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Rice occupies a prominent position in Pakistan's export market. While the cereal has found a market in far flung destinations of Africa and EU, inroads in China's market have been limited.
The ITC data indicate that China imported about $2 billion worth of rice in 2017, most of which is sourced from ASEAN countries. Pakistan’s share in China’s rice imports import was an insignificant 5 percent. Similarly, China’s share as a percentage of total rice exports of Pakistan in FY18 was 7 percent, as per SBP data.

In a recent conference held in Karachi, Razaq Dawood indicated that this skew would be addressed. Rice and sugar were highlighted as two exports which would lead the $1 billion increase in exports to China. Keeping sugar aside for the moment, the potential of increase in rice exports has to be considered.

On one hand, ASEAN countries have a significant advantage over Pakistan’s exports in terms of tariffs. As a rice producing country, China has put rice on its no concession list under the Pakistan China Free Trade Agreement (PCFTA). Pakistan’s exports face 65 percent tariffs. On the other hand, ASEAN China FTA (ACFTA) allows rice imports at an average tariff of 31 percent.

This barrier is one of the several that have prevented any real increase in the export of rice to China. Pakistan is not the only country trying to get a bigger piece of the Chinese pie. India has also been pushing China to increase rice imports to correct the trade deficit which is in the latter’s favour.

China’s preferred rice variety from Pakistan is long grained non-basmati. Even if China is willing to buy rice, with or without adjusting tariffs, there needs to be sufficient supply available for the exports to take place. Exports worth $1 billion translate roughly into 2 million tons of rice with PBS data putting FY18’s total rice exports at 4.1 million tons that fetched $2 billion.

Despite the hurdles, one of Pakistan’s leading rice exporting companies, Matco’s views were positive on the matter. While the $1 billion increase in rice exports may not be realized in FY19, the next 2-3 years could see the high number come to fruition.

Speaking to BR Research, Faizan Ghouri, director of the vertically integrated Matco, talked about the need for improvements on the agri-side. Seeds here have good yields but high postharvest damage reduces quality and quantity.

Not only is there lack of milling infrastructure, there is also grain damage of drying equipment. A source in REAP lamented weather change which has made field drying of paddy less effective. Less sunlight during winters in Punjab increases the need for more dryers to prevent rise in aflatoxin levels. Aflatoxin is a naturally occurring toxin that can cause damage to health. Various countries have various acceptable limits with EU arguable having the toughest (meaning lowest) acceptable limit. (For more details read “Fungi, toxins, and basmati exports” published on January 15, 2019)
While, Ghouri opined that $500 million in 2-3 years is a realistic figure to target it cannot be achieved without government support.

The rice sector does not need subsidies to become export competitive, but it does need infrastructural support to be able to increase volume by 50 percent in a short time frame.

Copyright Business Recorder, 2019

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