POLICY RESEARCH WORKING PAPER 1407

# Summary findings

A key source of the imprcssivc growth in Pakistan's GDP (6 percent annually for rwo decades) has been the agriculture sector, which grcw about 3.6 percent a year for 25 years. Faruqee analyzes whether such a growth ratc is sustainable.

In diffcrent periods, growth has come from different sources: from a seed, fertilizer, and irrigation package in the 1960s, fromn intensification of water and fertilizer use in the 1970s, and from improvement of crop management and incentives in the 1980s. In the past 10 years, cotton has been a main source of growth.

The momentum for growth may be ending. Total cultivable land and irrigation cannot increase significandy. At best, water resources can expand by 10 percent, and only at great cost. And there have been problems with cotton in recent years.

Future growth must come mainly from increases in productivity, achieved by allocating resources to crops for which the country has a comparative advantage, improving the technical efficiency of inputs for each major crop, and increasing cropping intensity. But increasing productivity means changing major agricultural systems, policies, and institutions, including:

* Poor incentive policies, which havc lcd to inappropriate use of land and hence to problems of soil crosion and land degradation.

* Poor distribution of land resources and inadequatc systems of land tenurc. At one extremc are very large estates of absentee landlords, and at the other, very small, ill-equipped peasant farms. Insecurity of tenure creates disincentives for invcsting in land.

***** Persistent problems with irrigation, cssential on more than three-fourths of agricultural land in Pakistan. ***** Weak human resources and infrastucture.

> ***** Direct government intervcntion in agricultural markets, which, although recently diminished, still distorts markets. Subsidized imports of wheat and price controls on cotton exports reflect a persisting bias against cotton and whbat, while sugarcane is heavily protected. The protection of domestic industry distorts sectoral prices. Government policy also distorts the market for such vital inputs as seeds and fertilizer. Serious problems in the credit market exacerbate other problenis arising from policy distortions.

- - This paper a product of the Agricultural Operations Division, South Asia, Country Department I is part of a larger effort in the department to analyze the major issues facing Pakistan's agriculture sector and to suggest a strategy to improve its performance. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Fayana Willie, room MC1O-346, extension 82262 (33 pages). January _1995._

_The Polry Researcb Workng Paper Senes ditseminates the fdvings_ **_of_** _work in progress to ecowuc the chbange of ideas about development issue An ojeaeivofth serics istoget theftdingsoutquikly, even if the psntatiomareless than fidlypolised. The papes cwry the names of the auors and should be sed and cted accordingly. The fitndigs, interpretations, and conclusions are the atabors' ow and should not be attributed to the World Bank, its Executive Board of Direats, or any of its mnmber counties._ Produced by the Policy Rcsearch Dissemination Centcr