Farm–Corporate Linkage is the Key to Double Digit Growth

Compiled from the speech of one of the 

Former President, FBCCI 

In quest of achieving a double-digit growth for Nepal farm-corporate Linkage has been identified as a key to that goal. To examine and consider this aspect Firstly, we should review the contributions of agriculture in the economy, the need for inter and intra sectoral adjustment for promoting a sustainable agricultural and rural development and finally the need for its corporate linkage. Secondly, we should also examine the growth potential of agriculture with corporate linkage based on the experience of other South Asian Countries in farm corporate linkage. Thirdly and finally, we should prescribe the scope of and tools for farm corporate linkage for realizing the potentialities of the agriculture sector.

Like other less developed countries is the Ministry of Nepal’s Economy Agricultural sector alone contributes to about 60% of the GDP and provides employment to nearly 80% of the entire population of Nepal. The country has about 986898 ha. or about 17.66% of the total land area available for agriculture production. Agricultural land per capita is only 0.14 ha. and there is little chance of expanding agricultural land. So, it has become compulsive that Nepal has to integrate a development dimension into land productivity within the rural development programme as well as open up off farm economic opportunities for industrial development based on the available resources.

In this exercise Ministry of Agriculture in collaboration with other line agencies such as Ministry of local development, Ministry of Water Resources, Ministry of Forests and other government and private corporate bodies may cooperate for a sustainable agriculture and rural development. Agriculture in greater sense has immense potentialities for growth. With better irrigation management crops sub-sector may increase its productivity at least two focus. Crop diversification in favour of cash crop will flourish if there is a buy-back arrangement from corporate bodies. Harticulture development would out win any other crop sector. Animal husbandry is a success story at cottage level but could not attain potentialities for a number of reasons. The fishing sub sector would also grow may fold by creation of small water holes between the hills.

These immense potentialities could be reaped only if the agricultural sectors and sub sectors are linked to the corporate bodies for production facilities as well as for marketing.

1.3       Every country’s economy has its own specialty because of its demography, land tenure system, level of governance. These factors should be made favorable for a sustained agricultural growth. In the following sections a brief account of farm-corporate linkage in South Asian countries is presented. This is followed by a discussion on linkage gap in Nepal that could be plugged for agricultural growth and benefit of the rural people.

Experience of South Asian countries on facilitation role of Government bodies and market linkage by private bodies:

 2.1       In Bangladesh there is some success stories where Government Corporation could satisfactorily work with the farmers. Bangladesh Sugar Corporation is an example where the sugar mills provide agricultural inputs and cash advance to sugarcane growers and buy-back their sugarcane when harvested. This is of course a traditional culture developed over the years since British rule. Of course, the corporation is plagued by financial mismanagement and corruption, but their backward linkage could sustain this sugarcane culture in the country and this cash crop has played a vital role in poverty reduction in the Mill Zones.

There is another success story in which an old alluvial semi-arid area (Barendra) could be irrigated by a statutory body. This body (Barendra Authority) has taken loan from the government for providing irrigation water to small farms and could successfully repay the government loan as the realization rate was quite satisfactory. They have clearly defined land and water unit for this purpose. The name of the organization is Bangladesh Barendra Authority.

For supply and distribution of milk cooperative units have been also operating successfully. In this case animal breeders are provided with fund for buying cattle heads and animal feed. In return the farmers sell their milk at fixed rate to the cooperative.

Private Companies have also introduced buy-back systems. Fruits like mango, orange, guava, star fruits grown by small farmers find easy markets at fruit juice making factories. Sometimes contract buying is also made. However, there are unsuccessful stories as well. In Bangladesh Government allotted plots of land for rubber plantation and also for growing palm tree. The experiment failed for shortage of market linkage in case of rubber plantation and for technicalities in case of palm-tree. The latest trend in this regard is in vegetable exports where exporters develop their own hinterland farming or make contract with grower and supervise their production.

Similar cooperation is sure to grow in the other two sub-sectors of agriculture’s namely Dairy farming and pisciculture for feeding either the home market or for export.

2.2       In Pakistan huge chunk of lands were allotted to economically well-off class for horticulture, crop culture and pisciculture. This scheme has benefited the agriculture sector of Pakistan where commercial farming has emerged as an important player.

India has become a trend setter in production and distribution of milk products under a company named Amul.

3. The needed linkage:

Having Judged the economies of backward and foreward linkage in greater agriculture in Nepal as well as other South Asian Countries Nepal should come up with a full programme of farm corporate integration, this conference may help prepare a guideline to be offered to the government. The programme may include:

• Areas of linkage for increased agriculture production.
• An action plan specifying all the possible fields and identifying the benefits.
• Need assessment for implementation of the action plan.
• Improvement of Corporate Governance.
• Viable and profitable corporate operations

3.1       Within the existing land tenure system, arable land area, cropping pattern, possibilities of introducing new crop and items Nepal may chart priority areas of integration in agriculture that will yield maximum benefit with minimum capital outlay for promoting sustainable agriculture and rural development. This identification task should be as elaborate as possible so that extent of corporate intervention may be assessed correctly.

3.2       Once the areas of integration have been identified an action plan with definite time frame may be prepared. The action plan may include both macro and micro interventions. While the government may play the facilitating role the private sector may be shown the fields in which they may profitably invest in with relatively less risky areas of agriculture. The action programme should reflect the national perspective plan on agriculture.

3.3       There should be an overall need assessment interns of investment, HRD, means of farm market linkage channels of distribution for implementation of action the plan. Private companies may be induced to play its role by offering due facilities and incentives in agriculture fields. They should be helped in technology transfer and quality compliance.

3.4       Linkage is a two-prong aspect. The other part besides the farm is the corporate entity. Both should be equally efficient. In this day of competition corporate governance must be improved to be called a scientific management for an economical production. Corporate governance should match the vision of the macro plan at the same time take care of all the aspects of their micromanagement. Days are coming when good corporate governance will be a cry in the least developed countries (LDCs). Like other fields the entrepreneurs in agriculture fields should start up-grading their governance.

4.0       Conclusion: We have been hearing, and perhaps this is true, that in LDCs we could not manage our resources and policies. We should not hear this anymore. We should manage ourselves be competitive and attain prosperity at par with others. This should also happen in case of backward and forward integration in agriculture in Nepal.

Farm–Corporate Linkage is the Key to Double Digit Growth: Farm–Corporate Linkage is the Key to Double Digit Growth: Farm–Corporate Linkage is the Key to Double Digit Growth

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