Russian ban on Pakistan Agri-Products2013.

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2013-Russian Ban on Pakistan’s Agriculture Products – Causes and

Consequences

Tabassum Naveed MSc I.R. 3rd

Sunday, October 27, 2013

Thursday, October 03, 2013

Ban on import from Oct 1, 2013 by Russian authorities

Pakistan likely to face

$160-$170m loss in fruit, vegetable exports

By Tanveer Sher

KARACHI: Pakistan is likely to face $160 to $170 million worth loss of fruits and vegetables export

orders during the current year from Russian exporters following rejection of a request of the Pakistani

government.

Violation of quarantine rules by Pakistani exporters

Russia places ban on agri imports from

Pakistan By Tanveer Sher

KARACHI: Russian government has placed temporary

ban on import of Pakistani agriculture products

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Wednesday, November 02, 2013

Sequence of Presentation

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Statement of ProblemAgricultural products constitute 21% of total exports of Pakistan. However international quality control regime is impeding sustained growth of Pakistan's exports. The ban by Russian government on Pakistan’s agricultural exports posed a serious threat to economy. The situation warrants in-depth study of causes of ban, analysis of situation and suggesting response strategy. 6

Pakistan Agriculture PotentialPakistan has rich agriculture potential which constitutes the largest sector of county’s economy. It accounts for 21 % of GDP and is a primary source of raw material to downstream industry and therefore contributes substantially to Pakistan’s exports besides absorbing more than 40 % of employment. The exports of agriculture products all around the world fetches over 625 million US dollars of foreign exchange.

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Pakistan’s Agro Export Potential• 21 % of GDP• 40 % Employment• Exports earn over 625

million USD

8(Source: Pakistan Bureau of Statistics)

Pakistan Agriculture Potential

Billion US$Balance of Trade

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 -

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

19.05 17.69 19.29

24.81 23.62 24.52

39.97

34.82 34.71

40.41

44.91 44.95 Exports Imports

9(Source: Pakistan Bureau of Statistics)

Agriculture Export Destinations

24%

17%

15%

14%

8%

7%5%

USA

China

UAE

Afghanistan

UK

Germany

Bangladesh

(Source: Pakistan Bureau of Statistics)

• Pakistan and Russia had some minor trade disputes in the past including;

• Reluctance on part of Russia to sign FTA(Free Trade Agreement)/PTA(Preferential Trade Agreement) as Russia earlier committed to sign PTA, proposed by Government of Pakistan after signing WTO but later it declined on the pretext that it has already entered into Customs Union with Kazakhstan and Belarus.

• Pakistan and Russian sides have long persisting overlapping claims against each other and in the same context National Bank of Pakistan on the instructions of government of Pakistan had to freeze $14 million account owed to Russian state corporations.

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Pak-Russia Trade Relations

Pakistan – RussiaMajor Imports/ Exports

S# Imports1 Iron2 Paper3 Crude Rubber4 Non Ferrous metals5 Wheat6 Corriander Seed7 Paper Board8 Steel manufacturers

S# Exports1 Cotton2 Fruits3 Vegetables4 Rice5 Finished Leather Goods6 Sports goods7 Surgical Items8 Cutlery

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Exports Flow to Russia

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-120

20

40

60

80

100

120

140

160

180

200

52.4

83.498.6

105.7119.2

183.5 189.6US $ in Millions

13(Source: Pakistan Bureau of Statistics)

Ban History• In year 2007, Russian government imposed

first ban on Pakistan’s agro products on account of Quarantine (it is a regime preventing intrusion of diseases from other countries) issues which was lifted on Nov 2007, a MUTUAL COOPERATION PROCEDURE AGREEMENT was signed between Russia and Pakistan assured to make full compliance to the Russian and international quality standards.

Recent Ban The ban was imposed after a series of

unattended complaints regarding presence of quarantine items in rice and golden nematode in potatoes.

Since 2008, 4 major complaints were sent to the Ministry of National Food Security & Research in which Russian government showed serious concerns.

Feb 2012 Russia's Federal Service for Veterinary and Phytosanitary Surveillance (FSVPS) wrote letter to Pakistani authority to express their enxiety over presence of nematode in potatoes and likely quarantine objects in citrus products.

An alarming aspect was that most of the potatoes consignments which were found infected had the certification by Department of Plant Protection, a subsidiary of Ministry of National Food Security & Research.

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Warning Letter by FSVPS Potatoes’ consignment

had golden nematode which is detrimental for Russian market

Referred to four unattended complaint letters sent in year 2008, 2009, 2010 & 2011

In September 2013, FSVPS placed a notice on its website regarding imposing ban on Pakistani agro products w.e.f 1st October, 2013 which went unnoticed1st October, 2013 - Department of Federal Service for Veterinary & Phytosanitary Surveillance (FSVPS), Russia imposed ban on Pakistan’s agricultural productsBan was attributed to violations of international and Russian Quarantine & Phytosanitary Regulations on rice and potatoes

Ban ompopsed on all agricultural products

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Analysis of SituationRussian market is perceived to have a huge potential for

Pakistani exports particularly fruits and vegetables

Pakistani kinos are on high demand in Russia and being used for making juices as

mix content with Vodka drinks.

The ban caused loss of approx. $ 55 million for Kinos and $ 24 million for potatoes.

The ban imposed on all agro items, overall it deprived off Pakistan from 160-170 million

US dollars foreign exchange.

Processed Food & Meat exports sectors will remain untapped 18

• Ministry of Commerce in the case under consideration, miserably failed to play any worthwhile role instead it confined itself to an isolation and left the matter into the hands of Ministry of National Food Security & Research. Its role was in total contrivance to one of the cardinals of its marketing mandate i.e. collection of better commercial intelligence. In the case under consideration, the INTELLIGENCE KNOCKED AT THEIR DOOR BUT MINISTRY KEPT ITS EYES SHUT.

• Phytosanitary and Quarantine issues have assumed prime significance in international trade spectrum. Unfortunately, In Pakistan no tangible efforts are seen on ground despite prospects of capitalizing foreign funding. A Lab has been established at Karachi but failed to implement second phase i.e. hiring human resource.

• Certification of products without due processing exposes weak regulatory framework which invited embarrassment at international forum.

Analysis of Situation

Russian authorities are quite strict on quality control standards.2012, Similar kind of ban was imposed on India due

to presence of pest in rice and oil seeds. Indian government reacted very fast and sent two members delegation to Russia on 9th day of receiving complaints and managed to resolve it in 4 months’ time. They also invited Russian delegation to India and arranged inspection to the cultivation sites and assured full compliance. Likewise they didn’t let the ban to be imposed on any other item which had no symptoms of contamination.

Russian Trade Attitude

RSVPS issued a warning to Netherlands on presence of quarantine objects on food items which was immediately addressed by up gradation of their quality standards in line with Russian standards. Netherlands Ambassador took keen interest in the matter and managed it in 45 days.

Competators in Russian Market• Egypt, Morocco, Spain, Israel, Holland,India and

France. • They will definitely grab Pakistan’s market share due

to the void created on account of ban.• Russia, Kazakhstan and Belarus are signatories’ to

Customs Union. On occasions, the consignment destines to Russia, reaches at Belarus from where it is transported to Russia by road while a portion of it, consumed in local market as well. It is quite likely that Belarus and Kazakhstan may also follow the suit and our Government end up in loosing additional 12 million US dollars per annum.

Consequences

Since the ban attributes to health reasons, it has a social dimension as well. It may shatter the confidence of consumers in those markets. Once an agro-product is labeled for being contaminated, the consumers may not like to prefer it if alternative option is available.

Apart from international trade perspective, the ban has serious domestic implications. Thousands of people employed in agro-sector and export industry may lose their jobs which may increase the poverty and ultimately lead to rise of crimes.

Closure of international market means more supply in local market and hence price would drop significantly due to which farmers will suffer.

Recommendations

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Bilateral Dialogue - Inviting Russian Delegation

Inquiry to be conducted by Ministry of National Food Security & Research against

fake Phytosanitary Certificates

Capacity Building of Quarantine and Phytosanitary Establishments and

installation / Implementation of Weeboc system.

Pakistan- Russia Business Forum be Re-activated

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