What went wrong with corporate farming?

corporate-farming

October 09, 2014 – BR Research –

The idea of Corporate Agriculture Farming (CAF) in Pakistan has divided views among stakeholders right since the reported promulgation of its ordinance in 2001. CAFs champions hold the issue close to their heart, whereas its detractors term the concept an anathema to Pakistans rural economy. Before delving into why the policy couldn    take off the way its supporters wanted, some contentions are summarised below.

Proponents argue that large corporate farms can put the massive barren and cultivable wastelands to good use and make efficient use of existing farming area – about 11 percent of Pakistans total area is said to be cultivable waste. Opponents point out that existing landless tenants and sharecroppers, who they claim the three land reform rounds simply passed by, are more in need of such land.

CAF would help introduce new technologies, make investments in machines and materials to help raise cropping yields, and focus on all spheres of the cultivation process for efficiency, supporters say. Others resist the idea saying modern farming techniques degrade the soil, genetically-modified crop varieties lead to low nutrition levels (as has been proved through scientific studies in the West: today one has to eat more of the same staple to derive the same amount of nutrients as in the 1950s), and excessive mechanization pollutes the environment.

Defenders of corporate farming contend that modern farming methods will not only make Pakistan food secure (half of population is reportedly food insecure) but also help the country earn export earnings from surplus produce. Antagonists claim the opposite: due to their sheer scale as large buyers and sellers, corporates market behavior would result in high input prices and low produce prices for subsistence landholders, who would then find it hard to even feed themselves, thus ruining the rural food ecosystem.

Since corporate farmers would specialize in specific marketable crops, they would be able to increase efficiency and reduce waste. But the opposing camp maintains that CAFs universal focus on profitable monoculture (single cash crop) will be detrimental to immediate environment and overall balanced food security. Smallholders tend to diversify, by growing vegetables and fruits on the sidelines, they say, and besides excessive irrigation by large farms would increase water shortages for smallholders.

Agriculture in Pakistan contributed 21.04 percent to GDP in FY14 and employed 43.7 percent of workforce, latest economic survey shows. Corporate farming protagonists suggest that this represents overemployment-cum-low-productivity situation needs to be addressed. Through scalable interventions, they hope to increase yield and production, so that a smaller portion of agriculture workforce can feed a greater number of people. The displaced, if any, can find work in various agro-based industries and services that depend on agriculture through forward and backward linkages.

But some are concerned that if corporate farming investors are able to acquire huge landholdings with many tax benefits on capital investment and commercial operations (as reportedly encouraged in the policy), then smallholders and landless tenants will first be rendered unprofitable and booted out, respectively, leaving them little choice but to find work and shelter in urban areas. That would exacerbate pressures on urban congestion, civic services and welfare transfers.

One must be cautious here: the above arguments have little empirical evidence from Pakistan because corporate farming hasn    gained much traction in the country so far. In recent years, other than a few Gulf countries and some local industrial agriculturists reportedly buying some large tracts of land, not much has come to surface. One doesn find the government actively advocating CAF either, but the website of its Board of Investment is still attracting investment in the field:

“Of the total 16.5 million hectares of cultivable land in Punjab, a vast 1.7 million hectares is still available for corporate farming. Likewise, as much as 30% (3.4 MT) of horticultural produce that goes to waste every year can be converted into economic gain by investing agribusiness value chain industries.”

But surely, disagreements over a policy cannot entirely explain its lack of success. Dr. Abid Suleri, Executive Director at the Islamabad-based think tank SDPI told BR Research that the corporate farming policy failed majorly due to the law and order issues.

“A few months after the policy was first introduced in 2001, 9/11 happened and the international investors, whom the then government was hoping to attract, seemed to have lost confidence. In the coming years, the effects of the war on terror ensured that no significant investment came into the area,” he suggested.

Dr. Suleri, who is a noted expert in food security, agreed that the CAF policy instantly galvanized opinion against it. “There was strong resistance on many grounds. Both in terms of food security and food sovereignty, the policys provisions were anti-small-farmers. Eventually, the idea couldn    gain traction. Only about half a dozen agriculture farms were incorporated; some by local influentials like Jahangir Tareen and the rest by countries like China and the UAE,” he stated.

The other side of this saga also merits attention. Afaq Tiwana, CEO of Farmers Associates Pakistan, doesn    agree that CAF policy has been a failure.

“Agriculture is a big sector in Pakistan, so it will take some time before any policy progress can take place. In this particular case, the corporate farming policy evolved over time, but since legislation was lacking, issues surfaced. However, it was a result of CAF policy that many large dairy farms (e.g. Anhaar, Prema Milk, and Sapphire Dairies) have been opened in last decade. A few large vegetable farms are also in the offing. The policy is slowly working,” he pointed out.

Tiwana, who was one of the framers of the CAF policy, maintained that corporates need large tracts of land for scalable farming, which the federal government couldn    provide. Then, the CAF perception also got distorted in the country, even though Pakistans agriculture badly needed capital to avoid continued stagnation, he lamented.

“The idea behind CAF was not smallholder-land-grab or government-loot-sale. It was to provide the sector with capital, technology and management. It was to work within the agriculture system to make it easy for corporates to make investments in the agri-value chain,” he clarified.

If farmers do not want to sell their land, they can lease or even go for contract farming, achieving a win-win for everyone, Tiwana proclaimed. “JDW Group (of Mr. Tareen) has leased 30,000 acres of land in Rahimyar Khan, and this has now become a model for other farmers to emulate. In fact, many progressive cotton farmers are already looking at that.”

So, while the corporate farming project is slow and divisive, what is its future likely going to be in Pakistan? Dr. Suleri suggested that he would support a revised corporate farming policy in the future if it makes better use of barren state land, does not compromise small famers, keeps the objectives of food security and food sovereignty in mind, and disallows corporate farms to export. Tiwana feels that if corporate farming legislation is completed soon, the concept will fly in Pakistan.

Put simply, there is a case for Pakistans existing agriculture dynamics to move towards more efficiency and productivity. Corporate farming can do that, its advocates claim, but those suspicious warn that the situation could be worse with corporate farming. But it is need of the hour that the two poles converge and find common ground. The biggest question is: can smallholders and corporate farms profitably coexist?

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