"Agriculture exports from Pakistan are extremely competitive," CEO Engro EXIMP

Abdul Samad Khan is the Chief Executive Officer of Engro EXIMP Private Limited since 2003 and a Vice-President at Engro Corporation Limited. He was named to this position in 2009 and is involved in driving initiatives in commodity trading for Engro EXIMP.
Samad Khan serves on the Board of Engro Foods Limited, Engro EXIMP Private Limited and Engro Foods Supply Chain Limited. Samad Khan began his career at Engro in 1988. He has worked in various functions in the Company, which include Sales and Marketing of fertilisers to rural customers at regional and national levels. He has been involved in international trade for the last six years, focused mainly on driving profits through trading positions.
BR Research (BRR): Briefly tell us about your experience in association with Engro. Abdul Samad Khan (ASK): I completed my MBA from the Institute of Business Administration in 1988 and soon afterwards joined Exxon. I have been associated with Engro for the past 23 years. During the initial years I spent a lot of time in the fields of Southern Punjab. As an area manager, regional manager and then sales manager, I gained intimate knowledge of the fertiliser market.
Then I came to EXIMP which is heavily involved in the business of local and foreign agricultural commodities, so I have been able to draw a lot on my experience from previous positions and experiences.
BRR: Please tell us more about Engro EXIMP.
ASK: When EXIMP was formed in 2003, it was initially concentrating in imports of phosphates. Following consistent successes we have ventured further within the realm of imports and exports.
Earlier, the imports of phosphate fertiliser were taking place directly through Engro Fertiliser and it was marketed in Punjab, Balochistan and some parts of Khyber-Pakhtunkhwa as well. We have a manufacturing facility at Port Qasim which uses about 60,000 tons per annum besides which we also buy for the rest of the country.
The total volume of that business is now somewhere between 350,000 and 400,000 tons per year. Annual trade volume peaked back in 2007 to 575,000 tons.
BRR: Tell us more about the products that EXIMP is dealing in or plans to get into?
ASK: We have a zinc-based fertiliser that is marketed as Zingro. It is marketed by Engro Fertiliser while we procure the product. This brings up the fertiliser side of the business along with what I have already described.
There are two key ingredients, phosphates and soda ash; that are added to urea to produce fertiliser. Local supply of the first two is limited as compare to the demand. We are the second biggest players in this market in terms of volume. Given this strength in terms of the import business, we are well positioned for exports as well.
We believe value-added agri exports from Pakistan are very competitive in international markets and that is why we embarked on this path in 2007. Consider the case of rice. Pakistan produces about 6.5 million tons of rice each year. Since we are not primarily a rice-eating nation, it is not strongly linked to food security here and should be considered an export crop. In fact about three to four million tons of rice is exported from the country per year, at present.
Similarly among the fruits, mango holds immense export potential. The quality and price of mangoes in Pakistan is extremely competitive globally. Also, given the high sugar content of this fruit, it can be sold as concentrated pulp which is used in juices and other products. India holds a commanding share of two thirds of the global mango pulp exports. Even though our mangoes have higher sugar content, our share in this international trade is zero. Then there are other fruits such as guava, banana or even tomato that can be turned into pulp and exported.
Potatoes are grown in Pakistan, yet French fries are imported. Turkey and China have emerged as major exporters of potato products, but no one here has given the proposition much thought. We have to provide the requisite technology to farmers to ensure quality and also develop an efficient supply chain process for producing and exporting fries from the country.
BRR: Rice and the pulping unit, those are the two main foci for EXIMP. What is your intended plan in terms of the timing of their execution?
ASK: As far as rice is concerned we are already exporting from Pakistan. In this market there are a few well organised firms and a plethora of ill-organised players. So, we aim to become an established contract-packing company which is basically a branded logistics company that is supplied by other companies.
After achieving appreciable scale we shall go into pulping. That requires extensive relationship with the farmer. You have to provide them with a good deal so they can concentrate on quality. It also requires adequate processing and again, this entails ensuring the right resources for the process.
Our vision is to make sure that the agriculture in Pakistan is organised in a way where you can grow and source produce competitively, professionally, process it, add value to it and then export it. This is missing in Pakistan.
BRR: What challenges are faced in processing of perishables?
ASK: Typically there is a lot of wastage in the process of converting fruit to pulp. If the plant is not healthy, fruit yields are low. If the potash nutrient is low in the plant, fruit keeping quality is diminished. Then there are restrictions in some countries regarding the use of pesticides on plants.
Proper cold storage facilities are crucial in the case of fruits such as mango, to guard growers against post harvest losses. But organising the entire supply chain is the biggest challenge. It entails monitoring farmers, providing them with finance as well as technical support, the construction of cold storages and other necessary infrastructure.
BRR: What form of financing is the company providing to farmers at present?
ASK: Currently we are working through one bank and will also commence similar operations through another bank soon. At present, farmers bring their produce to us and we issue checks in payment against them. We do not under write risks and banks have their own requirements such as the presentation of passbooks to receive payments.
Aartis charge about twice the mark-up compared to banks and the cash is also made available to growers belatedly. But, on the other hand, banks have documentation requirements which may be time consuming and tedious for growers, so the challenge is improving the documentation process to facilitate growers.
BRR: What role can crop insurance play in improving agriculturists' ability to access credit from financial institutions?
ASK: Banks are generally more interested in the passbook than the assets of growers. Plus it would be quite difficult for a bank to possess any assets that may have been pledged as collateral by a farmer. So, I believe that crop insurance would be a real catalyst in enabling banks to lend more freely to growers.
BRR: What progress has been made on the development of a commodity exchange for growers?
ASK: A commodity exchange along with a warehouse system is needed, but absent in the country so far. There is a trial project being run in India right now where a farmer can go and lock in a certain price for his produce before the harvest. But this sort of a mechanism cannot be restricted to Karachi, Lahore and Islamabad. It requires a network of storage facilities. Farmers should be allowed delivery at these warehouses. In North America, growers often lock in rates when they are starting cultivation of a certain crop.
BRR: In your opinion should the government's involvement in commodity finance be limited and the role of banks enhanced?
ASK: The current system must be entirely replaced with a new one. At present, commercial banks mostly finance aartis, who in turn deal with agriculturists. The banks are going through them to mitigate their own risks. The growers suffer as a consequence because they are charged relatively higher rates.
BRR: What role can public-private partnerships play in improving farmers' incomes, quality of produce, etc?
ASK: Value addition of agri products can be boosted to a great extent through concerted efforts. In our case, we routinely sponsor research and other initiatives at rice institutes in the country. We also print a lot of literature pertaining to farming techniques and also help circulate these to farmers. Usually it is best to have a written understanding with other institutes and organisations so that we can then provide them with the support on the ground.