The skewed pattern of land holdings has emerged as a topic these days in public discourse on policymaking as concerns mount about the abnormally low productivity in agriculture, worsening food insecurity and the recent surge in high-priced food imports.

One of the major underlying reasons for poor agricultural performance is inequitable access to resources, particularly a highly skewed pattern of land ownership, says Daud Khan, an economist and former UN official based in Rome.

And the need for subduing the dominant archaic mindset through structural land reforms was stressed recently in comments on policymaking by the President of the United Nations Global Compact Network Pakistan Majyd Aziz.

An increase in agricultural output improved its share in GDP to 22.7 per cent in 2021-22 while critics say it still excessively employs 37.4pc of the national labour force.

The inequalities of the agriculture sector lead not only to poor overall performance and low tax revenue but also a high level of rural poverty

Looking at longer-term average performance, Sustainable Development Policy Institute head Dr Abid Qaiyum Suleri says agriculture is currently absorbing double the workforce (40pc) than its contribution to the GDP (20pc). This mismatch is resulting in lower productivity and income inequality across our economy.

Mr Khan says that not enough non-farm jobs have been created and the ratio of labour employed in agriculture in Pakistan has reduced from 45pc in 1990 to 38pc in 2020 — a fall of 7pc in over three decades, as compared to a decline of 35pc in China and over 30pc in Vietnam.

Migration of labour from rural to urban areas changes the power balance in the countryside by altering the land labour ratio. Mr Khan says the process can be accelerated by the development of a large-scale manufacturing sector. Anecdotal evidence also suggests that wages of rural labour are higher in areas with significant migration of labour to cities and the Middle East.

Pakistan is now working on proposals that it should invite the Qatar government to co-invest or participate in joint venture projects in agriculture and livestock during the visit of Prime Minister Shahbaz Sharif to Qatar on August 23.

Pakistan’s efforts in the past to attract Arab investors to join hands with big local farmers to produce food items for export to the Middle East did not achieve any results.

Under various proposals being mulled by the Ministry of National Food Security and Research is one that Pakistan and Qatar could form a company to co-invest in the agriculture sector. Modern farms could thus be set up with the latest technology and techniques to improve the standards of farming. Value-addition and food processing were identified as areas through which farmers could benefit.

The National Assembly has also passed the Inter-Governmental Commercial Transactions Bill 2022 to allow state-owned enterprises of the two sides to undertake a commercial venture either in Pakistan or a foreign country. Some interest has also been shown by UAE to invest in Pakistani companies.

Officials are of the view that joint venture projects with Qatar in agriculture and livestock could help that food deficit country achieve food security while Pakistan could benefit from investment in farming.

Under the prevailing cultural practices, very little progress has been made in the shift from family/individual ownership of big landed holdings to corporate livestock/crop farming which could boost farm productivity.

The poultry sector appears to be an exception apart from a few corporate entities operating in the dairy sector. Nor has any serious effort been made to promote cooperative farming among small landholders to achieve economies of scale.

One common feature of relatively successful economies is they have prospered from meaningful land reforms carried out in the initial days of their independence as seen in China and India, and Bangladesh in the early 1950s when it was part of Pakistan.

To open up the path of investment in farming and agro-based industrialisation, former president Ayub Khan reduced the maximum ceiling on land holdings. This was followed by more radical land reforms of former prime minister Zulfikar Ali Bhutto which were not effectively implemented. During former president Zia ul Haq’s tenure the reduction in land ceilings was declared unIslamic.

The skewed land holding pattern translates directly into major imbalances in power, access to government services (such as animal health and subsidies) to other productive resources such as water, credit and technology, says Daud Khan.

And the inequalities lead not only to poor overall performance but also a high level of rural poverty with severe consequences to the well-being of large segments of the population. With climate change, things could get worse.

Some 2pc of the farmers own 45pc of all agricultural land with 98pc owning the remaining 55pc, says Mr Khan and adds that Pakistan’s farm economy is dominated by 7.4m smallholders who cultivate less than 12.5 acres.

The productivity of five staple crops is reported to be less than 50pc compared to the world’s leading producers.

Another related major issue is that the landed aristocracy — dominating the provincial assemblies — has been able to get away with virtually paying nothing when compared to their estimated huge income tax liabilities. This has denied much-needed funds for investment in modernising agriculture, revamping the irrigation system and preventing soil degradation.

As the federal Income Tax Ordinance 2001 exempts agriculture income from the federal income tax, federal income tax filers also inflate their farm incomes by including sources of income from other non-exempt sectors of the economy. On this count, the Federal Board of Revenue also suffers losses in the collection of income tax.

In an analysis of the provincial tax issues, Dr Ishrat Hussain says agriculture income tax (AIT) yields an insignificant amount of Rs3 billion annually while gross agriculture value added (GVA) in 2020-21 was Rs15 trillion. Non-agriculture income tax collection was Rs1.7tr. Of the total farm area of 21.4m hectares in Pakistan, he notes the land holding of 10 hectares and above by the top 4pc of the farmers constitutes 35pc, and the top 1pc have 22pc.

Assuming one-quarter of agriculture GVA can be attributed to this top category of 4pc landlords, the former State Bank Governor says, their contribution would be at least Rs3.75tr. Applying an average tax rate of 10pc (with a progressive sliding scale), he estimates we should expect AIT to yield Rs375bn or 0.5pc of GDP.

Published in Dawn, The Business and Finance Weekly, August 22nd, 2022