Pakistan is a blessed land rich in resources and products. But processed food from here is rarely seen in other countries, even in China where markets are highly open to the rest of the world. If you enter “Pakistan” and click “search” on JD.com, a Chinese e-commerce giant, most results shown are books, with interspersing Pakistani rice brands. Further, if you narrow the scope to “Pakistani food”, virtually all items you get are unprocessed or slightly processed farm products such as rice or fruits. Only a meager amount of condiments on the result page can be counted as “processed food”.
How is it going with the processed food industry in Pakistan? How long is it before its processed food like olive oil or buffalo milk can reach China?
Plight of Pakistan’s food processing industry
In this agriculture-dominated country, the food industry is the second largest after textiles. Over a thousand large-scale food processing factories can be found throughout the country. But the export is not commensurate with its scale. Statistics show that from July to December 2020, Pakistan’s food exports stood at USD 25 million, far lower than the USD 2 billion home textile export and USD 1.2 billion ready-to-wear garment export, even less than the tobacco industry which records an export of USD 29 million in the same period.
In response to the huge gap, Muhammad Israr, Secretary Agriculture & Livestock Department, GoKP said that a major constraint is the absence of international certification. “Pakistan should introduce either ISO certification, global GAP certification, or health certification. And then ultimately we do have the potential to export to nearby countries and to developed countries which are asking for the certification as a mandatory for export.”
Producing technique and technology is another confining factor. More than one Pakistani professionals have called on the government to invest more in agriculture and introduce more agricultural technology. Take honey as an example, Iqrar Ahmad Khan, former Vice-Chancellor of the University of Agriculture, Faisalabad said, “We all know that honey is a huge market, but we don’t have the equipment to extract it and ordinary beekeepers can’t afford it.”
President Arif Alvi once expressed his confidence that Pakistan has the potential to become one of the largest honey producers. Recently, Shah Farman, Governor of Khyber Pakthunkhwa proudly introduced KP honey to Chinese honey manufacturers, saying that “Our honey has two advantages, low sugar content and low freezing point. Even at minus 3, it remains liquid.”
It is a pity that such high-quality honey cannot directly make it to western markets. Rather, it has to be licensed in the Middle East before entering European and American countries. According to data from the State Bank of Pakistan, the country exported USD 6.351 million of natural honey in July-November 2020. Behind this figure is a huge loss of profits. “We sell our honey for USD 20 or USD 25 a kilo, whereas other countries package our honey and sell it for USD 100”, revealed Dr. Muhammad Azeem Khan, Chairman of Pakistan Agricultural Research Council (PARC).
In Pakistan, crops rely heavily on natural climate. According to Muhammad Israr, “we haven’t yet harvested the full potential of those crops. We depend on rainfall and we haven’t yet reached the threshold of an efficient irrigation system.”
With abundant agricultural resources but limited technology, Pakistan is anticipating Chinese enterprises to come and invest.
Favourable policies for Chinese enterprises
Low labor costs and abundant natural resources guarantee huge development potential for Pakistan. According to Abdul Karim Khan, Special Assistant to Chief Minister on Industries & Commerce KP, KP spans five major agricultural climatic zones and boasts the world’s premium fruit varieties, which are exported to more than 40 countries, over 75 percent of Pakistan’s tobacco as well as huge dairy and fishery resources. “At the same time, KP has a huge market of meat products in neighbouring Central Asia,” he revealed.
To tap into such a rich repertoire of resources, both Pakistani officials and agricultural experts are eager for Chinese investments and technologies, and offer to devise favourable land policies. Asim Saleem Bajwa, Chairman of China-Pakistan Economic Corridor Authority said, the KP government has provided a large amount of land to local investors and encouraged them to set up joint ventures with Chinese enterprises. “We have the potential and are ready for it in the next three years,” said Shah Farman.
Pakistan is amassing a large amount of idle land to build a China-Pakistan agricultural demonstration base and introduce China’s advanced agricultural scientific facilities and technologies. Promoting bilateral cooperation in the agricultural industry will boost bilateral agricultural development and exports, and bring the Belt and Road Initiative to new levels, noted Liu Yadan, Vice Secretary-General of China Agriculture Association for International Exchange. She also said, the Chinese Academy of Agricultural Sciences, its affiliated research institutes and some agricultural units have already cooperated with Pakistan in areas of planting and processing, cattle and sheep disease prevention and control, and cotton cultivation.
Apart from favourable policies, well-established infrastructure also adds lustre to Pakistan as an investment destination. Thanks to the infrastructure, which has been put in place under the first phase of CPEC, the barren border areas have now surged into a logistics powerhouse for Pakistan and KP’s economic crops such as tobacco, olives, tea, date palms and honey could quickly reach ports and airports for exports, remarked Hassan Daud Butt, CEO of the Khyber Pakhtunkhwa Board of Investment & Trade.
As further bonuses, the KP government will provide potential Chinese enterprises with subsidies in land lease and reductions in corporate income tax, transportation fees and import and export tariffs.
“We hope that Chinese companies will establish foot-and-mouth disease (FMD) -free areas as soon as possible and invest in food processing industrial parks, slaughterhouses, agricultural special economic zones in KP, especially in the less developed areas, which will provide a great return on investment,” Hassan Daoud Bhat said.
In response, H.E. Nong Rong, Chinese Ambassador to Pakistan noted that China will introduce more Pakistani agricultural products as well as beef and mutton products to the Chinese market by strengthening communication and coordination with Pakistan to lay out inspection and quarantine procedures of cherries, potatoes and other agricultural products, and speed up the construction of FMD-free areas.
Booming tea industry
China-Pakistan agricultural cooperation has an origin of long standing. For example, bilateral tea cooperation can be dated back to 40 years. Muhammad Khurshid, Technical Advisor Rustam Tea and Organic Farming Pakistan, told CEN that tea plantations in Mansehra were set up in the 1980s with Chinese support.
Obsessed with tea, Pakistanis consume more than 1 kilogram of tea annually per capita, but there has been a tiny portion of tea produced locally. To meet growing domestic demand, Pakistan turns to Southeast Asia and Africa for tea and in 2020 alone, Pakistan imported nearly USD 600 million US worth of tea. According to Muhammad Khurshid, expanding tea cultivation and sales in Pakistan would not only relieve the foreign exchange pressure on Pakistan, create jobs, but also reduce soil erosion. “Growing tea is very good for environment, which is the same philosophy as in China.”
China and Pakistan have also set up a tea cooperation centre for tea research and cultivation. “Over the years, we have received support from China in terms of technology, investments and trade.” said Mohamed Khurshid. He hopes to further deepen bilateral cooperation in tea cultivation and processing under the second phase of CPEC.
China-Pakistan cooperation is also present in other cash crops in Pakistan, such as date palms, honey and dairy products. Chinese honey products enterprises attended the China-Pakistan Agricultural Products Processing Cooperation and Exchange Forum held on June 23, and many of them have invested in countries along the Belt and Road initiative. According to Guo Qi, supply director of Beijing Zhibeitang Health Technology Co., Ltd., which has imported propolis and honey raw materials from South America, the Middle East and Central Asia, the enterprise is interested in cooperating with Pakistan in honey after learning about the premium quality of Pakistani honey.
Pakistan not only hopes that Chinese companies enter Pakistan, but also hopes that its products can be exported to China.
Ali Salman, Executive Director of Policy Research Institute of Market Economy, illustrated his ambition with two contrasting figures. He said that China imported about USD 90.8 billion of food from all over the world in 2019, while Pakistan’s current food exports to China are less than USD 5 million. He hopes that Pakistani foods can gain a greater share of the Chinese market.
In addition to fruits, rice and other products with traditional export advantages, olive oil is also a new cash crop that Pakistan has vigorously developed in recent years.
With an annual oil output of about 1.6 million tons, Spain produces 50% of the world’s total. In recent years, China, as the fastest growing country in olive oil consumption, imports 95% of such oil from EU countries, of which Spain accounts for 80%.
As one of Asia’s leading olive oil producers, Pakistan also focuses on the huge consumer market of China. “Pakistan has 4.4 million hectares of land, which has been identified suitable for all the farming. The potential is really huge compared to Spain, which supplies almost half of the world’s olive oil with its 2.6 million hectares of land. So certainly, these are the opportunities which need to be fully exploited,” Ali Salman said.
There are about 40 million wild olive plants in Khyber Pakhtunkhwa province, which can be turned into edible olive plants by grafting. Now, this requires a huge investment from government or private sector in which Chinese can play a major role and integrated as a supply chain with the olive oil extraction sector, this has enormous potential for the KPK and also for the Chinese investors, said Atif Hanif, an expert on olive sector.
Can potential transformed into strength?
At the China-Pakistan Agricultural Products Processing Cooperation and Exchange Forum held on June 23, one of the words that came up frequently was “potential”, which was mentioned in terms of export potential, cooperation potential and growth potential. To this end, industry insiders of the two sides continue to seek the convergence of interests between Chinese and Pakistani industries.
“I’m requesting the experts sitting over here, just to help formulate plans on how to translate Pakistan’s agricultural potential into export or business model, or be a source of income or remittances for the country,” Shah Farman said sincerely.
As the fourth session of China-Pakistan Agricultural and Industrial Cooperation Information Platform Seminar, the forum will create opportunities for exchanges and cooperation, and contribute to the mutual benefit and win-win situation of the agricultural processing industries of the two countries.
There is ample room for cooperation. CPEC is entering a new stage of high-quality development, with a focus on industrial and agricultural cooperation. The two countries are highly complementary in agricultural trade, intensive processing, cold chain storage and improving crop yield, which is of profound significance to Pakistan. “Increasing agricultural cooperation between China and Pakistan is part of Pakistan’s social-economic development strategy,” emphasized Abdul Karim Khan.
Source: China Economic Net