"Pakistan Increasing Agricultural Productivity for Inclusive Growth", presented by Madhur Gautam, the Lead Economist Agriculture and Rural Development, South Asia Region at The World Bank Presented at DSGD Pakistan Strategy Support Program Brown Bag Panel Discussion “Addressing the Needs for Sustained and Rapid Agriculture Sector Growth in Pakistan”, Oct 22, 2014
- 1. PAKISTANIncreasing Agricultural Productivity forInclusive GrowthMadhur GautamAgriculture Global PracticeThe World Bank(Based on Ahmed and Gautam 2013: Agriculture and Water Policy: TowardSustainable Inclusive Growth. The World Bank)1
2. Structural TransformationDeclining share of ag. in GDP: 46% in 1960 => 26% in 2000 => 21% in 2010Socio-economically and politically important: employment; exports20.80.750.70.650.60.550.50.450.40.350.3Labor Employment Patterns Distribution of PovertyPredicted cross-country path200619801980Pakistan0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000Share of employment in agricultureGDP per capita (constant PPP)Large,med. farm1.9%Small farm20.1%Landlessfarmers9.7%Rural agriclaborer11.8%Urban17.5%Rural non-farm39.0%Source: Hazell et al (2011) Source: IFPRI (2012) 3. 332.521.510.50-0.5-1-1.5-2-2.5Source of Growth Matters for PovertyImpact of Alternative Growth Scenarios on Per Capita Incomes by Household CategoryUrban Poor(37.0)Non-Farm Poor(38.0)Ag Wage Labor(48.0)Non-Farm Non-Poor (66.2)Small-DryFarms (67.0)Urban Non-Poor (158.8)Med-LargeFarms (241.7)Livestock Industry Services CropNote: Figures in parentheses are base year level of per capita household income in thousands of Rupees.Source: Ahmed and Gautam (2013), using IFPRI (2012) model simulation results 4. Sub-par Agricultural Performance4Focus on crops, not livestock/fisheries (55% Sector GDP).Concern: decelerating growth in agricultural output since 1990sNotably though volatility has reducedSignificant unexploited potential for further gainsSubstantial yield gaps for major cropsAgricultural Growth and Volatility Yield Gaps2.6 T/ha1.8 T/ha55 T/ha50 T/ha2.9 T/ha2.1 T/ha2 T/ha0.8 T/ha145 T/ha80 T/ha4 T/ha1.7 T/ha100%90%80%70%60%50%40%30%20%10%0%Wheat Cotton Sugarcane(Sindh)Sugarcane(Punjab)Maize RiceNational Average Gap6.005.004.003.002.001.000.001980198219841986198819901992199419961998200020022004200620082010201210 Yr Trend Growth Rate Growth VolatilitySource: Planning Commission (2009) Source: IFPRI (2012) 5. Issue 1: Sluggish Productivity Growth6543210Output DecompositionIrrig New land Input/Area TFP Limited land with declining TFP growth rate Currently lowest TFP growth rate among comparators such as BD, CH, IN, SL Impressive historical growth in crop yields due to investment inresearch (NARS) Estimated IRR on research investments range 57 - 65%, in form of GR techs Reviving TFP growth requires re-invigorating agric. Research system5-11961-1970 1971-1980 1981-1990 1991-2000 2001-2009Source: Fuglie (2012) 6. Declining Intensity of R&D Expenditures60.60.550.50.450.40.322.214.171.124.150.119961997Agricultural R&D Spending as Share of GDP199819992000200120022003200420052006200720082009Bangladesh India Nepal Pakistan Sri LankaSource: ASTI (2012) Severe technical and human capacity constraints Public investment in research has been on the decline (0.21% Ag GDP) Insufficient qualified staff, inadequate incentives Inefficiencies generated by the complex institutional environment 111 agencies involved in ag R&D, of which, 37 were federal agencies, 98were provincial agencies, and 13 private sector entities. 7. Issue 2: Water Use Inefficiencies7Irr. Area as Share of Cropped and Harvested Area1.000.950.900.850.800.750.700.650.6019901991199219931994199519961997199819992000200120022003200420052006200720082009Pakistan - Irrigated Area/Cropland Pakistan - Irrigated Area/Harvested AreaSource: Ahmed and Gautam (2013) using data from Fuglie (2012)Seepage Losses in Irrigation System10616790 83Loss: 61%25581741120100806040200Main andbranch canalsDistributariesand MinorsWatercourses Fields Crop UseMAFSource: Yu et al (2012) Semi-arid conditions make water absolutely essential for agric. 95% area irrigated, highest irrigation intensity in the world Convergence of IA/CA with IA/HA important for successfulharvests reduction in output growth volatility But huge inefficiencies threaten continuing contributions to growth 8. Climate Change: Raises Threats to Sustainability8Impact of Investments to Mitigate Climate Change ImpactsSource: Yu et al (2012) Biggest impacts on households outside agriculture (higher prices) Canal Efficiency will help mitigate impacts, but new storage largely helpsin energy supply Best bet to mitigate impact of climate change: yield increases 9. Main Constraints: Institutional Issues Water availability & irrigation access critical for agriculturalproductivity growth Average farmers access to water limited by constraints of waterallocation system. Access is determined by warabandi system and contingent on landaccess/location => often insufficient water by the time it gets to users at the tailend of distributaries/watercourses. The irrigation system is highly inefficient: both in delivery and on-farmuse Important to mitigate the potentially large negative climate change impacts Financially unsustainable water management system Only a quarter of annual O&M costs recovered, with shortfall expected toincrease with rising costs and stagnant Abiana . Low collection rate of assessed Abiana low (only 60% of assessed values).9 10. Issue 3: Policy Distortions to Trade100.20.10-0.1-0.2-0.3-0.4-0.5-0.6Nominal and Relative Rates of Assistance to Agriculture1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010RRA NRA AgricultureSource: Anderson and Nelgen (2012): World Bank Agricultural Distortions website Policy reforms introduced in 1996 reversed starting in 2006 Continued anti-agricultural domestic policy bias Major crops like wheat, rice, sugar and cotton implicitly taxed 11. Emerging HVA Exports11700650600550500450400350300250200150100500Growth in High-Value Agricultural Products from PakistanDairy and Eggs Fruits, Vegetables andOilseedsFishery Products Meat and LivestockMillions of USD (real 2000)2008 2009 2010 2011Source: Ahmed and Gautam (2013) using UN COMTRADE data Wheat procurement policies create price distortions Negative impact on consumers, heavy fiscal burden HVA growing but diversification slow and threatened by protection of LVA Acreage share of grains (esp. wheat), increased over time to 60% (40) Seed sector weakness also a constraining factor Need for reform in the regulatory environment 12. Refocus on Policy Reforms Agric. exports account for 11% of exports revenues;downstream industries account for another 40% Policy induced price distortions limit diversification,exports and growth Reversals on trade liberalization since 2006 =>discretionary & uncertain trade regime => highly variableoutput and input prices Several reforms reversed for wheat, sugar & fertilizer. Expanded use of SROs & new regulatory duties to provide adhoc and arbitrary exemptions to products/entities Wheat procurement policies fiscally unsustainable andcontribute to unexpected outcomes (e.g. subsidizedexports) with ambiguous welfare impacts12 13. Policy Action 1: Improve agricultural productivityFocus: National agricultural research system reformShort Run Long Run Initiate NARS reform toimprove efficiency &effectiveness Undertake an institutionalaudit and clearly delineateroles/functions/mandates offed and prov bodieso Private R&Do Agri-businesses13 Implement the shift fromfederal to provincial levelso Staffing levels andcompositiono HR reforms Increase budget foragricultural research Plan & implement long runcapacity building program forscientific research capacity 14. Policy Action 2: Improve water use efficiencyFocus: Institutional reforms Identify the current state ofmechanisms for the watermanagement systemo Develop a plan fordevolution of authorityto the relevant scale(provincial, FO, WUAs)o Clarify roles andmandates of eachauthority14Short Run Long Run Implement institutionalreform devolve authority torelevant scale Provide sufficient federal andprovincial resources fortransition and capacitybuilding Establish third partywatchdog to evaluate thereform process and monitorfor rent seeking behavior 15. Policy Action 3: Remove protection variability &bias against agricultural exportsFocus: SRO phase out and trade policy simplification Identify timetable forremoval of SROs, tariffreduction and uniformity/harmonization, and removalof alternative instruments(e.g., export taxes) Identify WTO compliantinstruments that may beappropriate to use, e.g.special safeguardmechanisms15Short Run Long Run Implement the reforms:remove of SROs, reduce andharmonize tariffs, anddismantle export barriers 16. Policy Action 4:Reduce distortions in domestic grains marketsFocus: Wheat procurement policy Identify minimum volume ofpublic wheat procurement,accounting for both federal &provincial programs. Identify floor/ceiling prices tofollow world prices Identify food insecure groupsfor social protectionprograms16Short Run Long Run Implement rules-basedadjustable tariffs to maintainprice bands Develop & roll out socialprotection programs for foodsecurity witho clear triggerso graduation requirements 17. 17Thank you!