Understanding the Bottlenecks and Opportunities in Value-Added Exports of Fruits and Vegetables

This report examines the value chain of fruits and vegetables in Pakistan and unbundles the factors impeding productivity at the farm level, the weaknesses in the local market systems and maintaining quality standards while exploring the potential for exporting fresh and processed fruits and vegetables to the global market. Evidence suggests that by improving productivity and expanding the associated downstream industry, Pakistan can increase its horticulture exports of the following fruits and vegetables:

  1. Citrus and its juices
  2. Potatoes, fries and chips
  3. Tomato and its paste
  4. Bananas
  5. Mangoes

Despite its agriculture based economy, Pakistan is a net importer of fruits and vegetables. In 2018, Pakistan exported USD 674 million, and imported USD 870 million worth of horticultural commodities. In terms of market share, Pakistan retains 1.5% share in world exports of citrus fruits and 2.8% share in world exports of potatoes, the two main commodities with the potential for increasing exports in the future. Pakistan’s export share of food products such as orange juice, potato chips and fries, and tomato ketchup is below half a percent in each category, against a global trade value of USD 7 billion, USD 10.8 billion, and USD 6.4 billion for each category respectively. This highlights the unrealized potential, and an opportunity for Pakistan to invest in improving its production and value addition, build global brand recognition and increase export volumes.

Global trade in horticulture commodities has increased four times over two decades from USD 51 billion in 2001 to USD 200 billion in 2018. Benchmarking with its peer producing countries, should Pakistan have kept pace with upgrading its production methods, seed varieties, processing infrastructure and produce quality, it could have exported USD 2.2 billion worth of horticulture commodities in 2019, three times the actual level. Egypt provides a good case study for Pakistan to learn from. By implementing a Sustainable Agricultural Development Strategy since 2009, Egypt has focused on capturing export markets for its horticulture commodities and currently exports about USD 3.1 billion worth of oranges, grapes, potatoes, strawberries and onions to the Russian Federation, European Union and the Middle East.

Global trade in horticultural food products, mainly grape based juices and wines, potato fries and chips, citrus juices and jams, tomato paste, pulp and juices, packaged mushrooms, frozen strawberries and preserved fruits, vegetables and nuts amounted to USD 81 billion in 2018. Of these Pakistan has the potential to export processed citrus products and potato fries and chips, however the unavailability of industrial grade varieties, surplus production, and processing capacity have been the binding constraints for making export quality food products.

Pakistan needs to increase its output by improving yields and attaining exportable surplus crops. There is currently an emphasis on catering to the domestic market. The impediments contributing to Pakistan’s inability to increase its horticultural exports include weaknesses at all stages of production i.e. on-farm production, on-farm harvesting, post-harvest marketing, processing and quality control for export. Pakistan’s horticulture suffers from low-yields as compared to its peer countries, unavailability of the necessary seeds for industry grade produce of fruits and vegetables, weak contract enforcement for contract farming, poor on-farm sanitary and phytosanitary standards (SPS) enforcement, inadequate post-harvest infrastructure for packing, handling and transportation, lack of protocols for certifications of health and safety standards, and unassured supply of raw material to processors.

Non-tariff trade barriers also need to be overcome to enable exports of fruits and vegetables from Pakistan. China is potentially a large export destination for Pakistan’s fruit commodities, but exports are restricted due to stringent SPS compliance requirements enforced by China. For instance, citrus trade is not permitted via land and air routes to China, and therefore Pakistan has to transport its mandarins by sea to the eastern Chinese ports, increasing cost and time. It would be cheaper and easier to export via land through the Sost border crossing or by air to Urumqi, the permission for which is pending a quarantine agreement between Pakistan and China.