a right enshrined in the constitution and is a critical Sustainable Development Goal.

The Consortium for Development Policy Research (CDPR) recently brought together a panel of experts to discuss the current status of drinking water in Pakistan and what is being done to ensure that citizens enjoy this constitutional right.

Pakistan’s “water stress”

The panel distinguished between “water scarcity” and “water stress”. With the world’s fourth highest rate of water use, Pakistan’s economy is one of the most water-intensive in terms of cubic meters consumed per unit of GDP. Subsequently, water availability per capita has shrunk to under one thousand cubic meters by 2017 from over five thousand in 1951. Pakistan crossed the “water scarcity line’” in 2005, indicating a shortage of overall supply. With higher than expected population growth, this is likely to get worse.

The focus of the discussion was primarily on “water stress”, or the prevalence of polluted water that is unsafe to drink. Panelist Syed Hasan, Assistant Professor of Economics at the Lahore University of Management Sciences, noted that Pakistan became a water-stressed country in 1990 and is expected to be among the most water-stressed countries in the world by 2040.

Panelist Hammad Khan, Director General of World Wild Fund for Nature (WWF) Pakistan, pointed out that the level of arsenic in the water supply far exceeds the government’s own thresholds for contamination, which are in fact less conservative the World Health Organization’s (WHO) standards. A 2015-16 nation-wide survey by the Pakistan Council of Research in Water Resources (PCRWR) found that only a third of the 369 samples tested for water quality were safe for consumption. A separate PCRWR study conducted in 2011 found 100 percent of water samples in Lahore were polluted with arsenic. A study led by Joel Podgorski, a scientist at the Swiss Federal Institute of Aquatic Science and Technology, found that water in two-thirds of the 1200 wells sampled across Pakistan exceeded the WHO-recommended threshold of arsenic. Based on this data, nearly 60 million citizens are estimated to be consuming toxic ground water.

Microbial pollution is also common. In cities, water becomes contaminated due to improper disposal of solid waste and continued usage of outdated water and sewage networks. Chemical pollutants from industrial waste also infect water. In rural areas, open defecation and animal waste are the leading sources of contamination.

Poor quality of water burdens the health sector, increases missed days of work, and reduces labor productivity. High levels of arsenic in water contributes to underweight birth, skin defects and miscarriages. Syed Hasan mentioned the burden of poor health outcomes in the form of waterborne diseases costs Pakistan 1.6 million disability-adjusted life years – and almost four percent of GDP.

Poor governance

Pakistan has been unable to incentivize conservation and efficient usage of water. Syed Hasan commented on the pricing mechanism and its failure to reflect the true market value of this critical resource. The tariff for water used for household consumption in urban Pakistan was last revised in 2004. Operation and maintenance costs incurred by water authorities continue to exceed the revenue they collect, while water metering covers only eight percent of the households.

Hammad Khan explained that if sources of water remain unprotected, the availability of drinking water will keep dwindling. Ground water once contaminated cannot be treated. The installation of filtration plants by Punjab’s Saaf Pani Company (see below), meant to cover all union councils in Punjab, are remedial measures – not sustainable solutions. The unrelenting adulteration of water sources despite decades of several dedicated water authorities in operation reflects a serious governance failure.

The government response in Punjab

Following devolution, water became a purely provincial subject. Punjab set up the Saaf Pani Company three years ago to ensure provision of drinking water in rural Punjab. The company’s progress is personally overseen by the chief minister.

Panelist Tahir Majid, Chief Technical Officer, Punjab Saaf Pani Company, agreed that despite being the Punjab government’s flagship initiative and substantial public expenditure, progress has been slow. A third of the water schemes in the province remain non-functional while 79 percent provide water that is unsafe for consumption.

The problem with Saaf Pani Company reflects a deeper problem of governance pervasive across several other sectors. When parallel governance structures are set up in the presence of existing departments, such as the Punjab Health and Engineering Department, inefficiencies slide in. The company saw several quick changes in senior management (some resulting in criminal inquires) and frequent changes in the operational design. This has resulted in delays and has not encouraged strong private sector engagement in the delivery of safe drinking water to the citizens.

After being heavily scrutinized for its performance, the company is now restructuring itself to improve delivery and remains committed to providing clean drinking water to Punjab’s entire unserved population of 60 million by 2025.

What can be done?

It is encouraging that “water-stress” can be overcome. Singapore’s example, cited by Syed Hasan, shows how the risk of extreme water stress can be countered by efficient regulation and management. Inaction, however, may result in a crisis similar to the one in Cape Town, a city that is now on the verge of rationing clean drinking water.

The panel suggested immediate steps Pakistan can take to tackle the water crisis and avoid the Cape Town outcome:

Set the right priorities: An over-arching water policy framework is critical. The National Water Policy, in circulation since 2004, should be updated in light of changes and approved.

Set water classification standards: Every country (including India, Bangladesh, and China) has water classification standards where all the water bodies are categorized according to their usage. This should also be done in Pakistan. WWF has offered to use remote sensing and GIS mapping to help government conduct this exercise. Authorities will then be able to ensure more effectively that water bodies classified for drinking purposes are kept clean and used for that purpose alone. Water classification will also help avoid disputes between different stakeholders (agriculture vs. industrial vs. household consumption).

Let prices work: Even though water is a basic right, it is a limited resource and hence water pricing is important. The fact that people pay for bottled water indicates that there is willingness to pay.

Mobilize community ownership: Community ownership is key to ensuring that water schemes remain functional and well-maintained. The WWF for example signs a legal contract with the community for joint ownership of the filtration plants it has provided.

Hina Shaikh is a Pakistan country economist at the International Growth Centre.

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Drive cautiously down China’s Belt and Road

KarachiPort

By Shahid Yusuf

China’s Belt and Road Initiative (BRI) aims to create a Eurasian economic corridor and a string of economic hubs anchored to Chinese cities,  thereby generating a development dynamic that is advantageous to China’s growth. The investment and trade generated by BRI could enable China to sustain a growth rate of 6 to 7 percent and double its GDP between 2010 and 2021. As of end 2016, $900 billion worth of BRI-related projects were planned or under implementation – with loans and credits from Chinese banks amounting to $1.2 trillion (not all for BRI projects). Chinese agencies claim that the BRI will eventually absorb between $4 trillion and $8 trillion.

But what are the benefits and risks for countries accepting BRI-linked financing to build transport and energy infrastructure?

To this day, the BRI remains a patchwork of projects without a well-articulated strategy backed by solid analysis of the potential benefits for China and countries that will borrow from Chinese entities to finance large infrastructure projects. This is critical if the politically less-than-stable countries in Central and South Asia with a poor track record of sound policymaking are to benefit from BRI. In order to service BRI loans, the investment in transport and energy infrastructures plus any associated technology transfer must attract private investment in tradable goods and services and increase export earnings from exports.[1] Whether such a virtuous spiral of investment and exports will ensue, is far from certain. Moreover, infrastructure building and mining on the scale envisaged could lead to severe environmental degradation absent the enforcement of strict regulations, which are either not in place or enforced with a light touch.

There are other reasons for proceeding cautiously down the Belt and Road. The terms and conditions of loans extended by Chinese entities are less than transparent. Furthermore, the governance and finances of the more than 50 Chinese state-owned enterprises that are responsible for major BRI projects are opaque, and their capacity to manage and implement complex transnational projects is untested. Contractual relations with such entities could prove to be tendentious if projects fail, the quality of work and materials is poor, or if lax environmental standards cause damage. The Tharparkar project in Pakistan is a case in point.

This context elicits the following questions and concerns that deserve closer attention and more systematic study.

Can China finance BRI projects to the tune of several trillion dollars from its own resources? And if not, will China need to tap the international bond market for the bulk of the financing? By doing so, its indebtedness would increase and it would absorb considerable risk associated with lending for long-term projects in countries such as Uzbekistan, Pakistan, Sri Lanka, and Laos. In the end, given the current state of China’s forex reserves, will the outlay on BRI be an affordable but not game changing $25 billion per year?

China’s neighbors worry that the purpose of BRI infrastructure and connectivity is to further Chinese exports and geopolitical ambitions. Many are already on the slippery slope to deindustrialization and BRI could accelerate the process. Existing light consumer manufacturing would be imperiled and the likelihood of diversifying into more complex products would be greatly diminished because of China’s competitive advantage in a wide range of manufactures.

European experience suggests that cross-border transport infrastructure has not led to regional convergence. If anything, it has tended to increase regional disparities by making existing hubs more dominant and disadvantaging nearby regions in the hubs’ shadow. Rail links between Milan and Naples have strengthened hub economies while contributing little to the development of Southern Italy. A study of road infrastructure building in Portugal came to similar negative conclusions: greater accessibility did not improve the cohesion and purchasing power of less developed parts of the country.

To service loans from China and other borrowers, countries on the receiving end of infrastructure investment will need to greatly expand their exports and run trade and current account surpluses. Given recent trends in manufacturing and slower growth of world merchandise trade, is that likely? In 2016, China ran a trade surplus amounting to $250 billion with participants in the BRI. Could countries such as Pakistan (which runs a $13 billion trade deficit with China) possibly narrow and reverse the trade gap and run surpluses with its hyper competitive neighbor?[2] If they do not, what is the return to these countries in the form of long term gains from infrastructure? In other words, how much growth could BRI projects unlock by way of tradable goods and services? Furthermore, if highly indebted countries are unable to repay these loans, what are the consequences for Chinese firms and for their bankers?[3] Taking over assets that will need to be marked down would involve absorbing large losses.

What is the risk of BRI exacerbating the resource curse in countries such as Kazakhstan, Turkmenistan, and Afghanistan? Could the creation of the BRI trade corridor render them even more resource dependent and stunt their non-resource based tradable sectors?

So far, China’s projects in its own Western provinces have at best yielded modest returns. The profitability of China’s foreign direct investment in developing countries has also been low. This suggests that the cross-national infrastructure projects intrinsic to BRI will be costly to build and the financial returns are likely to be meager, at least in the medium term. Political changes in destination countries could easily affect project outcomes. Political risk could discourage participation by investors from developed countries.

Geopolitical issues need to be factored in. China’s actions have alarmed some of its neighbors – India in particular.[4]  Chinese closeness to and support for Pakistan could contribute to continuing friction between Pakistan and India. Political tensions within and among countries, sporadic violence (as in Pakistan’s Baluchistan Province), and arms races in South, Southeast, and East Asia may undermine the BRI – as will continuing discord in the Middle East. How might these developments and others affect growth prospects is a key question.

Shahid Yusuf is Chief Economist of the Growth Dialogue at George Washington University and an adjunct professor at Johns Hopkins University.

Note: The views expressed in this article are the author’s and do not necessarily represent those of Pakistan’s Growth Story.

[1] Premier Li Keqiang referred to technology transfer as China’s, “golden business card”. Financial Times (2017, July 18th p.9).
[2] Between 2006/7 and 2015/16, Pakistan’s exports to China went from $575 billion to $1.63 billion. Meanwhile China’s exports to Pakistan increased from $3.5 billion to $12.1 billion (Source: http://fp.brecorder.com/2017/03/20170314153866/). Figures in the Financial Times indicate that China’s exports amounted to $16.5 billion in 2015.
[3] Down the road, servicing the loans from China will be burdensome for many countries. Chinese firms have already encountered problems with projects in Myanmar, Sri Lanka and Indonesia. Chinese SOEs that are spearheading BRI, such as the China Railway Corporation, are themselves increasingly in debt to Chinese banks – CRC’s debts amount to $558 billion and these are rising largely because much of China’s 22,000 high-speed rail network runs at a loss (Source: https://www.ft.com/content/9a4aab54-624d-11e7-8814-0ac7eb84e5f1?mhq5j=e3, https://www.ft.com/content/156da902-354f-11e7-bce4-9023f8c0fd2e?mhq5j=e3).
[4] In response to BRI and disputes along its northern border with China have induced India to launch its own initiative extending from Africa to Southeast Asia variously called the “Spice Route” the “Blue Revolution” and SAGAR – “Security and Growth for all in the Region”. India is also investing $300 million to lease the 2,000 acre tract of land which is the site of the largely deserted Mattala Rajapaksa Airport adjacent to Hambantota Port in Sri Lanka in order to prevent a Chinese takeover of the facility and to control China’s access to the port that it has leased for 99 years (Source: http://www.businessinsider.com/india-and-china-are-fighting-for-control-in-sri-lanka-2017-12, https://www.reuters.com/article/us-sri-lanka-port-india/india-eyes-airport-in-sri-lanka-near-chinese-belt-and-road-outpost-idUSKBN1CI0KI).

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Clearing the air of toxic smog

smog-lahore-3

Sharmin Arif and Shehryar Nabi

Last October, Punjab was blanketed by grey soot, which not only hampered visibility, but stung the eyes and created a burning smell that was toxic to inhale. This was unprecedented. Smog in Lahore is usually not so dense and dark, nor does it settle on the city as a layer of grime.

The smog was a mixture of fog and a soup of air pollutants spewing from vehicles’ exhaust, industrial smoke, backup generators, open waste burning, and crop burning. Lahore wasn’t the only city to fall under its haze; thick smog extended across cities in Punjab and Northern India.

The Consortium for Development Policy Research recently brought together three Lahore-based experts, a government official, and one Indian researcher (via Skype) to discuss the consequences of smog and strategies to prevent it.

Here are some key insights gleaned from the event:

Why do we see smog, and how bad is it?

While air pollution is severe year-round, smog is only visible in cooler months because of a meteorological process known as thermal inversion, explained by Sanval Nasim, Assistant Professor of Economics at the Lahore University of Management Sciences. Cold air gets trapped between layers of hot air, constricting air movement and concentrating air pollution.

Ali Habib, Managing Partner at Hima Verte, pointed out that the predominant irritant found in Lahore’s air is a particulate known as PM 2.5. Smaller than one-fortieth the width of a human hair, these tiny particulates can get permanently lodged in human lungs with constant exposure. Lahore’s PM 2.5 levels average at 68 per cubic meter, nearly seven times higher than what the World Health Organization (WHO) considers safe, and 4.5 times higher than Pakistan’s own standard. PM 10 has also been found in large quantities in Lahore’s air and poses a health hazard, though less severe than PM 2.5.

Severe air pollution costs lives and money. According to the Air Quality-Life Index, Pakistan’s life expectancy would increase by 2.5 years if WHO standards were met. According to a World Bank report, air pollution is connected to 10 percent of deaths worldwide and costs South Asia almost one percent of its gross domestic product.

Tackling big polluters

To check the emissions of large polluting industries, the government’s prevailing policy has been command and control: Enforce a limit on how much stationary sources can emit toxic chemicals. Sanval Nasim argued that this policy suffers because it imposes blanket limits on very different kinds of emissions sources. The standards ought to change depending on the source, and the government has been ineffective at differentiating between polluters. Santosh Harish, Associate Director of Research (India) at the University of Chicago’s Energy Policy Institute, added that command and control policies are also expensive and difficult to enforce, making them ultimately counter-productive.

Nasim described two price-based mechanisms that would be more effective. One is setting a per unit tax on emissions, which, in the firm’s perspective, functions as a “price” for polluting. As long as the price of emissions is higher than cost of reducing emissions, it’s in the firm’s best interest to reduce emissions. This could incentivize the adoption of green technology and raise substantial revenue for the government.

The other is tradable permits. After setting a limit on emissions, firms can pollute at that limit by purchasing a permit. These permits can be exchanged between firms in a regulated market. While this system has worked well in the United States and the European Union, a major challenge is the initial allocation of permits to prevent a few companies from gaining a monopoly over selling permits.

While these policies could work for stationary sources of emissions, Nasim proposed two additional policies to keep vehicles in check. The first is imposing a congestion tax – a toll for driving through high-traffic areas at certain times of the day. This could encourage more people to carpool and reduce the number of vehicles on the road, in turn reducing emissions. The second is to require cars to receive regular emissions checks, which could prompt less vehicle use.

Getting farmers to stop burning crop stubble

Talking about India, Santosh Harish commented that reducing crop stubble burning should focus on alternative methods to dispose of the stubble. But this hasn’t been easy. Existing bans on stubble burning have been ineffective. While alternative harvest machines could work, it is unclear whether they are used regularly and enforcing their use is a big challenge. A possible solution is to pay farmers to deposit stubble at a collection point, but it will still need to be disposed without burning.

Lower air pollution could be a byproduct of government reform

To curb air pollution from small-scale sources such as construction dust, stubble burning, and open trash burning, Harish argued that improving municipal governance overall would go farther than intervening on each individual issue. For example, if waste collection authorities increased their capacity to do what they are already supposed to, we would see less open-air trash burning. If the overall quality of road construction improved, less congestion would reduce the number of vehicles on the road and thus road dust. These benefits for air quality would essentially be “built-in” features of broader improvements in government capacity.

Citizens need to own the problem

The panel unanimously underscored the importance of increasing citizen demand for air pollution. Until that happens, polluters will not be held accountable for meeting government emissions standards. Harish noted that the discussion surrounding air pollution is currently too technocratic, leaving most citizens unengaged. Rafay Alam, an environmental lawyer and activist, said that better communication of air quality data can create the political constituency needed to put pressure on politicians for prioritizing air pollution in the 2018 General Election.

Pakistan and India need to work together

Because air pollution is a regional problem, Pakistan’s cities will continue experiencing smog from India even if it takes effective unilateral action. The same is true of India’s cities. That’s why Pakistan and India need to collaborate.

Political tensions make that difficult, of course, especially when it comes to getting both governments to talk to each other. However, Santosh Harish and Rafay Alam proposed a solution outside of government engagement: A cross-border university network to monitor and compile air pollution data.

This is, in fact, something the government desperately needs. Saif Anjum, Secretary Environment Protection Department of the Government of Punjab, commented that the government’s current data on air pollution is scanty. IT cannot distinguish between polluters, nor does it know how much an intervention will be worth its investment. He said that not only does the quality of data need improvement, but the ability to determine its relevance for policy needs to be embedded within the policymaking process. The Punjab government’s capacity to do that is limited.

A university network could present this data to governments and citizens. This will give us a better grasp of where air pollution is concentrated, which goes a long way towards taking the right course of action.

Sharmin Arif is a communications assistant at the Consortium for Development Policy Research.

Shehryar Nabi is a communications associate at the Consortium for Development Policy Research.

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Citizen Trust in Police: A Puzzling Paradox

Ali Cheema and Zulfiqar Hameed

Public ratings of the police have consistently been below the ratings of other institutions in Pakistan. Only 33% of Pakistani respondents in Pew’s 2014 Global Attitudes Survey agreed that the police are exerting a good influence on the way things are going in Pakistan. This was much lower than the rating given to courts (47% agreed), the Federal Government (60% agreed) and the Pakistan Army (80% agreed). Pew’s 2009 survey found similar differences as did the Gallup survey of 2017.

It should, therefore, come as no surprise that less than 25% of respondents in the Institute of Development and Economic Alternatives’ (IDEAS) Lahore Crime Survey (LCS) 2016 agreed that “the Lahore police are trustworthy.” Figure 1 shows that citizen trust in the Lahore police is low by global standards. The level of citizen trust in Lahore police is half the level found in London and urban centers in the U.S.

What is surprising is that that the Lahore police does much worse on citizen trust than the police services in London and the Urban U.S. despite the lower rate of victimization experienced by citizens in Lahore. The victimization rate in Lahore was 25% less than the rate in London and the Urban U.S. in 2016 (Figure 2). Low citizen trust in the Lahore police is even more surprising when one recognizes that more than 70% of the respondents in the IDEAS LCS 2016 reported that public safety had improved in their neighborhood compared to the last year. The co-existence of low citizen trust in the police with low victimization and a recognition that public safety has improved is a puzzling paradox!

What explains this paradox? We can begin to arrive at a solution by unpacking the reasons for low trust. The IDEAS LCS 2016 asked citizens questions about three important metrics: trust in police effectiveness, trust in police honesty and trust in police’s procedural fairness. We find that while half our respondents agreed that the Lahore police are effective, around 25% agreed that they are procedurally fair and only 10% agreed that they are usually honest (Figure 3). Interestingly, while citizen perceptions of police effectiveness are in line with global averages, citizen perceptions of police honesty and procedural fairness fall well below them. The verdict of citizens is that their issue with the police is not competence; it is poor processes of service delivery. Which parts of the policing process are adversely impacting citizen trust? We find that the First Information Report (FIR) registration system is a particularly pernicious cause of low citizen trust. Our evidence shows that the percentage of victimization incidents (reported in crime surveys) registered as criminal cases (reported in the police’s case registration data) – what we call the registration rate – was far lower in Lahore than in London and the Urban U.S. in 2016.

We found that the Lahore police registered only 7% of victimization incidents reported by citizens in the IDEAS LCS 2016 as FIRs. The registration rate in Lahore is much lower than the crime registration rate found in Urban U.S. (19%) and in London (42%). The IDEAS LCS 2016 asked victims who reported an incident but whose complaint was not registered by the police to provide up to three reasons for the police’s failure to register. 50% said that the registration process was complex and ad hoc, while another 40% said that the current system provides poor incentives to register crime. In short, the citizens’ view is that fixing the registration process requires reforming institutional incentives at the level of the thana (police station).

The IDEAS LCS 2016 also asked respondents to report the number of times the police demanded unofficial payments from them during the past year. 50% of complainants (victims whose complaint was recorded by the police) in the survey reported direct experience of corruption. What is worrying is that direct experience of complainants with police corruption is double the level experienced by non-complainants (20%). This difference is due to the high burden of unofficial payments associated with the FIR registration that is faced by complainants. Nearly 40% of complainants report registration as the reason for the unofficial payment, which is far less than the proportion of non-complainants (5%) who report it as a reason.

The main message from this evidence is that rebuilding citizen trust in the Lahore police will not be possible without reforming the FIR registration process. In our view, there is a strong case for institutionalizing an automatic registration system that registers cases on the basis of a complaint. We recommend institutionalizing this system in cases of crime against property (theft, robbery, burglary, dacoity, extortion and attempts at these crimes) where no one is nominated as a culprit at the time of the complaint. According to our data these types of cases constitute a majority of victimization incidents in Lahore and hence the reform can have a big impact, as it will be applicable to a large number of cases.

This simple reform can go a long way in restoring citizen trust and healing the broken relationship between citizens and the police. The question is whether there is political appetite for this simple reform?

Ali Cheema is a Senior Research Fellow at the Institute of Development and Economic Alternatives.

Zulfiqar Hameed is associated with the Police Service of Pakistan.

The reports on which this blog is based can be found at:

http://ideaspak.org/images/Publications/Governance-Institutions/Serving-Protecting-Victimization-Citizen-Engagement-Policing-Lahore-Policy-Note.pdf

http://ideaspak.org/images/Publications/Governance-Institutions/Safeguarding-Pakistanis-Punjab-Police-Crime-Urbanization-Working-Paper.pdf

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Why CPEC is a wake-up call for Pakistan’s agriculture

Agriculture

Sharmin Arif and Ijaz Nabi

Many media reports and opinion columns treat the China-Pakistan Economic Corridor (CPEC) as a cure-all. The reality is more complex. The benefit we get from CPEC depends on how much effort we put into using the opportunity. This point was stressed at a recent panel, “What CPEC means for agriculture” hosted by the Consortium for Development Policy Research (CDPR) on November 10th. Following are key points from the discussion.

Why CPEC opens an opportunity in agriculture

CPEC, as elaborated by panelist Hasaan Khawar, policy analyst and CDPR Fellow, is part of a larger economic and strategic initiative whereby China seeks to connect its economy to Europe, Africa and the Middle East through land and sea routes. CPEC is one of the six such routes which connects China to Pakistan through two routes linked to our sea ports: the eastern route and the western route.  Clearly, China knows what it is doing and is here to invest, but Pakistan needs to respond to create the conditions to maximize returns from investments for both economies.

There are seven areas of cooperation for benefiting from the routes, and agriculture is one of them. China’s plan is mainly to invest in our agriculture inputs – specifically fertilizers – as well as in post-harvest infrastructure. Such cooperation in agriculture between China and Pakistan poses challenges and opportunities.

A forthcoming study by International Growth Centre (IGC), cited at the discussion, highlighted that China has become the world’s largest food market with 1.3 billion consumers, and it’s worth $1 trillion. In ten years, it is expected to reach $1.5 trillion. China is undergoing rapid urbanization which is depleting both labor for agriculture and land for growing enough food for its citizens. It has recently struck 80 deals in international food markets worth $12 billion. The U.S., Australia and Brazil have increased their agriculture exports to China three-folds. Russia, recognizing its geographical advantage of being located closer to China, has overtaken the U.S. as the largest wheat exporter to China.

Pakistan, China’s neighbor in the southwest, has yet to take advantage of the opportunity in agricultural trade with China. This is despite the fact that multinational corporations are racing to set up operations in countries close to China for exporting perishable goods in the shortest time and lowest costs. This is unfathomable, as Pakistan is seated on fertile plains, making agriculture a natural source of business for Pakistan’s economy.

CPEC is a wake-up call for Pakistan to energize its agriculture sector through exports. The overall agricultural export basket of Pakistan is mostly reliant on cotton textiles, comprising 70 to 80 percent of total exports. Of that – leaving out cotton and livestock – agri-exports to China account for a negligible portion of other products. Pakistan’s share in the Chinese ballooning market for agriculture imports remains miniscule and will continue to shrink unless addressed effectively.

CPEC will reduce the logistics costs of trade in agriculture products with China. But this will not automatically translate into greater exports for Pakistan. This is because not only does our agriculture sector need to be revamped to improve product quality, but at the micro-level, farmers need to be given better access to formal credit for investing in expensive inputs. Pakistan needs to utilize all available tools to attract foreign businesses. The private sector must accelerate efforts to negotiate new deals with international food companies for export opportunities.

What will it take?

Panelist Arif Nadeem, head of the Pakistan Agricultural Coalition (PAC) and former Secretary of Agriculture, Government of Punjab, pointed out that irrigation costs are a massive 40 to 50 percent of the total production costs of Pakistani farmers. Furthermore, ground water quality has deteriorated sharply, negatively affecting yields. These irrigation challenges need to be addressed, including an overt focus on wheat and sugar cane production, which wastes water resources that can be used for other, more economically viable crops, such as oil seeds, which require much less water for irrigation and lesser input costs. In short, Pakistan’s agriculture needs an overhaul focusing on comparative advantage based on its land and water resources. Additionally, the latest irrigation technologies need to be adopted to produce more crops per drop of water.

Pakistan’s agriculture needs to become part of an eco-system comprising key players from the public and private sectors to help farmers grow high quality produce which can be stored in warehouses that come with crop insurance. Farmers should be able to use their crops as collateral for getting short-term loans from banks for sustaining their investment cycles. This should be accompanied by commodity exchange systems to ensure that farmers don’t have to undergo distress sales, which adversely affect profitability.

The federal government has to improve market access to China. This requires an examination of tariff and non-tariff barriers to trade with China. Currently, the federal government is re-negotiating the Free Trade Agreement with China. However, even though the tariff for seedless citrus fruit is favorable, Pakistan has not shifted toward its production and therefore has not taken advantage of the opportunity. Furthermore, despite the fact that China’s rice imports are mostly non-basmati, there is still significant room to increase exports of basmati rice to China. The major impediment here is the non-favorable tariff regime. No preferential tariff is applicable on any rice category in Pakistan, rendering it non-competitive. Tariff and non-tariff barriers also affect other product categories such as fruit juices and vegetables, which hinder Pakistan’s exports to China.

Pakistan’s agriculture must respond to Chinese food consumption habits, which will entail a move from traditional products to high-value products. The government is making efforts to achieve this and is emphasizing the importance of shifting from cereal production to horticulture, as China’s growing urban population demands more fresh produce such as fruits and vegetables.

The government needs to allow market forces to determine prices for farmers’ produce and eradicate exploitation by middlemen who control access to information. Commodity exchange programs for farmers need to be set up that link multiple sellers to multiple buyers and implement alternate marketing mechanisms to save the farmers from distress sales.

Moderator Naved Hamid concluded the discussion by emphasizing that for Pakistan’s agriculture to benefit from CPEC, the federal government must reduce the tariff and non-tariff barriers to improve access to the rapidly growing Chinese market of agriculture produce. The provincial governments must play their part and improve farmer access to modern inputs and market information and encourage arrangements that collateralize agriculture produce, provide crop insurance and reduce distress sales by farmers. China has its own interests in mind, and unless we can meet their needs through a better managed farming sector, we will not be in a position to demand their technology or investment for developing our agriculture sector.

Sharmin Arif is a communications assistant at the Consortium for Development Policy Research.

Ijaz Nabi is Chairman of the Board of the Consortium for Development Policy Research and Pakistan Country Director at the International Growth Centre.