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Competitiveness of Rural Msmes and Their Resilience to COVID-19 Crisis Evidence from Sindh, Pakistan

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Competitiveness of Rural Msmes and Their Resilience to COVID-19 Crisis Evidence from Sindh, Pakistan This project is funded by the European Union GRASP • PAKISTAN GROWTH FOR RURAL ADVANCEMENT AND SUSTAINABLE PROGRESS Competitiveness of Rural MSMEs and their resilience to COVID-19 crisis Evidence from Sindh, Pakistan www.intracen.org/GRASP/ Digital images on the cover: © Xxxxx, © Xxxxx The designations employed and the presentation of material in this document do not imply the expression of any opinion whatsoever on the part of the International Trade Centre concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. This document has not formally been edited by the International Trade Centre. © ITC © ITC Agricultural MSMEs are key to advancing rural development in Pakistan Agricultural micro, small, and medium-sized enterprises MSMEs has potential to make significant contributions ( MSMEs ) are central to the economy and society of Pa- to the achievement of Agenda 2030 on Sustainable De- kistan. Approximately 68 % of the population is engaged velopment in Pakistan, notably in terms of goals on in farming directly or indirectly through production, poverty ( SDG1 ), hunger ( SDG2 ), gender ( SDG5 ), decent processing, or distribution of major agricultural com- work ( SDG8 ) and climate ( SDG13 ). modities, and agriculture contributes 21 % of the coun- try’s GDP.1 In line with this scenario, the Growth for Rural Ad- vancement and Sustainable Progress ( GRASP ) project In Pakistan’s southeastern province of Sindh, agricul- takes a holistic approach to reducing poverty through ture provides livelihoods to about 56 % of the rural the development of rural MSMEs in the Sindh and Ba- inhabitants.2 The province contributes about 23 % to lochistan provinces of Pakistan. With support from the national agricultural value-added,3 accounts for half of European Union, it is working towards the creation of the country’s total seafood exports and grows 25 % of gender inclusive employment and income opportunities the country’s cotton. in rural areas through targeted support to public and private sectors. The programme will help MSMEs and Agricultural MSMEs play a key role in securing access agribusinesses in the horticulture and livestock sectors to food, alleviating poverty and growing the economy become more competitive by making improvements at in Sindh. Small companies are found at each link of all levels of the value chain. GRASP will also improve value chains as input suppliers, farmers, traders, pro- the institutional and regulatory environment to make cessors, wholesalers and retailers. Unlike their larger it more conducive to the rural MSMEs. Hence, the counterparts, agricultural MSMEs have less than 250 project aligns with Pakistan Vision 2025, which aims employees and an annual revenue under Pakistani Ru- to transform Pakistan into an inclusive upper-middle pees ( PKR ) 650 million, and they include both regis- income country by 2025 including through poverty al- tered and informal companies.4 leviation, women’s empowerment, better governance and sustainability. Despite a vibrant and prominent rural economy, Sindh has relatively low agricultural productivity and signifi- Sindh agriculture in five numbers. cant annual fluctuations in output. Gender inequality Agriculture in Sindh accounts for: and climate change pose additional challenges, and poverty is persistent, especially in the rural areas.5 Given their role in employment, food security and the economy, improving the competitiveness of agricultural 22 % 14 % 8 % 1. Business Recorder ( 2018 ). Agriculture is backbone of Pakistan of the country’s of the country’s of the country’s accessed at https ://fp.brecorder.com/2018/02/20180225347122/ livestock population fruit production vegetable production 2. Husain, I ( 2014 ), The Economy of Sindh, Concluding keynote address at the 2nd International Seminar on Sindh through the Centuries; Sindh Agriculture Policy ( 2018-2020 ) 3. Sindh Agriculture Policy ( 2018-2030 ), 2018, Government of Sindh 4. GRASP definition of MSMEs using criteria established by the State 45 % 56 % Bank of Pakistan and SME Policy 2019 5. Multidimensional Poverty Index ( MPI ) in Pakistan, UNDP of provincial employment of rural livelihoods www.pk.undp.org/content/dam/pakistan/docs/MPI/MPI %204pager.pdf Gathering data to inform transformative change The SME competitiveness and medium-term responses that will inform GRASP activities and strategy-making support. 153 agribusi- survey in Sindh, Pakistan nesses and 99 farmers were interviewed by phone for this COVID-19 survey. ITC collaborated with IBA Sukkur University in De- cember 2019 to survey agribusinesses and farms in Analysing MSME Sindh province to identify the main competitiveness challenges faced in the horticulture and livestock sec- Competitiveness tors. The surveys served to feed into the needs assess- ITC analyses MSME competitiveness using its SME ment and project baseline setting, which in turn, was Competitiveness Grid.6 The first pillar of the grid fo- vital to elaborate on key priority actions and strategic cuses on the capacity to compete by meeting current directions of selected product lines and districts in the market requirements. The second pillar centres on the project’s Inception Report. 144 agribusinesses and 92 capacity to connect to buyers, suppliers, and institutions farmers were interviewed in 11 selected districts ( Figure to obtain information and knowledge. The third pil- 1 ). Interviewed agribusinesses included 70 traders, 39 lar zooms in on an MSME’s capacity to make changes input suppliers and 35 processors. in response to, or in anticipation of, dynamic market forces, including through investments in skills, finan- Amongst surveyed agribusinesses, 81 % were micro firms cial capital and innovation. Finally, ITC analyses the ( 1-9 employees ) and 17 % were small firms ( 10-49 em- ability of companies to sustain competitiveness, in- ployees ). As for farms, 64 % were micro and 35 % were cluding through gender inclusiveness and environment small. 41 % of interviewed farmers had small holdings, sustainability. 38 % had medium holdings and 21 % had large holdings. The majority of agribusinesses and farmers reported an These pillars of competitiveness are examined at the annual revenue between PKR 200 thousand and 2 mil- firm level, in terms of the firm-level capacities that drive lion. Despite efforts made to find women-led MSMEs, competitiveness, as well as at the business ecosystem none of the respondent companies were owned or led level and the national environment. The SME Com- by women. petitiveness Survey in Sindh gathered data on firm and business ecosystem-level capacity to compete, connect, A follow-up survey concerning the COVID-19 situation change and sustain competitiveness. This report pre- was carried out in May 2020. It assessed the impact of sents highlights from the findings. the crisis on business operations, production capaci- ties and market access of farmers and agribusinesses 6. ITC. 20015. SME Competitiveness Outlook 2015. in Sindh. The survey also identified potential short http ://www.intracen.org/publication/SME-Competitiveness-Outlook-2015/ Sindh - Google Maps https://www.google.es/maps/place/Sindh,+Pakistan/@25.6807693,71.893755,6z/data=!4m5... SindhFigure 1. Sindh & its Surveyed Districts Map data ©2020 Google 200 km 1 de 1 12/06/2020 20:14 © ITC Competing on agri-food markets today Buyers of agricultural produce in Sindh demand safe, Four out of five farmers reported that they did not store nutritious produce that looks fresh and clean and sells at any produce, and the same share said that spoilage or a good price. Although there are niche markets for high pests caused up to 10 % post harvest losses – though they quality and packaged produce, including for export, tended not to consider this a significant problem. most produce sells at a tight margin on local markets. This makes it especially important that farmers and ag- Fostering compliance ribusinesses produce more with what land, labour and machines they have. However, the average yield in the with quality requirements province is very low and harvest-post harvest losses are Agribusiness firms in Sindh seem to be well informed high – over 35 % for many fruits and vegetables. Produc- about how to maintain quality standards across the value tion and transportation practices also have implications chain. Sixty-nine per cent of the surveyed agribusiness for the ability to meet quality market requirements. firms felt that there was high availability of domestic in- formation on standards and certification, and nearly half Limited use of modern farming ( 49 % ) said that they had taken advantage of product test- ing, certification, and/or inspection services. However, practices to increase agricultural quality challenges persist upstream in the value chain, productivity with 35 % of the farmers saying that the lack of quality inputs into their farming is the biggest challenge they Farm productivity is essential both to agricultural live- face meeting quality requirements. Furthermore, only lihoods and to the ability to sell an affordable product 25 % of farmers had received any form of training or sup- on agri-food markets. With its agrarian economy domi- port from agribusinesses. nated by small-scale farmers, Sindh’s agricultural out- put depends on the field-level farming practices they Help needed to learn farm use, many of which could be improved. Fifty-seven percent of interviewed farmers did not apply
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