Fields of Poverty

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Trade Liberalization and export-oriented, market-based policies in agriculture have fuelled rather than alleviate rural poverty in Pakistan

By Tahir Hasnain

Trade liberalisation under the auspices of World Trade Organisation (WTO) is an important aspect of globalisation. Developing countries are required to abruptly liberalise their trade policies under the WTO regime. Pakistan is a great supporter of trade liberalisation and is among the pioneer members of GATT (General Agreement on Tariff and Trade) and the WTO. At the policy level, Pakistan believes that trade liberalisation (privatisation, deregulation, no tariff protection) will solve all economic ills and eradicate poverty in the country. That's why export driven growth has been the main focus in the last three decades.

The thrust behind the trade policy is evident from a quote by then commerce minister: "We can do it if every Pakistani -- the worker, the farmer, the producer, the exporter, the civil servant, the house wife -- everyone is committed to the cause of exports," the minister said while announcing the trade policy of Pakistan 2000-01.[i]

Pakistan is basically an agricultural country and its economy is mainly agrarian. While Pakistan's gross domestic product (GDP) in 2005 is estimated at approximately $368 billion,[ii] agriculture accounts for about 23 percent of GDP and 9 percent of the country’s export earnings.[iii] Over three-quarters of the population are to be found in rural areas and are dependent mainly on agriculture. According to Labor Force Survey 2001-02, 67 percent of the country’s labor force belongs to rural areas out of which 42 percent is employed in the agriculture sector. Food products constitute 48 percent of household consumption expenditure (39 and 54 percent in urban and rural areas respectively) in the fiscal year (FY) 2002.[iv]

Pakistan has taken the unilateral step of carrying out substantial liberalization of the agriculture sector of course under the advice and conditionalities of International Financial Institutions (IFIs). Speaking at a seminar, former Federal Minister for Food and Agriculture Mr. Yousuf Talpur said the government under pressure from the International Monitory Fund (IMF) and World Bank has withdrawn all kinds of subsidy and even imposed GST on inputs of agriculture which had increase the cost of production, whereas other countries including America and India are continuously subsidizing their agriculture sector.[v] Similarly, the present import tariff level, on average, for farm products is 13.9%. This is towards low side as compared to other South Asian countries; India has an average of 37.2% while that of Bangladesh is 23.4%.[vi]

In addition to tariff reform the Pakistan Government has also been rolling back its intervention in markets for products and inputs by withdrawing the public sector's support on procurement of major crops. Pakistan has recently signed a loan agreement with Asian Development Bank as ‘agriculture reforms programme’ in which Pakistan committed itself to abolishing the support price mechanism for various crops (including wheat and sugarcane), shutting down food departments, downsizing agricultural research institutes and opening up the grain storage sector to private investors in five years time[vii]. This allows prices to be determined by supply and demand in the market. Furthermore, the private sector has also been allowed to participate in the import and export of agricultural products. Thus, Pakistan's domestic prices are becoming more closely aligned with international market prices.

According to an IMF report[viii], the Pakistan government’s current strategy in agriculture is to limit the role of the public sector, transfer management to the private sector, strengthen local capacity, remove policy distortions in factor and output markets, and assist in natural resource management and environmental protection.

Pakistan, without a doubt, has the potential to gain a larger share of the international agriculture trade market in order to grow economically and cope with widespread poverty in the country. It is, however, argued that despite economic reforms and trade liberalisation policies over time, domestic policies have failed to improve domestic supply conditions aimed at promoting agricultural export performance. So far, as a matter of fact, our home is not in order to compete in the free trade regime. WTO affects all walks of life and no one, even the industrialists, is aware and prepared to cope with the challenges it poses. Over time policies have not only failed to boost exports, but have also failed to alleviate poverty in the country. Poverty, unemployment and food insecurity have been rather on the rise for the last two decades.

A study was recently conducted by this writer to look at the implications of export-oriented policies in the agricultural sector and on the lives and livelihoods of rural communities. It was noted with shock that rural poverty is more severe in areas where cash crops are grown, particularly for export purposes. Based on this finding, a field survey was conducted in cotton/wheat and citrus/sugarcane areas to investigate the implications of government policies on the lives of farmers. The situation on ground in both agro-ecological zones confirmed that, with the exception of a few, most of the farmers in these areas have suffered badly at the hands of government policies over time.

The respondents in the survey complained about agricultural policies that had no input from the farming communities. A large number of farmers were reported to be living in absolute poverty and were finding them in a hopeless situation due to enormous social/societal pressures. The situation also confirms that there has been no trickle down effect of government policies and consequently, the rural poverty is increasing at an alarming rate. Given below are the most common problems being faced by the farming communities at the moment:

1. High cost of production: It is alarmingly high at the moment and farmers sometimes get no net return from their harvest. As a result, they invest in agriculture reluctantly that further affect the quality of their produce.

2. Irrigation water: Many farmers depend on diesel-operated tubewells. Due to current high diesel prices, they are failing to continue their agricultural activity. In canal-irrigated areas, farmers at the tail of canals do not receive sufficient water for their crops and, hence, fail to produce good quality crops.

3. Lack of guidance: Nobody is guiding the farmers how to compete in a free market regime. Farmers have no access to the Agriculture Extension Departments in the country these days. Only the representatives of agrochemical companies contact them to market their company products.

4. Debt pressures: Many farmers have resorted to bank loans in order to improve/mechanise their agricultural activity but due to some obvious reasons, they fall into a severe debt trap. Some farmers have sold their farm machinery and agricultural land to clear the debts but many of them are still struggling to pay the instalments. Similarly, due to costly agricultural inputs, poor farmers usually purchase inputs from retailers/middlemen on credit. The payback conditions are so stringent that hardly any farmer makes profit from his harvest.

5. Insecurity in the market: The middlemen exploit small farmers. They have actually reduced the farmers' net returns. Farmers cannot sell their produce bypassing the middlemen who have control over local markets. Farmers thus fail to market their agricultural produce independently.

6. Deteriorating state of food security: Majority of farmers fail to hold back wheat and rice for their family consumption. Due to various pressures, they sell out all their produce after the harvest and then purchase food from market throughout the year. Intensive growth of cash crops has eliminated other food security crops including vegetables. Within the farming households, women and children are more vulnerable to food shortages.

7. Reduction in the income of farming households: This is obviously the outcome of both increased cost of agricultural production and rising living cost. On the one hand, farmers' profit margins have reduced due to high production cost and low/uncertain market prices of their produce. On the other, they have to purchase food from market that eats up most of their earning. Consequently, poor farmers are being marginalised and leaving agricultural activities as well as their villages.

8. Deteriorating law and order situation: Farmers have complained that lawlessness is on the rise. The only law that prevails is of might is right. Poor farmers and their families feel insecure as the people in power (big landlords and their minions in cahoots with police) violate law and human rights without any fear. Theft of farmers' livestock and other belongings is common while the police, instead of protecting poor people, supports the powerful.

9. Rising tensions: Farmers have confirmed that over time tensions, disputes and court cases have increased which have damaged social fabric of farming communities. With the introduction of high yielding crop varieties and high economic returns in the beginning, farmers have become greedy and isolated from each other. Introduction of farm machinery has also eliminated their joint ventures and cooperative farming. Currently most of their disputes revolve around land rights, water rights and women.

The underlying factor behind these tensions, however, is increased dependence on market and farmer's deteriorating financial condition. Farmers now know about such luxuries as cemented houses, TVs, refrigerators, tractors, and cars/motorcycles but due to increasing social and financial disparities, only few of them can afford to purchase them. All the rest remain tense and curse their fate as well as the state policies for their deprivation. Farmers, who take loans either from banks or retailers/middlemen to buy these things, fall into a debt trap.

10.Growing displacement: This basically answers the question as to why urbanisation is growing at an alarming rate. Agriculture activity for many poor farmers is becoming difficult and unattractive and, consequently, several individuals and families are moving to urban centres. Some of them find jobs abroad, in Gulf States, and have improved the living standard of their family. Many of farmers that are still left in villages are prepared to move. They seem to be waiting only for an appropriate time and opportunities to make the decision.

11. Shrinking space for women farmers: Traditionally, women farmers have been important player in agriculture in order to sustain household's food security and livelihood. Female members of the farming households are losing their involvement in agricultural activities due to heavy use of farm machinery and new farming practices including use of agrochemicals. Due to deteriorating social norms and law and order situation, women farmers cannot find alternate jobs. Most of them have become confined to their homes.

12.Growing hopelessness: Farmers form the majority 70 percent of the population. They may bring a change by exercising their electoral prowess but an acute hopelessness has been found among farming communities because of the fact that they do not have a choice. Only the big landlords or industrialists of their area can contest elections. Villages in this system are controlled in such a way that farmers even cannot decide to boycott elections.

The above analysis gives us a mere glimpse of the ground situation. The exact state of rural poverty is rather more sever, complex and beyond one’s capacity to put that in words. Every Pakistani have certain rights and, in principle, our Government has to assure everyone’s rights i.e. right to basic needs, right to food, right to education, right to health & healthy environment, right to know, right to be heard, right to elect, right to justice, etc. While few urban residents and all the rural elites enjoy such rights, rural poor are totally deprived. Due to inconsistent and biased policies in the country, few among our society have grabbed maximum resources & power rendering the majority population into poverty and social disorder.

In the context of trade liberalization and export-oriented, market-based policies in agriculture, Pakistan lacks consistent and well-consulted policies to boost exports and thereby alleviate poverty as was claimed by the government. The agricultural policies over time have fuelled rather than alleviate rural poverty. These have now started exposing social disparities between those with authority, education, skills, and mobility and those without them. Our experience of trade liberalisation so far is that it has exacerbated social and economic polarisation in our country. Our farming communities, likewise labourers, traders, industrialists and consumers, are being exposed to compete with international giants in the free market without taking them into confidence, making them aware and helping them prepare. In reality, the extremes of affluence, over-consumption and over-production in the rich countries are paralleled by a concentration of poverty, scarcity, and exploitation in our poor communities.

People generally are now more anxious about their living standards and their economic insecurity in the current integrated world economy than they were before. If something is not done about this situation, it may result in severe tension between the market and other sections of the society.

Farming communities, more specially, are precious segment of the society and it is recommended that they should be given due respect in national policies. The Government must realise the rising vulnerability of small farmers under the WTO regime. We should principally protect our farmers not only to produce commodities, but also to eradicate poverty. The recent Government policies of ‘corporate farming’ and ‘import of duty free food products’ are escape tactics and are far from realities. In view of farmer’s pathetic condition given above, these policies will seize whatever breathing space the poor farming communities have at the moment.

        Endnotes

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