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THE PROSPECTS OF CORPORATE FARMING IN PAKISTAN BY DR. MIDRAR UL HAQ
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Corporate farming pakistan

Oct 29, 2014

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Page 1: Corporate farming pakistan

THE PROSPECTS OF CORPORATE FARMING IN

PAKISTAN

BY

DR. MIDRAR UL HAQ

Page 2: Corporate farming pakistan

Farming

Page 3: Corporate farming pakistan

FARMING TYPESFARMING TYPES

CooperativeFarming

Family Farming

Organic Farming

ExtensiveFarming

Intensive Farming

CollectiveFarming

Hi-techFarming

Tunnel Farming

Contract Farming

Corporate Farming

FarmingFarming

Page 4: Corporate farming pakistan

MODELS OF FARMINGMODELS OF FARMING

SIMPLE MODELSIMPLE MODEL

IMPROVED OR ADVANCED MODELIMPROVED OR ADVANCED MODEL

HIGHLY ADVANCED MODEL-CORPORATE HIGHLY ADVANCED MODEL-CORPORATE FARMINGFARMING

Page 5: Corporate farming pakistan

DIFFERENCE AMONG THE THREE FARMING MODELSDIFFERENCE AMONG THE THREE FARMING MODELS

Production at Farm Level

Market Access

MiddleMan

AdvancedModel of Farming

(Corporate Farming)

Improved Model

(Contract Farming)

Simple Model

Page 6: Corporate farming pakistan

HOW PEOPLE WENT FOR HOW PEOPLE WENT FOR CORPORATE FARMING?CORPORATE FARMING?

To increase agricultural production for To increase agricultural production for the mushroom growing population by the mushroom growing population by

using modern technology.using modern technology.

To bring self-sufficiency in food and To bring self-sufficiency in food and increase export earningsincrease export earnings

To stop land fragmentation for the costTo stop land fragmentation for the cost effective use of modern machinery.effective use of modern machinery.

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FOOD SOVERIGNITY AND FOOD SECURITY ARE THE MAJOR ISSUES BECAUSE DURING THE LAST COUPLE OF YEARS THE EXTRA ORDINARYINCREASE IN PRICES OF STAPLE COMMODITIES (WHEAT, RICE, CORN,SOYBEANS AND BARLEY) HAVE APPARENTLY COMPELLED MANYSTATES OF THE WORLD INCLUDING OIL RICH ARAB MONARCHIESAND MIDDLE EASTERN COUNTRIES TO GROW THEIR OWN CROPS TO MANAGE SUPPLIES TO THEIR DOMESTIC CONSUMERS AND ALSO TO BUILD STOCKPILES FOR BAD TIMES.

Page 8: Corporate farming pakistan

Land Grabbing CompetitionLand Grabbing Competition To Achieve Food Security South Korea began investing To Achieve Food Security South Korea began investing

in farms in Madagascarin farms in Madagascar

China, Japan, Libya, Egypt and Persian China, Japan, Libya, Egypt and Persian Gulf Countries acquired farmlands in Laos,Gulf Countries acquired farmlands in Laos,

Cambodia, Burma, Uganda, Ethiopia, Brazil, Pakistan Cambodia, Burma, Uganda, Ethiopia, Brazil, Pakistan and Central Asian States.and Central Asian States.

Saudi Arabia has acquired land in Ethiopia.Saudi Arabia has acquired land in Ethiopia.

UAE has acquired land in Somalia.UAE has acquired land in Somalia.

India has acquired land in Ethiopia.India has acquired land in Ethiopia.

Page 9: Corporate farming pakistan

is a business producing food or fiber products that is

organized as a corporate entity for tax purposes.

It is owned by stockholders and run by a board of directors.

A family corporate farm is one where the principle stockholders

are related by blood or marriage. A non-family corporate farm is

one where the principle stockholders have no family

relationships.

Corporate Farming

Page 10: Corporate farming pakistan

VETICAL INTEGRATION OF VETICAL INTEGRATION OF DIFFERENT PROCESSESDIFFERENT PROCESSES

0

10

20

30

40

50

60

70

80

90

100

Production Processing Marketing

Corporate Farming

Page 11: Corporate farming pakistan

SUCCESS AND FAILURE STORIES OF SUCCESS AND FAILURE STORIES OF CORPORATE FARMINGCORPORATE FARMING

AmericaAmerica RussiaRussia ChinaChina GermanyGermany UKUK The NetherlandsThe Netherlands BrazilBrazil IndiaIndia Saudi ArabiaSaudi Arabia IranIran

Page 12: Corporate farming pakistan

CORPORATE FARMING CORPORATE FARMING

In India the major companies involved in In India the major companies involved in corporate farming are:corporate farming are:

1.1. Jamnagar Farms Pvt LtdJamnagar Farms Pvt Ltd2.2. PepsicoPepsico3.3. Anil Dhurbaoil (Ambani Group)Anil Dhurbaoil (Ambani Group)4.4. Field Fresh (Airtel + Rothschild)Field Fresh (Airtel + Rothschild)5.5. Satluj Agriculture Pvt Ltd, New DelhiSatluj Agriculture Pvt Ltd, New Delhi6.6. Tata groupTata group

Page 13: Corporate farming pakistan

WHY PAKISTAN DECIDED WHY PAKISTAN DECIDED TO GO FOR CORPORATE TO GO FOR CORPORATE

FARMING?FARMING?

Page 14: Corporate farming pakistan

Rationale of the Corporate Farming OrdinanceRationale of the Corporate Farming Ordinance

Halving Hunger by the Year 2015United Nations Convention to Combat Desertification

(UNCCD)

Page 15: Corporate farming pakistan

RATIONALE OF CORPORATE FARMINGRATIONALE OF CORPORATE FARMING

As the small farmers of Pakistan are unable to adapt new technologies and cannot afford the costly inputs required to get optimum yield from new crop varieties

Page 16: Corporate farming pakistan

RATIONALE OF CORPORATE FARMINGRATIONALE OF CORPORATE FARMING

The idea of Corporate Farming was to cultivate all waste Lands in Pakistan by bringing foreign corporations, which Would cultivate these lands by modern technologies by Employing local labor, at attractive wages, train local People, pay local taxes, develop roads and communication net-works, and bring prosperity at nominal profits to themselves

Page 17: Corporate farming pakistan

CORPORATE FARMING ORDINANCE (CFO)-2001

Corporate Farming Ordinance (CFO) was passed in 2001Under which listed corporations could lease land in the Country for 99 years, broken into two periods of 50 yearsAnd 49 years. Besides, the then government had identified6.764 million acres of State lands for leasing to different corporations.

Page 18: Corporate farming pakistan

Land Identified for Corporate FarmingLand Identified for Corporate Farming

The provinces have identified 6.764 million acres of land The provinces have identified 6.764 million acres of land for corporate agriculture farming by local and foreign for corporate agriculture farming by local and foreign investors.investors.

PunjabPunjab 6.631 million acres6.631 million acres SindhSindh 29,842 acres29,842 acres BalochistanBalochistan 0.1 million acres0.1 million acres KhyberKhyber

PukhtunkhwaPukhtunkhwa2,449 acres2,449 acres

Page 19: Corporate farming pakistan

Activities under CAF PlanActivities under CAF Plan

The activities that may be carried out under The activities that may be carried out under CAF plan include:CAF plan include:

FarmingFarming Food ProcessingFood Processing Food Packaging,Food Packaging, Production and marketing of mutton,Production and marketing of mutton, Processing and packaging of milk,Processing and packaging of milk, Deep sea fishing and its processing,Deep sea fishing and its processing, Animal feed production and marketing Animal feed production and marketing and many more.and many more.

Page 20: Corporate farming pakistan

Corporate Farming ObjectivesCorporate Farming Objectives

To seek efficiency of production and increased incomes/revenues by bringing together agricultural production, processing and marketing activities at one place under management of a corporate entity.

To improve agricultural productivity and profitability through the use of latest production technology and adequate expertise particularly for exports.

To produce high quality agricultural products due to favourable resource base.

To achieve/maintain internationally competitive unit cost of production for all major crops, fruits and vegetables

Page 21: Corporate farming pakistan

Investment Policy, Incentives & Investment Policy, Incentives & Opportunities for Corporate FarmingOpportunities for Corporate Farming

1.1. Most Liberal Investment Policy:Most Liberal Investment Policy: CAF declared as an industryCAF declared as an industry 100% foreign equity allowed100% foreign equity allowed No minimum foreign investmentNo minimum foreign investment Remittance of capital, profits, dividends allowedRemittance of capital, profits, dividends allowed CAF will enjoy credit & other facilitiesCAF will enjoy credit & other facilities No ceiling on land holdingNo ceiling on land holding State land can be purchased, or leased for 50 years, and State land can be purchased, or leased for 50 years, and

extendable for another 49 yearsextendable for another 49 years All banks and financial institutions will earmark separate credit All banks and financial institutions will earmark separate credit

share.share.

Page 22: Corporate farming pakistan

Investment Policy, Incentives & Investment Policy, Incentives & Opportunities for Corporate FarmingOpportunities for Corporate Farming

2.2. Attractive Fiscal Incentives:Attractive Fiscal Incentives:

0% customs duty on import of agricultural machinery, equipment0% customs duty on import of agricultural machinery, equipmentand implements (not manufactured locally) New or used.and implements (not manufactured locally) New or used.

Exemption of duty on transfer of land for CAFExemption of duty on transfer of land for CAF Dividends from corporate agricultural farms (for non industrial Dividends from corporate agricultural farms (for non industrial

activities) not subject to taxactivities) not subject to tax Farm income given more favourable treatment than non farm Farm income given more favourable treatment than non farm

corporate incomes because of the risk/uncertainty associated corporate incomes because of the risk/uncertainty associated with farming.with farming.

Existing definitions of farming activity, as distinct from Existing definitions of farming activity, as distinct from processing/industrial activity, continue to be maintained.processing/industrial activity, continue to be maintained.

Page 23: Corporate farming pakistan

Investment Policy, Incentives & Investment Policy, Incentives & Opportunities for Corporate FarmingOpportunities for Corporate Farming

3.3. Investment OpportunitiesInvestment Opportunities:: Land development/reclamation of barren, desert and hilly land for Land development/reclamation of barren, desert and hilly land for

agriculture purpose and crops farming.agriculture purpose and crops farming. Crops, fruits, vegetables, flowers/integrated agriculture (cultivation Crops, fruits, vegetables, flowers/integrated agriculture (cultivation

and processing of crops)and processing of crops) Modernization and development of irrigation facilities and water Modernization and development of irrigation facilities and water

management plantationmanagement plantation Forestry, Horticulture, Dairy Farming, Livestock farming, breedingForestry, Horticulture, Dairy Farming, Livestock farming, breeding Production of quality seedsProduction of quality seeds Fruits, vegetables & flowers-grading, processing, packaging, Fruits, vegetables & flowers-grading, processing, packaging,

preservationpreservation Seafoods (farming/fishing, processing and preservation of fish and Seafoods (farming/fishing, processing and preservation of fish and

marine products)marine products) Agri-product storage facilities (separate package)Agri-product storage facilities (separate package) Marketing/Export of Agri-produce (separate package)Marketing/Export of Agri-produce (separate package) Cool Chains (Separate package)Cool Chains (Separate package)

Page 24: Corporate farming pakistan

COUNTRIES INTERESTED IN COUNTRIES INTERESTED IN CORPORATE FARMING IN PAKISTANCORPORATE FARMING IN PAKISTAN

ChinaChinaSaudi ArabiaSaudi ArabiaUnited Arab EmiratesUnited Arab Emirates

Page 25: Corporate farming pakistan

Forward Steps towards Corporate FarmingForward Steps towards Corporate Farming

The United Arab Emirates (UAE), which imports 85 Per The United Arab Emirates (UAE), which imports 85 Per cent of its food, purchased 324,000 hectares of cent of its food, purchased 324,000 hectares of Farmland in the Punjab, Sindh and Balochistan Farmland in the Punjab, Sindh and Balochistan Provinces in June 2008. Besides, the two UAE firms, Provinces in June 2008. Besides, the two UAE firms, Emirates Investments Group and Abraaj Capital, also Emirates Investments Group and Abraaj Capital, also expressed their interest in investing directly for corporate expressed their interest in investing directly for corporate farming.farming.

The UAE is also in negotiation with the provincial The UAE is also in negotiation with the provincial government in Sindh to acquire farmland in the districts government in Sindh to acquire farmland in the districts of Shikarpur, Larkana and Sukker, as well as with the of Shikarpur, Larkana and Sukker, as well as with the Punjab government for acquiring lands around Mianwali, Punjab government for acquiring lands around Mianwali, Sargodha, Khushab, Jhang and Faisalabad.Sargodha, Khushab, Jhang and Faisalabad.

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Forward Steps towards Corporate FarmingForward Steps towards Corporate Farming

The government is going to develop a new security force The government is going to develop a new security force of 100,000 men to be split among the four provinces to of 100,000 men to be split among the four provinces to help stabilizing the investment by Arab Monarchs. This help stabilizing the investment by Arab Monarchs. This will cost the government about $2 billion to pay the will cost the government about $2 billion to pay the salaries and train the security force.salaries and train the security force.

Sindh, Balochistan and Punjab have submitted their Sindh, Balochistan and Punjab have submitted their lease terms to the BOI. Khyber Pukhtunkhwa is in lease terms to the BOI. Khyber Pukhtunkhwa is in

in the process of finalising the terms and conditions for in the process of finalising the terms and conditions for

offering their land on long term basis to the investors.offering their land on long term basis to the investors.

Page 27: Corporate farming pakistan

Forward Steps towards Corporate FarmingForward Steps towards Corporate Farming

Sindh has proposed Rs 100,000 per acre lease per year Sindh has proposed Rs 100,000 per acre lease per year with a 20 percent annual increase. The province has with a 20 percent annual increase. The province has also indicated that the land could be leased out for 30 also indicated that the land could be leased out for 30 years with an extension of 20 years.years with an extension of 20 years.

Balochistan has demanded Rs 50,000 per acre for Balochistan has demanded Rs 50,000 per acre for

leasing out land for corporate agriculture farming. leasing out land for corporate agriculture farming.   

Punjab has proposed to lease out the land in Cholistan to Punjab has proposed to lease out the land in Cholistan to companies or firms registered under the Companies Act companies or firms registered under the Companies Act 1984 on a bank guarantee of Rs25,000 per acre for an 1984 on a bank guarantee of Rs25,000 per acre for an initial period of 50 years that can be extended to another initial period of 50 years that can be extended to another 49 years.  49 years. 

Page 28: Corporate farming pakistan

CORPORATE FARMING MERITS CORPORATE FARMING MERITS

New Technology UseNew Technology Use

High EmploymentHigh Employment

Increase in Production and economic activityIncrease in Production and economic activity

Reduce FragmentationReduce Fragmentation

Increases Export PerformanceIncreases Export Performance

Handsome Share of Taxes to the GovernmentHandsome Share of Taxes to the Government

Page 29: Corporate farming pakistan

Land Distribution by Farm SizeLand Distribution by Farm Size

Size of farm (ha)Size of farm (ha) Percent of total Percent of total no. of farmsno. of farms

Percent of total Percent of total farm areafarm area

< 2< 2 57.657.6 15.515.5

2 - < 52 - < 5 28.128.1 27.927.9

Sub totalSub total 85.785.7 43.443.4

5 - < 105 - < 10 8.88.8 19.119.1

Sub totalSub total 8.88.8 19.119.1

10 - < 2010 - < 20 3.93.9 16.316.3

20 - < 6020 - < 60 1.41.4 13.013.0

≥ ≥ 6060 0.20.2 8.28.2

Sub totalSub total 5.55.5 37.537.5

TotalTotal 100100 100100

Page 30: Corporate farming pakistan

CORPORATE FARMING DEMERITS CORPORATE FARMING DEMERITS

Non-sustainable ProductionNon-sustainable Production

Monopoly of high value input package by MNCsMonopoly of high value input package by MNCs

Makes farmers landlessMakes farmers landless

Undermines local productionUndermines local production

Undermines local farm machineryUndermines local farm machinery

Rural migration to urban areasRural migration to urban areas

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CONCLUSIONCONCLUSION Corporate farming is good and it will help to increase the Corporate farming is good and it will help to increase the

productivity of the farms as observed in various regions productivity of the farms as observed in various regions because it is backed & financed by big corporations.because it is backed & financed by big corporations.

It will enhance the use of highly advanced technology and It will enhance the use of highly advanced technology and will also develop our farm-market infrastructure and will will also develop our farm-market infrastructure and will also increase agricultural products export.also increase agricultural products export.

It will also provide employment opportunities to agriculture It will also provide employment opportunities to agriculture graduates and farmers.graduates and farmers.

The present condition of Pakistan’s agriculture indicates The present condition of Pakistan’s agriculture indicates that the prospects of corporate farming in Pakistan is that the prospects of corporate farming in Pakistan is bright subject to the managerial skills of the companies bright subject to the managerial skills of the companies and their relationship with the local community/small and their relationship with the local community/small farmers.farmers.

Page 32: Corporate farming pakistan

THANKSTHANKS