ADB Loan to Help Develop Pakistan's Agribusiness Sector

MANILA, PHILIPPINES - ADB will help promote the development of a competitive and sustainable agribusiness sector in Pakistan through a loan approved for US$31 million.

The Agribusiness Development Project will establish market-based approaches to agribusiness development and enhance technical and managerial capacity in the subsector. It will also dismantle barriers to entry for new enterprises and promote the expansion of existing ones into new markets.

The project will focus on horticulture and hortibusiness, though actions to improve the livestock and dairy institutional framework, and support for selected enterprises will be provided.

Pakistan's agriculture sector accounts for 25% of gross domestic product, almost half of jobs, and about 70% of exports. However, the sector's growth has been on the decline since 1990, and yields of major crops have stagnated in the past decade.

Commercial agriculture and agribusiness development in the country is constrained by poor infrastructure, sector institutions and policies, and governance practices. Limited access to modern technology and to financial and business development services further hampers development.

"The constraints facing the agribusiness sector are present throughout the production chain from input supply to processing and exports, leading to low productivity and value added," says Brian Fawcett, mission leader for the project.

"A comprehensive and systemic approach to removing these constraints is needed for the sector to tap the huge potential growth opportunities provided by both domestic and international markets."

In tackling these constraints, the project has five major components:

  • Creating an agribusiness support fund to provide farmers, farmer groups, and entrepreneurs with demand-driven technical and managerial services on a matching grant basis to improve their productivity, competitiveness, and creditworthiness to access financing for their enterprises;
  • Increasing access to agribusiness finance available from financial institutions to agro-enterprises;
  • Providing capacity building for horticulture and hortibusiness agribusiness; streamlining the collection and dissemination of market information; strengthening agribusiness technical training capacity; upgrading testing and certification facilities for seeds, nurseries, and crops; and building awareness of the need to comply with international agricultural product standards and practices;
  • Revising and updating the agribusiness regulatory framework and formulate a national agribusiness policy and provincial horticulture policies;
  • Project management support.

About 2,000 agro-enterprises are expected to benefit from the agribusiness support fund operations over the five years of the project life. Further, a handful of institutions are expected to develop dedicated agribusiness finance functions, which could benefit an additional 10,000 agro-enterprises, including up to 12,500 farmer entrepreneurs, by improving access to finance and providing significant jobs and income generating opportunities.

The total cost of the project is estimated at $49 million, to which the Government will contribute $6.9 million, the agribusiness enterprises $10.4 million, private sector institutions $600,000, and beneficiaries $100,000.

ADB's loan comes from its concessional Asian Development Fund, carrying a 32-year term, including a grace period of eight years. Interest is set at 1% per annum during the grace period and 1.5% per annum subsequently.