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CPEC can be a great opportunity to uplift our dairy sector

The China-Pakistan Economic Corridor (CPEC) has a number of infrastructure projects worth over $56 billion. The framework can be viewed as the foundation of comprehensive strategic cooperation between China and Pakistan. The projects can help enhance the socio-economic connectivity between Pakistan and China.

The development of China’s dairy industry over the past decade has been very impressive. Encouraging participation by small farms in milk production has been a component of national and regional policies to promote regional development and reduce poverty. Large processors have also played a significant role in sustaining small farms. The introduction of centralised milk collection stations has helped millions of small farmers contribute to the sector, particularly in the western provinces.

This development has been supported by the enabling policies of central and local governments that have encouraged investment in high-quality animals and infrastructure. Pakistani farmers and businessmen can use the enhanced connectivity to learn about the practices and techniques used in China for the production of various kinds of livestock and agricultural products.

By adopting modern practices and introducing technological advancements our farmers can improve productivity of their resourcesand boost the GDP growth in the country. China is currently world’s largest importer of dairy products. There is an opportunity for Pakistan to tap this market under the CPEC umbrella. It is important, however, to first assess whether our dairy sector is or can be competitive.

Despite the large amount of milk produced and consumed in Pakistan, the formal dairy sector remains a fraction of the overall dairy value-chain. Large-scale dairy processors are unable to operate at their full capacities because of various hurdles including, but not limited to, the seasonal nature of milk production in the country, abolition of zero-rating taxation regime for the dairy sector, increasing cost of production after devaluation and increased utilities and human resource costs.

To thrive in the long run, the milk processing industry needs an integrated approach that focuses on both producers and suppliers of raw milk. There is also need for innovations in the processing sector itself.

The government seems to have realised that focusing only on small cattle holders will not suffice and that they have to promote the growth of large commercial and corporate dairy farms to meet the challenges of rising demand for milk in the country and to tap the opportunities to export.

The Livestock Development Policy of 2007 was instrumental in the introduction of the modern commercial/corporate dairy farming in the country. The dairy farming sector attracted billions of rupees in investment from large industrial players, mainly from textile and leather background.

This was aligned with investments by various small and medium-scale businessmen and investors to set up medium-scale commercial dairy farms. However, the large start-up costs of these farms remains a major barrier to entry. Capital investment is required to import animals, machinery and the equipment to manage high-end mechanised dairy operations on such farms. Most of the farms have imported animals from Australia and, more recently, from the Netherlands and the USA.

In addition, farmers need awareness of different ways to control fodder shortages and keep production costs low. They should be trained, for example, in preparing silage for the consumption of animals during periods of fodder shortage and have access to equipment needed for silage preparation.

Corporate farms require huge initial investments in infrastructure and capital. Additionally, fodder, energy and labour costs impose a significant burden on these farms in the initial years. Most of these farms prefer use exotic breeds of cattle because their milk yield is higher than local breeds. Some farms use mixed breeds whose yield is higher than local breeds but less than pure exotic breeds. However, since both exotic and crossbreeds weigh more than local breeds, they need more feeding.

Exotic animals are also more prone to heat-stress compared to local animals. This adds costs for cooling and ventilation. Moreover, these animals are less resistant to local diseases, such as tick-borne infections, bovine ephemeral fever and FMD so that the farms need to hire specialised veterinarians to maintain animal health at the farms.

One of the biggest issues these farms have faced is the lack of vaccines necessary to protect these animals from various diseases. Since this is an emerging sector and the total size of the sector is a fraction of the entire local dairy farming, these vaccines are not commercially available in the country or registered with the Drug Regulatory Authority of Pakistan. This makes the large investment risky.

The government needs to find special ways to allow the import of necessary vaccines for these farms or else a single disease can wipe out whole farms so that billions of rupees are lost. FMD and brucellosis are among the important communicable diseases prevalent in Pakistan as well as China. Due to the increasing incidence of brucellosis during the last few years in some parts of China, the Chinese government has placed it on China’s compulsory immunisation plan.

FMD is prevalent in some parts of China. Given its experience with the disease China has urged Pakistan to take measures like developing of FMD-free zones before starting trade in animal products. The government of Pakistan is already trying to control and eliminate some of the important infectious diseases.

One such example is the development of a disease control compartment in the Cholistan region in Bahawalpur district calculated to increase the chances of export of animal products to the international markets, including China. Livestock and Dairy Development Department in the Punjab is also running a surveillance programme for the control of several diseases, including bovine brucellosis. The disease is endemic in Pakistan and can be transmitted through consumption of raw milk and milk products.

If appropriate attention is not paid to these suggestions it will be difficult for the dairy industry to get access to the Chinese market.

There is a need also for more investment; introducing new technologies; and importing and developing new breeds that can perform better in our weather conditions. For all this, public-private partnership in dairy frming is the need of the time.

There are 2.5 million dairy farms in the country with a herd size of 10 or more. These have the potential of adopting mechanical and electronic devices to enhance their productivity. This includes equipment for feed and fodder preparation and milking machines. Collecting data from representative dairy farms not using mechanisation and comparing them with typical mechanised dairy farms can help.

There is is a potential demand of around $8-9 billion for dairy machinery in the country. Effective awareness schemes and training programmes can help early adoption and enhance productivity of these dairy farms. CPEC can be a great opportunity to uplift our dairy sector.

Dr Abdul Rehman and Dr Waseem Shaukat     contributed to the article

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