Conducive Environment & Intervention Model: Agriculture

DAWN PakistanFood and Agriculture Conference

Expo 2016

Shahid Najam, Vice ChairmanDr. Mahmood Ahmad, Advisor

Shahid Javed Burki Institute of Public Policy at NetSol

(5 April 2016)

Sequence Introduction to BIPP

Part I: Context Situation Analysis

Part II: Diagnostics

Part III: Intervention Model

Professionalizing the policy process and reducing rationality deficit;

Transforming institutions to sustainable paradigm;

Producing leaders capable of bringing about a transformative change

We have devoted ourselves to:

Strategic Pillars• Research and Consultancy;

• Think Tank;

• Education and Learning;

• Knowledge Management

Major Strategic Programme Areas• Economic• Social• Environment• Political• Security• Trade• Foreign Policy

Regional and Global Context

Part I: Context Situation Analysis

The challenge ahead 55% (100 million almost) people in absolute

poverty; 23% below poverty line (income of $1-25 a

day); MDGs and SDGs:

MDG 1 – Eradicate extreme poverty and hunger by 50%

MDG 7 – Ensure environmental sustainability SDG 1 - End poverty in all its forms everywhere SDG 2 - End hunger, achieve food security and

improved nutrition and promote sustainable agriculture

SDG 12 - Ensure sustainable consumption and production patterns

SDG 13, 14, 15: Climate Change, Oceans and marine life, ecosystems and forests

Economic challenges:

Macroeconomic: underperforming export sector, high inflation, unstable rupee, FDI decrease;

Unemployment: potential demographic dividend could become liability; 6 to 7% growth required to absorb annual addition to labor force; generate 36 million jobs for next 3 years,

rigid labor market with 40% agriculture! unproductive sector private sector participation High risk country

Global competitiveness 133 outcome of 148 countries Ease of doing business 110 out of 189 countries (2014); 75 in 2010 restrictive trade policies 88th percentile of economies on a scale of

0 ( Singapore) to 16 (Iran) Pakistan at 9.9

Sectoral Share Agriculture 25.5% GDP; 43.7% labour Industry 19%; 22-4% labour force Services 55.5%; 33.9% labour force Exports 23.67 billion (textile, leather goods,

rice, sporting goods, carpets etc.) Imports 45.83 billion petroleum and products,

machinery, edible oil, transportation equip; iron and steel, tea etc)

Preface and Context Specificity

The pathways to development are varied and specific to a country’s historical, political and institutional conditions

Public policy orientation:

• Think of principles first (equity, poverty, inclusiveness, analysis etc.,)• Context specificity (state capacity, political constraints, institutions)• Global governance connectivity: ( numerous challenges: trade,

investment, migration, inclusion of LDCs in governance)

• Research

– Data and Knowledge Systems– Incorporate broader dimensions of HD

People are the Real Wealth of Nations

Part II: Diagnostics

Conditions Precedents Peace and security Development With equity Knowledge based society People centered, rights based

development paradigm Global competitiveness Sustainable human development

World Experience – Success StoriesAustralia Chile India

• Investment in Infrastructure

• High Value Addition (variety)

• Production

Management & Technology

• Investment in Infrastructure

• Value Chain investment

• Interventions by Multinationals, Production Management & Technology, e.g. grapes

• Cooperatives

• Terms of Trade (FTAs, Bilateral etc)

• Investment in Infrastructure

• Institutional Framework

• Processing Industry

Best practices: experiences of other countries

The importance of the legal and regulatory framework (that define rules and determine rights and obligations

Particular attention to strengthen public cooperation with the private sector

The importance of strengthening and supporting the development of commodity, location, industry and profession based associations

A key challenge: Identification and addressing trade-offs between the pace and nature of agri-industry development and poverty and food security

The governmental review of institutional mandates for influencing, regulating and supporting private sector investment in agri-business and agri-industry

Agriculture: Diagnostics & Value Leakages

Pre-production

Agricultural Production

Processing Post Processing Market

• Low quality inputs due to farmers’ lack of knowledge or limited access to input markets, resulting in sub-optimal production• High-cost procurement due to lack of economies of scale, no bargaining power • High energy costs • Inefficient use of water, resulting in salinization and higher costs

• Lack of economies of scale, resulting in higher unit costs

• ineffective crop rotation, resulting in low production• Inappropriate timing of production, leading to lower prices • Inefficient cultivation and harvesting techniques, leading to low production• Inefficient mechanization leading to higher costs

• Lack of advanced processing capabilities, resulting in low value-added

• Lack of semi-skilled workforce, leading to low levels of productivity• Lack of workforce with advanced skills, preventing innovation• Lack of financing, decreasing profitability• Lack of quality control, causing smaller market share

• Lack of Packaging, sales in bulk, lower profits

• Lack of product diversification, less resilience to market shocks and less responsiveness of market demands

• Lack of Eco-designs, less value-added

• Lack of traceability, less consumer confidence, less sales

• Lack of understanding different segments of domestic and foreign markets, leading to smaller market share

• Lack of anticipation of consumer needs, leading to less sales,

policies

Support services

institutions

+

+

Establishment of setting

Farm/Enterprise

(Environment ofBusiness)

Driving Factors

Part III: Intervention Model

Intervention ModelFinance

Marketing Intelligence and Information System

Capacity Development

Territorial participatory approach/ territorial development and value chain development

Physical Infrastructure

• Innovative financial services for small and medium farmers and SMEs –

– Mobile phones – m-banking, pay for purchases, transfer funds

– Branchless banking—stores, gas stations, and input providers to reach rural customers at low cost

• Value chain finance - financial intermediation through interlinked agents (input suppliers or output processors)

• Rural leasing - government and donor funds to jumpstart operations

• Credit ladders - mechanisms for credit and saving histories

Demand for Agricultural Finance

Retailers/Exporters /Wholesalers

Rural Households

Non-Agricultural Rural BusinessesOff-farm

Microenterprises

Processors

Input Suppliers

Farmers / Producer Groups

Local Traders & Processors

Multiple

economic

actors in

rural space

Intervention Model

Physical Infrastructure

Marketing Intelligence & Information System

Capacity Development

Territorial participatory approach/ territorial development and value chain development

Agri-malls

• Warehousing for fertilizer, seedpesticide etc.

• Infrastructure for diesel & lubricantsale

• Agriculture Machinery Farm Equipment

• Agriculture Credit Support Services

• Grain Storage

• Marketing Facility

Finance

Intervention Model

Physical Infrastructure

Marketing Intelligence & Information System

Capacity Development

Territorial participatory approach/ territorial development and value chain development

Strategy

• Market Information System

• Market Intelligence, Early Warning & Rapid Response

• Management Model: IT/ communication infrastructure; Vital info displayed on daily basis; Market committee office reorganized for service delivery; Participatory monitoring; Client feedback & grievance redressal; Reporting & analysis

• Supply Management

Finance

Intervention Model

Physical Infrastructure

Marketing Intelligence & Information System

Capacity Development

Territorial participatory approach/ territorial development and value chain development

sowing

Crop Transition

Harvest

Marketing

Int’l Market

Web

site

cell

Data

base

sM

IS

Information, dissemination

Info Analysis:Projections

Early WarningOperational

Plans

Policy Decisions

Finance

Intervention Model

Physical Infrastructure

Marketing Intelligence and Information System

Capacity Development

Territorial participatory approach/ territorial development and value chain development

Government Agencies

• Marketing and business development;• Projects and investment portfolio

development;• Facilitation for private sector growth;• KM, communication and advocacyStrengthening of Extension

Services• MFAL staff• Private Agricultural ConsultantsProducer Organizations/ Agro food

Industry• producers, entrepreneurs and their

organizations• Farmers, women

Finance

Intervention Model

Physical Infrastructure

Marketing Intelligence and Information System

Capacity Development

Territorial participatory approach/ territorial development and value chain development

Project and Investment Portfolio Development

• Policy framework (coordinate w/CG)• Identify Projects (coordinate w/ dept’s)• Investment documents (Advise dept)• Financing strategy (Advise dept)• Marketing strategy (Advise dept)• Identify key investors (Advise dept)• Develop timelines

Price and Regulatory Support• Agriculture Sector Trade Flow• …need business models• …and Venture Capital• Farm Service Center

Finance

Agriculture Strategy framework based on global Experience

It is a fact that agriculture sector is a risky enterprise with inherent price and volume risks.

The goal of such a policy option should not

necessarily to maximize the growth of production in any particular sub-sector/commodity

but to create the necessary and sufficient

conditions for the agricultural sector/farmers to adjust to a more competitive environment.

What needs to be done

Adjustment capacity requires :

sound management information systems, flexible rural factor markets (labor, land, water, and finance) as well as a competitive agribusiness sector, adequate infrastructure, technology development,

And most importantly, more human capital

(education research and training).

Thank you