CSF to Launch Policy Analysis on the Competitive Aspects of the Food Processing Sector in Pakistan

Islamabad, November 15, 2006: The Competitiveness Support Fund (CSF) is launching a policy analysis on competitive aspects of the food processing sector in Pakistan. The study will identify the potential of the industry for growth through a benchmarking exercise. It will also examine the obstacles and problems that the industry is facing and make recommendations to the government to remove these obstacles to make this sector nationally and internationally competitive. The CSF will work on the study with all the keys stake holders dealing with the sector, including the government agencies, private sector representatives and the educational and research institutions in Pakistan.

The Competitiveness Support Fund (CSF) is a joint initiative of the Ministry of Finance, Government of Pakistan and the United States Agency for International Development (USAID) which is based on international best practices (i.e., India, Thailand, Turkey, Ireland, Finland, etc.) and has been tailored to the current Pakistani economic environment to strengthen and make the private sector more competitive and to improve the policy framework needed for innovation-based competitiveness.

Pakistan is primarily an agricultural country with a high proportion of its population living in rural areas. Agriculture and fisheries provide the raw material for an extensively developed food processing industry that accounts for between 25 and 30 percent of GDP. With a host of sub-sectors it is the largest industry in Pakistan, and it continues to grow as the use of processed food becomes popular, particularly in the cities. The list of sub-sectors includes beverages, dairy, fruits and vegetables, snack foods and cereal-based foods (wheat and rice), meat, confectionery and vegetable oil (including vegetable ghee).

Given its geographic location and natural endowment, there are good reasons that Pakistan should develop a competitive food processing industry. It is ideally located for trade with the Middle-East, China and India. To capitalize on these advantages, the country must focus on the twin aspects of competition: technical innovation, or at least the ability to catch up with and adopt advanced food processing technology, and development of market conditions that encourage investment, both domestic and foreign. In this respect, the success of the Pakistani food industry depends on wider aspects of the economy and of governance.

The food processing sector depends on a highly vertical integrated structure. The study of the competitive advantages of the food processing sector will take into account the entire industry structure and the value chain, including the supply of raw material, its intermediate processing, the core industry itself and the market environment, both domestic and external, along with other essential inputs. It will also examine the structure of key sub-sectors, including a value-chain analysis of primary post-harvest processing through secondary to tertiary processing, comparative costs of production within the value chain, import parity pricing and technical and innovation aspects of individual sub-sectors, including factors affecting adoption of technology. A fundamental aspect of this approach is to understand the basic advantages (or disadvantages) with which the specific industry is endowed.

On the marketing side, the study will look into packaging, eco-labeling, design, distribution and market access. It will also analyze tariff measures (i.e. changes in the tariff structure), particularly in developed countries, which impact on developing country exporters and product pricing and non-tariff measures, e.g. sanitary and phyto-sanitary (SPS) measures, technical barriers to trade (TBTs).

The study will also look into the social aspects of the sector, including labor supply, ethnicity and gender issues. Environmental issues and other major infrastructure and public goods including ports, communications, markets and transportation will be considered.

It is expected that the study would be undertaken to include the cooperation of all the key stakeholders and will identify the potential of the sector for growth through a benchmarking exercise. The study will further give clear policy recommendations to the Government of Pakistan on how industry should be structured and how competition can be fostered by the removal of critical bottlenecks and obstacles to make the sector internally and internationally competitive.

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