Marketing of Fruits Under WTO Regime
by Dr. M. Sharif and Burhan Ahmad, Social Sciences Institute, NARC Islamabad
Published in "The News" Rawalpindi / Islamabad, Lahore and Karachi on August 29, 2005
Pakistan's economy has undergone considerable diversification over the years, yet agriculture is the largest sector of the economy. This sector contributes 23 per cent to GDP and employs 42 per cent of total labour force. Most importantly, 67.5 per cent of country's population living in rural areas is directly or indirectly dependent on agriculture for their livelihood. It is also the largest source of foreign exchange earnings by serving as the base sector for the country's major industries like textiles & sugar, and also contributes to growth by providing raw materials as well as being a market for industrial products. Fruits are a vital part of Pakistan's agricultural exports. Large areas of Pakistan are blessed with an agricultural and ecological environment conducive to the production of nearly 30 types of fruits of which citrus, mango, apple, dates, grapes, banana, melons and guava etc. are relatively more common. Among all the fruits, citrus area, production and exports are at the top. About 95 per cent of the citrus area is located in the Punjab. The area under total fruits is 651.8 thousand hectares with a total production and export of 5741.7 thousand tonnes and 6403.2 million rupees respectively.
Of the total area under fruits, 29.55 per cent is under citrus and 60 per cent of it is under kinnow with more than 75 per cent production of total citrus fruits in the country. Under citrus fruits, kinnow area, production and exports are at the top. More than 90 per cent of citrus exports are those of kinnow. Pakistan is among the top ten kinnow (hybrid mandarin) producing and exporting countries. Other major producing and exporting countries of hybrid mandarin are China, Spain, Italy, Morocco, Turkey and United States of America etc.
Our production capacity is 1.28 million tons per season. There are about 28 kinnow processing plants with a processing capacity of 5-10 metric tons per hour, located at Sargodha and Karachi.
Citrus also significantly contributes to employment generation through various activities from production to harvesting and domestic and international marketing. Assuming that all the kinnow produced in the Punjab is domestically marketed, the employment generated from kinnow production and marketing is estimated at about 23.48 million labour days or full time jobs for more than 75 thousand people (about 57 million labour days in production and remaining in marketing sectors).
Kinnow is a hybrid of two citrus cultivars; "King" and "Willow Leaf" and is classified as kinnow mandarin. It was introduced from California to the Punjab Agricultural College and Research Institute, Lyallpur (now University of Agriculture, Faisalabad) in the sub-continent in 1943-44. This "easy peal" citrus has assumed special economic importance and export demand being acknowledged for its high juice content, special flavour, delicious taste and as a rich source of vitamin-C. In per capita terms, the annual availability of citrus is nearly 12.5 kg of which kinnow makes up about 8 kg. A consumption of 8 kg per capita implies the availability of 1206 milligrams of vitamin-c, 1520 milligrams of calcium, 684 milligrams of phosphorous and nearly 16 milligrams of iron, per head during the citrus production season. In the citrus production season, kinnow consumption can make a significant contribution to improve human diet in terms of total micronutrients intake.
Most of the target export markets of Pakistani kinnow are those of developing countries. Only 2.6 per cent of kinnow exports target markets of developed countries, which is due to the emerging demand for seedless kinnow by the developed countries. About 61 per cent of total world exports of oranges and mandarins are of seedless varieties. Unfortunately, Pakistan is not producing seedless kinnow, due to which its target markets are limited and mostly confined to Middle East countries. Some important export markers of kinnow in the world are: Bahrain, Dubai, Kuwait, Oman, Qatar, Saudi Arabia, Indonesia, Malaysia, Afghanistan, Netherlands, Philippines, Singapore, U.K., Vietnam, etc. There is a great need to concentrate in the area of technological improvement like tissue culture technique and genetic engineering, to enhance the production of seedless kinnow, so that we may compete under the WTO regime. Furthermore, our production and export of kinnow have been increased overtime only due to increase in acreage and not due to improvement in technology. Therefore, we should also develop high yielding and disease resistant varieties through technological improvement.
Domestically, they use limited and expensive refrigerated transport facilities, costly packing material of good quality and other inputs needed in citrus processing, and non-availability of credit on easy terms and conditions. All these limitations result in the increased cost of production and also adversely affect quality. The inability of Pakistan's citrus fruit to compete in the expensive markets of the world is due to the unavailability of infrastructure like hi-tech labs for issuing various certificates for health and environmental safety. It is also due to the divergent paths of our citrus with the tastes and preferences of high-price markets. All these factors result in confining our exports to cheaper markets of the world.
Marketing practices are not performed on a scientific basis; that is, the requirement of agreement on application of Sanitary and Phytosanitary (SPS) measures of WTO. Due to its implementation our kinnow exports were rejected in the past because kinnow was packed into wooden boxes, which are prohibited under SPS because they may carry pathogen (pests) across the border. Complaints of pesticide residue are also reported. The SPS agreement is a threat for developing countries like Pakistan because they so far do not have enough modern technology to meet SPS requirements fully. They also do not possess enough resources to import these technologies.
Increasing exports of agricultural products and simultaneously minimising the import of agricultural-based products are some of the objectives of Pakistan's agricultural policy. The WTO has placed numerous challenges as well as created opportunities for Pakistan's agriculture. In the international trade arena, the issues of marketing with established quality and standards have become more pronounced and complicated. Pakistan must prepare itself to make progress in all sub-sectors in order to compete internationally. Hence, urgent efforts are needed to improve international competitiveness by introducing cost effective production technologies. The WTO regulations can become an opportunity for the citrus exporters, provided they prepare themselves to comply with the specifications needed. The policy support from the government is also equally important in this respect. Studies in Bangladesh and Sri Lanka show that the initial costs of compliance with SPS measures are quite high, but once the infrastructure is established, the return will be much higher than the costs incurred. Pakistan has to make necessary investment to comply with the export requirements under WTO; otherwise it is quite likely that we may lose our existing markets. Therefore, well co-ordinated efforts among research departments, the Export Promotion Bureau and exporters are needed to achieve the potential by exporting good quality fruit at high prices by providing all necessary certifications. It is suggested that in Sargodha, citrus exports zone may be established where all necessary infrastructure like cold stores, refrigerated transport, financial institution, SPS certify laboratories, marketing information analysis department, etc. are available.
Analysis on whether citrus growers of the Punjab were protected or not through the trade and pricing policies revealed that the kinnow producers were marginally unprotected. Hence, there are good possibilities of substantial gains from free trade, provided the infrastructure related to the WTO requirements is provided in the area on priority basis. The resource cost ratio (RCR) analysis revealed that kinnow producers of the study area (Sargodha district) are economically efficient from society's point of view. This means that with the freeing up of trade and removing distortions in the domestics markets, effective incentives for citrus cultivation would substantially increase. Therefore, it can be concluded that farmers in the Punjab have a comparative advantage of producing world-class citrus fruit for export as in the past they were unprotected from trade and pricing policies of the government. The only concern is the provision of necessary infrastructure needed for international trade in the WTO perspective.
We have a comparative advantage in terms of kinnow prices. Our kinnow export price is less than the average international mandarin price and lower than that in major mandarin exporting countries. According to some FAO studies, it is expected that prices of fruits and vegetables will rise in future, that is, the incentive for kinnow producers to grow and to raise its exports. The need of the hour is that we should adopt new technology to meet international requirements. We should produce seedless citrus varieties; adopt scientific techniques to perform various marketing activities and to reduce post harvest losses, in order to line with international competitive marketing systems.
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