Mar 22, 2010

Food for future

Pakistan has moved from being an exporter to an importer of food

By Aadil Mansoor

Fifty years down the road, the reign of the Green Revolution that began in the 1960s in India seems to be nearing its end. The Green Revolution pushed the production frontiers of the agriculture sector through farm mechanisation and introduction of high yielding varieties (HYVs), complemented by the construction of upstream water reservoirs. It helped farmers increase food grain and crop production at higher rates than the rates of population growth. In the following three decades (1960-80), the average yield per hectare rose at an impressive average rate of 4 percent per year. This growth was not only enough to feed a population of 85 million, growing at a fast rate of 4.12 percent per year during that period, but also generated surpluses that improved Pakistan's export performance and earned foreign exchange reserves for a cash starved economy.

Sadly, that phase of growth and ample food is no longer the prospect for Pakistanis today. In the last five years, there have been several occasions when the production of food grains (wheat and rice in particular) fell below the demand and the resultant shortfall had to be met through imports. This caused widespread food shortages and unrest on the one hand, and a serious blow to the country's scant foreign reserves and cash flows, on the other. Since 2004-05, Pakistan has imported as high as 4 million tonnes of wheat each year to meet the domestic demand. The situation is food security is worsening with every passing year and the crisis will likely turn into a disaster unless targeted and timely reforms of the agricultural system are carried out.

From a long term perspective, it is evident that agricultural productivity growth has remained dismally low in the past three decades. Since 1980, the food grain productivity has increased on an average rate of 1.79 percent per year. Over the same period, the country's population has increased at an alarmingly high rate of 2.5 percent per year. Pakistan has been able to partly bridge this gap, and by so doing defer the threat of food insecurity, by expanding the area under cultivation. This was, of course, possible only as long as cultivable land and irrigation water were available. While additional land may still be available, a long term decline in the flows of freshwater, storage capacity of reservoirs and underground water table, have depressed, if not altogether exhausted, the prospects of further land development.

The stagnation of the agricultural productivity has many causes. The key factors behind Pakistan's agricultural crisis include the distributional inefficiency and tenancy of land, ineffective management of water resources, low investment in production and technologies, and an ambitious - but highly ineffective, if not counterproductive - regulatory regime governing the agricultural factor and output markets. While all these issues are in want of reform, the issues of land distribution and tenancy are at the centre of the crises as it has been neglected by successive governments since the 1980s.

Historically, the distribution of land ownership in Pakistan has been highly unequal and concentrated in the favour of few landowners. According to the Pakistan Agricultural Census Organisation, in the year 2000 more than half of the cultivable land was possessed by less than 10 percent of the landowners - who own 20 or more acres of land. Ironically, the situation has not changed much since the 1960s when 7 percent of the landowners owned half the cultivable land in the country, each with a landholding of more than 25 acres.

That land reforms lead to efficient utilisation of land, improved agricultural production, employment and poverty reduction is a well established argument, supported by theory and empirical evidence. China and several countries of East Asia have successfully used land reforms to reinvigorate agricultural growth, promote employment and reduce economic and social inequalities. In the case of Pakistan, a growing and vibrant agriculture sector in the 1960s marred the need for the much needed land reforms. While two formal attempts at land reform were made in 1959 and 1972, both failed to achieve their stated objectives as they were mainly meant to contain social unrest and political chaos and to gain popular support in times of crises.

A closer look at the cultivable land ownership and use statistics of Pakistan make the need for land reforms obvious. First and foremost, research shows that in much of the developing world, where agriculture is characterised by constraints to investment and mechanisation, small and medium sized farms (12 acres) are more efficient than large sized farms (20 acres). Several empirical studies demonstrate that, if the effect of capital, technology and other factors is held constant, the income per acre of land from small farms can be up to double that of large farms. This becomes possible because of a higher allocative efficiency of land in the case of medium and small sized farms and b) the lower reservation price of labour for small farms in contrast with the larger farms that have to hire labour and thus making it expensive for them.

Secondly, the Pakistan Agricultural Census shows that nearly 40 percent of the arable land (i.e., 4 million hectares) is not cultivated in a given year. Almost 2/3rd of this utilisation land is held by large landowners, who own 25 or more acres of land, pointing towards the unmanageability or inefficiencies that are associated with large and concentrated landholdings. In contrast, most small farms cultivate over 90 percent of the arable land, deriving maximum benefit per acre of land.

The third important issue pertains to the weak land tenancy in the country, where nearly one third of the cultivable area is under tenancy. Amidst an absence of tenancy regulation and social safety nets, tenants are more often than not wholly dependent on and indebted to the landlords. Often tenancies are carried from one generation to the other and so are the debts and obligations, at times taking the form of bonded labour. Tenancy contracts are mostly informal and hence not enforced legally. Jacob and Mansuri (2006), in their seminal research for the World Bank, show through their research that incomplete tenancy contracts lead to "investment holdups", where due to tenure insecurity, the tenants tend to under-invest in productivity, thus leading to inefficient and suboptimal factor productivity of land.

Fourthly, in Pakistan's "labour surplus" economy, almost 44 percent of the labour force is employed by the agriculture sector. Due to the highly concentrated distribution of land, a large part of the labour force is landless and is hired seasonally, while others work as sharecroppers or tenant families, under a wide range of contract and tenancy regimes. However, as discussed above, the efficiency losses from incomplete contracts and insecure tenancies can be overcome by means of land redistribution and private ownership, where land can be distributed to a part of this labour force thereby creating incentives to invest in productivity enhancement and conservation.

And finally, land being the most valuable asset and a symbol of social status, also serves as a source of monopolisation of political and social power. In Pakistan, unequal landholdings have led to social polarisation and exploitation of landless and smallholders by the landed elite. In the rural arena, feudal capture of political institutions, public service delivery and extension services, access to farm credit, sources of inputs and means of marketing is hard to ignore. This has not only affected agricultural productivity but also suppressed the social, political and economic progress in the country.

One may ask that, given a total failure of previous land reform efforts, is land reform a mere idea in Pakistan's context? Experts have extensively reviewed the land reforms of 1959 and 1972 and have suggested that the failure of earlier land reforms was not a "strategy failure" - i.e., land reforms as a strategy for improving factor allocative efficiency and agricultural productivity and reducing unemployment, economic inequalities, and poverty.

Studies found that reforms failed due to, a) lack of political commitment, b) loopholes in legislation, e.g., provisions for exemptions and allowance of land transfer to heirs, c) the burdensome payments that the beneficiaries had to pay for the allotted land, and d) centralised and inefficient bureaucratic administration.

Recent land reform experiences of China, East Asian economies and selected regions of South Asia provide substantive evidence that land reforms are not only possible but also lead to positive economic and social outcomes. Depending upon the political, social and economic context, base conditions and specific objectives, different countries have applied different policy instruments, strategies and management models to land reform. The choices, trade-offs and balancing acts have involved setting the ceilings for landownership, government engagement versus the use of market based approaches (e.g. incentives, penalties and taxes), allocation and pricing of expropriated land, and timeframe for implementation. Pakistan can draw upon a wealth of international experience and learning to develop its land reform strategy.

If designed well and implemented through market based instruments, implementing a land reform policy will not require very large budgetary commitments. The requirements can be met by re-appropriating the existing budgets and resources of the Ministry of Food and Agriculture, Federal Board of Revenue, Provincial and District Administrations and the relevant line departments. Given the centrality of agriculture to Pakistan's economy, concessionary development financing from multilateral and bilateral institutions may also be forthcoming.

To delay land reforms is no longer an option today, given the current state and impending prospects of food insecurity, agricultural productivity and economic growth. If the issue is not addressed on a priority basis, it won't be long when we will be faced with a large food-starved population, high unemployment and unsustainable inequalities which can push the country into chaos, political turmoil, and jeopardise the gains from years of, albeit very slow, progress.

1 comment:

  1. Let's start on promting newer techniques and 'agri-industry" to entice more professional to manage the farms.

    The question of land ownership and loandlords who are incompetent or unwilling or non-progressive or soem way or another not managing their lands directly. It is much debatable but we can not wait until then.

    the lands available with governments should be distributed among those who are willing to be involved in progressive farming techniques. Also a industrial company to join hands and develop agri-industry and try exporting the value added products.

    Our farmers are stuck in "rock and hard place", the economies of scale and shortage of cash for full inputs, and then market forces pressing htem in onw way or other. This discourages farmer and then a time comes where he moves away from farming, and giving it for lease, divided in small parcels, sold and he moves out to the other work areas.