PROSPECTS OF VALUE ADDITION IN

HORTICULTURE CROPS

Dr. Babar Ehsan Bajwa

(Chief Operating Officer)
Punjab AgriMarketing Company, Government of the
Punjab

0
Horticulture Potential

• Horticulture is a major economic opportunity with a large global export market (USD
150bn) and fast growth (12% per year). It also has the potential for tremendous social
impact (employment creation and income generation) as well as sustainability (e.g better
economic use of water)
• Pakistan has not captured this opportunity yet, growing slower than the world market (6% vs.
12% per year). It still remains a net importer of horticulture products (-USD 250m)
• The issues of the sector in Pakistan are well recognized (i.e. low land dedicated to
horticulture, low productivity, high losses, low value add) however these are only symptoms of
the issue
• The real problem is that with the current industry structure, Pakistan cannot fulfil the
requirements of the large global buyers who dominate this increasingly sophisticated market.
Specific challenges include the:
– Lack of sophisticated/ professional players
– Lack of integration in the value chain
• The current set of solutions being undertaken in Pakistan focus on piecemeal interventions
which
hi h h
have limited
li it d iimpactt and
d li
limited
it d scalability
l bilit
• The government should facilitate a private-led integrated approach, with 3 specific initiatives:
– Attraction of one key foreign importer
– Development of an integrated pilot contract farming scheme
– Beauty
B t contest
t t for
f public
bli lland
d attribution,
tt ib ti promoting
ti nucleus
l ffarming
i
• If Pakistan does this successfully, it can aspire to have a ~$1 to 1.5 bn export market from the
horticulture sector within the next 5 years
1
Shift to horticulture can lead to a significant growth, income
increase

Growing fruits and vegetables can

Pakistan average size farm is 3.1 ha
help increase income for farmers
Simulated annual turnover (USD)1

100% = 6.6m farms 21m ha 16,800

> 5 ha
14,000

12,200
Average:
86% 3.1 ha per 9x
71% f
farm
8,000

< 5 ha 43%
25% 7,700

Farms Arable land

1,800

For small farmers this is a risky

y move because it requires
q a shift from
subsistence farming to commercial farming which also requires the right
market linkages and access to training and investment
1Simulated revenue = National average yield x Producer price (based on FAOStat) x Average farm size
Source: FAOStat, Agricultural Census 2000, Team analysis 2
Pakistan Missing the Opportunities

• Horticulture is a major economic opportunity with a large global export market (USD 150bn) and
fast growth (12% per year). It also has the potential for tremendous social impact (employment
creation and income g
generation)) as well as sustainability y ((e.g
g better economic use of water))

• Pakistan has not captured this opportunity yet, growing slower than the world market (6%
vs. 12% per year). It still remains a net importer of horticulture products (-USD 250m)
• The issues of the sector in Pakistan are well recognized (i.e. low land dedicated to
horticulture, low productivity, high losses, low value add)

• The real problem is that with the current industry structure, Pakistan cannot fulfil the
requirements of the large global buyers who dominate this increasingly sophisticated market.
Specific challenges include the:
– Lack of sophisticated/ professional players
– Lack of integration in the value chain
• The current set of solutions being undertaken in Pakistan focus on piecemeal interventions
which
hi h h
have limited
li it d iimpactt and
d li
limited
it d scalability
l bilit
• The government should facilitate a private-led integrated approach, with 3 specific initiatives:
– Attraction of one key foreign importer
– Development of an integrated pilot contract farming scheme
– Beauty
B t contest
t t for
f public
bli lland
d attribution,
tt ib ti promoting
ti nucleus
l ffarming
i
• If Pakistan does this successfully, it can aspire to have a ~$1 to 1.5 bn export market from the
horticulture sector within the next 5 years
3
Productivity of the horticulture sector in Pakistan can be further
improved to achieve the highest benchmark levels

Productivity gap vs. benchmarks1

Yield, t/ha Top 3 peer

Fruits Pakistan
18 4
18.4 17.7
15.3
12.7
10.4
7.5

On average,
Pakistan can
Apple Mango Tangerine improve
productivity levels
by 40% on fruits
Vegetables 40.4 and vegetables

25.7 23.3
19 5
19.5
14.0
10.2

Onion Potato Tomato

1 Average of the top quartile of peers ranked by productivity for each item; peer group includes Bangladesh, China, Egypt, India, Indonesia, Kenya, Morocco, Nigeria,
Philippines, Vietnam
SOURCE: FAOStat 4
Significant losses within the horticulture sector

Pakistan losses vs. best practices, %

• Level of losses vary according

Pakistan 30–40 to the nature of the product
– Highly perishable products
2–4 times (e.g. mango, vegetables)
more
– Durable products (e.g. potato,
onions)
• Significant room for improve-
ment with better post-harvest
management (e.g.,
(e g rapid cooling
Best practices 5–15 after harvest, packaging)
• Better varieties and Production
Technology

Source: Interviews 5
Pakistan has not yet fully developed its agro-processing industry

Low transformation rate

Processed food value add as share of total agri
and processed food (%)

Philippines 31

Vietnam 29
Pakistan only
China 19 processes little of
its produce
Morocco 18 compared to
benchmark
Indonesia 14 countries

Bangladesh 9

Pakistan 7

Egypt 7

India 4

Peer average: 14

SOURCE: Global Insight 6

Pakistan fresh products fetch much lower prices than other
exporting countries

Export unit value, $/kg

Fruits Vegetables

Spain 1.8 Morocco 0.4

M
Mangoes Kenya 1.5 P t t
Potatoes Vietnam 0.4
Philippines 1.3 Indonesia 0.3
Indonesia 0.8 Egypt 0.3
Peru 0.8 Bangladesh 0.3
India 0.7 China 0.2
Egypt 0.6 Pakistan 0.2
Pakistan fresh
Pakistan 0.3 India 0.1 produce fetches
lower prices in
international
Tanger- Kenya 1.0 Kenya 0.9
ines Toma-
markets than
India 0.9 Morocco 0.7 other countries
(incl. toes
Kinnow) Morocco 0.7 Indonesia 0.4
Indonesia 0.6 China 0.3
Egypt 0.4 Nigeria 0.3
China 0.4 India 0.3
Philippines 03
0.3 Egypt 03
0.3
Pakistan 0.3 Pakistan 0.2

SOURCE: FAO statistics, 2008 7

Specific Problems

• Horticulture is a major economic opportunity with a large global export market (USD 150bn) and
fast growth (12% per year). It also has the potential for tremendous social impact (employment
creation and income generation) as well as sustainability (e.g better economic use of water)

• Pakistan has not captured this opportunity yet, growing slower than the world market (6% vs.
12% per year). It still remains a net importer of horticulture products (-USD 250m)

• The issues of the sector in Pakistan are well recognized (i.e. low land dedicated to horticulture,
low productivity
productivity, high losses,
losses low value add) however these are only symptoms of the issue

• The problem are

• Lack of sophisticated/ professional players
• Lack of integration in the value chain
• Poor product post harvest management
• Technology

• The current set of solutions being undertaken in Pakistan focus on piecemeal interventions
which have limited impact
p and limited scalability
y

• The government should facilitate a private-led integrated approach, with 3 specific initiatives:
– Attraction of one key foreign importer
– Development of an integrated pilot contract farming scheme
– Beauty contest for public land attribution
attribution, promoting nucleus farming

• If Pakistan does this successfully, it can aspire to have a ~$1 to 1.5 bn export market from the
horticulture sector within the next 5 years
8
Pakistan has large traditional marketing structure which does not
link with product differentiation, quality and safety

9
With the current industry structure, Pakistan cannot fulfil the
requirements of these large global players

Pakistan industry structure

Agro-processing
Producer Intermediary
Exporter
• Fragmented • Fragmented • Limited agro-
subscale farmers intermediaries with processing with
short term/ sourcing issues Need to address
trader mindset industry structure to
• Absentee large break the current
landowners • Fragmented
exporters
t with
ith lilimited
it d vicious circle and
sophistication attract investment in
the sector
No value chain integration

Vicious circle: low investment – low

productivity/ quality – low profitability

10
Horticulture is no more just farming, its an industry!

New countries are competing

Customers are more demanding aggressively
• Certification • Development of very
Safety according to aggressive horticulture
standards (e
(e.g.,
g powerhouses over the last
CAC; SPS; Private Being successful decade in countries such as
Standards) as a nation in the China, Kenya, Turkey
• Importance of horticulture sector • Countries have developed
appearance, requires increased good
d relationships
l ti hi with
ith llarge
Quality
packaging and taste investment and buyers, who have invested
sophistication heavily in those countries

• Consistently high
Volumes volumes with timely
delivery

Source: Bajwa BE 2009. International Compliance Issues for Horticulture Commodities. 11

What needs to be done

• Horticulture is a major economic opportunity with a large global export market (USD 150bn) and
fast growth (12% per year). It also has the potential for tremendous social impact (employment
creation and income generation) as well as sustainability (e.g better economic use of water)

• Pakistan has not captured this opportunity yet, growing slower than the world market (6% vs.
12% per year). It still remains a net importer of horticulture products (-USD 250m)

• The issues of the sector in Pakistan are well recognized (i.e. low land dedicated to horticulture,
low productivity
productivity, high losses,
losses low value add) however these are only symptoms of the issue

• The real problem is that with the current industry structure, Pakistan cannot fulfil the
requirements of the large global buyers who dominate this increasingly sophisticated market.
Specific challenges include the:
– Lack of sophisticated/ professional players
– Lack of integration in the value chain

• The
Th governmentt should
h ld facilitate
f ilit t reforms,
f with
ith 3 specific
ifi initiatives:
i iti ti
– Institutional development
– Marketing & Agribusiness
– Research and Technology Development

• If Pakistan does this successfully, it can aspire to have a ~$1 to 1.5 bn export market from the
horticulture sector within the next 5 years
12
The Options for Value Addition!

13
The Chain Integration !!! (Three to Five Years)

DEPLOYMENT
INDUSTRY
INVESTMENTS

N
T IO
OD ET
TR RK
UC
IN MA

Working Draft - Last Mod

PUBLIC
PRIVATE
PARTNERSHIPS

dified 6/10/2008 7:56:05 AM

- Institution Reforms
T
MN
LO CT

- Market Reform
VE DU
PE
DE PRO

- Technology
T h l Ch
Change
- Entrepreneurship
UNIVERSITY - Model CRC’s
RESEARCH
BASIC+APPLIED

14
As part of this integration strategy, the private sector will make
investments in all parts of the value chain
NON EXHAUSTIVE
Typical
Technology needed Investment Expected impact

• Greenhouse (e.g. walk-in, low tunnel) • PKR 80,000/ha • Higher productivity

P d ti
Production • Modern irrigation (e.g.
(e g sprinkler,
sprinkler drip) for greenhouse • Off-season
Off season
• Enhanced seeds • PKR 100,000/ha production possible
• Adequate fertilizer additional for
inputs
• Cooling stations at production site • PKR 300
300-400k
400k • Higher quality
• Cold storage at packing sites for a 20’ reefer • Lesser losses
Cool chain

Working Draft - Last Mod

• Cool chain for transportation (e.g. reefer, (possible rental)
controlled atmosphere)

• Irradiation facility for e.g.

e g USA • Access to higher-
higher

dified 6/10/2008 7:56:05 AM

Export • Vapor heat treatment facility for e.g. • PKR 100-200m end more profitable
treatment for irradiation
Japan markets
facility
• Hot water dip for e.g. China

• Processing, washing, waxing, grading, • PKR 8m for a • Higher price fetched

Processing citrus processing
de-greening equipment
Packaging unit (8T/ha)
• Packaging and branding

• R&D Investments are a key to success

• Good Incentives to be given for Applied R&D

Source: Prefeasibility studies (SMEDA, PHDEC), Interviews, Web Search, Team analysis 15
Conclusion/Recommendations

• Horticulture is a major economic opportunity with a large global export market (USD 150bn) and
fast growth (12% per year). It also has the potential for tremendous social impact (employment
creation and income generation) as well as sustainability (e.g better economic use of water)

• Pakistan has not captured this opportunity yet, growing slower than the world market (6% vs.
12% per year). It still remains a net importer of horticulture products (-USD 250m)
• The issues of the sector in Pakistan are well recognized (i.e. low land dedicated to horticulture,
low productivity, high losses, low value add) however these are only symptoms of the issue

Working Draft - Last Mod

• The real problem is that with the current industry structure, Pakistan cannot fulfil the
requirements of the large global buyers who dominate this increasingly sophisticated market.

dified 6/10/2008 7:56:05 AM

Specific challenges include the:
– Lack of sophisticated/ professional players
– Lack of integration in the value chain
• The current set of solutions being undertaken in Pakistan focus on piecemeal interventions which
h
have lilimited
it d iimpactt and
d lilimited
it d scalability
l bilit
• The government should facilitate a private-led integrated approach, with 3 specific initiatives:
– Attraction of one key foreign importer for fruits
– Development of an integrated pilot contract farming scheme for vegetables
– Beauty
B t contest
t t for
f public
bli lland
d attribution,
tt ib ti promoting
ti nucleus
l ffarming
i
• If Pakistan can manage the value additions successfully, sky is the limit; Country may
bring in ~$2 to 2.5 bn foreign exchange from the horticulture sector within the next 3 years
16
Some Examples-PAMCO Introduces Farmer Markets in Pakistan

Working Draft - Last Mod

dified 6/10/2008 7:56:05 AM
17
References

 ADB 2009.
2009 Asian
A i Development
D l t Bank,
B k Steering
St i Committee
C itt Presentation
P t ti for
f the
th Establishment
E t bli h t off National
N ti l
Trade Corridor Improvement Programme.
 Bajwa BE 2009. International Compliance Issues for Horticulture Commodities. Pakistan Horticulture
Development and Export Company, Ministry of Commerce, Pakistan.
 Bajwa B.E, F.M Anjum and U.A Bajwa 2011. Kinnow Mandarin: Postharvest Management of Kinnow
Mandarin to Extend Shelflife. Lambart Academic Publishing, France.
 Bajwa B.E & F.M Anjum. 2007. Improving storage performance of Citrus reticulata Blanco mandarins by
controlling some physiological disorders. Int J Food Sci Technol. 42: 459-501. Blackwell Publishing,
London
London.

Working Draft - Last Mod

 FAO 2008. FAO STAT; Food and Agricultural Organization of the United Nations, Rome. Faostat.fao.org
 ITC 2009. International Trade Centre, Trade MAP. www.intracen.org
 Global Insight 2009. Economic and Financial Data. www.globalinsight.com

dified 6/10/2008 7:56:05 AM

 MinFA 2009. Agriculture Statistics of Pakistan. Ministry of Food and Agriculture, Islamabad, Pakistan.
www.minfa.gov.pk
 PHDEC 2009.
2009 Pakistan Horticulture Development & Export Company,
Company Ministry of Commerce
Commerce,
Government of Pakistan. www.phdec.org.pk
 SMEDA 2009. Small and Medium Enterprise Development Authority, Ministry of Industries, Government
of Pakistan. www.semda.org

 ACIAR 2008.
2008 ASLP Mango Quality
Q alit Improvement
Impro ement Workshops.
Workshops AAustralian
stralian Centre for International
Agriculture Research.
 ACIAR 2007. Market Research in China. Australian Centre for International Agriculture Research.
18