Initiatives for corporate farming

The Securities and Exchange Commission of Pakistan enrolled 19 companies in corporate agricultural farming last month. Most of them are in seed, poultry and feed businesses. It is, however, not immediately clear if any of these plan to invest in the vegetable and crop sector.

Nevertheless, a growing number of companies are enrolling in corporate farming, which has revived hopes of fresh investment in different areas of agriculture in Punjab, Sindh and Khyber Pakhtunkhwa.

“Major business groups are investing in corporate farming,” says Afaq Tiwana, one of the key architects of the policy framed in the early 2000s to attract foreign and domestic corporate agriculture farming.

“Numerous corporations have invested in dairy farming and halal meat since the adoption of the policy, and I expect many to invest in vegetables soon. I also know that several major textile companies are considering joint investment in cotton crop to grow quality fibre [to meet the requirements of foreign customers].”

The corporate agricultural farming ordinance was drawn to offer wide-ranging incentives to corporations to attract foreign and domestic capital in large-scale agricultural production.

It was hoped at that time that investors from Gulf countries like Saudi Arabia and the UAE will lease or buy large tracts of barren and uncultivated state and private land, and invest their capital to grow food crops to be exported back home. But the plan didn’t work out according to the script.

“Initially, some Gulf investors showed their desire to lease and buy land for corporate farming. Most were interested in productive, fertile land. But the plan could not pick momentum due to deteriorating security conditions in the country,” says Midrar ul Haq, a Peshawar-based agriculture and environment consultant.

Corporate agricultural farming is believed to have tremendous promise for attracting foreign investment, as many countries try to achieve food security. The South Koreans, Chinese, Saudis, Japanese and others have acquired farmlands in Laos, Cambodia, Madagascar, Burma, Uganda, Ethiopia, Brazil and other Central Asian countries in recent years. Large Indian companies like Tata and Reliance are also said to have invested heavily in this area.

The law adopted by Pakistan offers numerous attractive incentives to potential investors. It declared corporate agricultural farming as an industry, made sufficient bank credit available for corporate entities, gave several fiscal and tax concessions like zero-rating imports of machinery (not manufactured locally), did away with the upper ceiling on landholding for registered agricultural companies, allowed 100pc foreign ownership with checks on repatriation of investment and profits, and exempted transfer of land from taxes.

“It is one of the most attractive and liberal packages offered anywhere in the world to corporations and investors,” a Punjab agriculture department official argues. “If no foreign investor has come, it is not because of any flaw in the incentive package, but because of insecurity and political instability gripping the country for last 7-8 years.”

Meanwhile, Afaq Tiwana clarifies that the incentives were not necessarily meant for foreign investors.

“The law was enacted to comfort investors that the legal cover is there, so they can come and invest in this sector. It was essentially meant to allow corporations to own and lease land for agricultural farming. Many major local investors like Mian Mohammad Mansha and Jehangir Khan Tareen have put money in it.

“Foreign investors demand very large tracts of land, which are difficult to acquire from private landowners. Only the state can provide such large tracts, which the government is not prepared to give,” he says.

Corporate agricultural farming has many advantages. It helps transfer modern technology, raises output, cuts input costs, improves food security, prevents fragmentation of cultivable land, creates much-needed — backward and forward — linkages between agriculture production, processing and marketing, and pushes industrial growth.

Nevertheless, the promulgation of the ordinance triggered a debate against the government’s decision to encourage corporate farming. Many said it would displace small landholders, create massive unemployment and increase poverty. Afaq dismisses these apprehensions.

“Those who invested in corporate dairy farming imported technology, management and animals. This is the route that other sectors of the economy also need to take to progress,” he argues. “I don’t agree with people who say that development of corporate farming will create unemployment or make people landless,” he says.

“Corporate farming speeds up the development of the services sector, which will create thousands of better paying jobs and urbanise our rural population. In America, for example, only 2pc of the population is actively involved in the fields. But a far bigger number of people are earning their livelihood in the services and industrial sectors, which are connected with and dependent on agriculture through backward and forward linkages.

“We have to decide if we want to keep our [rural] people the way are, or improve their living conditions and give them better jobs and increase their access to urban facilities. This will happen when only a fraction of them are producing food and other crops and the rest of them will be working in the services and industrial sectors,” he says.

Writer Nasir Jamal

Source: Dawn