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(Last updated: 29 Oct 2008)
Trends and opportunities
The market
Although Pakistan’s agriculture sector has declined as a proportion of GDP over the last 25 years, it still accounts for over 25 per cent of gross domestic product (GDP), employs 44 per cent of the workforce and is the main source of foreign exchange earnings.
Over the last decade growth in the agricultural sector has been an average annual growth rate of 4.4 per cent. The growth rate is subject to large fluctuations, mainly due to:
- Weather
- Pest attacks on crops
- Traditional methods of farming producing low per hectare yields
- Shortage of key inputs
- Adulterated pesticides
- Unstable price market
Wheat accounts for 45.6 per cent of cropland in Pakistan, producing approximately 19 million tonnes, with an additional three million tonnes imported (tightly controlled by government) from sources such as Australia and the USA. The government is making efforts to increase the acreage under wheat cultivation.
Pakistan consumes approximately two million tonnes of edible oils annually and consumption is growing by nine per cent each year. Approximately 0.6 million tonnes is produced locally and 1.4 million tonnes are imported per year. As local production of oilseed is not sufficient to meet demand, there are significant opportunities for Australian suppliers – particularly as bulk shipments.
Pulses are an important part of the Pakistani diet; however, production of pulses has remained stagnant, and even declined, during the last decade. Desi chickpeas are the preferred pulse, although some large-seeded kabuli chickpeas and red lentils, with a medium cotyledon size, are also in demand.
Opportunities
Major agricultural products opportunities for Australian exporters to Pakistan include:
- wheat
- oilseed – cotton, canola, sunflower and soybean
- pulses – chickpea, lentil, mung bean and black gram
- high yielding dairy livestock
- halal beef and goat meat
- animal forage, potato and corn seeds
- modern abbattoir
- dairy products
- tree nuts
In Pakistan there is a significant interest in the development of dairy sector. That had led to successful buyer missions and development of commercial linkages between Australian exporters and Pakistani buyers.
Australia is a popular supplier of agrifood commodities and Australian companies have been active in Pakistan for a number of years. Demand is increasing and there is capacity for additional volumes suppliers.
Opportunity also exists for establishing modern pulse processing plants (splitting and food processing).
Competitive environment
Pakistan regards Australian agrifood products highly. The strongest competition for markets comes from Canada, Hungary and China.
The Pakistan Government fixes the support prices of important crops, as means to aid the industry – especially small farmers. For instance, the government through its agency, the Pakistan Agricultural Storage and Supply Corp (Passco), has some ability to control the supply and prices of pulses in Pakistan, including the price paid to farmers. Passco uses its storage program as a supply control mechanism, and can, to some degree, protect the price paid by consumers.
Pakistan imports pulses from:
- Turkey
- Syria
- Hungary
- Netherlands
- Canada
- Australia
The United Arab Emirates (UAE) is Pakistan’s largest import supplier (11.2 per cent of total imports), followed by Saudi Arabia (10.9 per cent) and China (7.3 per cent). Dubai, in the UAE, is the major transhipment centre for good imported into Pakistan. |
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Tariffs, regulations and customs
Pakistan has no restrictions in the import of agricultural produce however some items, such as wheat, are imported solely by the government. Import duties in general vary from zero per cent to 10–25 per cent depending on the item. Soya beans, rape or colza, sunflower and safflower seeds have a custom duty of 10 per cent. Duties on designated essential items (including wheat) are nil.
A sales tax of 15 per cent applies in addition to the tariff on imported food items.
The Pakistan Government maintains a list of restricted import items. Items are restricted for religious reasons or to protect local industries. The Ministry of Commerce can authorise the importation of items on the list.
Regulations mandate that exporters need to acquire a compulsory letter of credit or register the contract with a bank in order to import goods into Pakistan.
Pakistan uses the Harmonized System to classify and describe goods. Customs duties are levied on an ad valorem basis.
Industry standards
Agrifood industry standards are mandated and certified by the Government of Pakistan, Ministry of Food, Agriculture, and Livestock and the Ministry of Commerce.
More information
The Government of Pakistan, Federal Board of Revenue has further information on Pakistan tariffs and regulations.
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Marketing your products and services
Market entry
Australia is well placed in Pakistan’s agribusiness industry in terms of the market’s perception of the quality of Australian commodities and their comparative price.
The three biggest consumer markets in Pakistan are: Karachi (population: 12 million); Lahore (8 million); and Faisalabad (4 million).
The market can be segmented into two major consumer groups – the growing middle and upper class urban families and less affluent majority.
For the majority of the population price is the major purchase determinate. The middle and upper class segment is driving changes to the traditional profile of the market. Taste and product preferences are changing, quality product is affordable for many more consumers, supermarket retailing is becoming more prevalent and pre-prepared meals (and fast-food franchising) are increasing rapidly. The food processing industry is expanding. It is worth noting that a third of the food processing industry is based in Karachi.
These changes to the market indicate that Australian exporters can investigate Pakistan for opportunities which may not have been available a few years ago. It will mean that the methods of market entry and marketing used for developed economies are becoming more relevant when exporting to Pakistan. Although the middle and upper class segment is only estimated at five per cent of the population, this represents a significant market when the overall population is approximately 150 million.
Australian exporters, of both niche and bulk commodities, need to undertake careful investigation of the market (and selection of partners and agents) when preparing to enter the Pakistan agrifood market.
Within the trader community e-business activity is surging even while Internet penetration is low overall. While much of this activity is limited to email use, more sophisticated online business practices will emerge in the near future.
Distribution channels
It is essential to identify the most appropriate and competent agent/distributor for your product.
In Pakistan, there many people who claim to be traders or distributors in all fields, but very few are, in fact, capable. A capable and experienced agent is necessary to facilitate importation through Pakistan’s (sometimes) complex regulations and to ensure that product gets into the most effective distribution chains.
Some commodities, such as pulses, are imported through traders, while others, such as wheat, are imported directly by the Pakistan Government. Austrade can assist exporters in identifying which channels apply to which commodities.
Transport
In Pakistan, 80 per cent of goods are transported by road. The country’s railway network is extensive but the infrastructure has deteriorated. However, the government has designated transport infrastructure renewal as a priority for the coming years.
The major seaports, Karachi and Bin Qasim, are connected to the rail network. Rail is the preferred method, where possible, to freight petroleum products, coal, fertiliser, and bulk agrifood commodities such as wheat and sugar.
Karachi is Pakistan’s busiest seaport, accounting for 75 per cent of commercial maritime activity. Bin Qasim specialises in loose goods.
The major airline is the government-owned Pakistan International Airlines (PIA) which services the major centres as well as over 30 other domestic terminals. Aero Asia International is Pakistan’s largest private enterprise airline and provides domestic and international services.
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Contact details
The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.
Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.
Austrade:
- Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
- Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
- Administers the Export Market Development Grants scheme.
- Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
- Provides advice to the Australian Government on its trade and investment development activities.
- Delivers consular, passport and other government services in designated overseas locations.
A list of Austrade offices (in alphabetical order of country) is available.
More information
For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au |
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