Rice Sector Report.docx

THE RICE INDUSTRY OF PAKISTANANALYSIS OF PAKISTANI INDUSTRIES

5/7/2013Submitted to: Ms. Mehwish AliSubmitted by: Maha Talha, Aaqib Nazim, Kanza Zulfiqar, Bilal Ahmed, Syeda Mahrukh Fatima Naqvi, Komal Asim, Jitesh Jewani

TABLE OF CONTENTSExecutive Summary3Literature Review6Overview of the Economy11Introduction13Brief Overview13Current News about the Rice Sector16Market Share Distribution17Export details21PEST Model25SWOT Analysis27Porters Diaod Model38Advantages and Disadvantages39Factor Conditions40Demand Conditions42Related and Supporting Firms44Firm Structure, Strategy and Rivalry47Production cycle of rice49Role of the Government52Interview Analysis54Recommendations60Conclusion63References64Appendix78

9EXECUTIVE SUMMARYPakistan is the 4th largest producer and 11th largest exporter of Rice. It earns a significant amount of foreign exchange revenue for Pakistan which helps our economy stay competitive. Since the independence of Pakistan, our achievements in the rice industry have been promising. Production has increased by a ratio of 2:1 compared to increase in land. This can be credited to the variety of seeds present, improved facility for rice production and introduction of various preventions for rice crop against diseases. Punjab is the major producer of rice, followed by Sindh. This has also been the reason that Pakistan was able to stand the global financial recession in 2008 comparatively better than the world, as it opened up new markets for us to export rice.The privatization of the industry has benefited us tremendously. It led to the introduction of new technology, new ideas related to production and introduction of variety of seed and it opened up new opportunities for employment. Two research institutes also exist within Pakistan to help with the research for new seeds and techniques, and plans to establish institutes to train farmers are also in the pipe line. The price of rice, and hence the revenue generated in dependent on the demand and supply. Pakistan is known for the production of basmati rice internationally, which is highly demanded too.However, there are a number of problems faced by the rice industry of Pakistan. The rice industry receives no support from the government of Pakistan in the form of subsidies or tax incentives, whereas international competitors are known to be fully supported by their government which leads to them being able to offer lower prices to their consumers. This depicts that imports of rice in Pakistan can increase, because our farmers are prey to inflationary pressure in the form of rising raw material costs; oil and the shortage of gas in Pakistan which affects our ability to deliver and produce orders of parboiled rice at the required time. The rice produced in Pakistan is 40 percent domestically consumed and 60 percent is exported. This case will lead to a fall in our export level of rice, affecting the foreign revenue we are from rice exports which is the backbone of the Pakistani economy. Currently, Pakistan is facing a fall in exports of 53 percent; whereas rise is domestic demand is for 15 percent. Thus we face a mismatch in demand and supply.We are also affected by the failure to incorporate new technology in our production ways which is a big deterrent for us as Pakistan Rice producers and sellers lose out on efficiency and quality, as those employing the new technology take advantage of spread out costs, and economies of scale. India is an example of this case. Numerous unregistered seeds also exist and are used by the rice farmers, however because they are unregistered, the government is not aware of them and so, the revenue earned by farmers in this aspect is lower than it should

be. There lack export incentives as well as lack of quality checks on the rice exported, which ultimately affect our brand name in the international market because mixing of varieties exist.To analyze the rice industry, we conducted the SWOT analysis, PEST analysis to fully analyze our weaknesses and strength internally and externally, as well as in the local environment. The climactic conditions of Pakistan are a major strength Pakistan should be proud of, as it allows rice production and cultivation more than any other naturally endowed country. Pakistan also produced variety of rice and seeds therefore allowing us to cater to different types of demands internationally. The recent privatization of the rice industry of Pakistan has increased the efficiency of this industry by allowing the employment of new and improved technology and modern mechanized ways to cultivate rice. Pakistan also has the advantage of being blessed with a population that works in the urban sector as well as population working the rural sector. The hunger for employment can be used in our advantage by training those individuals to the specifications of the rice industry, and such labor can be employed at cheaper rates.However, weaknesses can be identified as the mixing of rice variety, ruining our name in the international market and as no check and balance exists, there is no way to counter that weakness. Pakistani rice is internationally known and demanded, however black markets exist for its sales which again make us lose out on the revenue that could have been earned. There exists lack of value addition and lack of trained labor too. On the other hand, Pakistan is open to take advantage of opportunities like TDAP, collaborations with REAP, tender with Philippines, new market with China, but international competition from Bangladesh, India, and Vietnam can work against our leverage in those opportunities. The climate is also unpredictable, and floods; unexpected, bring along with it diseases that ruin the crops and thus hamper the total yield.Economic and political problems of Pakistan also pose as a major threat.

We also conducted a diamond model analysis to understand the different factors affecting the rice industry. Factor conditions affecting the rice industry are that it is a staple food, and employs a lot of labor and earns considerable foreign exchange revenue. Pakistan is renowned for producing Basmati because we have an absolute advantage in this arena owing to our fertile soil and favorable climate. It is also an ideal industry for FDI. However, limited water, untimely rain, lack of proper storage of rice stock, backward in technology, law and order situation of Pakistan and transport costs all are factors working against our farmers and thus, the yield and our competitiveness. Moreover, majority of our farmers are of the export view affecting domestic quality of rice and increase in imports.Role of government is merely present in the rice industry owing to the recent privatization. No tax exemptions or tax holidays exist. Lack of subsidies also play a negative role as it reduces our competitiveness. Suggestions for the government sector include training the rural population to ou outies agiultues adatage, iig the ua ad ual populatio to ipoe the

rice industry and production techniques, holding seminars, helping with procurement of seeds, pesticides and raw materials like DAP and Urea. Other than that, checks to ensure the superior quality of rice should be made compulsory. Methods to increase the fertility of soil should be employed because that would ensure rice production for the future, even if more land is not taken up for rice production. More improved varieties should be developed, and lastly, ways for the easy disbursement of credit for the small farmers should be put in play, to encourage investment and business, ultimately aiding to our foreign exchange and economy.

LITERATURE REVIEWRice is not only a food crop, but is also considered an essential cash crop in Pakistan. Also, rice is one of the main export items of our country. Pakistan grows high quality rice to meet both domestic demand and for exports. According the business recorder of December 2012, the gad suess of Pakistas ie epots as it diesified aketig stateg. Pakista is oe of the largest exporters of rice. Rice is a monsoon crop and is mostly sown in the Irrigated area next to Indus River and its tributaries. Around 11% of the total agricultural land is used in rice production.

The rice crop has always been an essential part of the economic planning of Pakistan. It is the second biggest source of foreign exchange for Pakistan and is second staple food after wheat. Rice contributes for 6.7% in value addition to agriculture and accounts for 1.6% in the GDP of Pakistan. Pakistan's production of rice is enough to meet the domestic requirement, as well as, export rice of up to one million ton per annum. Pakistan trends in growing a wide variety of rice for example, Basmati PK-385, IRRI-6, IRRI-9 and Super Basmati, the most prominent of which are Super Basmati and Basmati PK-385. The two varieties which dominate the market share are Basmati and IRRI. Basmati is grown, mainly, in Punjab whereas Punjab and Sindh both boast wide cultivation of IRRI rice. Basmati, alone, accounts for 2% of the exports.

Furthermore, rice trade in Pakistan was initially under the government control. The industry was liberalized in the 1990s after disbandment of the state run Rice Export Corporation of Pakista ECP. Pakistas ie tades hae espoded ell to aket liealizatio ad hae taken a leading role in rice market. In 2009, however, in the wake of a record harvest and concerns over a slump in market prices the government intervened in the rice market and started procurement from farmers through PASSCO and Trading Corporation of Pakistan (TCP).

As far as production is concerned, Pakistan would experience a growth in its rice exports in MY 2010/11 at 28 percent to 3.2 million tons mainly due to increased demand and better prices in the world market. Rice exports in MY 2012/13 are projected at 4.0 million tons based on a good harvest. However reduced water availability during this period would have a greater impact on the op pospets. Pakistas ie epots also eefited fo the Idia goeet a o rice exports earlier in the marketing year. MY 2011/12 rice exports are estimated at 3.7 million tons, three percent higher than last year exports estimate.

Pakistas MY / ie podutio is o estiated at . illio tos, thit peet higher than the 2010/11 flood affected production level of 5.0 million tons. The average production of rice for the last five years is 5.97 million tons. But unlike 2010 disastrous floods,

2011 flooding was localized and restricted to lower Sindh.

Rice exports make the Pakistani economy stronger. The major importers of rice from Pakistan are KSA, UAE, Oman, Bahrain, Malaysia and Mauritius. UAE being the largest importer of rice from Pakistan despite the unfair practices mentioned above. From June 2012 to December 2012, UAE imported $53,312,158.54 worth of rice from Pakistan. Estimates of Economic efficiency implies that with the amount of globalization going on, growers of basmati rice can gain significantly by increasing the production level. Also because of a fall in domestic support of other rice producing countries and a rise in international prices, Pakistan could benefit even more by exporting more Rice.

Out of $81 million in Pakistani agricultural exports to the United States during 2011, rice exports comprised of $17 million (21 percent) of the total. Pakistan produces about 2/3 of the olds Basati ie op, hile the est is go i Idia. I ase of Basati ie the ol competing country is India. However unlike other South and South Asian countries, rice is not considered to be a staple crop in Pakistan.

A sharp decline of 30 percent in quantity of rice exports has been noticed from the months July to September of fiscal year 2012. The price of these exports has also undergone a tremendous downfall of 35 percent, resulting in a deteriorated quarterly export objective or target amounting to $500 million. As per the official figures, the month of September has recorded a significant fall of 51 percent in export of Basmati rice quantifying to 128,278 tons in contrast to July where the exports were relatively higher, amounting to 260,466 tons. Likewise, a decreasing trend has been noticed in the export of non-Basmati rice during the month of October FY2012.

According to the chairman of Rice Export Association of Pakistan (REAP), the major reason for fallig epots has ee the eleated pie of Pakistas ie. The stoks i ie idust ae predominantly held by the growers or exporters rather than investors, and this has had a detrimental effect on the export trade. India has removed any kind of trade barriers previously imposed but unfortunately the machinery in Pakistan is incapable of catering to the demand which has caused a drop in exports of rice.

The Trade Development Authority of Pakistan (TDAP) needs to determine the root cause of falling exports which it has failed to do so. As per our research, Pakistan is required to take initiatives in reacquiring its lost markets pertaining to Middle East and Gulf, while also expanding into big markets such as US, UK and Canada where Indian Basmati is primarily being used. There is also a need to give Export Credit Guarantee Insurance (ECGI) to the exporters of

rice so as to penetrate into third world countries.

The month of January FY2013 has recorded an increase in basmati exports by 15%. This has regained the confidence of traders as they are now optimistic about the rice reacquiring its nominal level before the FY2013 ends. This is predominantly because of the narrowing or declining gap between Pakistani and Indian Basmati rice. India has tied to offset Pakistas Basmati by reducing its price below than that of Pakistan.

Moreover, the Pakistani Rice sector is well suited to meet the growing demand of rice from around the world due to it being the third largest cultivated crop in Pakistan after wheat and cotton. Also there is increasing demand of rice in the EU based on per capita consumption of rice. Rice industry is growing over the last three decades with an increasing demand in processed rice in export market. The rice mills have increased from 170 units in 1986 to 500 in 2010. All these statistics suggest dynamic growth in the rice sector and this is because of the increasing foreign and domestic demand of rice. Much of our foreign demand comes from Europe which consumes a much greater quantum of rice and thus relies on imports to meet its consumption requirements. The quantity imported into Europe jumped over 700% within 7 years. (SBI report) Further Investments are required in Rice Technologies to facilitate the growth of the sector. Such high demand has encouraged the rice industry to innovate actively in terms of packaging processing etc. However much research conducted up till now continues to emphasize the strong need for rice industries to innovate continuously and thus sustain their competitive advantage.

Currently the local demand for rice is easily met hence there is great export potential. Of the total production of rice 40% is locally consumed and 60% is exported. There is immense potential to produce more rice and easily double exports. Therefore a majority of rice millers and producers are export-oriented, as they obtain far better profits from abroad than locally.

Pakistanis, in general, prefer the higher priced Basmati rice which is mainly consumed by the more affluent. Exporters made huge investments in rice processing equipment installing state- of-the-art imported machinery to improve the quality of rice. International as well as local consumers are now more quality conscious and demand high quality rice. Demand for parboiled rice is also increasing due to its nutritional value.

However the industry is not perfect and has sufficient problems of its own. Even though rice has been a major export for Pakistan, it has become more and more inefficient over the years. The yield has been decreasing continuously, the farmers are in turmoil of the high costs of input and there has not been much support from the government side or from Rice Exporters

Association of Pakistan (REAP). This was highlighted by Mubarik Ali and John Finn in their article in 1989, that the demands were increasing but the yields remained constant. Seeds, fertilizer, tube wells, tractor etc. are the variables which help to produce good quality rice. The farmers were not provided with these especially with the growing technology, Farmers in Pakistan were using the traditional techniques. They lacked technical, as well as allocative efficiency. Therefore the export of basmati rice has suffered a setback and non basmati rice is not fetching a good price. The milling plants have old machinery and banned varieties are also being ultiated. Uless ad util epots pik up, the epotes liailities ill keep ieasig. Thus the epotes eed oe tie to adjust thei epot efiae loas ad a edutio i the finance rate due to the lowering of the discount rate.

Varieties of rice are subdivided into grades based mainly in the proportion of broken rice on a consignment. Khapra beetle was detected in some rice consignment from Pakistan to United States and if effective measures are not taken, this can cause significant problems for the future Pakistan rice exports to US as rice is a major Pakistani export to United States.

Pakistan produces one of the best varieties of rice in the world due to the rich soil and humid climate found here. However due to traditional and outdated post-harvest practices there are substantial losses in the output and quality of rice which in turn affect the farmers profits.Pakistan may face a decrease in export demand as it faces intense competition from India in the Basmati rice segment. Also the industry has suffered a loss of competitiveness brought about podues shift toads ultiatio of hid ie athe tha fagat ie. Futheoe increasing rice production in Asia means that the region that consumes the most rice will not need to import so much of itLike most agricultural commodity markets, the rice market also suffers from the cobweb phenomenon, where price fluctuations are caused by the time lag between making the decision to cultivate the crop and the ultimate selling of the crop. To decrease the risk faced by farmers from fluctuating prices, the government has set support prices for various varieties of rice (Ahmed, et al., 2000).According to an article published on 8th February, 2012, in Express Tribune, Pakistan has the capacity to increase its rice exports to up to four billion dollars but barely reaches up to one billion dollars worth of rice export. The reason being that farmer interest has declined in the cultivation of rice due to stagnancy of prices since 2008 and a downward trend is expected to be seen in 2012-13. BGA President, Hamid Malhi, also pointed out the lack of innovation that persists in the sector. He said that the only available type of rice is Super Basmati which was brought under use in 1996. Since then, public sector institutions have failed to invent

something new. He also claimed that urea prices have hiked up to Rs 2,000 from Rs850 in a atte of eas. These fatos fail to attat faes attetio toads the ultiatio of rice and stops the sector from reaching the benchmark.

Furthermore something that needs to be focused on is investment in the rice industry. Private sector investment in milling improved the quality of rice available for exports and so improving the competitiveness of Pakistas ie i the old aket. The potetial fo foeig iestet in this sector is very high due the limited global avenues for investment in other countries world over. This investment is much needed as the standard agrarian infrastructure present in major rice exporting industries is missing in Pakistan. The members of the rice export industry realize the potential of this sector and thus are also investing heavily in rice paddy processing facilities and their expansion. However billions of dollars of investment are needed to modernize Pakistani rice industry so that there is minimum wastage.

An article on Matco, one of the biggest rice firms in the industry, states that Match has investing in the most modern agro-processing infrastructure that addresses the post-harvest losses problem in Pakistan. Matco's plant is located in Sadhoke. With the collaboration of the latest Japanese and American technologies, this plant will include the most modern paddy dryers, rice parboiling units, and silos that monitor humidity, temperature, moisture of the rice paddy amongst other things. This shows that the rice industry realizes the need to invest in technology and infrastructure thus we might see an increase in production in the coming years.

According to an article published in Express Tribune on the 5th of February, 2013, Pakistan has started reaping benefits from the System of Rice Intensification (SRI) method that was introduced in the Sheikhupura district by Lok Sanjh Foundation (non-profit organization) back in 2005. But now, as many as 65 villages and 300 farmers are using this technique for rice cultivation. 80% of the farmers who are using the SRI method have reported multiple advantages, such as the development of strong roots in order to fight lodging and crop loss and the use of less water for cultivation. As said by the CEO of Lok Sanjh, Shahid Zia, use of SRI cultivation method produces five to ten tons more in contrast to the usage of orthodox cultivation methods. He stated that due to SRI being a more tedious and tiring job, NGOs tend to neglect of introducing this method. He also asserted that due to the water crises and pollution of wetlands, it is necessary to introduce such measures.

10OVERVIEW OF THE ECONOMYPakistas eoo a e alled a sei-industrialized economy. Our industrial sector makes up only 24.3% of our GDP. Pakistan has a total labor force of 55.88 million (as of 2009). The largest industries of the country are textile, cement, agriculture, fertilizer, steel, tobacco, edible oil, pharmaceuticals, construction materials, shrimp, sugar, food processing, chemicals and machinery. Net foreign investment in Pakistani industries contributes a mere 2.5% to the outs GDP.Any government or economy has three goals. These are:

1. Sustained growth2. Low and stable prices3. Decreased unemployment

Over here high growth and low unemployment are complimentary to one another as achieving one can result in achieving the other. On the other hand low unemployment and inflation are contradictory.In the economic survey of 2012 we saw that consumption has increased to 88%. Private investment has decreased and public investment has increased. Government expenditures have also increased. Exports are up by 0.1% and imports are up by 14.5%. This means that we have negative net exports which mean that our trade deficit has increased.The increased law and order situations have decreased our foreign investments and reduced our growth and development. Agriculture accounts for more than 20% of our output and 40% of the total employment. Textiles account for most of our foreign exchange eaigs. Pakistas lack of value addition has made it fall behind with regards to this sector. Textile exports have fallen to $1.09 billion in July 2012. Our total exports stood at $2.057 billion in July 2012, which is 4.84% lower from $2.157 billion in the corresponding month of the last fiscal year.Moreover, the official unemployment figure is 6% but this figure might not capture the true essence of unemployment because the informal sector in Pakistan is pretty big and that is not accounted for here.Furthermore low growth and high inflation have increased poverty in the country. According to UN Human Development Report poverty levels in Pakistan were 50% of the population.Inflation has worsened the case as due to political and economic instability the Pakistani rupee has depreciated by more than 40% since 2007.

19A bright spot in the economy is the amount of foreign remittances that Pakistan receives daily. However due to high oil prices and lower cotton export prices, Pakistan is stuck in a low income and low growth trap with its growth averaging at 2.8% per year from 2008-2011.Pakistan must address government spending and revenues along with energy production in order to increase economic growth and employ its growing population. Investment in education, healthcare and infrastructure also needs to be increased for long term benefits. Borrowing needs to reduce as our foreign debt totals up to $130 billion. Foreign aid needs to be diminished as well as this has done nothing but make the economy more dependent on external factors for growth and survival.

INTRODUCTIONBRIEF OVERVIEW OF THE SECTORRice is not only the third largest crop which is grown but it also earns a lot of foreign reserves for Pakistan. Production of Rice is gro % i last fie eas. Pakistas ahieeet, oe the past 50 years, has been phenomenal in reference to the rice industry. Pakistan had around 856,000 hectares of rice cultivation land back in 1947, which increased to 2.4 million hectares by 1998. The production of rice, during this period, showed a significant increase by approximately 6 times (from 737,000 to 4.6 million tons) whereas the increase in area was half of this. Apart from increase in area of cultivation, production increased due to introduction of high yielding variety seeds, improved facilities to the farmers and different methods to protect the crop. Punjab is the leading producer of rice in the country. It accounts for 59.5 percent of the total production. The next leading province is Sindh. It accounts 29.5 percent. The remaining provinces NWFP and Baluchistan contribute 11 percent of the total production.Many of the rice processing units are traditional huller type and are inefficient. Therefore, there is a dire need to establish modern rice mills through which entrepreneurs of rice mills can be able to produce the high capacity production.Rice is an important food and cash crop. It has been the third largest crop of Pakistan falling behind wheat and cotton. Its plantation takes an area of approximately 2.5 million ha (11% of the total cropped area) and adds up to 27% of the cereals produced annually in Pakistan.Production of milled rice, on an annual basis, has increased from 5.5 million tons to 11.7 million tons posing a share of 8.1% in agriculture sector and 2.1% in GDP. Long grain aromatic Basmati rice is the main product over which Pakistan has gained popularity as a rice exporter. Around4.1 million ton per annum, of exported rice, has accounted for 7.3% of the foreign exchange from exports of food based goods. The rice export increased manifold during the recent years and a record export of 4.7million tons of worth about Rs.100 billion was made. The country ranks 11th in terms of rice production and 4th in rice export in the world.Despite the global recession of 2008, Pakistan was able to succeed in exporting rice because of its diversified marketing approach and by trying to take new market share in Middle Eastern, African and other Asian countries. One other reason is that wheat is majorly consumed as a staple food item in Pakistan rather than rice.The pivot point for the rice industry was back in 1988 when government decided to fully privatize it, after that our export earnings increased from 300 Million dollars to 2200 million dollars. Currently Rice is the second highest export earner for Pakistan as it earns 11% of total foreign earnings. There is a lot of demand for Pakistani Basmati rice. Pakistan grows the best basmati of the world.

PK-385 (famous for their aroma), Basmati 2000 and basmati KS-282 (equivalent to Thai rice) are found in the Punjab province. Sindh accounts for 41% of the rice population. IRRI 6 and IRRI 9 are found in Sindh. Some Basmati is grown in Sindh but at a very low level. Overall the Basmati yield is lower than that of IRRI in Pakistan.We have two rice research institutes of rice in Pakistan, one at Punjab and the other at Sindh. Prices of rice are not determined by farmers instead they are determined by market forces. The rice sector is deregulated but the government intervenes in exports of rice. However it does not provide any subsidies and does not determine prices as well.Punjab is a Basmati growing area and so it needs more efforts for sowing, plantation and taking care of required water, harvesting, milling and ageing etc. Due to all this Punjabi rice captures more value in the international markets.

The value addition of farm products in Punjab encourages potential investors to reinvest in modernizing the agro industry of Pakistan. New financial instruments are also merging industries and agriculture together. Pakistan markets are ready for expansion in next five years and that will determine not only local but international prices.Due to ease in economic policies and investment policies now Pakistan will be going for mergers with international players and this sector is gaining a lot of attention and investment by foreign markets. Due to sufficient domestic demand in Pakistan for rice, there is a lot of chance for this sector to grow and expand. Basmati is always a leading player from the demand side of international players and due to shoulder to shoulder competition with India, Pakistan is also becoming more competitive and is introducing new breeds of good quality basmati.CURRENT PROBLEMS Many unregistered seeds are available in the market at quite a low rate which results in low yields. Lack of awareness about mechanical transplantation, use of fertilizers, use of technology and maintenance of plant population which results in low yield and quality. Use of old technology, like use of tractor, increases the ratio of broken rice. Low feasibility and no incentives to import. Paddy dealers are also not using moisture meters or other upgraded technology which again results in huge losses. ISSUES WITH EXPORTS:1) No proper refinement of exporting rice giving rise to quality issues2) No checking of quality by any authority at different levels of the supply chain

3) Though Sindh is perfect for IRRI only but farmers do produce Basmati which causes not only lower yields and lower profits but disparity in quality between Sindh and Punjab Basmati as well4) Inferior quality seeds available5) No pre-shipment check of exporting rice

CURRENT NEWS ABOUT THE RICE SECTOR1. Rice export orders may not be accomplished due to shortage of natural gas to produce 'parboiling rice' which has the potential to increase 15% foreign earnings in value addition.2. India is a big threat to Pakistan due to high quality Basmati and lower prices and recent trade ease between both countries have given Indian rice exporters a chance to explore domestic market and to find opportunities.3. Due to some judiciary actions against one of the rice exporter of Pakistan by Iranian Government, Pakistan lost one of its potential markets.4. Export Finance Scheme rate cuts for refinancing has supported rice industry a lot in flourishing.5. A steep fall of around 53 per cent was registered in export of basmati rice during the first six months (July-Dec) of the current fiscal year as exports stood at 239,764 tons as against 506,904 tons recorded in the corresponding period last year due to increased market capitalization by India and increased domestic demand by 15%.6. Globally price falls of rice by approximately $5 per one ton.7. REAP pressuring government for currency swap with Iran and settling issues for gaining a giant market again.8. India taking share of Iran Rice Market by using financial instruments and diplomatic tactics from Pakistan.9. China becomes the major market for Pakistan rice export.10. Gas and other energy shortage resulting in 60% decline of export of Basmati and other value added rice.

Sr.#TitleEstimated costFunded by

1Evaluating suitability of exotic rice varieties and elite germplasm for par- boilingRs.5.193 millionPSDP (RADP)

2Incorporation of resistance against BLB from wild into cultivated riceRs.5.26 millionPSDP (RADP)

3Development and dissemination of water saving rice technologies in South AsiaUS$ 63000/ADB (through IRRI)

4Aflatoxin contamination in riceRs.1.889 millionPSF

5Marker assisted selection and genomic studies for stress tolerance in wheat and riceRs.71.785 millionPSDP (RADP)

MARKET SHARE DISTRIBUTION COMPANY ANALYSIS

ENGRO CORPORATIONOverviewEngro EXIMP AgriProducts Ltd is a subsidiary of Engro EXIMP. It is primarily operating the Basmati rice Procurement, Processing and Export business. The business is growing on a fast pace and has a visionary approach of being amongst the top and leading Basmati rice businesses worldwide.The aim of Engro EXIMP is to develop strong relationship with the farmers who grow Basmati, by ensuring those services with viable value addition as well as procurement of superior Basmati paddy. Alongside this, the company also provides supreme quality registered seed to these growers of Basmati. To further enhance the workability of the business, Engro EXIMP has also kept advisory as well as procurement team which is directly working on field with the farmers. The company has also invested in research and development pertaining to technologies that are desirable for the proficiency of farmers in areas of water conservation; yield growth, management of crop etc.OperationsEngro EXIMP Agri-Products not only owns but also operates a massive and modernized integrated processing complex, situated close to Muridke. The area covered by this facility accounts for 67 acres, and is undoubtedly present in the core of Basmati growing area. The equipment is imported from USA, Germany and Japan, and seeks commission in 2011. This facility has the capacity to dry as much as 150 tons of paddies on an hourly basis, and store 66,000 tons of clean and dried out paddy, while processing the rice at a speed of 24 tons per hour.CapacityThe company has the capacity and capability to procure 150,000 tons or more of paddy while the season for Basmati is present. As the next step, they ensure that it is stored in stacks or silos after undergoing the procedure of being dried and cleaned.RevenuesThe rice trading business of Engro EXIMP Agri-Products reaped revenue worth Rs.3.7 billion for FY 2012, as opposed to Rs. 1.6 billion for FY 2011. The business has recorded higher revenue than the previous year but it has been limited due to excess of capacity over production. The plant operations had to undergo curtailment during paddy season of 2012 which led to a lower

procurement of paddy for the year. The International Basmati prices were lower in first half of 2012 due to prevalence of Indian Basmati, however they started improving by the second half, and Pakistani Basmati was able to trade with Indian Basmati at a premium. By cutting down on the energy costs, the business is aiming to achieve an improved margin.Sales39kT of finished rice equivalent accounted for the total sales during FY 2012 out of which 25kT were catered to the local market while the remaining 14kt were exported.

MATCO RICE PROCESSING (PVT) LTD.OverviewFounded in 1990, Matco is the leading exporter of rice from Pakistan, with the premium variety of ie eapig the highest popotio of sales eig Basati. The opas iteatioal presence extends to 65 countries, with their prominent brand Falak having an edge in more than 35 countries.OperationsMatco is currently operating 4 rice processing plus milling plants, and also has pertinent storage facilities. The company also has the privilege of being the greatest rice exporter from Pakistan. With effectively vertically integrated paddy-drying, storage, husking, and processing facilities existent in Karachi (Sindh) and Sadhoke (Punjab), the export of the flagship brand Falak Rice, as well as other private brands are exported to as many as 65 or more countries.Sales and CapacityA geate popotio of Matos sales eopass peiu Basati ie, takig ito aout that Matco is the largest exporter from Pakistan. The capacity in terms of the total processing reaches 40 MT per hour, along with the investment of the company in plant and property crossing beyond US$25M.GrowthA number of incidences support the fundamental growth of Matco

Processed above 95000 MT raw rice in the year 2010 State-of-the-art facilities are used in processing For the FY 2012 the existing production facilities have been enhanced by 35%, hence increasing total production capacity to 150,000 MT of raw rice per year. A latest paddy husking facility has been built in Sadhoke (Punjab) with the facility covering an area of 15 acre.

Private LabelingMatco is involved in private labeling of brands to cater to customers worldwide. Presently, the private labels are being exported to over 60 countries. Few of the varieties of rice available in private labeling include Super Basmati, Super Basmati Brown, Super Basmati Sella, Super Fine, Pure Basmati, and so on.

GUARD GROUPOverviewEstablished in 1989, Guard Agri is the very first company in the private sector which has its own Rice Research and Development (R&D) facility. Ever since its inception, the business has progressed dramatically and currently owns five divisions-- R&D, Crop Agronomy, Food, Seed and Agriculture Machinery. Guard Rice Mills is a subsidiary of Guard Group, with a history of 50 years in manufacturing, trading and distributing variety of products not only in Pakistan but across the globe.Production CapacityThe company has latest rice mills located in Lahore, with the production capacity ranging to12.5 ton/hour.

Quality ControlWithin Pakistan, the company has the honour of being the first rice mill that has been awarded ISO 9001:2000 Quality Management System certification in the year 1998. In 2006, it was again the first rice mill to be certified ISO 22000:2005 Food Safety Management System certification. It has the supreme standard of ensuring food safety along the entire food chain, until it reaches the point of consumption.Market ShareAs a symbol of its quality strength, Guard is supplying to predominant rice brands, along with owning labels with an export range of up to 36 countries. Aside from export markets, Guard Rice is the National Market Leader, and has a massive distribution network country wide.ProductsThe product range includes Supreme Basmati-Easy cook Sella-Super Kernel-Super Kernel Sella- Brown Rice-Tibar Basmati-Guard Awami-Longrain rice.The most preferred choice of people worldwide is Super Kernel Basmati, and is perceived as the highest quality basmati. Guard rice is known for procuring and processing very high quality of Basmati Rice, and is positioned for sale in big markets such as hyper marts and super marts.

GARIBSONS (PVT) LIMITEDOverviewGaribsons is oe of the leadig ie poessos ad epotes. The opas ifastutue comprises of five state-of-the-art rice processing mills. The warehousing space exceeds 400,000 square feet and is situated near pertinent locations of Karachi Port and Port Qasim. The company also devotes 35 acres of land to Basmati rice growing areas in Punjab housing, and above 100 acres of industrial land in different industrial estates.Main MarketsThe predominant markets where Garibsons is present include the following:

20 South America North America Eastern Asia Western Europe Eastern EuropeSales Volume and Exports Africa Mid East Oceania Southeast Asia

The total sales volume amounts to US$50 Million - US$100 Million. Since July 2001 till present, the company has exported goods worth US$41 Million.GrowthKeeping into consideration the customer's high quality expectations, Garibsons (Pvt.) Ltd., has installed the Sortex Series 90,000, which uses the most up-to-date CCD technology, and encompasses state-of-the-art optical sensing, data-processing plus ejector technology. The Product yield increases by the resorting capabilities of the Sortex Series 90,000. Garibsons assures "absolute" quality on the basis of employing the latest equipment installed.Quality ControlGaribsons has been granted the ISO 9000 certification.

Fauji FoundationFauji Foundation initiated the rice category under its subsidiary Fauji Cereals. They introducedie flakes i the ea 9, hile Basati ie has ee eetl itodued i . Fauji started its journey in 1954, and has the vision of creating a stronger and smarter Pakistan. Fauji Ceeals poduts ae podued usig latest state of the at iss plat that as istalled recently in 2012. Fauji has also achieved ISO 9001-2008 Certification for producing superior quality food products. The company has established itself in the international market and exports to numerous countries. It also supplies to UNICEF and World Food Program.

EXPORT DETAILSPAKITAN EXPOT of ICE.

QRC RICE INSPECTION CELLARACHI,LAHORE,QUETTA& TCP COUNTRY WISE POSITION OF EXPORT OF BASMATI RICEJULY, 2012 TO DECEMBER, 2012S.NO NAME OFSUPER BASMATIPARBOILED RICEBASMATI RICEBROWN RICETOTALFOB PERAs you can see here Pakistan exports a high quantity of rice to a number of different countries.

COUNTRYQTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)M/TON ($)

1Aergentina24.0816,350.3224.0816,350.32679

2Afghanistan10.11,217.5114.114,000.124.125,217.51010

3Algeria67.79,372.39.648,114.106.6127,486.1196

4Angola22.14,520.22.14,520.660

5Australia704.48936,620.52347.38466,965.627,471.716,111,798.138,523.577,515,384.27882

6Azerbaijan7,907.793,985,869.7,907.793,985,869.504

7Bahrain5,328.816,081,724.64239.6166,121.1,449.971,218,635.87,018.387,466,481.441064

8Bangladesh506.629,775.21.16,324.98527.646,099.981226

9Belgium1,120.111,116,174.750.4650,169.6852.557,460.25.19,946.1,248.071,243,750.38997

10Brazil50.58,000.50.58,000.1160

11Brunei25.35,500.25.35,500.1420

12Canada1,481.381,765,291.95581.52788,143.28484.31519,825.062,547.213,073,260.281207

13Cape Town20.16,280.20.16,280.814

14China263.41311,833.838.927,183.8218.16,650.290.33335,667.651156

15Comoros130.8141,855.8115.398,007.8246.1239,863.6975

16Congo25.26,250.34.18,055.59.44,305.751

17Cyprus26.22,880.26.22,880.880

18Denmark329.96438,776.0946.39,514.24.0819,260.400.03497,550.091244

19Djibouti489.76590,596.28101.6387,044.16591.39677,640.441146

20Egypt15.15,015.25.16,950.12.12,060.52.44,025.847

21Estonia44.58,215.344.58,215.31323

22Finland48.55,944.3848.55,944.381166

23France348.56424,305.9872.598,422.623.28,350.03444.06551,078.611241

24Germany652.03777,465.04540.44755,615.83182.36188,685.34226.68180,854.371,601.511,902,620.581188

25Gerogia17.8126,817.3417.8126,817.341506

26Gothenburg25.19,000.25.19,000.760

27Greece523.14546,098.1153.530,768.3925.25,000.25.19,946.626.64621,812.5992

28Haiti185.5103,148.53185.5103,148.53556

29

S.NONAME OF COUNTRYSUPER BASMATIPARBOILED RICEBASMATI RICEBROWN RICETOTALFOB PER

QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)M/TON ($)

29Helsinburg22.21,340.22.21,340.970

30Hong Kong170.83214,743.577.468,788.023.523,829.76181.81227,361.351251

31Indonesia12.15,600.12.15,600.1300

32Iran13,862.3812,057,304.489,914.45,320,792.116,362.73,721,830.7830,139.4821,099,927.36700

33Iraq458.66241,255.49458.66241,255.49526

34Ireland250.26286,826.23250.26286,826.231146

35Italy572.06656,546.49436.24364,979.994.66,670.514.77449,437.71,617.071,537,634.09951

36Ivory Coast575.705,525.575.705,525.1227

37Johannesburg11.516,560.6.8,940.2.2,900.19.528,400.1456

38Jordan71.556,874.571.556,874.5795

39Kenya1,406.821,521,461.81,653.33955,004.463,060.142,476,466.26809

40Korea4.5,200.2.272,549.216.277,749.211236

41KSA11,536.3213,334,474.83,076.982,603,512.18,628.926,957,707.5223,242.2222,895,694.42985

42Kuwait908.781,059,213.55194.9223,791.49778.08720,747.131,881.772,003,752.171065

43Labnon163.97206,506.1900.92743,454.231,064.89949,960.33892

44Liberia275.347,825.275.347,825.1265

45Libya42.59,823.9618.717,834.2660.777,658.221279

46Lithuania163.185,265.74.74,836.237.260,101.1097

47Madagascar2.2,200.2.2,200.1100

48Madagscar24.28,680.24.28,680.1195

49Malawai20.25,600.20.25,600.1280

50Malaysia173.163,205.50.64,950.3,400.2,798,200.3,623.3,026,355.835

51Maldives241.273,186.98878.88773,272.051,119.881,046,459.03934

52Malta18.16,038.15.12,482.33.28,520.864

53Matadi24.24,000.24.12,000.48.36,000.750

54Mauritius2,174.992,761,142.19296.252,764.2,470.993,013,906.191220

55Maurtius25.16,250.25.16,250.650

56Monorivia75.93,075.75.93,075.1241

57Mozambique211.7282,131.82.3,400.28.240,250.241.9325,781.81347

58Muara Daru23.28,402.9323.28,402.931235

59Netherlands91.985,040.567.2262,370.159.12147,410.5926

60New Zaeland209.2252,721.85195.71230,480.681,310.231,278,962.921,715.141,762,165.451027

S.NONAME OF COUNTRYSUPER BASMATIPARBOILED RICEBASMATI RICEBROWN RICETOTALFOB PER

QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)M/TON ($)

61New Zealand8.4412,655.567.10,745.121.35123,856.9136.79147,257.461077

62Nigeria75.45,000.75.45,000.600

63Norway214.95259,870.44157.62224,745.2412.13,500.384.57498,115.681295

64Oman23,990.2727,870,598.67174.42221,924.874,084.723,544,262.428,249.4131,636,785.931120

65Parague21.32,004.21.32,004.1524

66Philippines68.888,599.5668.888,599.561288

67Piraeus24.24,696.24.24,696.1029

68Pireaus48.50,784.9.5,760.57.56,544.992

69Poland50.57,500.50.57,500.1150

70Port Au Prince14.57,540.14.57,540.520

71Qatar5,091.56,410,808.383,415.662,584,727.038,507.178,995,535.411057

72Reuinon20.18,600.20.18,600.930

73Reunion288.239,400.93.82,635.72.57,442.09453.379,477.09838

74Romania7.911,114.7.911,114.1407

75Russia347.377,033.217.245,189.58370.23401,949.33934.231,024,171.911096

76Seychelles208.210,080.208.210,080.1010

77Seychells312.319,280.312.319,280.1023

78Singapore455.49612,305.0911.511,960.158.2151,482.42625.19775,747.511241

79Sir Lanka72.38,736.72.38,736.538

80South Africa315.8393,122.8410.6,750.274.73233,565.4600.52633,438.241055

81Spain429.87533,626.847.8,708.104.69100,600.69350.319,784.891.56962,719.531080

82Sri Lanka377.04433,555.043,111.22,442,265.393,488.242,875,820.43824

83Sudan928.21,248,179.1138.167,118.1,066.21,415,297.11327

84Sweden124.94144,772.27371.98426,848.13.15,549.911,175.937,462.1,684.921,524,632.18905

85Switzerland20.38,600.11.6213,653.531.6252,253.51653

86Tanzaina163.191,921.662.2,500.87.8850,751.25252.88245,172.91970

87Tanzania24.24,000.24.0525,589.248.0549,589.21032

88Thailand28.32,200.100.112,875.128.145,075.1133

89Thessaloniki24.25,632.24.25,632.1068

90Trinidad & Tobago19.7931,020.519.7931,020.51567

91Tunisia22.26,422.22.26,422.1201

92Turkey708.360,868.24.12,000.32.38,552.764.411,420.539

S.NONAME OFSUPER BASMATIPARBOILED RICEBASMATI RICEBROWN RICETOTALFOB PER

COUNTRYQTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)QTY(MT)VALUE($)M/TON ($)

93U.K.1,339.771,506,641.77668.85833,728.34151.6151,092.28,355.357,450,994.410,515.579,942,456.72945

94UAE47,245.0749,545,906.04431.81416,576.274,056.733,344,032.234.355,644.51,737.9653,312,158.541030

95Ugenda40.21,200.40.21,200.530

96Ukraine301.333,830.3852.54,600.353.388,430.381100

97USA1,895.042,448,692.772,488.653,424,953.95422.65459,769.33222.77228,474.5,029.116,561,890.061305

98Wellington7.496,102.7212.269,987.8319.7416,090.55815

99West Indies19.1624,572.3619.1624,572.361282

100Yemen7,512.038,367,974.23168.171,024.9,570.89,081,372.9917,250.8317,620,371.221021

101Zambabwe1.800.1.800.800

TOTAL14577815478065421060177457776195550793356109719669985239765232998772

Rice Export Prices are as follows:

RICE EXPORT PRICESThaiWhite 100% BU.S.ThaiThaiParboiled LongGrain 100.% 2,4%ThaiViet5.%Argentina5.% max 10%IndiaPakThaiViet25.%25.%25.%SecondgradeA125.% Super 1/U.S.California PakThai MediumBasmatiFragrantGrain2/Ordinary100.%200720082009201020112011335695587518565332722619532563436782545510577325682555492549313614432416505(US $/tonne, f.o.b.)338584 ...459 ...499 ...47528940929049835137243330560346044451129455338438746727555767755050691310779143291019937954386764881104546485510081054JulyAugust September October November December2012January February March April May June July20112012% Change548582618620649620548588625610624598549605650639597569532566601604632603505564555576560492450 ...450 ...450437450419450396468384467466455418405391490520550556594587466530515524515464445471497505553560871866860860816764910106287510969501110962114095011418901125Jan.-Jul.Jan.-Jul.54856356756961361960052858310.453157061460862261558453059211.7546535524514544565572552543-1.753154755155260260959751157011.6446431428431434413411473428-9.6475475472470470470470491 472-3.9 390395379384379382394386379379415411412411404437402-852954255155358057957047455817.6410395387384388369379437387-11.351553054354655454553642653826.4816816788772780783788871792-9.19509509508258819319311068917-14.11087111011201091107810621062100410878.2Sources: Jackson Son & Co. (London) Ltd., Thai Department of Foreign Trade (DFT) and other public sources.1/ White broken rice. 2/ No. 1, maximum 4-percent brokens, sacked, California mill.Note: Please note that data may have been subject to revision due to temporary unavailability and/or late publishing of weekly price quotations.FAO Rice Market Monitor July 2012

PEST MODELPEST analysis is an analysis tool employed by companies for their product to judge the environment they are going to operate in. PEST analysis gives a good view of the external factors that can affect the product, locally and internationally. It evolves around four major pointers; Political conditions, Economic conditions, Social conditions and Technological oditios. It gies a ids ee ie of the hole eioet, ad allos the aalsis of the industries to be done easily. It helps companies and industries identify what issues they will be facing if they launch into that particular environment and make the decision of countering those issues easier by forming effective strategies. PEST takes into account four important factors:

1. Political: These factors determine the extent of government intervention in the industry and how it affects the industry. Government intervention can be via strict regulatory checks, fiscal policy implementation, trade tariffs and its affect on exports and the business environment. The political conditions affecting the Rice Industry are majorly the weak law and order situation of Pakistan that deters foreign and local investment within this industry. It also affects the demand and supply of the rice farmers by negatively affecting the procurement of raw materials because of transport strikes, and delays the shipment of orders. Moreover, the presence of feudal lords with strong alliances with political leaders work against the favor of a common farmer as their stocks are at time left behind until the stocks of the influential people are sold. However, government has employed field advisors who help the farmers with respect to their education, the ways that can be used to farming, sowing and harvesting. Other than that, no government intervention with respect to taxes and subsidies is present.

2. Economic: These factors try to understand the position of the industry economically and the reasons for it being so. For example, inflation rate prevalent in the economy and how it would affect the rice industry by affecting price, cost of raw materials. Other than that, interest rate, foreign exchange rate also fall in this category. Foreign exchange has affected the rice industry as due to the fall of the value of Vietnamese currency, their exports in the international market have become cheaper, giving them an edge over the Pakistani rice products in the market. Thus, Vietnamese variety has been able to claim the international market share of Pakistan. Inflationary pressure domestically in Pakistan has led to rising oil prices and raw material cost for the farmers. This has then led to higher prices as the farmers are not allotted any subsidies. Higher domestic prices pave way for lower international competition, affecting the revenue of the farmers.

3. Technological: These facts deal with the introduction of new technology that may affect the

competitiveness of the industry and its efficiency and how, ultimately demand and supply would be affected. Research and development, and automation fall in this category. Pakistan has been an agriculture based industry since the time of its inception in 1947. The farmers from that time have only learnt the traditional ways of farmers, and those ways are which they are comfortable with. With the developments in technology on a daily basis globally, this has acted in our disadvantage because international rice producers have attained efficient and cheaper ways of producing rice, exporting them at cheaper price, hence we face competition and are susceptible to losing out our market share in the international market. The farmers in Pakistan are also reluctant to learn these ways. Moreover, they even lack the awareness of new and effiiet tehologs eistee. This is ou disadatage. Hoee, ee fis like Eip Engro are now a part of the rice market because they found a gap in the rice market of Pakistan which they saw as one they could cover. Such firms are also investing in the modern technology now available. They also hold seminars for the education of rice farmers. Research institutes are also now establishing themselves in Pakistan with the help of REAP, and so Pakistan can have the technological factors work in its favor.

4. Social: These facts deal with the social environment and take into account trends of the industry, demographics, population. The population of Pakistan is growing in a geometric trend. This assures demand of rice for the future, hence promising good revenue to the farmers. Furthermore, diet trends claiming rice to be nutritious are an attractive factor for the demand of rice to rise in the future. The increasing popularity of the Asian Cuisine worldwide is also aiding rice consumption because these are based on rice as the main ingredient. Example; Black Rice and Chinese food. Rice is also considered to be eaten in a hurry and in a cleaner method than curry with chapatti; therefore the social pattern depicts an increase in the rice consumption and is a positive sign for the rice industry.

SWOT ANALYSIS

Strengths:1. Climate/edaphic conditions2. Variety of rice produced3. Exposure to export markets4. Privatization5. Competiveness6. Pakistan is the 4th largest exporter and 11th largest producer of rice7. Availability of laborWeaknesses:1. Mixing of Rice2. Technology3. Selling without brand names4. Lack of value addition5. Seeds yield6. Lack of facility with cluster7. Black market (Punjab and Sindh)8. Labor issues

Opportunities:1. Agriculture based Economy of Pakistan with high export and investment potential2. High demand3. Export opportunities with China and Philippines4. Role of TDAP5. Organic farming6. Asian cuisine influence7. New diet studies8. Minimum export price9. Introduction of new technologyThreats:1. Competition in rice exports2. Unpredictable Climate and Global warming3. Shortage of gas in Pakistan4. Soil erosion5. Water issues6. Increase in small farmers7. Feudal Lords8. Lack of infrastructure in rural areas9. Economic and Political situation of Pakistan10. Role of Urbanization11. Falling value of the Pakistani rupee and role of Vietnamese currency12. No government support13. Various duties and taxes imposed.

STRENGTHS:1. Climate and edaphic conditions:

Rice is best grown in a hot climate with a lot of humidity. The required temperature is a little above 25C and about 150-200mm of rainfall is required during the sowing period. Clayell land and alluvial soil is also required. All this is present in Pakistan hence it acts as a major strength for the industry. Pakistan is divided into 4 rice zones according to the climatic and edaphic conditions for the different varieties of rice.Zone 1- Sub humid monsoon, 750-1000mm of rainfall and flat valleys. High quality Basmati not grown in this zone. Northern mountainous areasZone 2- Sub humid and sub-tropical climate. 400-700mm of rainfall. For better quality of rice. Lies between the river Ravi and Chenab. Basmati rice is grown in this zone.Zone 3- West bank of the Indus River. Arid subtropical climate with 100mm of rainfall. Has a long and extremely hot summer. Good for many coarse of rice varieties.Zone 4- In the Indus Delta. Arid tropical marine climate. Not much rain. Rice grown with rotation.2. Variety of rice produced

As stated by Mr. Naveed (BD manager Engro Eximp) that there are two major types of rice in Pakistan Basmati and Non-Basmati (e.g., IRRI). Pakistan specializes in and is very famous for exporting long and long grain which is aromatic basmati rice. This quality is exported to UAE, Australia and European Union. Super Basmati is considered one of the best around the world by the Agriculture Department of the Government. Others are:1) Cargo Rice: (BROWN RICE, HUSKED RICE) is the kind of rice obtained from the paddy, the only process implemented on it is Husk removal. This includes whole grain, head rice.2) Plain or White Rice: is rice obtained from the paddy and it has been husked, milled resulting in removal of bran layers. This includes whole grain, head rice.3) Parboiled Rice: It can be husked and milled rice or husked rice having been subjected to heat treatment after being soaked in water so that the starch is fully gelatinized. This is followed by a drying process.Pakistan produces varieties of rice, the popular ones being: Basmati:1) Basmati 2000

2) Basmati 385

3) Basmati 198

4) Super Basmati

5) Basmati 370

6) Kernal

7) Shaheen ( Basmati) Other Rice Varieties:1) IRRI 6

2) IRRI 9

3) PG (IRRI) 4) KS 282These various varieties cater to various demands in different countries and because Pakistan produces all these, Pakistan has an edge as it can cater to demands from various countries and not be dependent on one quality.3. Exposure to foreign markets (Exports)

The quality of rice which Pakistan grows gives it an edge over many other countries and helps us export rice. Pakistan is the 4th largest exporter of rice in the world. There was an indirect subsidy on tractors and bags of rice recently which helped Pakistan export more. REAP (rice exporters association of Pakistan) was set up to assist the exporters.4. Privatization

After the reign of Bhutto, all industries were privatized and so was the rice industry. We all know that privatization of industries leads to more efficiency and productivity which leads to lower prices, higher variety and more exports. There has been a 27.7% increase of rice production in the country since the past year. The government sector mentioned themselves about the issues a nationalized industry faces which are over employment and political pessue hih doest eist i the ie idust i Pakista afte it as privatized.5. Competitiveness

Since we all know that the rice industry is privatized, there are numerous players in the market. Engro Eximp entered the market recently and added to the competition which already existed among the major players. Competitiveness has its own advantages. Each Company will want to have an edge over the other hence they will produce the better quality with lesser costs. What Engro did is it is using its brand name to capture the market. Whereas Guard being a company with Chinese affiliation is using its low cost to compete.6. Pakistan is the 4th largest exporter and 11th largest producer of rice:Asian countries have 80 million hectares of land, able to cater to 75% of the total demand of rice. Pakistan achieved phenomenal increase in ie podutio i Au Khas ea. Pakistan produces 6.22 million tons of rice on 5 million acres of land. Rice export has remained the second largest foreign exchange earning commodity for Pakistan. Pakistan exports 80% of Super Basmati to European countries and has the potential to export more.7. Availability of labor:

Pakistan being an agro based economy has an ample supply of labor. The rice industry being a labor intensive industry has access to all this labor. Therefore there is a chance of high production.

30WEAKNESSES:1. Mixing of Rice.

We all know about the instability of pricing of Pakistani products in the foreign markets when exported. Basmati rice has been mixed with non-basmati rice skillfully retaining the cooking ability of rice and labeling it under basmati rice when it is not 100% basmati rice. There are two drawbacks of this, people who do not know about the iig, the lael Pakistas asati as ot as good as Thailads o a othe outies. Also he foud out that it has ee ied with non-basmati rice, the customer feels cheated decreasing goodwill.2. Technology

Although Pakistan has started using technology in the rice industry, it is still far behind a few countries. According to the Bahoori Mills in Punjab, the inconsistent quality and quantity of rice podued i Pakista is eause of the lak of teholog. The taditioal tehologies aet able to cope with the rising demand. According to Iftekhar Ahmed Khoso Sindh has two major zones of rice production and none have ever achieved the desired per acre result because of lak of teholog. The ie goes though aious poesses util its a finished good. The rice ills loated i idh ae outdated ad thats h Chia ad Idia alas had a lead i the industry due to the up gradation of technology in their industry. This is also why Pakistan experiences a lot of grains of broken rice after the final process.3. Selling without Brand names

A major weakness of the Pakistani rice exports is that they sell without any brand names. This was also highlighted by the Engro BD manager that despite the major players and high exports the packaging expoted ae ko as Basati ie, Pakista. This has haged a little ith GUARD into the industry and Engro is trying to change it while trading rice. This has had a drawback as each company differs in their quality of rice. When consumers buy Pakistani exported goods, they are bound to get a different variety every time. Because of this the exporters do not even get a good price for the rice exported.4. Lack of value addition

Talking about exports specifically in this case. Pakistan exports rice in bulk quantity and rarely in 1kg, 2kg and 5kg packets. Again with the help of Engro and GUARD it has just started but not on a very large scale. The majority is in bulk. The consequences of this are that it loses its foreign markets as other countries sell in every possible quantity.5. Seed yields

39Although new seeds have been developed but due to lack of technology and use of good quality fertilizers, the seed yield of rice has been falling. Because of this rice seeds have to be imported into Pakistan. Hybrid seeds are being imported; Hybrid seeds have a much higher yield than Basmati in Pakistan. The Kissan Food spokesman said that the government should invest more into the rice industry rather than companies importing seeds.6. Lack of facility within culture

The rice industry is privatized in Pakistan and the government of Pakistan does not provide any diet susidies. The faes aet e ell taied ad euipped. Most of the poesses ae mishandled by them which results in lack of crop. They have been learning from their forefathers and the experience they have received. The farmers need to be educated more to help podue oe ie. EAP has ee odutig okshops ut its udestood that the cannot cater to entire Pakistan with a few individuals. The government sector proposed themselves that the private sector has better schemes to facilitate the industry then what the government does.7. Black Market

I the past eas, a issues hae theateed Pakistas ailit to feed itself a it e ie, wheat or any other crop. Pakistan has faced black marketing in wheat and sugar extensively. However black marketing of Urea has given a rise in price of rice from Rs. 635 to Rs. 850 in interior Sindh. Urea consumption has been increasing due to bumper crops hence the marketers started taking advantage of this situation. Other than that, the rice is cheaper in Punjab than in Sindh, so traders buy rice from Punjab and sell it in Sindh. This is how they exploit the market and earn a higher profit in Sindh.8. Labor Issues

Most of the labor employed in the rice industry is not educated and there is little training provided especially regarding rice processing. This has led to increased losses in the yield because proper knowledge and training is not available to the farmers.

OPPORTUNITIES:

1. Agro-based economy with high export and investment potential:

Pakistan is an agriculture based economy, with the majority of population living in rural areas and using agriculture as their source of income. This is an opportunity because as more farmers are present in agriculture, there is a greater chance of human investment in this sector. Even at the high political level, most of the leaders have lands in their name used for the purpose of agriculture. Rice is produced in Pakistan in Sindh and Punjab. Despite the demand of rice in South Africa, Senegal, Saudi Arabia, Kuwait, USA, Turkey, Sri Lanka, Australia, Malaysia, Indonesia, Philippines, Pakistan has a small share in these markets. Immense potential for investment is present in the Rice sector via development of Silos, Parboiled rice processing plants, quality polishing and processing. Saudi Arab and USA are major demanders of parboiled rice (70%) therefore investment in this sector is an opportunity for Pakistan.2. High DemandPopulation growth in Pakistan is quite visible. Rice being the 2nd staple food of Pakistan is required in large quantities. This helps the industry to produce more with lower prices and provide ample rice for the entire country.3. Export opportunities with China and Philippines:

Punjab Governor Makhdoom Ahmad Mehmood said that our rice exporters have been able to attract the interest of the Chinese buyers into buying the rice we produce (04-04-2013, Business Daily Recorder). Tanzania and China have become major rice exporting importing companies from and for Pakistan resulting in them being a sure source of our demand for the variety of rice that Pakistan produces. This is because of the efforts of Rice Exports Corporation to encouage epot of Pakistai ie. As of Jaua , Pakistas ie epot to Chia has recorded an increase as the volume of non-basmati rice (72,623 MT) to China worth $30 million in just one month was exported. (DAILY TIMES (14-03-2013)).Pakistan has won a tender for supply of 50,000 MT rice to Philippines as a result of bidding held on December 2, 2009. Philippines have also announced another tender for purchase of 600,000 MT rice. Pakistan can avail this opportunity.4. Role of TDAP:

Trade Development authority of Pakistan (TDAP) has announced to strategize with a detailed program focused on the promotion of rice export to Central Asian States. Exhibitions such as Epos ae plaed to e aaged i ollaoatio ith the ie epotes to aket Pakistas

rice. As it would help exporters to earn more foreign exchange for the country, this is good sign by TDAP. Punjab Government will sign 5 acres of land for the establishment and development of Rice Technical Training Institute, where skilled manpower for the rice industry would be trained. (THE NATION (29-03-2013))5. Organic Farming:

Sales of organic food have increased in comparison to the production of organic food at the ratio of 1:3. It shows an increasing demand supply gap. This is an opportunity for agriculture economy of Pakistan. If the rice farmers shift towards Organic farming and production for rice, this could be sold at higher prices meaning higher profits for farmers. This will attract more farmers, convince them to improve their ways or farming and ultimately, increase international demand.6. Asian cuisine influence:

Asian restaurant and food are gaining popularity all over the world. Asian recipes rely heavily on rice as their stable ingredient example Chinese food, porridge, black rice of Valencia. As Asian food becomes more popular, the demand for rice will also increase.7. New diet studies:

The new diet studies have shown rice to be more nutritious than any other food. These researches for the health conscious people lead to an increase in demand for rice, which is again a window of opportunity for the farmers, promising future stable demand.8. Minimum Export Price for Rice:

ie Epot Assoiatio of PakistaEAPs ole i fiig a iiu epot pie fo ie is a opportunity because it promises for the farmers, a stable price for rice, and hence promises a steady amount of profits too. Therefore, it is also an incentive for farmers to increase their supply of rice and earn higher revenue.9. Introduction of Technology

There have been glimpses of Pakistan rice industry using technology in the recent years which have helped the industry go in a very positive manner. Dr. Fida Abbasi developed a technology that happened to increase the number of grains per panicle of a rice plant from 250 to 700. The technology Super NPT has helped increase rice production from 5 ton per hectare to 15 tons pe hetae. Aodig to D. Aasi this kid of ie ast podued ahee i the old.

Threats:

1. Competition in rice exports:

Idia is uetl poduig aiet of ie hih is of ette ualit tha Pakistas basmati rice. Due to this, it is highly demanded by the international market at a higher price as well becoming a major competitor for Pakistan.Bangladeshs faes ae epeted to podue a e aiet of ie seeds i the oig ea that will speed the maturity of the rice crops process in 105 days, which is the fastest of all the varieties ever produced and tested. This seed was developed by Bangladesh Rice Research Institute (BRRI) via hybridization or cross mixing of a local rice variety with the high-yielding BRRI Dhan-9. Bagladeshs goeet ill also aid the faes the poisio of fee seeds and fertilizers to boost the cultivation of rice watered by rain and hence, protect the eioet as a esult. Bagladesh is the olds fouth iggest podue of the gai ad this would lead to an increase in its exports.2. Unpredictable Climate and Global warming:

Global warming is an international concern as it leads to higher temperature globally. That leads to melting of glacial in the seas and rivers, leading to floods. Pakistan has been known to be badly affected by floods in the Pakistan. Lower Sindh is a major producer of rice and is also the area most affected by floods, which affect the crops harvested in those areas. Rice needs a constant and specific supply of water. Too much water, caused by floods cause water logging and also brings with it various diseases. Unexpected climate also brings about droughts and famines, and as Sindh is a major producer of rice, it needs water supply constantly.3. Shortage of gas in Pakistan:

The epot odes of paoilig ie ae at a ege of eig ot opleted eause of unavailability of natural gas which is a main raw material in the production, Parboiled rice have a great demand in the international market to the extent that can fetch 15% of our foreign exchange with value addition. Rice Exporters Association of Pakistan (Reap) Vice Chairman Chaudhry Samee Ullah urged the Sui Northern Gas Pipelines Limited (SNGPL) authorities to ensure uninterrupted gas supply to rice millers and exporters as the top priority because export ake up a high peetage of ou eoos eeue.4. Soil Erosion

To counter to soil erosion, no mode has been adopted to bring back the fertility to soil after harvesting rice crops leading to the soil becoming infertile. The thickness of fertile layer of soil

in Pakistan is more than 6 inches whereas that of other countries is 4 inches. Despite that, the yield of our soil is lower compared to those of other countries.5. Water issues:

Water wastage is very high in our country. The traditional method of flood irrigation is still in practice throughout the country which wastes almost 50 percent of water. Water is needed for rice production. This wastage of water leads to water logging in some areas, and the other areas being completely deprived of water, affecting the supply of rice.6. Increase in small farmers:

The small farmers are increasing in our country as with succeeding generations, land gets divided. These small farmers are unable to avail their credit facilities to purchase seeds, pesticides, fertilizers because of lack of credibility. Additionally, a large area of land for rice is owned by feudal employing the farmers as workers or tenants. This uncertain situation of occupancy neither creates incentive of work nor does attract capital investment by the farmer or by international investors either.7. Feudal Lords:

The existence of feudal lords and their connections with the leading political parties of Pakistan are a threat as they force up the prices of rice stock by using influence and making sure their stock is sold before that of the small farmers. This is a threat as it negatively affects the small farmers and their supply. The feudal landlords are also in possession f very large land, and because they do not know the ways of farming, much of the land is left to waste.8. Lack of infrastructure in rural areas:

The only means of communication in rural areas is television or radio. Via government expenditure in this sector, programs related to rice sowing, germination and planting can be aired so that the farmers can learn of them. However, these programs would need to be cast in local and regional levels. Lack of guidance is the ai easo of faes akadess. This is because of communication gap between well qualified experts and simple farmers. The experts are unwilling to travel to such areas because of lack of infrastructure. Due to this, the farmers have not learnt the best techniques, which affect their output.9. Economic and Political situation of Pakistan:

The political situation of Pakistan deters foreign investment. Also, this situation causes strikes affecting the output and sales of farmers and their profits. This has led to farmers willing to shift to Bangladesh. Lack of electricity and gas adds to the pressure.

10. Role of Urbanization:

Urbanization is leading to rural farmers shifting to urban areas and moving away from traditional practices such as farming and rice production. This is a threat because Pakistan is an agro based country and our major export revenue comes from there.11. Falling value of the Pakistani rupee and role of Vietnamese currency and prices:

The devaluation of Vietnamese currency may affect the price of rice in international market. Vietnamese rice price is expected to fall as the government has stopped its intervention by fixing a higher price. This will make Vietnam able to compete in the rice market with India and Pakistan due to their lower priced rice.12. No government support:

Lack of government support in the case of provision of subsidies and tax incentives and reduction of duties lead to increased price for rice exporters ultimately increasing their cost of production, lowering profits or leading to higher prices. Other countries, aided by the government can sell internationally at lower prices, again affecting our share in the international market.13. Various duties and taxes imposed:

These pose a threat because duties and taxes increase the cost for farmers, again affecting their profits and the prices rice is sold and exported at, giving way for internationally competitors to sweep the market share.

PORTERS DIAMOND MODELPotes Diaod Model helps us udestad the positio of a atio ith egad to gloal competition. According to Porter productivity is the major contributing factor to competitieess hih i tu helps to ipoe a atios stadad of liig. The odel suggests that there are some basic reasons why some nations and some industries within particular nations are more competitive than others on a global scale.When we think about the fact that why do nations compete, the first and foremost reason that we need to consider is the standard of living. All nations compete essentially to increase their standard of living. An increased standard of living makes sure that the citizens of any country have factors such as widespread education, access to health facilities and employment opportunities amongst many others.Potes Diaod Model fo the opaatie adatage of atios osists of fou aiattributes which shape the national environment in which domestic firms compete.

1. Factor Conditions:These include factors such as skilled workforce, technological advancements, natural resources etc.2. Demand Conditions:These conditions describe the nature of the demand of the local market with respect to the foreign demand.3. Related and Supporting Industries:Local competition between related and supporting industries creates innovations and cost effectiveness within the industry which drives up productivity4. Firm Strategy, Structure and Rivalry:This includes how companies are created, organized and managed. In addition to this it talks about the nature and extent of local rivalry.

These four factors promote the competitive advantages of firms, industries and nations. Business leaders can use this model to determine competitive factors and create benchmarks for their firms and industries. Furthermore the model can be used to analyze which countries to invest in and which countries have more potential for development.

ADVANTAGES & DISADVANTAGES OF PORTERS MODEL:The Porter Model has several advantages. They are as follows:

1. It helps a nation or a firm to utilize its resources to the best of its abilities2. It helps a nation or a firm to be competitive3. It helps a nation or a firm to streamline its natural capabilities and improve upon them4. It brings about innovation and technology5. It helps nations build up on their competitive advantage6. It helps to open up nations and firms to global market and opportunities

The disadvantages of the model are as follows:

1. It makes the firms concentrate too much on particular resources2. Diversification is promoted at a much later stage3. Many implications depend on the element of luck4. There is no guarantee that the application of the model will be successful as every nation has a different case.5. The model does not take culture history into account

Potes odel a e applied to atios aoss the gloe poided that the atio concentrates on converting its basic resources into advanced ones. Pakistan can well focus on its agricultural products as it has an advantage here. However the focus should be on making the sector more technology and innovation savvy. Pakistan is still struggling in this aspect.However according to recent research the industry has moved in a positive direction albeit slowly.

THE DIAMOND MODEL FOR THE PAKISTANI RICE INDUSTRYFACTOR CONDITIONSFactor conditions in the diamond model can be categorized under human resources, material resources, knowledge resources, capital resources and infrastructure. According to Porter it is not necessary that these factors are naturally present in a country or inherited. They can develop and change. Factor conditions provide initial advantages to the nation and industry which are then built upon. Each nation has its own particular set of factor conditions hence the development of each nation differs.Pakistan is an agro based economy where rice plays a major role. Rice is a very important crop for Pakistan for several reasons. Firstly, rice is second staple food and contributes more than 2 million tons to our national food requirement. Secondly, rice industry is a significant source of eploet ad ioe fo ual people. Thidl, it otiutes to the outs foeig exchange earnings.Research shows that rice is grown in three stages in Pakistan. The first stage is that the rice is shelled when it is grown. This means that the eatable rice is taken out from the shell and the shell is used as a by-product. Then it is re-processed to remove the bran from the rice making it rough rice. Bran itself is a very useful byproduct. In the third stage the rice is transported to the city and then polished after which it is exported.Pakistan has been blessed with abundant natural resources that work in its favor where rice production is concerned. These resources allow Pakistan to produce Basmati rice which is one of the finest qualities of rice in the world. It is a non replicable variety and is grown in high quantities in Pakistan due to the fertile Pakistani soil, humid climate and slit forming deltas carrying high level of nutrients to the rice plains. Another high quality breed of rice that is produced in Pakistan is the IRRI rice. This is hybrid rice and it is grown in Pakistan because of its heat and salt tolerance. Rice growing season is fairly long and suitable for cultivating fine aromatic Basmati as well as some IRRI varieties.However limited water availability plays an adversary role to rice production as water is a major component for production. When monsoon rains do come they bring much relief but they also bring floods at time which ended up damaging 400,000 tons of rice paddies in 2011. When rice is harvested it needs a proper storage place which unfortunately is not a concept developed in Pakistan. If the rice is harvested and rainfall occurs then the whole crop is destroyed.Technology is an important fato i todas old. Teholog otiutes heail toadsproductivity and efficiency. In Pakistan the technology, with respect to the rice industry, is not

40as progressed as it should be. Traditional and outdated post harvest practices have resulted in substantial losses of output and quality of Basmati rice. However, big brands in Pakistani rice, like Matco, are trying to solve this problem. Matco recently invested in the most modern agro processing infrastructure that aims to correct the post harvest losses problem in the rice industry. With the collaboration of the new Japanese and American technologies the Sadhoke project of Matco contains the latest technology such as modern paddy dryers, rice parboiling units etc.There is also a transportation issue associated with the rice industry. USA uses cargo trains to taspot ie. Hoee i Pakista tukig is ail used fo taspotig ie although its much cheaper to use trains. Even though train transport will benefit farmers more, it is still not done in Pakistan. Another factor to consider is the law and order conditions of Pakistan. This factor along with rapidly changing governments and their policies can hinder development of any industry, the rice industry included.

Agriculture is the major industry for Pakistan and thus this sector provides employment to a large number of the population. This applies to the rice industry as well thus we can confidently say that the rice industry is highly labor intensive. However just like most other agricultural sectors of Pakistan, the workforce in the rice industry is also largely unskilled. Only workers hired in big rice mills have the appropriate training to function the machines. The workforce is highly underutilized as a lot of potential exists for training and development. However as the ie idust is a lao itesie idust, it is suited to Pakistas high populatio as oe employment is generated through this sector.

As far as investment is concerned, the Pakistan rice industry seems to be an ideal place to attract foreign direct investment. This is because of limited avenues of investment in the global arena. The investment in infrastructure and technology is much needed as both these things are traditional and outdated still in Pakistan. This is contributing to a decrease in the competitiveness of the rice industry of Pakistan. There is huge untapped potential in this sector but millions of dollars are required to modernize this industry.As local demand is easily met rice millers and producers tend to be export oriented because this reaps them higher profits than local markets. Good crop and competitive pricing is expected to increase exports. International competition from India with regard to Basmati rice decreased Pakistani Basmati exports in 2012. Even though Pakistan has better quality rice than India, Idias pootio, aketig ad fiishig is ette hih esults i highe epots. Hoee this competition should be used to further develop the industry so that Pakistan surpasses its competitors.

49DEMAND CONDITIONSDemand conditions are the second element in the diamond model. Porter defines the demand oditios as: The atue of hoe dead fo idusts product or service demand oditios desie the leel of doesti dead that a fi faes. Thus dead oditios depend on not only the quantity of the demand but also the nature or sophistication of demand. Porter points out that the primary source of competition between firms is due to local demand. A high and sophisticated domestic demand drives firms within a nation to have higher productivity and efficiency which further drives these firms to be competitive on a global basis. The nature of local demand also makes domestic firms aware of the new and emerging trends i the i iteatioal akets. It also helps i shapig a fis esposieess toads ue needs.According to Michael Porter, the local demand should be anticipatory of the foreign demand and it should be sophisticated. Competition at local level can lead to national productivity and innovation. It also means that a country can achieve national advantages in an industry or market segment, if the local demand provides clearer and earlier signals of demand trends to domestic suppliers than to foreign competitors. Normally, local markets have a much higher ifluee o a ogaizatio's ailit to eogize ustoes eeds tha foeig akets do.

Pakistan grows high quality rice for local as well as international demand. Rice is a very important crop for Pakistan. It stands second after wheat in crop production in Pakistan and is a staple food for the Pakistani people. Rice is also an important source of foreign exchange ratings. Foreign and local demand for rice is increasing and the rice industry has the potential to produce more so production is expected to expand to 6.3 million tons of milled rice. There are a number of associations such as REAP (Rice Exporters Association of Pakistan) that are promoting Rice industry in the international arena.

Local demand for rice is easily met as production is very high due to favorable edaphic conditions. From all the rice produced In Pakistan only 40% is locally consumed whereas 60% is exported. The domestic demand for rice in Pakistan measured up to be 2.5 million tons in 2012.As far as brands of rice are concerned, there is few branded rice present in the Pakistani market. The three most well know are Falak rice, Guard rice and Mughal rice. However research shows that recently the brand awareness has increased and the consumer base has widened very significantly due to brand promotion in the local markets. This trend is seen in the international market for rice as well.Moreover as we have seen there is little investment in the rice industry but a huge potential for development exists. Recently only there have been investments in modern agro processing

infrastructure and technologies which will result in higher quality rice to be produced which is now being demanded locally. It will also lead to reduced post harvest losses. When we interviewed Mr. Naveed from Engro, he even stated that the reason Engro entered the Basmati rice industry is because they saw huge potential in the industry and a huge gap where there were not many known firms present for trading. He stated that there is a need for more big firms in the industry because investment is desperately needed.Initially after the rice industry was privatized, the competition used to be on price rather than quality. However, now a shift is seen in the local market towards quality. Now buyers in the local as well as international markets are demanding high quality rice. Demand for parboiled rice is also increasing day by day due to its nutritional value and high quality. Furthermore, the price of rice in the local market has increased despite higher production. This is because there has been an increase in the cost of cultivation as well as strong local demand for high quality rice.The demand for rice is also affected by the way our consumers market is segmented. According to buying power of consumers, the market for rice can be divided into three broad groups.These are:

1. Lower Income groups: This segment is the major market of broken rice and IRRI rice2. Middle income group: This segment purchases good quality rice which is polished rice as well as semi-polished rice3. Upper income group: This segment prefers to buy high quality branded rice

Furthermo