By Farzana Shah
Government of Pakistan has announced to lease lands to foreign entities for corporate farming under the CAF policy. Government is hoping to get notable amount of revenue and job employment through this policy. Other than that government is also hoping to bring in new technology and best business practices for agriculture in Pakistan in order to boost this crucial sector.
Critics of this policy are apposing this due to various reasons and concerns. Pool of critics includes farmer associations, human right activists, analysts, food experts and columnists who are of the view that this policy holds more bane than bone.
This paper examines the CAF policy, Corporate farming worldwide and concludes that current CAF policy adopted for leasing land is not in best interest of Pakistan in context of food, water and land security.
In the end paper also contains some policy recommendations and suggestions for corporate farming to make it more beneficial for local farmers and communities alike.
Background
Government of Pakistan has decided to lease or sell at least 1.2 million acres of its fertile lands to two Gulf countries i.e. UAE and Saudi Arabia for corporate farming in order to fulfill the needs of these two countries. No contract with Saudi Arabia has been signed yet whereas according to reports an agreement with a company of UAE has been reached.
Corporate farming is a term that describes the business of agriculture, specifically, agriculture methodologies of multinational corporations (MNCs) involved in food production on a very large scale. Corporate farming is not limited to leasing farm only but also encompasses entire life cycle of a crop in that farm this includes seed supply, agrichemicals, food processing, machinery, storage, transport, distribution, marketing, advertising, and retail sales. [1]
But this is not limited to this far, corporations involved in corporate farming influence on education, research and public policy, through their educational funding and government lobbying efforts as well.
According to an estimate about 50 million acre of land have been bought or leased by foreign countries, MNCs or investors abroad. African countries are top of the list
Like any other business this kind of agriculture business has pros and cons for local people and foreign consumers alike. Practices and technology adopted in this kind of farming enhances the crops growth many times. This enhanced growth provides copious supply of food to foreign consumers but foster the idea to manipulation of resources like food, water and land for local community and farmers.
Current news regarding corporate farming in Pakistan has ignited a new debate about these pros and cons of the decision by government. Most of the analysts believe that CAF has a potential in country and also can enhance the growth of crops but that is only bright side of picture. Government CAF policy (discussed below) has paint a very bleak other side of picture. Due to current CAF policy adopted by Islamabad many of the farmers, agriculture businessmen, experts and analysts are not inline with government’s view about corporate farming.
Despite serious concern of farmers’ community and civil society, previous government approved Corporate Agriculture Farming (CAF) policy, while present government push the policy step ahead and announced to offer six million acre land to resourceful countries and Multinational Companies (MNCs).
Introduction to Corporate Farming Policy
According to ministry of investment the federal government through CAF policy is trying to achieve the followings;
1. To seek efficiency of production and increased incomes/revenues by bringing together agricultural production, processing and marketing activities at one place under the management of a corporate entity.
2. To improve agricultural productivity and profitability through the use of latest production technology and adequate expertise particularly for exports.
3. To produce high quality agricultural products due to favorable resource base.
4. To achieve/maintain internationally competitive unit cost of production for all major crops, fruits and vegetables
Government wants to meet these goals with following benefits being offered to investor or MNCs.- 100% foreign equity allowed (only in CAF on case to case basis)
- Minimum $ 0.3 foreign equity investment
- Remittance of 100% capital, profits, dividends allowed
- Only such local and foreign companies will be entitled to Corporate Agriculture Farming that are incorporated in Pakistan under the Companies Ordinance, 1984.
- No upper ceiling on land holding. The size of the proposed corporate farm may be left to be determined by the prospective investor.
- State land can be purchased, or leased for 50 years through open auction, extendable for another 49 years
- All banks and financial institutions will earmark separate credit share for Corporate Agriculture Farming (CAF)
- Labor laws may not be presently applicable to Corporate Agriculture Companies. Due to special circumstances of the agriculture sector however appropriate labor laws be developed for this sector within five year.
- Agriculture Income Tax regime applicable in provinces, on income from agriculture, would be applicable to Corporate Agriculture Farming [2]
Fiscal Incentives for Corporate Agriculture Farming (CAF)
- 0% custom duty and sales tax on import of agricultural machinery, equipment
- and implements under SRO 575(I)/2006 dated 5th June, 2006
- Exemption of duty on transfer of land for CAF
- Tax relief; Initial depreciation allowance @ 50% of machinery cost.
- Dividends from corporate agriculture farms are not subject to tax
- Farm income given more favorable treatment than income from other sources
Land Reforms When our own 75 percent households are landless and poverty is rampant, why we are leasing land to rich Arab countries? While on the other hand India is grabbing land in African countries to meet its food security needs. Best way to push for an agriculture based economy in Pakistan is to do land reforms which remained an unfinished agenda of many governments since last many decades. Land distribution in past has remained a mere political stunt by ruling parties in Islamabad. It is time to change this clumsy attitude and do land reforms on a fast pace. Landless Pakistanis must get land from government to grow crops instead of selling or leasing this land. According to reports government is going to lease or sell 700,000 acres to UAE and 500,000 to Saudi Arabia now this is a total of 1.2 million acres of fertile cultivable land. Government can feed at least 120,000 families in rural Pakistan by providing 10 acres each from this land to in villages. This will cripple the poverty in rural areas to a great extend. To prevent this program from political interference an associated program can also be launched to give ownership of these lands to farmers or landless families after a certain time period or after receiving a certain amount against allocated 10 acres. This will pave way for preventing subsequent governments to grab the lands back from these poor families and would also be helpful in raising their standards of living. Education and Training Framers One major reason behind low productivity in Pakistan has been long reliance on old methods of farming by farmers and this is due to the very low literacy rate among farmers in Pakistan particularly among small farmers. Pakistani farmers are one of the most industrious workforces in the world but due to lack of know how about modern mechanized farming they are failed to achieve food sufficiency for the nation and competitiveness in the world market. It is recommended that government launch training and education program for farmers giving small farmers priority to enhanced their productivity in the fields. Training about new irrigation techniques, high yield seeds, farm management are very critical at this point of time to keep Pakistan’s agriculture sector sustainable and productive enough to meet food supplies to the nation and for export as well. Provision of New Agriculture Technology According to the policy government has given incentive for MNCs to import machinery for corporate farming. This kind of incentive must be given to farmer communities at national level irrespective kind of farming the farmer is associated with; corporate or family. Pakistani farmers are not incapable but only require government support in areas where small and medium scale farms cannot afford mechanized farming equipment. Provision of Seed and Fertilizers It is fact that during 1960s with improvement in irrigation system and government support Pakistani farmers were able to double the production of wheat, rice and enhanced cotton production 6 times to meet national demands there is no reason a our farmers cannot repeat same. Only thing missing this time is commitment from government’s end who has absolutely no idea how to enhance the provision of necessary quality fertilizers and seed to whole farmer communities according to their soil and climatic conditions. Comprehensive and integrated efforts are required to assess required amount and quality of necessary seed and fertilizers to the farmers. Pakistan has enhanced its fertilizer production over the years but still relay on imported fertilizers which some times lead to shortage of this crucial item in agriculture. Protection for Small Farmer While inviting MNCs and investor for corporate farming it is also crucial to provide protection to the assets of small farmers who earn their bread and butter from their small farms. This is something very essential to protect social setup of large communities who depends on family farming totally. Government must ensure through legal means that no MNC will buy land from a small farmer against his will and nor will he threaten by other means to leave or sell his farm to MNC. Financially small farmer cannot withstand challenges of corporate farming alone in market place as well. Government must also take this into consideration that prices offered by MNCs in market can be lower than those offered by small farmers. So a lower and upper limit of price for all items produced under CAF must be fixed to protect small farmers in local food market. Keeping all above facts in mind it is evident that corporate farming is not a tool of increase local agriculture output in Pakistan by any means. International practices of corporate farming shows that it never paid any tangible benefit to local masses. Countries who lend their lands to MNCs are still facing severe or high risk of food shortages and decline in provision of resources like water to local communities (e.g Africa). Local communities and citizen often deprived any benefits of corporate farming and there are multiple reasons for this like demands back in home, manipulation of local resources, influence of local supply chain of food etc. But manipulation and influence on food supply is only possible if local policy for corporate farming allow this to happen (unfortunately this is the exact case in Pakistan). India is also growing in population like Pakistan but India has adopted to be in group of countries who lend land from other countries unlike Pakistan where own land is lend to others. Government must take above mentioned issues and suggestions into consideration before concluding any deal for corporate farming. There is no doubt that Pakistan is in need of investment in agriculture in Pakistan but the policy which governs these investment must be inline with its national, economic, food, resource interests. With growing population and declining food surplus worldwide every country is busy in securing food supplies for its masses. Pakistan currently facing a water shortage and is predicted to face food shortage in future as well. Pakistan must stick to its long term plans and must render all policies according to these long term plans. With rapid rate of growth in population it would very difficult for Pakistan to feed whole population when its own lands will be occupied by MNCs sending all eatable goods abroad or selling at high prices back to Pakistan. References: [1] Corporate Farming – Wikipedia, Free Encyclopedia: http://www.wikipedia.com [2] Corporate Agriculture Farming (CAF) Policy: http://www.pakboi.gov.pk/pdf/Sectoral%20Policies/CAF%20-%20Policy%20Package.pdf [3] Agriculture, Food, Water & Land Vision 2030: http://www.pakboi.gov.pk/pdf/Agriculture,%20Food,%20Water%20&%20Land%20Vision%202030.pdf [4] Maplecroft – Food Security Risk Index, 2009: http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/news/sci-tech/12-pakistan+at+extreme+food+security+risk--bi-07