INDUSTRY AND SECTOR ANALYSES/STUDIES

During 2006-07 CSF initiated industry studies that led to concrete recommendations which will be taken forwards during 2007-08. These studies were:

• Automotive Sector

o Policy Analysis on the Competitive Advantage of the Motorcycle
Industry (accomplished) (Click here to Download the Study)
o Policy Analysis on the Competitive advantage of the Automotive
Vendor Industry (in progress)

• Agriculture and Fisheries Sector

o Action Plan for Fish Quality and Value Adding at Karachi Fisheries Harbor
o CSF also completed Policy Study entitled “Policy Analysis on the Competitive Advantage of the Food Processing Industry”.(Click here to Download the Study)
oAction Plan for the Horticulture Industry.(Click here to Download the Action Plan)

• Action Plan for the Meat Industry

The Mechanism to carry out Policy Analysis and selection of the expert.

Automotive Sector

Policy Analysis of the Motorcycle Industry in Pakistan

The study was accomplished with the following recommendations.

1. Identified two major obstacles to be removed:
   1. Provide bank financing for purchase of motorcycles as it is available for automobiles, three wheelers, trucks etc to increase domestic market.
   2. Give R&D support of 15% of the free-on-board (FOB) cost per motorcycle unit imported which includes the tax already paid by the importers to promote and increase export.
      
2. Outcomes:
   1. Will increase the motorcycles market from existing 750,000 units p.a to 1.7 million units by 2010-11.
   2. Promote 100,000 units export annually.
   3. Additional 500,000 jobs will be created by 2010-11 due to increase in the market size.
   4. Approximately an additional Rs. 40 billion will be generated as government revenue.

Action Plan for Fish Quality and Value Adding at Karachi Fisheries Harbor

The Study has been accomplished with the following recommendations:

Outcomes:

•  A resulting annual increase in the value of catch of US$ 35 million will occur through the improvement in quality, access to better market prices and reduction of trash fish used for animal feed at loss-making prices.

•  A loss of US$ 60 million annually in exports to Europe (30% of value of exports) will be restored by reinstating EU listings for fish processors.

During 2007-08 CSF will carry forward discussions with the Government of Sindh (the current owner and operator of the KFH) and and the Ministry of Food, Agriculture and Livestock. Based on agreements between GoS and the national Government of Pakistan , CSF will assist in the implementation of the proposed recommendations.

Policy Analysis on the Competitive Advantage of the Food Processing Industry

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 especially in the cities. The list of sub-sectors includes beverages, dairy, fruits and vegetables (horticulture), 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 why Pakistan should develop a competitive food processing industry.

While the Study is on-going certain findings and recommendations have been presented informally to CSF and the Ministry of Finance. These include:

The global approach to food processing is demand driven and focuses on quality, safety and consumer health; in contrast Pakistan 's industry is comprised of very many micro-enterprises and SMEs that are based on the availability of raw materials and pay little attention to quality, hygiene or safety.

The effective demand for manufactured food products (processed and packaged) is limited, while most people consume low-cost energy foods

Value chain losses in post-harvest processing are considerable, probably running into hundreds of millions of dollars. One reason is that the supply and cost of raw materials and inputs in Pakistan is higher than in competing countries.

Based on these findings, CSF will develop a series of specific sector-based recommendations relating to interventions in the area of post-harvest handling (e.g., the use of cool chains in horticulture and dairy) and the development of a food quality inspection process that will assist manufacturers in up-grading factory facilities, process equipment and packaging/label design in order to improve quality and add value.

Action Plan for the Horticulture Industry

An Action Plan for the Government of Pakistan’s approach to the horticulture industry was developed by CSF. It is based on work undertaken in the context of an overall Study of the Competitive Advantage of the Food Industry undertaken by the CSF. A written background document was supported by an MS PowerPoint presentation of the Action Plan. The proposed Action Plan is based on the finding that many agencies are involved in the industry and that much good work is already being undertaken. However there may be a duplication of effort. GOP resources may not be used efficiently. Equally, a small effort and more coordination could move the industry past a “tipping point”. Many of the elements are in place that would enable the Pakistan horticulture industry to become a world-class industry if more focused and targeted efforts are made. CSF proposed that that these issues be tackled by a Task Force for Horticulture Competitiveness (TFHC). This taskforce has been created and is now fully operational.

• Click here to Download the Action Plan
  

As a result of the above-mentioned study of the food industry, CSF was asked to undertake more specific work on horticulture, a sub-sector of agriculture accorded national priority by the Government of Pakistan. An Action Plan for the horticulture industry was subsequently developed by the CSF in close consultation with MinFAL and other stakeholders in May and June 2007.

The Action Plan proposed a Task Force chaired by the Ministry of Finance. The approach is based on the fact that while many agencies and projects are involved in horticulture, there is a duplication of effort. In this case the CSF proposed that that these issues be tackled by a Task Force for Horticulture Finance & Competitiveness (TFHF&C or “the Task Force”). The first meeting of the Task Force was held on the 12th July 2007.

The lackluster performance of the horticulture industry in Pakistan is due to a multitude of factors. According to expert agronomists, there is not one single aspect of the horticulture industry in Pakistan that is undertaken properly. CSF brought these to the attention of the Government of Pakistan which has emphasized the need for swift corrective action.

The overarching goal of the Task Force is to establish a world-class horticulture industry in Pakistan. Its aim is to provide guidance for restructuring the finance, management and organization of the industry on a nationwide basis. Its objectives are (a) to ensure that agreed changes are included in Government policy and in the work plans of the various agencies actively involved in horticulture development, and (b) to facilitate the work of the active agencies, (c) to encourage the private sector and especially the commercial banks to provide the industry with the investment and resources required for success.

The Task Force met for an initial brainstorming meeting on 12th July 2007. The Task Force decided that an Implementation Committee would be formed and chaired by the Secretary, Ministry of Agriculture, Livestock and Fisheries (MinFAL). The Implementation Committee (IC) is chaired by the Secretary of the Ministry of Food, Agriculture and Livestock.

The Task Force requested that the Implementation Committee should establish operational sub-committees that would generate specific action items and work to coordinate the work already being undertaken by government line agencies, projects and the private sector. These sub-committees were to analyze the current situation in the horticulture industry and report back to the Task Force.

The four sub-committees designated by the Implementation Committee met initially as follows:

• Horti-business Finance – 9th August
• Production, Processing and Marketing – 10th August
• Infrastructure – 11th August
• Quality, Standards and Regulations – 20th August

Each sub-committee then met again on two further occasions in early September, completing the work by 12th September when the Implementation Committee met and prepared a report and recommendations.

The recommendations were that there must be a holistic, integrated and coordinated approach based on leadership by key agencies, principally (but not only) MinFAL (NAPHIS), PHDEB, the BOI and the State Bank of Pakistan. It was also emphasized that the private sector (including the commercial banks) has a key role to play in the development of the industry. The Implementation Committee made the following specific recommendations:

Production, processing marketing

• Adopt an integrated and holistic approach to the total management of all sectors of this industry
• Establish priority production “zones” and products for development,
• Provide incentives for investment in post harvest handling and processing,
• Improve human capacity for producing quality products

Quality

• Rationalize and utilize existing Q/C laboratories;
• Set up labs in the production areas,
• Review the laws applying to food standards,
• Coordinate the work of all agencies involved in food health and safety.

Infrastructure

• Develop a GIS for common planning based on facts;
• Undertake an Action Plan for transport interventions;
• Invest in an integrated cool chain including building cold storage/controlled atmosphere at key airports.

Finance

• Develop banking guidelines,
• Undertake a media campaign and a workshop for training bankers to understand the industry.

Institutions

• Establish PHDEB under Section 42 of the Companies Ordinance;
• Empower NAPHIS as an autonomous agency empowered to enforce the law.

Action Plan for the Meat Industry

Following the study entitled “The Competitive Advantage of the Food Processing Industry: Focus on Quality, Safety and Standards”, the CSF was tasked to undertake more specific work on the meat industry. A series of meetings with MINFAL, the Livestock and Dairy Development Board (L&DDB) and the MOF established that development of the meat industry is a critical element in the development of the agricultural economy of Pakistan and the alleviation of poverty . However, whereas much work has been undertaken by various agencies on the dairy sub-sector, little is known about the overall livestock industry and the linkages between live animals, dairy products and meat production. Meat production in particular is an area that has remained largely unexplored and the sub-sector is under-invested. Work on the Action Plan for the Meaty Industry is on-going in September 2007.