Corporate farming risks

Corporate farming risks

With the continued flight of capital, the foreign investment has gone all-time low in Pakistan because of rising Taliban insurgency coupled with alleged corruption and misgovernance in the country.

By Javed Rana (Dateline Islamabad)

Published: Mon 25 Feb 2013, 9:26 PM

Last updated: Sat 4 Apr 2015, 9:13 AM

For understandable reasons, the policy makers in Islamabad are desperate to attract foreign investment. Therefore, the government is offering extra ordinary concessions and tax exemptions to foreign investors with dreamy promises of their return on investment, something may not necessarily materialise in the long run in all desired areas for foreign investment particularly in corporate farming sector.

The official corporate farming policy envisages to lease or sell agricultural land to multinational companies and friendly countries to bring much-needed foreign investment and also modernise the agricultural sector through technological advancement in an effort to enhance the crop yield.

Up to 100% foreign equity

The official policy on the corporate farming offers from 60 per cent to 100 per cent foreign equity on case-to-case basis. With the remittance of 100 per cent capital, the profits and dividends are allowed. Both local and foreign companies legally registered in Pakistan, will be allowed to have no upper ceiling on landholding. The state land can be bought, or leased for 50 years through an open auction, extendable for another 49 years.

All banks and financial institutions would provide separate credit share for corporate farming and Pakistan’s labour laws may not be applicable on multinational companies investing in the corporate farming. The policy on corporate farming was initiated by Gen Pervez Musharraf government in June 2002. The sitting regime pursued the same policy, but came up with more generous offers to allocate six million acres of land to developed countries and multinational companies. Alone last month as many as 18 foreign companies registered themselves with Security Exchange Commission of Pakistan. The government is offering land to potential Gulf investors mainly from Saudi Arabia and the UAE, which spend lot of money on importing food staple. The local media reports that some private companies in partnership with Gulf states are purchasing land in Balochistan near Mirani Dam to begin mechanised farming. Many other companies from the Middle East are negotiating with the Sind government to acquire land in districts of Jamshoro, Shikarpur, Larkana and Sukkur. In Punjab, they want to invest in Mianwali, Sargodha, Khushab, Jhang and Faisalabad.

The government’s eagerness for investment to develop agricultural infrastructure, enhance crop productivity and create more job opportunities in the rural areas to bring the ailing economy back on track, is not entirely free of pitfalls. To begin with, in theory, there seems no major hurdle in implementing the investment policy on corporate farming.

But given the peculiar economic, social and political conditions in Pakistan, the ambitious initiative may backfire sooner or later if it is not rationalised to tune itself with the ground realities prevailing in Pakistan. Here is why!

Dissenting voices

A consensus seems to be emerging among major stakeholders involving farmers, their countrywide network of representative organisations and civil right activists to oppose corporate farming policy in its existing shape. There are growing apprehensions that the corporate farming will lead to the displacement of small farmers who by average hold less than two hectares of land or landless altogether. Ultimately, they would be forced to compete with a highly organised and capital-intensive corporate sector and therefore, they may be forced to sell off their land to private companies.

Not long ago, there have been protests against the government policy to invite foreign investors by giving them the legal right to take 100 per cent of their yield back to their home. There have been threats by organisations representing farmers to multinational companies. These can no longer be ignored given an increasing uncertain social and economic conditions in Pakistan.

Growing food insecurity

In Food Security Risk Index of 148 countries, Pakistan stands at 11th position. This glaring reality is also reflected in National Nutrition Survey of 2011 of government of Pakistan. The survey reveals that 58 per cent Pakistanis are food insecure while around 30 per cent among them suffer from acute symptoms of hunger. The survey says that 72 per cent people in southern Sindh province are the most food deprived. And so is the case with 63 per cent of people in southwestern Baluchistan province. The survey reports that the most of families in Pakistan spend almost half of their income on food. And the poorest 20 per cent of the population earn hardly 6.2 per cent of the country’s total income. Coincidently, there is greater size of population with symptoms of food insecurity in south regions where government wants friendly countries and multinational companies to invest in corporate farming.

Pakistan’s population is likely to reach from existing 180 to 250 million by 2030. The country is already infested with energy crises and growing incidents of violence. Many forecast food riots if the economy is not brought back on the track. In a country where people are prone to readily believe in conspiracy theories, much of the bucks of food crises would be passed onto countries and multinational companies for taking 100 per cent yield to the destinations of their origin. And perhaps these were reasons that there were proposals under consideration by the government in the past to recruit a force of 100,000 personnel to provide security to multinational companies engaged in corporate farming. An estimated 75 per cent households in Pakistan are landless and there is growing demand in Pakistan for abolishing the big landholdings through reforms — something that directly comes in clash with corporate farming policy. Given the uncertainty prevailing in Pakistan, investment in corporate farming is indeed a risky venture to undertake.

Neutralise dissenting voices

The chain of representations of farming community is countrywide. They have the potential to gain more influence in power circles in a situation when the networks of over 50 private news channels and hundreds of newspapers are fiercely getting independent and dictating the agenda of the governments one after another. Therefore, their concerns can no longer be brushed aside. And these stakeholders have suggested a way out. They want foreign investors to directly sign agreements with individual owners giving them legal guarantees to allow them to retain the ownership of their lanwd and an appropriate annual share in the profits.The lease agreements should not go beyond 20 years to help farmers to learn about the latest techniques to increase their yield and labour laws should be strictly enforced to protect the rights of labourers.

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