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THE RICE INDUSTRY OF

PAKISTAN
ANALYSIS OF PAKISTANI INDUSTRIES
5/7/2013
Submitted to: Ms. Mehwish Ali
Submitted by: Maha Talha, Aaqib Nazim, Kanza Zulfiqar, Bilal Ahmed, Syeda Mahrukh Fatima
Naqvi, Komal Asim, Jitesh Jewani

TABLE OF CONTENTS
Executive Summary

Literature Review

Overview of the Economy

11

Introduction

13

Brief Overview

13

Current News about the Rice Sector

16

Market Share Distribution

17

Export details

21

PEST Model

25

SWOT Analysis

27

Porters Diaod Model

38

Advantages and Disadvantages

39

Factor Conditions

40

Demand Conditions

42

Related and Supporting Firms

44

Firm Structure, Strategy and Rivalry

47

Production cycle of rice

49

Role of the Government

52

Interview Analysis

54

Recommendations

60

Conclusion

63

References

64

Appendix

78

EXECUTIVE SUMMARY
Pakistan is the 4th largest producer and 11th largest exporter of Rice. It earns a significant
amount of foreign exchange revenue for Pakistan which helps our economy stay competitive.
Since the independence of Pakistan, our achievements in the rice industry have been
promising. Production has increased by a ratio of 2:1 compared to increase in land. This can be
credited to the variety of seeds present, improved facility for rice production and introduction
of various preventions for rice crop against diseases. Punjab is the major producer of rice,
followed by Sindh. This has also been the reason that Pakistan was able to stand the global
financial recession in 2008 comparatively better than the world, as it opened up new markets
for us to export rice.
The privatization of the industry has benefited us tremendously. It led to the introduction of
new technology, new ideas related to production and introduction of variety of seed and it
opened up new opportunities for employment. Two research institutes also exist within
Pakistan to help with the research for new seeds and techniques, and plans to establish
institutes to train farmers are also in the pipe line. The price of rice, and hence the revenue
generated in dependent on the demand and supply. Pakistan is known for the production of
basmati rice internationally, which is highly demanded too.
However, there are a number of problems faced by the rice industry of Pakistan. The rice
industry receives no support from the government of Pakistan in the form of subsidies or tax
incentives, whereas international competitors are known to be fully supported by their
government which leads to them being able to offer lower prices to their consumers. This
depicts that imports of rice in Pakistan can increase, because our farmers are prey to
inflationary pressure in the form of rising raw material costs; oil and the shortage of gas in
Pakistan which affects our ability to deliver and produce orders of parboiled rice at the required
time. The rice produced in Pakistan is 40 percent domestically consumed and 60 percent is
exported. This case will lead to a fall in our export level of rice, affecting the foreign revenue we
are from rice exports which is the backbone of the Pakistani economy. Currently, Pakistan is
facing a fall in exports of 53 percent; whereas rise is domestic demand is for 15 percent. Thus
we face a mismatch in demand and supply.
We are also affected by the failure to incorporate new technology in our production ways
which is a big deterrent for us as Pakistan Rice producers and sellers lose out on efficiency and
quality, as those employing the new technology take advantage of spread out costs, and
economies of scale. India is an example of this case. Numerous unregistered seeds also exist
and are used by the rice farmers, however because they are unregistered, the government is
not aware of them and so, the revenue earned by farmers in this aspect is lower than it should
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be. There lack export incentives as well as lack of quality checks on the rice exported, which
ultimately affect our brand name in the international market because mixing of varieties exist.
To analyze the rice industry, we conducted the SWOT analysis, PEST analysis to fully analyze our
weaknesses and strength internally and externally, as well as in the local environment. The
climactic conditions of Pakistan are a major strength Pakistan should be proud of, as it allows
rice production and cultivation more than any other naturally endowed country. Pakistan also
produced variety of rice and seeds therefore allowing us to cater to different types of demands
internationally. The recent privatization of the rice industry of Pakistan has increased the
efficiency of this industry by allowing the employment of new and improved technology and
modern mechanized ways to cultivate rice. Pakistan also has the advantage of being blessed
with a population that works in the urban sector as well as population working the rural sector.
The hunger for employment can be used in our advantage by training those individuals to the
specifications of the rice industry, and such labor can be employed at cheaper rates.
However, weaknesses can be identified as the mixing of rice variety, ruining our name in the
international market and as no check and balance exists, there is no way to counter that
weakness. Pakistani rice is internationally known and demanded, however black markets exist
for its sales which again make us lose out on the revenue that could have been earned. There
exists lack of value addition and lack of trained labor too. On the other hand, Pakistan is open
to take advantage of opportunities like TDAP, collaborations with REAP, tender with Philippines,
new market with China, but international competition from Bangladesh, India, and Vietnam can
work against our leverage in those opportunities. The climate is also unpredictable, and floods;
unexpected, bring along with it diseases that ruin the crops and thus hamper the total yield.
Economic and political problems of Pakistan also pose as a major threat.
We also conducted a diamond model analysis to understand the different factors affecting the
rice industry. Factor conditions affecting the rice industry are that it is a staple food, and
employs a lot of labor and earns considerable foreign exchange revenue. Pakistan is renowned
for producing Basmati because we have an absolute advantage in this arena owing to our fertile
soil and favorable climate. It is also an ideal industry for FDI. However, limited water, untimely
rain, lack of proper storage of rice stock, backward in technology, law and order situation of
Pakistan and transport costs all are factors working against our farmers and thus, the yield and
our competitiveness. Moreover, majority of our farmers are of the export view affecting
domestic quality of rice and increase in imports.
Role of government is merely present in the rice industry owing to the recent privatization. No
tax exemptions or tax holidays exist. Lack of subsidies also play a negative role as it reduces our
competitiveness. Suggestions for the government sector include training the rural population to
ou outies agiultues adatage, iig the ua ad ual populatio to ipoe the
4

rice industry and production techniques, holding seminars, helping with procurement of seeds,
pesticides and raw materials like DAP and Urea. Other than that, checks to ensure the superior
quality of rice should be made compulsory. Methods to increase the fertility of soil should be
employed because that would ensure rice production for the future, even if more land is not
taken up for rice production. More improved varieties should be developed, and lastly, ways for
the easy disbursement of credit for the small farmers should be put in play, to encourage
investment and business, ultimately aiding to our foreign exchange and economy.

LITERATURE REVIEW
Rice is not only a food crop, but is also considered an essential cash crop in Pakistan. Also, rice
is one of the main export items of our country. Pakistan grows high quality rice to meet both
domestic demand and for exports. According the business recorder of December 2012, the
gad suess of a i ta ie epots as it diesified a etig stateg. a i ta is oe of
the largest exporters of rice. Rice is a monsoon crop and is mostly sown in the Irrigated area
next to Indus River and its tributaries. Around 11% of the total agricultural land is used in rice
production.
The rice crop has always been an essential part of the economic planning of Pakistan. It is the
second biggest source of foreign exchange for Pakistan and is second staple food after wheat.
Rice contributes for 6.7% in value addition to agriculture and accounts for 1.6% in the GDP of
Pakistan. Pakistan's production of rice is enough to meet the domestic requirement, as well as,
export rice of up to one million ton per annum. Pakistan trends in growing a wide variety of rice
for example, Basmati PK-385, IRRI-6, IRRI-9 and Super Basmati, the most prominent of which
are Super Basmati and Basmati PK-385. The two varieties which dominate the market share are
Basmati and IRRI. Basmati is grown, mainly, in Punjab whereas Punjab and Sindh both boast
wide cultivation of IRRI rice. Basmati, alone, accounts for 2% of the exports.
Furthermore, rice trade in Pakistan was initially under the government control. The industry
was liberalized in the 1990s after disbandment of the state run Rice Export Corporation of
a i ta ECP. a i ta ie tades hae e poded ell to aket liealizatio ad hae
taken a leading role in rice market. In 2009, however, in the wake of a record harvest and
concerns over a slump in market prices the government intervened in the rice market and
started procurement from farmers through PASSCO and Trading Corporation of Pakistan (TCP).
As far as production is concerned, Pakistan would experience a growth in its rice exports in MY
2010/11 at 28 percent to 3.2 million tons mainly due to increased demand and better prices in
the world market. Rice exports in MY 2012/13 are projected at 4.0 million tons based on a good
harvest. However reduced water availability during this period would have a greater impact on
the op pospets. a i ta ie epots also eefited fo the Idia goeet a o
rice exports earlier in the marketing year. MY 2011/12 rice exports are estimated at 3.7 million
tons, three percent higher than last year exports estimate.
a i ta MY / ie podutio is o e tiated at . illio to , thit peet
higher than the 2010/11 flood affected production level of 5.0 million tons. The average
production of rice for the last five years is 5.97 million tons. But unlike 2010 disastrous floods,
6

2011 flooding was localized and restricted to lower Sindh.


Rice exports make the Pakistani economy stronger. The major importers of rice from Pakistan
are KSA, UAE, Oman, Bahrain, Malaysia and Mauritius. UAE being the largest importer of rice
from Pakistan despite the unfair practices mentioned above. From June 2012 to December
2012, UAE imported $53,312,158.54 worth of rice from Pakistan. Estimates of Economic
efficiency implies that with the amount of globalization going on, growers of basmati rice can
gain significantly by increasing the production level. Also because of a fall in domestic support
of other rice producing countries and a rise in international prices, Pakistan could benefit even
more by exporting more Rice.
Out of $81 million in Pakistani agricultural exports to the United States during 2011, rice
exports comprised of $17 million (21 percent) of the total. Pakistan produces about 2/3 of the
old Ba ati ie op, hile the est is go i Idia. I ase of Ba ati ie the ol
competing country is India. However unlike other South and South Asian countries, rice is not
considered to be a staple crop in Pakistan.
A sharp decline of 30 percent in quantity of rice exports has been noticed from the months July
to September of fiscal year 2012. The price of these exports has also undergone a tremendous
downfall of 35 percent, resulting in a deteriorated quarterly export objective or target
amounting to $500 million. As per the official figures, the month of September has recorded a
significant fall of 51 percent in export of Basmati rice quantifying to 128,278 tons in contrast to
July where the exports were relatively higher, amounting to 260,466 tons. Likewise, a
decreasing trend has been noticed in the export of non-Basmati rice during the month of
October FY2012.
According to the chairman of Rice Export Association of Pakistan (REAP), the major reason for
fallig epots has ee the eleated pie of a i ta ie. The sto s i ie idu t ae
predominantly held by the growers or exporters rather than investors, and this has had a
detrimental effect on the export trade. India has removed any kind of trade barriers previously
imposed but unfortunately the machinery in Pakistan is incapable of catering to the demand
which has caused a drop in exports of rice.
The Trade Development Authority of Pakistan (TDAP) needs to determine the root cause of
falling exports which it has failed to do so. As per our research, Pakistan is required to take
initiatives in reacquiring its lost markets pertaining to Middle East and Gulf, while also
expanding into big markets such as US, UK and Canada where Indian Basmati is primarily being
used. There is also a need to give Export Credit Guarantee Insurance (ECGI) to the exporters of
7

rice so as to penetrate into third world countries.


The month of January FY2013 has recorded an increase in basmati exports by 15%. This has
regained the confidence of traders as they are now optimistic about the rice reacquiring its
nominal level before the FY2013 ends. This is predominantly because of the narrowing or
declining gap between Pakistani and Indian Basmati rice. India has tied to offset a i ta
Basmati by reducing its price below than that of Pakistan.
Moreover, the Pakistani Rice sector is well suited to meet the growing demand of rice from
around the world due to it being the third largest cultivated crop in Pakistan after wheat and
cotton. Also there is increasing demand of rice in the EU based on per capita consumption of
rice. Rice industry is growing over the last three decades with an increasing demand in
processed rice in export market. The rice mills have increased from 170 units in 1986 to 500 in
2010. All these statistics suggest dynamic growth in the rice sector and this is because of the
increasing foreign and domestic demand of rice. Much of our foreign demand comes from
Europe which consumes a much greater quantum of rice and thus relies on imports to meet its
consumption requirements. The quantity imported into Europe jumped over 700% within 7
years. (SBI report) Further Investments are required in Rice Technologies to facilitate the
growth of the sector. Such high demand has encouraged the rice industry to innovate actively
in terms of packaging processing etc. However much research conducted up till now continues
to emphasize the strong need for rice industries to innovate continuously and thus sustain their
competitive advantage.
Currently the local demand for rice is easily met hence there is great export potential. Of the
total production of rice 40% is locally consumed and 60% is exported. There is immense
potential to produce more rice and easily double exports. Therefore a majority of rice millers
and producers are export-oriented, as they obtain far better profits from abroad than locally.
Pakistanis, in general, prefer the higher priced Basmati rice which is mainly consumed by the
more affluent. Exporters made huge investments in rice processing equipment installing stateof-the-art imported machinery to improve the quality of rice. International as well as local
consumers are now more quality conscious and demand high quality rice. Demand for
parboiled rice is also increasing due to its nutritional value.
However the industry is not perfect and has sufficient problems of its own. Even though rice
has been a major export for Pakistan, it has become more and more inefficient over the years.
The yield has been decreasing continuously, the farmers are in turmoil of the high costs of input
and there has not been much support from the government side or from Rice Exporters
8

Association of Pakistan (REAP). This was highlighted by Mubarik Ali and John Finn in their article
in 1989, that the demands were increasing but the yields remained constant. Seeds, fertilizer,
tube wells, tractor etc. are the variables which help to produce good quality rice. The farmers
were not provided with these especially with the growing technology, Farmers in Pakistan were
using the traditional techniques. They lacked technical, as well as allocative efficiency.
Therefore the export of basmati rice has suffered a setback and non basmati rice is not fetching
a good price. The milling plants have old machinery and banned varieties are also being
ultiated. Ule ad util epots pik up, the epotes liailities ill keep iea ig. Thus
the epote eed oe tie to adjust thei epot efiae loa ad a edutio i the
finance rate due to the lowering of the discount rate.
Varieties of rice are subdivided into grades based mainly in the proportion of broken rice on a
consignment. Khapra beetle was detected in some rice consignment from Pakistan to United
States and if effective measures are not taken, this can cause significant problems for the future
Pakistan rice exports to US as rice is a major Pakistani export to United States.
Pakistan produces one of the best varieties of rice in the world due to the rich soil and humid
climate found here. However due to traditional and outdated post-harvest practices there are
substantial losses in the output and quality of rice which in turn affect the farmers profits.
Pakistan may face a decrease in export demand as it faces intense competition from India in the
Basmati rice segment. Also the industry has suffered a loss of competitiveness brought about
podue shift toad ultiatio of hid ie athe tha fagat ie. Futheoe
increasing rice production in Asia means that the region that consumes the most rice will not
need to import so much of it
Like most agricultural commodity markets, the rice market also suffers from the cobweb
phenomenon, where price fluctuations are caused by the time lag between making the decision
to cultivate the crop and the ultimate selling of the crop. To decrease the risk faced by farmers
from fluctuating prices, the government has set support prices for various varieties of rice
(Ahmed, et al., 2000).
According to an article published on 8th February, 2012, in Express Tribune, Pakistan has the
capacity to increase its rice exports to up to four billion dollars but barely reaches up to one
billion dollars worth of rice export. The reason being that farmer interest has declined in the
cultivation of rice due to stagnancy of prices since 2008 and a downward trend is expected to
be seen in 2012-13. BGA President, Hamid Malhi, also pointed out the lack of innovation that
persists in the sector. He said that the only available type of rice is Super Basmati which was
brought under use in 1996. Since then, public sector institutions have failed to invent
9

something new. He also claimed that urea prices have hiked up to Rs 2,000 from Rs850 in a
atte of ea . These fato fail to attat faes attetio toad the ultiatio of
rice and stops the sector from reaching the benchmark.
Furthermore something that needs to be focused on is investment in the rice industry. Private
sector investment in milling improved the quality of rice available for exports and so improving
the competitiveness of a i ta ie i the old aket. The potetial fo foeig ie tet
in this sector is very high due the limited global avenues for investment in other countries world
over. This investment is much needed as the standard agrarian infrastructure present in major
rice exporting industries is missing in Pakistan. The members of the rice export industry realize
the potential of this sector and thus are also investing heavily in rice paddy processing facilities
and their expansion. However billions of dollars of investment are needed to modernize
Pakistani rice industry so that there is minimum wastage.
An article on Matco, one of the biggest rice firms in the industry, states that Match has
investing in the most modern agro-processing infrastructure that addresses the post-harvest
losses problem in Pakistan. Matco's plant is located in Sadhoke. With the collaboration of the
latest Japanese and American technologies, this plant will include the most modern paddy
dryers, rice parboiling units, and silos that monitor humidity, temperature, moisture of the rice
paddy amongst other things. This shows that the rice industry realizes the need to invest in
technology and infrastructure thus we might see an increase in production in the coming years.
According to an article published in Express Tribune on the 5th of February, 2013, Pakistan has
started reaping benefits from the System of Rice Intensification (SRI) method that was
introduced in the Sheikhupura district by Lok Sanjh Foundation (non-profit organization) back in
2005. But now, as many as 65 villages and 300 farmers are using this technique for rice
cultivation. 80% of the farmers who are using the SRI method have reported multiple
advantages, such as the development of strong roots in order to fight lodging and crop loss and
the use of less water for cultivation. As said by the CEO of Lok Sanjh, Shahid Zia, use of SRI
cultivation method produces five to ten tons more in contrast to the usage of orthodox
cultivation methods. He stated that due to SRI being a more tedious and tiring job, NGOs tend
to neglect of introducing this method. He also asserted that due to the water crises and
pollution of wetlands, it is necessary to introduce such measures.

10

OVERVIEW OF THE ECONOMY


a i ta eoo a e alled a ei-industrialized economy. Our industrial sector makes
up only 24.3% of our GDP. Pakistan has a total labor force of 55.88 million (as of 2009). The
largest industries of the country are textile, cement, agriculture, fertilizer, steel, tobacco, edible
oil, pharmaceuticals, construction materials, shrimp, sugar, food processing, chemicals and
machinery. Net foreign investment in Pakistani industries contributes a mere 2.5% to the
out GDP.
Any government or economy has three goals. These are:
1. Sustained growth
2. Low and stable prices
3. Decreased unemployment
Over here high growth and low unemployment are complimentary to one another as achieving
one can result in achieving the other. On the other hand low unemployment and inflation are
contradictory.
In the economic survey of 2012 we saw that consumption has increased to 88%. Private
investment has decreased and public investment has increased. Government expenditures have
also increased. Exports are up by 0.1% and imports are up by 14.5%. This means that we have
negative net exports which mean that our trade deficit has increased.
The increased law and order situations have decreased our foreign investments and reduced
our growth and development. Agriculture accounts for more than 20% of our output and 40%
of the total employment. Textiles account for most of our foreign exchange eaig . a i ta
lack of value addition has made it fall behind with regards to this sector. Textile exports have
fallen to $1.09 billion in July 2012. Our total exports stood at $2.057 billion in July 2012, which
is 4.84% lower from $2.157 billion in the corresponding month of the last fiscal year.
Moreover, the official unemployment figure is 6% but this figure might not capture the true
essence of unemployment because the informal sector in Pakistan is pretty big and that is not
accounted for here.
Furthermore low growth and high inflation have increased poverty in the country. According to
UN Human Development Report poverty levels in Pakistan were 50% of the population.
Inflation has worsened the case as due to political and economic instability the Pakistani rupee
has depreciated by more than 40% since 2007.

11

A bright spot in the economy is the amount of foreign remittances that Pakistan receives daily.
However due to high oil prices and lower cotton export prices, Pakistan is stuck in a low income
and low growth trap with its growth averaging at 2.8% per year from 2008-2011.
Pakistan must address government spending and revenues along with energy production in
order to increase economic growth and employ its growing population. Investment in
education, healthcare and infrastructure also needs to be increased for long term benefits.
Borrowing needs to reduce as our foreign debt totals up to $130 billion. Foreign aid needs to be
diminished as well as this has done nothing but make the economy more dependent on
external factors for growth and survival.

12

INTRODUCTION
BRIEF OVERVIEW OF THE SECTOR
Rice is not only the third largest crop which is grown but it also earns a lot of foreign reserves
for Pakistan. Production of Rice is gro % i last fie ea . a i ta ahieeet, oe
the past 50 years, has been phenomenal in reference to the rice industry. Pakistan had around
856,000 hectares of rice cultivation land back in 1947, which increased to 2.4 million hectares
by 1998. The production of rice, during this period, showed a significant increase by
approximately 6 times (from 737,000 to 4.6 million tons) whereas the increase in area was half
of this. Apart from increase in area of cultivation, production increased due to introduction of
high yielding variety seeds, improved facilities to the farmers and different methods to protect
the crop. Punjab is the leading producer of rice in the country. It accounts for 59.5 percent of
the total production. The next leading province is Sindh. It accounts 29.5 percent. The
remaining provinces NWFP and Baluchistan contribute 11 percent of the total production.
Many of the rice processing units are traditional huller type and are inefficient. Therefore, there
is a dire need to establish modern rice mills through which entrepreneurs of rice mills can be
able to produce the high capacity production.
Rice is an important food and cash crop. It has been the third largest crop of Pakistan falling
behind wheat and cotton. Its plantation takes an area of approximately 2.5 million ha (11% of
the total cropped area) and adds up to 27% of the cereals produced annually in Pakistan.
Production of milled rice, on an annual basis, has increased from 5.5 million tons to 11.7 million
tons posing a share of 8.1% in agriculture sector and 2.1% in GDP. Long grain aromatic Basmati
rice is the main product over which Pakistan has gained popularity as a rice exporter. Around
4.1 million ton per annum, of exported rice, has accounted for 7.3% of the foreign exchange
from exports of food based goods. The rice export increased manifold during the recent years
and a record export of 4.7million tons of worth about Rs.100 billion was made. The country
ranks 11th in terms of rice production and 4th in rice export in the world.
Despite the global recession of 2008, Pakistan was able to succeed in exporting rice because of
its diversified marketing approach and by trying to take new market share in Middle Eastern,
African and other Asian countries. One other reason is that wheat is majorly consumed as a
staple food item in Pakistan rather than rice.
The pivot point for the rice industry was back in 1988 when government decided to fully
privatize it, after that our export earnings increased from 300 Million dollars to 2200 million
dollars. Currently Rice is the second highest export earner for Pakistan as it earns 11% of total
foreign earnings. There is a lot of demand for Pakistani Basmati rice. Pakistan grows the best
basmati of the world.
13

PK-385 (famous for their aroma), Basmati 2000 and basmati KS-282 (equivalent to Thai rice) are
found in the Punjab province. Sindh accounts for 41% of the rice population. IRRI 6 and IRRI 9
are found in Sindh. Some Basmati is grown in Sindh but at a very low level. Overall the Basmati
yield is lower than that of IRRI in Pakistan.
We have two rice research institutes of rice in Pakistan, one at Punjab and the other at Sindh.
Prices of rice are not determined by farmers instead they are determined by market forces. The
rice sector is deregulated but the government intervenes in exports of rice. However it does not
provide any subsidies and does not determine prices as well.
Punjab is a Basmati growing area and so it needs more efforts for sowing, plantation and taking
care of required water, harvesting, milling and ageing etc. Due to all this Punjabi rice captures
more value in the international markets.
The value addition of farm products in Punjab encourages potential investors to reinvest in
modernizing the agro industry of Pakistan. New financial instruments are also merging
industries and agriculture together. Pakistan markets are ready for expansion in next five years
and that will determine not only local but international prices.
Due to ease in economic policies and investment policies now Pakistan will be going for
mergers with international players and this sector is gaining a lot of attention and investment
by foreign markets. Due to sufficient domestic demand in Pakistan for rice, there is a lot of
chance for this sector to grow and expand. Basmati is always a leading player from the demand
side of international players and due to shoulder to shoulder competition with India, Pakistan is
also becoming more competitive and is introducing new breeds of good quality basmati.

CURRENT PROBLEMS

Many unregistered seeds are available in the market at quite a low rate which results in low
yields.
Lack of awareness about mechanical transplantation, use of fertilizers, use of technology
and maintenance of plant population which results in low yield and quality.
Use of old technology, like use of tractor, increases the ratio of broken rice.
Low feasibility and no incentives to import.
Paddy dealers are also not using moisture meters or other upgraded technology which
again results in huge losses.
ISSUES WITH EXPORTS:
1) No proper refinement of exporting rice giving rise to quality issues
2) No checking of quality by any authority at different levels of the supply chain

14

3) Though Sindh is perfect for IRRI only but farmers do produce Basmati which causes not
only lower yields and lower profits but disparity in quality between Sindh and Punjab
Basmati as well
4) Inferior quality seeds available
5) No pre-shipment check of exporting rice

15

CURRENT NEWS ABOUT THE RICE SECTOR


1. Rice export orders may not be accomplished due to shortage of natural gas to produce
'parboiling rice' which has the potential to increase 15% foreign earnings in value
addition.
2. India is a big threat to Pakistan due to high quality Basmati and lower prices and recent
trade ease between both countries have given Indian rice exporters a chance to explore
domestic market and to find opportunities.
3. Due to some judiciary actions against one of the rice exporter of Pakistan by Iranian
Government, Pakistan lost one of its potential markets.
4. Export Finance Scheme rate cuts for refinancing has supported rice industry a lot in
flourishing.
5. A steep fall of around 53 per cent was registered in export of basmati rice during the
first six months (July-Dec) of the current fiscal year as exports stood at 239,764 tons as
against 506,904 tons recorded in the corresponding period last year due to increased
market capitalization by India and increased domestic demand by 15%.
6. Globally price falls of rice by approximately $5 per one ton.
7. REAP pressuring government for currency swap with Iran and settling issues for gaining
a giant market again.
8. India taking share of Iran Rice Market by using financial instruments and diplomatic
tactics from Pakistan.
9. China becomes the major market for Pakistan rice export.
10. Gas and other energy shortage resulting in 60% decline of export of Basmati and other
value added rice.
Sr.#

Title

Estimated cost

Evaluating suitability of exotic rice varieties and elite germplasm for par- Rs.5.193 million
boiling

PSDP (RADP)

Incorporation of resistance against BLB from wild into cultivated rice

PSDP (RADP)

Development and dissemination of water saving rice technologies in South US$ 63000/
Asia

ADB (through
IRRI)

Aflatoxin contamination in rice

PSF

Marker assisted selection and genomic studies for stress tolerance in wheat Rs.71.785 million
and rice

Rs.5.26 million

Rs.1.889 million

Funded by

PSDP (RADP)

16

MARKET SHARE DISTRIBUTION


COMPANY ANALYSIS
ENGRO CORPORATION
Overview
Engro EXIMP AgriProducts Ltd is a subsidiary of Engro EXIMP. It is primarily operating the
Basmati rice Procurement, Processing and Export business. The business is growing on a fast
pace and has a visionary approach of being amongst the top and leading Basmati rice
businesses worldwide.
The aim of Engro EXIMP is to develop strong relationship with the farmers who grow Basmati,
by ensuring those services with viable value addition as well as procurement of superior
Basmati paddy. Alongside this, the company also provides supreme quality registered seed to
these growers of Basmati. To further enhance the workability of the business, Engro EXIMP has
also kept advisory as well as procurement team which is directly working on field with the
farmers. The company has also invested in research and development pertaining to
technologies that are desirable for the proficiency of farmers in areas of water conservation;
yield growth, management of crop etc.
Operations
Engro EXIMP Agri-Products not only owns but also operates a massive and modernized
integrated processing complex, situated close to Muridke. The area covered by this facility
accounts for 67 acres, and is undoubtedly present in the core of Basmati growing area. The
equipment is imported from USA, Germany and Japan, and seeks commission in 2011. This
facility has the capacity to dry as much as 150 tons of paddies on an hourly basis, and store
66,000 tons of clean and dried out paddy, while processing the rice at a speed of 24 tons per
hour.
Capacity
The company has the capacity and capability to procure 150,000 tons or more of paddy while
the season for Basmati is present. As the next step, they ensure that it is stored in stacks or silos
after undergoing the procedure of being dried and cleaned.
Revenues
The rice trading business of Engro EXIMP Agri-Products reaped revenue worth Rs.3.7 billion for
FY 2012, as opposed to Rs. 1.6 billion for FY 2011. The business has recorded higher revenue
than the previous year but it has been limited due to excess of capacity over production. The
plant operations had to undergo curtailment during paddy season of 2012 which led to a lower
17

procurement of paddy for the year. The International Basmati prices were lower in first half of
2012 due to prevalence of Indian Basmati, however they started improving by the second half,
and Pakistani Basmati was able to trade with Indian Basmati at a premium. By cutting down on
the energy costs, the business is aiming to achieve an improved margin.
Sales
39kT of finished rice equivalent accounted for the total sales during FY 2012 out of which 25kT
were catered to the local market while the remaining 14kt were exported.

MATCO RICE PROCESSING (PVT) LTD.


Overview
Founded in 1990, Matco is the leading exporter of rice from Pakistan, with the premium variety
of ie eapig the highest popotio of sales eig Ba ati. The opa iteatioal
presence extends to 65 countries, with their prominent brand Falak having an edge in more
than 35 countries.
Operations
Matco is currently operating 4 rice processing plus milling plants, and also has pertinent storage
facilities. The company also has the privilege of being the greatest rice exporter from Pakistan.
With effectively vertically integrated paddy-drying, storage, husking, and processing facilities
existent in Karachi (Sindh) and Sadhoke (Punjab), the export of the flagship brand Falak Rice, as
well as other private brands are exported to as many as 65 or more countries.
Sales and Capacity
A geate popotio of ato sales eopa peiu Ba ati ie, ta ig ito aout
that Matco is the largest exporter from Pakistan. The capacity in terms of the total processing
reaches 40 MT per hour, along with the investment of the company in plant and property
crossing beyond US$25M.
Growth
A number of incidences support the fundamental growth of Matco

Processed above 95000 MT raw rice in the year 2010


State-of-the-art facilities are used in processing
For the FY 2012 the existing production facilities have been enhanced by 35%, hence
increasing total production capacity to 150,000 MT of raw rice per year.
A latest paddy husking facility has been built in Sadhoke (Punjab) with the facility
covering an area of 15 acre.

18

Private Labeling
Matco is involved in private labeling of brands to cater to customers worldwide. Presently, the
private labels are being exported to over 60 countries. Few of the varieties of rice available in
private labeling include Super Basmati, Super Basmati Brown, Super Basmati Sella, Super Fine,
Pure Basmati, and so on.

GUARD GROUP
Overview
Established in 1989, Guard Agri is the very first company in the private sector which has its own
Rice Research and Development (R&D) facility. Ever since its inception, the business has
progressed dramatically and currently owns five divisions-- R&D, Crop Agronomy, Food, Seed
and Agriculture Machinery. Guard Rice Mills is a subsidiary of Guard Group, with a history of 50
years in manufacturing, trading and distributing variety of products not only in Pakistan but
across the globe.
Production Capacity
The company has latest rice mills located in Lahore, with the production capacity ranging to
12.5 ton/hour.
Quality Control
Within Pakistan, the company has the honour of being the first rice mill that has been awarded
ISO 9001:2000 Quality Management System certification in the year 1998. In 2006, it was again
the first rice mill to be certified ISO 22000:2005 Food Safety Management System certification.
It has the supreme standard of ensuring food safety along the entire food chain, until it reaches
the point of consumption.
Market Share
As a symbol of its quality strength, Guard is supplying to predominant rice brands, along with
owning labels with an export range of up to 36 countries. Aside from export markets, Guard
Rice is the National Market Leader, and has a massive distribution network country wide.
Products
The product range includes Supreme Basmati-Easy cook Sella-Super Kernel-Super Kernel SellaBrown Rice-Tibar Basmati-Guard Awami-Longrain rice.
The most preferred choice of people worldwide is Super Kernel Basmati, and is perceived as the
highest quality basmati. Guard rice is known for procuring and processing very high quality of
Basmati Rice, and is positioned for sale in big markets such as hyper marts and super marts.

19

GARIBSONS (PVT) LIMITED


Overview

Garibsons is oe of the leadig ie poessos ad epotes. The opa ifa tutue


comprises of five state-of-the-art rice processing mills. The warehousing space exceeds 400,000
square feet and is situated near pertinent locations of Karachi Port and Port Qasim. The
company also devotes 35 acres of land to Basmati rice growing areas in Punjab housing, and
above 100 acres of industrial land in different industrial estates.
Main Markets

The predominant markets where Garibsons is present include the following:

South America
North America
Eastern Asia
Western Europe
Eastern Europe

Africa
Mid East
Oceania
Southeast Asia

Sales Volume and Exports


The total sales volume amounts to US$50 Million - US$100 Million. Since July 2001 till present, the

company has exported goods worth US$41 Million.


Growth

Keeping into consideration the customer's high quality expectations, Garibsons (Pvt.) Ltd., has
installed the Sortex Series 90,000, which uses the most up-to-date CCD technology, and
encompasses state-of-the-art optical sensing, data-processing plus ejector technology. The
Product yield increases by the resorting capabilities of the Sortex Series 90,000. Garibsons
assures "absolute" quality on the basis of employing the latest equipment installed.
Quality Control

Garibsons has been granted the ISO 9000 certification.

Fauji Foundation
Fauji Foundation initiated the rice category under its subsidiary Fauji Cereals. They introduced
ie fla e i the ea 9, hile Ba ati ie has ee eetl itodued i . Fauji
started its journey in 1954, and has the vision of creating a stronger and smarter Pakistan. Fauji
Ceeals poduts ae podued u ig latest state of the at i plat that as i talled
recently in 2012. Fauji has also achieved ISO 9001-2008 Certification for producing superior
quality food products. The company has established itself in the international market and
exports to numerous countries. It also supplies to UNICEF and World Food Program.
20

EXPORT DETAILS
AKITAN EXPOT of ICE.

As you can see here Pakistan exports a high quantity of rice to a number of different countries.
QRC RICE INSPECTION CELL
ARACHI,LAHORE,QUETTA& TCP
COUNTRY WISE POSITION OF EXPORT OF BASMATI RICE
S.NO NAME OF
COUNTRY
1 Aergentina
2 Afghanistan
3 Algeria
4 Angola

SUPER BASMATI
QTY(MT) VALUE($)

JULY, 2012 TO DECEMBER, 2012


PARBOILED RICE
BASMATI RICE
BROWN RICE
TOTAL
FOB PER
QTY(MT)
VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) M/TON ($)
24.08 16,350.32
679
24.08 16,350.32
124.
125,217.5
1010
114.
114,000.
106.6 127,486.
1196
39.6
48,114.
22.
14,520.
660
22.
14,520.

10.
67.

11,217.5
79,372.

5 Australia
6 Azerbaijan
7 Bahrain
8 Bangladesh
9 Belgium
10 Brazil
11 Brunei
12 Canada
13 Cape Town
14 China
15 Comoros
16 Congo
17 Cyprus

704.48
7,907.79
5,328.81
506.
1,120.11
50.
25.
1,481.38

936,620.52
3,985,869.
6,081,724.64
629,775.
1,116,174.7
58,000.
35,500.
1,765,291.95

347.38

263.41
130.8
25.

18 Denmark
19 Djibouti
20 Egypt
21 Estonia
22 Finland
23 France
24 Germany
25 Gerogia
26 Gothenburg
27 Greece
28
Haiti

8,523.57
7,907.79
7,018.38
527.
1,248.07
50.
25.
2,547.21
20.
290.33
246.1
59.
26.

7,515,384.27
3,985,869.
7,466,481.44
646,099.98
1,243,750.38
58,000.
35,500.
3,073,260.28
16,280.
335,667.65
239,863.6
44,305.
22,880.

882
504
1064
1226
997
1160
1420
1207
814
1156
975
751
880

400.03
591.39
52.
44.
48.
444.06
226.68 180,854.37 1,601.51
17.81
25.
626.64
25.
19,946.
185.5

497,550.09
677,640.44
44,025.
58,215.3
55,944.38
551,078.61
1,902,620.58
26,817.34
19,000.
621,812.5
103,148.53

1244
1146
847
1323
1166
1241
1188
1506
760
992
556

466,965.62 7,471.71 6,111,798.13

239.6

166,121.

50.46

50,169.68

581.52

788,143.28

311,833.83
141,855.8
26,250.

8.92

7,183.82

329.96
489.76
15.
44.
48.
348.56
652.03

438,776.09
590,596.28
15,015.
58,215.3
55,944.38
424,305.98
777,465.04

46.

39,514.

25.

16,950.

523.14

546,098.11

72.5
540.44
17.81
25.
53.5

98,422.6
755,615.83
26,817.34
19,000.
30,768.39

1,449.97 1,218,635.8
21.
16,324.98
52.5
57,460.

484.31 519,825.06
20.
16,280.
18.
16,650.
115.3 98,007.8
34.
18,055.
26.
22,880.
24.08
101.63
12.

19,260.
87,044.16
12,060.

23.
28,350.03
182.36 188,685.34

25.
185.5

25,000.
103,148.53

25.

19,946.

21

S.NO

NAME OF COUNTRY

29
30
31
32
33
34
35
36
37

Helsinburg
Hong Kong
Indonesia
Iran
Iraq
Ireland
Italy
Ivory Coast
Johannesburg

38
39
40
41
42
43
44
45
46
47
48
49
50

Jordan
Kenya
Korea
KSA
Kuwait
Labnon
Liberia
Libya
Lithuania
Madagascar
Madagscar
Malawai
Malaysia

51
52
53
54
55
56
57
58
59
60

Maldives
Malta
Matadi
Mauritius
Maurtius
Monorivia
Mozambique
Muara Daru
Netherlands
New Zaeland

SUPER BASMATI
PARBOILED RICE
BASMATI RICE
BROWN RICE
TOTAL
FOB PER
QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) M/TON ($)
22. 21,340.
22.
21,340. 970
170.83 214,743.57
7.46 8,788.02
3.52 3,829.76
181.81 227,361.35 1251
12. 15,600.
12.
15,600. 1300
13,862.38 12,057,304.48 9,914.4 5,320,792.11 6,362.7 3,721,830.78
30,139.48 21,099,927.36 700
458.66 241,255.49
458.66 241,255.49 526
250.26 286,826.23
250.26 286,826.23 1146
572.06 656,546.49
436.24 364,979.9
94. 66,670. 514.77 449,437.7 1,617.07 1,537,634.09 951
575.
705,525.
575. 705,525. 1227
11.5
16,560.
6. 8,940.
2. 2,900.
19.5
28,400. 1456
71.5 56,874.5
1,406.82 1,521,461.8
1,653.33 955,004.46
4.
5,200.
2.27 2,549.21
11,536.32 13,334,474.8 3,076.98 2,603,512.1 8,628.92 6,957,707.52
908.78 1,059,213.55
194.9 223,791.49
778.08 720,747.13
163.97 206,506.1
900.92 743,454.23
275.
347,825.
42. 59,823.96
18.7 17,834.26
163.
185,265.
74. 74,836.
2. 2,200.
24.
28,680.
20.
25,600.
173.
163,205.
50. 64,950. 3,400. 2,798,200.
241. 273,186.98
18.
16,038.
24.
24,000.
2,174.99 2,761,142.19
75.
211.7
23.
209.2

93,075.
282,131.8
28,402.93
252,721.85

878.88 773,272.05
15. 12,482.
24. 12,000.
296. 252,764.
25. 16,250.
2.

3,400.

28.2

40,250.

91.9 85,040.5
67.22 62,370.
195.71 230,480.68 1,310.23 1,278,962.92

71.5 56,874.5 795


3,060.14 2,476,466.26 809
6.27 7,749.21 1236
23,242.22 22,895,694.42 985
1,881.77 2,003,752.17 1065
1,064.89 949,960.33 892
275. 347,825. 1265
60.7 77,658.22 1279
237. 260,101. 1097
2.
2,200. 1100
24.
28,680. 1195
20.
25,600. 1280
3,623. 3,026,355. 835
1,119.88 1,046,459.03 934
33.
28,520. 864
48.
36,000. 750
2,470.99 3,013,906.19 1220
25.
16,250. 650
75.
93,075. 1241
241.9 325,781.8 1347
23. 28,402.93 1235
159.12 147,410.5 926
1,715.14 1,762,165.45 1027

22

S.NO
61
62
63
64
65
66
67
68
69

SUPER BASMATI
PARBOILED RICE
BASMATI RICE
BROWN RICE
TOTAL
FOB PER
NAME OF COUNTRY QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) M/TON ($)
New Zealand
136.79 147,257.46 1077
8.44
12,655.56
7.
10,745.
121.35 123,856.9
Nigeria
75.
45,000. 600
75.
45,000.
Norway
384.57 498,115.68 1295
214.95 259,870.44
157.62 224,745.24
12.
13,500.
Oman
28,249.41 31,636,785.93 1120
23,990.27 27,870,598.67
174.42 221,924.87
4,084.72 3,544,262.4
Parague
21.
32,004. 1524
21.
32,004.
Philippines
68.8
88,599.56 1288
68.8
88,599.56
Piraeus
24.
24,696. 1029
24.
24,696.
Pireaus
57.
56,544. 992
48.
50,784.
9.
5,760.
Poland
50.
57,500. 1150
50.
57,500.

70
71
72
73
74
75
76
77
78
79
80
81
82

Port Au Prince
Qatar
Reuinon
Reunion
Romania
Russia
Seychelles
Seychells
Singapore
Sir Lanka
South Africa
Spain
Sri Lanka

83
84
85
86
87
88
89
90
91
92

Sudan
Sweden
Switzerland
Tanzaina
Tanzania
Thailand
Thessaloniki
Trinidad & Tobago
Tunisia
Turkey

S.NO

NAME OF
SUPER BASMATI
PARBOILED RICE
BASMATI RICE
BROWN RICE
TOTAL
FOB PER
COUNTRY QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) QTY(MT) VALUE($) M/TON ($)
U.K.
1,339.77 1,506,641.77
668.85 833,728.34
151.6 151,092.2 8,355.35 7,450,994.4 10,515.57 9,942,456.72 945
UAE
47,245.07 49,545,906.04
431.81 416,576.27 4,056.73 3,344,032.23
4.35
5,644. 51,737.96 53,312,158.54 1030
Ugenda
40.
21,200. 530
40.
21,200.
Ukraine
353. 388,430.38 1100
301. 333,830.38
52. 54,600.
USA
1,895.04 2,448,692.77 2,488.65 3,424,953.95
422.65 459,769.33
222.77 228,474. 5,029.11 6,561,890.06 1305
Wellington
19.74 16,090.55 815
7.49 6,102.72
12.26 9,987.83
West Indies
19.16 24,572.36 1282
19.16 24,572.36
Yemen
17,250.83 17,620,371.22 1021
7,512.03 8,367,974.23
168. 171,024. 9,570.8 9,081,372.99
Zambabwe
1.
800. 800
1.
800.

93
94
95
96
97
98
99
100
101

TOTAL

5,091.5 6,410,808.38
20.
18,600.
288.
239,400.
7.9
11,114.
347.
377,033.
208.
210,080.
312.
319,280.
455.49 612,305.09

145778

315.8
429.87
377.04

393,122.84
533,626.84
433,555.04

928.2
124.94
20.
163.
24.
28.
24.
19.79
22.
708.

1,248,179.1
144,772.27
38,600.
191,921.66
24,000.
32,200.
25,632.
31,020.5
26,422.
360,868.

154780654 21060

14.5
7,540.
3,415.66 2,584,727.03
93.

82,635.

217. 245,189.58

370.23 401,949.33

11.5

11,960.

10.
7.

6,750.
8,708.

158.2 151,482.42
72.
38,736.
274.73 233,565.4
104.69 100,600.69
3,111.2 2,442,265.39

371.98

426,848.

2.

2,500.

100.

112,875.

24.

12,000.

17745777 61955

138.
13.
11.62
87.88
24.05

167,118.
15,549.91
13,653.5
50,751.25
25,589.2

32.

38,552.

50793356 10971

72.

57,442.09

350.

319,784.

1,175.

937,462.

9669985

14.5
7,540. 520
8,507.17 8,995,535.41 1057
20.
18,600. 930
453. 379,477.09 838
7.9
11,114. 1407
934.23 1,024,171.91 1096
208.
210,080. 1010
312.
319,280. 1023
625.19 775,747.51 1241
72.
38,736. 538
600.52 633,438.24 1055
891.56 962,719.53 1080
3,488.24 2,875,820.43 824
1,066.2 1,415,297.1 1327
1,684.92 1,524,632.18 905
31.62
52,253.5 1653
252.88 245,172.91 970
48.05
49,589.2 1032
128.
145,075. 1133
24.
25,632. 1068
19.79
31,020.5 1567
22.
26,422. 1201
764.
411,420. 539

239765

232998772

23

Rice Export Prices are as follows:


RICE EXPORT PRICES
Thai
White
100% B

U.S.

Second
grade
2007
2008
2009
2010
2011
2011

335
695
587
518
565

332
722
619
532
563

Thai

Viet
5.%

436
782
545
510
577

325
682
555
492
549

Argentina
5.% max 10%

313
614
432
416
505

India

(US $/tonne, f.o.b.)


338
584 ...
459 ...
499 ...
475

July
548
548
549
532
505
August
582
588
605
566
564
September
618
625
650
601
555
October
620
610
639
604
576
November
649
624
597
632
560
December
620
598
569
603
492
2012
January
548
531
546
531
446
February
563
570
535
547
431
March
567
614
524
551
428
April
569
608
514
552
431
May
613
622
544
602
434
June
619
615
565
609
413
July
600
584
572
597
411
2011
528
530
552
511
473
Jan.-Jul.
2012
Jan.-Jul.
583
592
543
570
428
% Change
10.4
11.7
-1.7
11.6
-9.6
Sources
: Jackson Son & Co. (London) Ltd., Thai Department of Foreign Trade (DFT) and other public sources.
1/ White broken rice. 2/ No. 1, maximum 4-percent brokens, sacked, California mill.
Note

U.S.
California Pak
Medium
Basmati

Thai

Thai
Parboiled Long
Grain
100.% 2,4%

450 ...
450 ...
450
450
450
468
475
475
472
470
470
470
470
491
472
-3.9

Pak
25.%

Thai
25.%

Viet
25.%

A1
25.% Super
1/

Grain
2/

Thai
Fragrant

Ordinary

100.%

409

290
498
351
372
433

305
603
460
444
511

294
553
384
387
467

275
506
329
386
464

557
913
1019
764
855

677
1077
937
881
1008

550
914
954
1045
1054

437
419
396
384

467
466
455
418
405
391

490
520
550
556
594
587

466
530
515
524
515
464

445
471
497
505
553
560

871
866
860
860
816
764

910
875
950
962
950
890

1062
1096
1110
1140
1141
1125

379
379
415
411
412
411
404
437
402
-8

529
542
551
553
580
579
570
474
558
17.6

410
395
387
384
388
369
379
437
387
-11.3

515
530
543
546
554
545
536
426
538
26.4

816
816
788
772
780
783
788
871
792
-9.1

950
950
950
825
881
931
931
1068
917
-14.1

1087
1110
1120
1091
1078
1062
1062
1004
1087
8.2

289

390
395
379
384
379
382
394
386

: Please note that data may have been subject to revision due to temporary unavailability and/or late publishing of weekly price quotations.

FAO Rice Market Monitor July 2012

24

PEST MODEL
PEST analysis is an analysis tool employed by companies for their product to judge the
environment they are going to operate in. PEST analysis gives a good view of the external
factors that can affect the product, locally and internationally. It evolves around four major
pointers; Political conditions, Economic conditions, Social conditions and Technological
oditio . It gie a id ee ie of the hole eioet, ad allo the aalsis of the
industries to be done easily. It helps companies and industries identify what issues they will be
facing if they launch into that particular environment and make the decision of countering
those issues easier by forming effective strategies. PEST takes into account four important
factors:
1. Political: These factors determine the extent of government intervention in the industry and
how it affects the industry. Government intervention can be via strict regulatory checks, fiscal
policy implementation, trade tariffs and its affect on exports and the business environment.
The political conditions affecting the Rice Industry are majorly the weak law and order situation
of Pakistan that deters foreign and local investment within this industry. It also affects the
demand and supply of the rice farmers by negatively affecting the procurement of raw
materials because of transport strikes, and delays the shipment of orders. Moreover, the
presence of feudal lords with strong alliances with political leaders work against the favor of a
common farmer as their stocks are at time left behind until the stocks of the influential people
are sold. However, government has employed field advisors who help the farmers with respect
to their education, the ways that can be used to farming, sowing and harvesting. Other than
that, no government intervention with respect to taxes and subsidies is present.
2. Economic: These factors try to understand the position of the industry economically and the
reasons for it being so. For example, inflation rate prevalent in the economy and how it would
affect the rice industry by affecting price, cost of raw materials. Other than that, interest rate,
foreign exchange rate also fall in this category. Foreign exchange has affected the rice industry
as due to the fall of the value of Vietnamese currency, their exports in the international market
have become cheaper, giving them an edge over the Pakistani rice products in the market.
Thus, Vietnamese variety has been able to claim the international market share of Pakistan.
Inflationary pressure domestically in Pakistan has led to rising oil prices and raw material cost
for the farmers. This has then led to higher prices as the farmers are not allotted any subsidies.
Higher domestic prices pave way for lower international competition, affecting the revenue of
the farmers.
3. Technological: These facts deal with the introduction of new technology that may affect the
25

competitiveness of the industry and its efficiency and how, ultimately demand and supply
would be affected. Research and development, and automation fall in this category. Pakistan
has been an agriculture based industry since the time of its inception in 1947. The farmers from
that time have only learnt the traditional ways of farmers, and those ways are which they are
comfortable with. With the developments in technology on a daily basis globally, this has acted
in our disadvantage because international rice producers have attained efficient and cheaper
ways of producing rice, exporting them at cheaper price, hence we face competition and are
susceptible to losing out our market share in the international market. The farmers in Pakistan
are also reluctant to learn these ways. Moreover, they even lack the awareness of new and
effiiet teholog ei tee. This is ou di adatage. Hoee, ee fi like Eip
Engro are now a part of the rice market because they found a gap in the rice market of Pakistan
which they saw as one they could cover. Such firms are also investing in the modern technology
now available. They also hold seminars for the education of rice farmers. Research institutes
are also now establishing themselves in Pakistan with the help of REAP, and so Pakistan can
have the technological factors work in its favor.
4. Social: These facts deal with the social environment and take into account trends of the
industry, demographics, population. The population of Pakistan is growing in a geometric trend.
This assures demand of rice for the future, hence promising good revenue to the farmers.
Furthermore, diet trends claiming rice to be nutritious are an attractive factor for the demand
of rice to rise in the future. The increasing popularity of the Asian Cuisine worldwide is also
aiding rice consumption because these are based on rice as the main ingredient. Example; Black
Rice and Chinese food. Rice is also considered to be eaten in a hurry and in a cleaner method
than curry with chapatti; therefore the social pattern depicts an increase in the rice
consumption and is a positive sign for the rice industry.

26

SWOT ANALYSIS
Strengths:
1.
2.
3.
4.
5.
6.

Climate/edaphic conditions
Variety of rice produced
Exposure to export markets
Privatization
Competiveness
Pakistan is the 4th largest exporter and
11th largest producer of rice
7. Availability of labor

Opportunities:
1. Agriculture based Economy of Pakistan
with high export and investment
potential
2. High demand
3. Export opportunities with China and
Philippines
4. Role of TDAP
5. Organic farming
6. Asian cuisine influence
7. New diet studies
8. Minimum export price
9. Introduction of new technology

Weaknesses:
1.
2.
3.
4.
5.
6.
7.
8.

Mixing of Rice
Technology
Selling without brand names
Lack of value addition
Seeds yield
Lack of facility with cluster
Black market (Punjab and Sindh)
Labor issues

Threats:
1. Competition in rice exports
2. Unpredictable Climate and Global
warming
3. Shortage of gas in Pakistan
4. Soil erosion
5. Water issues
6. Increase in small farmers
7. Feudal Lords
8. Lack of infrastructure in rural areas
9. Economic and Political situation of
Pakistan
10. Role of Urbanization
11. Falling value of the Pakistani rupee and
role of Vietnamese currency
12. No government support
13. Various duties and taxes imposed.

27

STRENGTHS:
1. Climate and edaphic conditions:
Rice is best grown in a hot climate with a lot of humidity. The required temperature is a little
above 25C and about 150-200mm of rainfall is required during the sowing period. Clayell land
and alluvial soil is also required. All this is present in Pakistan hence it acts as a major strength
for the industry. Pakistan is divided into 4 rice zones according to the climatic and edaphic
conditions for the different varieties of rice.
Zone 1- Sub humid monsoon, 750-1000mm of rainfall and flat valleys. High quality Basmati not
grown in this zone. Northern mountainous areas
Zone 2- Sub humid and sub-tropical climate. 400-700mm of rainfall. For better quality of rice.
Lies between the river Ravi and Chenab. Basmati rice is grown in this zone.
Zone 3- West bank of the Indus River. Arid subtropical climate with 100mm of rainfall. Has a
long and extremely hot summer. Good for many coarse of rice varieties.
Zone 4- In the Indus Delta. Arid tropical marine climate. Not much rain. Rice grown with
rotation.
2. Variety of rice produced
As stated by Mr. Naveed (BD manager Engro Eximp) that there are two major types of rice in
Pakistan Basmati and Non-Basmati (e.g., IRRI). Pakistan specializes in and is very famous for
exporting long and long grain which is aromatic basmati rice. This quality is exported to UAE,
Australia and European Union. Super Basmati is considered one of the best around the world by
the Agriculture Department of the Government. Others are:
1) Cargo Rice: (BROWN RICE, HUSKED RICE) is the kind of rice obtained from the paddy, the only
process implemented on it is Husk removal. This includes whole grain, head rice.
2) Plain or White Rice: is rice obtained from the paddy and it has been husked, milled resulting
in removal of bran layers. This includes whole grain, head rice.
3) Parboiled Rice: It can be husked and milled rice or husked rice having been subjected to heat
treatment after being soaked in water so that the starch is fully gelatinized. This is followed by a
drying process.
Pakistan produces varieties of rice, the popular ones being:
Basmati:
1) Basmati 2000
28

2) Basmati 385
3) Basmati 198
4) Super Basmati
5) Basmati 370
6) Kernal
7) Shaheen ( Basmati)
Other Rice Varieties:
1) IRRI 6
2) IRRI 9
3) PG (IRRI)
4) KS 282
These various varieties cater to various demands in different countries and because Pakistan
produces all these, Pakistan has an edge as it can cater to demands from various countries and
not be dependent on one quality.
3. Exposure to foreign markets (Exports)
The quality of rice which Pakistan grows gives it an edge over many other countries and helps
us export rice. Pakistan is the 4th largest exporter of rice in the world. There was an indirect
subsidy on tractors and bags of rice recently which helped Pakistan export more. REAP (rice
exporters association of Pakistan) was set up to assist the exporters.
4. Privatization
After the reign of Bhutto, all industries were privatized and so was the rice industry. We all
know that privatization of industries leads to more efficiency and productivity which leads to
lower prices, higher variety and more exports. There has been a 27.7% increase of rice
production in the country since the past year. The government sector mentioned themselves
about the issues a nationalized industry faces which are over employment and political
pe ue hih doe t eist i the ie idu t i a i ta afte it as privatized.
5. Competitiveness

29

Since we all know that the rice industry is privatized, there are numerous players in the market.
Engro Eximp entered the market recently and added to the competition which already existed
among the major players. Competitiveness has its own advantages. Each Company will want to
have an edge over the other hence they will produce the better quality with lesser costs. What
Engro did is it is using its brand name to capture the market. Whereas Guard being a company
with Chinese affiliation is using its low cost to compete.
6. Pakistan is the 4th largest exporter and 11th largest producer of rice:
Asian countries have 80 million hectares of land, able to cater to 75% of the total demand of
rice. Pakistan achieved phenomenal increase in ie podutio i Au Kha ea. Pakistan
produces 6.22 million tons of rice on 5 million acres of land. Rice export has remained the
second largest foreign exchange earning commodity for Pakistan. Pakistan exports 80% of
Super Basmati to European countries and has the potential to export more.
7. Availability of labor:
Pakistan being an agro based economy has an ample supply of labor. The rice industry being a
labor intensive industry has access to all this labor. Therefore there is a chance of high
production.

30

WEAKNESSES:
1. Mixing of Rice.
We all know about the instability of pricing of Pakistani products in the foreign markets when
exported. Basmati rice has been mixed with non-basmati rice skillfully retaining the cooking
ability of rice and labeling it under basmati rice when it is not 100% basmati rice. There are two
drawbacks of this, people who do not know about the iig, the lael a i ta a ati as
ot as good as Thailad o a othe outies. Also he foud out that it has ee ied
with non-basmati rice, the customer feels cheated decreasing goodwill.
2. Technology
Although Pakistan has started using technology in the rice industry, it is still far behind a few
countries. According to the Bahoori Mills in Punjab, the inconsistent quality and quantity of rice
podued i a i ta is eause of the la of teholog. The taditioal tehologies aet
able to cope with the rising demand. According to Iftekhar Ahmed Khoso Sindh has two major
zones of rice production and none have ever achieved the desired per acre result because of
la of teholog. The ie goes though aiou poesses util it a finished good. The rice
ills loated i idh ae outdated ad that h Chia ad Idia ala had a lead i the
industry due to the up gradation of technology in their industry. This is also why Pakistan
experiences a lot of grains of broken rice after the final process.
3. Selling without Brand names
A major weakness of the Pakistani rice exports is that they sell without any brand names. This
was also highlighted by the Engro BD manager that despite the major players and high exports
the packaging expoted ae o as Ba ati ie, a i ta. This has haged a little ith
GUARD into the industry and Engro is trying to change it while trading rice. This has had a
drawback as each company differs in their quality of rice. When consumers buy Pakistani
exported goods, they are bound to get a different variety every time. Because of this the
exporters do not even get a good price for the rice exported.
4. Lack of value addition
Talking about exports specifically in this case. Pakistan exports rice in bulk quantity and rarely in
1kg, 2kg and 5kg packets. Again with the help of Engro and GUARD it has just started but not
on a very large scale. The majority is in bulk. The consequences of this are that it loses its
foreign markets as other countries sell in every possible quantity.
5. Seed yields

31

Although new seeds have been developed but due to lack of technology and use of good quality
fertilizers, the seed yield of rice has been falling. Because of this rice seeds have to be imported
into Pakistan. Hybrid seeds are being imported; Hybrid seeds have a much higher yield than
Basmati in Pakistan. The Kissan Food spokesman said that the government should invest more
into the rice industry rather than companies importing seeds.
6. Lack of facility within culture
The rice industry is privatized in Pakistan and the government of Pakistan does not provide any
diet susidies. The faes aet e ell taied ad euipped. Most of the poe e ae
mishandled by them which results in lack of crop. They have been learning from their
forefathers and the experience they have received. The farmers need to be educated more to
help podue oe ie. EA has ee odutig okshops ut it udestood that the
cannot cater to entire Pakistan with a few individuals. The government sector proposed
themselves that the private sector has better schemes to facilitate the industry then what the
government does.
7. Black Market
I the past ea , a issues hae theateed a i ta ailit to feed itself a it e ie,
wheat or any other crop. Pakistan has faced black marketing in wheat and sugar extensively.
However black marketing of Urea has given a rise in price of rice from Rs. 635 to Rs. 850 in
interior Sindh. Urea consumption has been increasing due to bumper crops hence the
marketers started taking advantage of this situation. Other than that, the rice is cheaper in
Punjab than in Sindh, so traders buy rice from Punjab and sell it in Sindh. This is how they
exploit the market and earn a higher profit in Sindh.
8. Labor Issues
Most of the labor employed in the rice industry is not educated and there is little training
provided especially regarding rice processing. This has led to increased losses in the yield
because proper knowledge and training is not available to the farmers.

32

OPPORTUNITIES:
1. Agro-based economy with high export and investment potential:
Pakistan is an agriculture based economy, with the majority of population living in rural areas
and using agriculture as their source of income. This is an opportunity because as more farmers
are present in agriculture, there is a greater chance of human investment in this sector. Even at
the high political level, most of the leaders have lands in their name used for the purpose of
agriculture. Rice is produced in Pakistan in Sindh and Punjab. Despite the demand of rice in
South Africa, Senegal, Saudi Arabia, Kuwait, USA, Turkey, Sri Lanka, Australia, Malaysia,
Indonesia, Philippines, Pakistan has a small share in these markets. Immense potential for
investment is present in the Rice sector via development of Silos, Parboiled rice processing
plants, quality polishing and processing. Saudi Arab and USA are major demanders of parboiled
rice (70%) therefore investment in this sector is an opportunity for Pakistan.
2. High Demand
Population growth in Pakistan is quite visible. Rice being the 2nd staple food of Pakistan is
required in large quantities. This helps the industry to produce more with lower prices and
provide ample rice for the entire country.
3. Export opportunities with China and Philippines:
Punjab Governor Makhdoom Ahmad Mehmood said that our rice exporters have been able to
attract the interest of the Chinese buyers into buying the rice we produce (04-04-2013,
Business Daily Recorder). Tanzania and China have become major rice exporting importing
companies from and for Pakistan resulting in them being a sure source of our demand for the
variety of rice that Pakistan produces. This is because of the efforts of Rice Exports Corporation
to encouage epot of a i tai ie. As of Jaua , a i ta ie epot to Chia has
recorded an increase as the volume of non-basmati rice (72,623 MT) to China worth $30 million
in just one month was exported. (DAILY TIMES (14-03-2013)).
Pakistan has won a tender for supply of 50,000 MT rice to Philippines as a result of bidding held
on December 2, 2009. Philippines have also announced another tender for purchase of 600,000
MT rice. Pakistan can avail this opportunity.
4. Role of TDAP:
Trade Development authority of Pakistan (TDAP) has announced to strategize with a detailed
program focused on the promotion of rice export to Central Asian States. Exhibitions such as
Epo ae plaed to e aaged i ollaoatio ith the ie epotes to a et a i ta
33

rice. As it would help exporters to earn more foreign exchange for the country, this is good sign
by TDAP. Punjab Government will sign 5 acres of land for the establishment and development
of Rice Technical Training Institute, where skilled manpower for the rice industry would be
trained. (THE NATION (29-03-2013))
5. Organic Farming:
Sales of organic food have increased in comparison to the production of organic food at the
ratio of 1:3. It shows an increasing demand supply gap. This is an opportunity for agriculture
economy of Pakistan. If the rice farmers shift towards Organic farming and production for rice,
this could be sold at higher prices meaning higher profits for farmers. This will attract more
farmers, convince them to improve their ways or farming and ultimately, increase international
demand.
6. Asian cuisine influence:
Asian restaurant and food are gaining popularity all over the world. Asian recipes rely heavily
on rice as their stable ingredient example Chinese food, porridge, black rice of Valencia. As
Asian food becomes more popular, the demand for rice will also increase.
7. New diet studies:
The new diet studies have shown rice to be more nutritious than any other food. These
researches for the health conscious people lead to an increase in demand for rice, which is
again a window of opportunity for the farmers, promising future stable demand.
8. Minimum Export Price for Rice:
ie Epot A oiatio of a i taEA s ole i fiig a iiu epot pie fo ie is a
opportunity because it promises for the farmers, a stable price for rice, and hence promises a
steady amount of profits too. Therefore, it is also an incentive for farmers to increase their
supply of rice and earn higher revenue.
9. Introduction of Technology
There have been glimpses of Pakistan rice industry using technology in the recent years which
have helped the industry go in a very positive manner. Dr. Fida Abbasi developed a technology
that happened to increase the number of grains per panicle of a rice plant from 250 to 700. The
technology Super NPT has helped increase rice production from 5 ton per hectare to 15 tons
pe hetae. Aodig to D. Aasi this id of ie a t podued ahee i the old.

34

Threats:
1. Competition in rice exports:
Idia is uetl poduig aiet of ie hih is of ette ualit tha a i ta
basmati rice. Due to this, it is highly demanded by the international market at a higher price as
well becoming a major competitor for Pakistan.
Ba glade h faes ae epeted to podue a e aiet of ie seeds i the oig ea
that will speed the maturity of the rice crops process in 105 days, which is the fastest of all the
varieties ever produced and tested. This seed was developed by Bangladesh Rice Research
Institute (BRRI) via hybridization or cross mixing of a local rice variety with the high-yielding
BRRI Dhan-9. Baglade h goeet ill also aid the faes the poi io of fee seeds
and fertilizers to boost the cultivation of rice watered by rain and hence, protect the
eioet as a esult. Baglade h is the olds fouth iggest podue of the gai ad this
would lead to an increase in its exports.
2. Unpredictable Climate and Global warming:
Global warming is an international concern as it leads to higher temperature globally. That
leads to melting of glacial in the seas and rivers, leading to floods. Pakistan has been known to
be badly affected by floods in the Pakistan. Lower Sindh is a major producer of rice and is also
the area most affected by floods, which affect the crops harvested in those areas. Rice needs a
constant and specific supply of water. Too much water, caused by floods cause water logging
and also brings with it various diseases. Unexpected climate also brings about droughts and
famines, and as Sindh is a major producer of rice, it needs water supply constantly.
3. Shortage of gas in Pakistan:
The epot odes of paoilig ie ae at a ege of eig ot opleted eau e of
unavailability of natural gas which is a main raw material in the production, Parboiled rice have
a great demand in the international market to the extent that can fetch 15% of our foreign
exchange with value addition. Rice Exporters Association of Pakistan (Reap) Vice Chairman
Chaudhry Samee Ullah urged the Sui Northern Gas Pipelines Limited (SNGPL) authorities to
ensure uninterrupted gas supply to rice millers and exporters as the top priority because export
ake up a high peetage of ou eoo eeue.
4. Soil Erosion
To counter to soil erosion, no mode has been adopted to bring back the fertility to soil after
harvesting rice crops leading to the soil becoming infertile. The thickness of fertile layer of soil
35

in Pakistan is more than 6 inches whereas that of other countries is 4 inches. Despite that, the
yield of our soil is lower compared to those of other countries.
5. Water issues:
Water wastage is very high in our country. The traditional method of flood irrigation is still in
practice throughout the country which wastes almost 50 percent of water. Water is needed for
rice production. This wastage of water leads to water logging in some areas, and the other
areas being completely deprived of water, affecting the supply of rice.
6. Increase in small farmers:
The small farmers are increasing in our country as with succeeding generations, land gets
divided. These small farmers are unable to avail their credit facilities to purchase seeds,
pesticides, fertilizers because of lack of credibility. Additionally, a large area of land for rice is
owned by feudal employing the farmers as workers or tenants. This uncertain situation of
occupancy neither creates incentive of work nor does attract capital investment by the farmer
or by international investors either.
7. Feudal Lords:
The existence of feudal lords and their connections with the leading political parties of Pakistan
are a threat as they force up the prices of rice stock by using influence and making sure their
stock is sold before that of the small farmers. This is a threat as it negatively affects the small
farmers and their supply. The feudal landlords are also in possession f very large land, and
because they do not know the ways of farming, much of the land is left to waste.
8. Lack of infrastructure in rural areas:
The only means of communication in rural areas is television or radio. Via government
expenditure in this sector, programs related to rice sowing, germination and planting can be
aired so that the farmers can learn of them. However, these programs would need to be cast in
local and regional levels. Lack of guidance is the ai ea o of faes a adess. This is
because of communication gap between well qualified experts and simple farmers. The experts
are unwilling to travel to such areas because of lack of infrastructure. Due to this, the farmers
have not learnt the best techniques, which affect their output.
9. Economic and Political situation of Pakistan:
The political situation of Pakistan deters foreign investment. Also, this situation causes strikes
affecting the output and sales of farmers and their profits. This has led to farmers willing to
shift to Bangladesh. Lack of electricity and gas adds to the pressure.
36

10. Role of Urbanization:


Urbanization is leading to rural farmers shifting to urban areas and moving away from
traditional practices such as farming and rice production. This is a threat because Pakistan is an
agro based country and our major export revenue comes from there.
11. Falling value of the Pakistani rupee and role of Vietnamese currency and prices:
The devaluation of Vietnamese currency may affect the price of rice in international market.
Vietnamese rice price is expected to fall as the government has stopped its intervention by
fixing a higher price. This will make Vietnam able to compete in the rice market with India and
Pakistan due to their lower priced rice.
12. No government support:
Lack of government support in the case of provision of subsidies and tax incentives and
reduction of duties lead to increased price for rice exporters ultimately increasing their cost of
production, lowering profits or leading to higher prices. Other countries, aided by the
government can sell internationally at lower prices, again affecting our share in the
international market.
13. Various duties and taxes imposed:
These pose a threat because duties and taxes increase the cost for farmers, again affecting their
profits and the prices rice is sold and exported at, giving way for internationally competitors to
sweep the market share.

37

PORTERS DIAMOND MODEL


ote Diaod Model helps us ude tad the positio of a atio ith egad to gloal
competition. According to Porter productivity is the major contributing factor to
competitieess hih i tu helps to ipoe a atio stadad of liig. The odel
suggests that there are some basic reasons why some nations and some industries within
particular nations are more competitive than others on a global scale.
When we think about the fact that why do nations compete, the first and foremost reason that
we need to consider is the standard of living. All nations compete essentially to increase their
standard of living. An increased standard of living makes sure that the citizens of any country
have factors such as widespread education, access to health facilities and employment
opportunities amongst many others.
ote Diaod Model fo the opaatie adatage of atio o i t of fou ai
attributes which shape the national environment in which domestic firms compete.
1. Factor Conditions:
These include factors such as skilled workforce, technological advancements, natural
resources etc.
2. Demand Conditions:
These conditions describe the nature of the demand of the local market with respect to
the foreign demand.
3. Related and Supporting Industries:
Local competition between related and supporting industries creates innovations and
cost effectiveness within the industry which drives up productivity
4. Firm Strategy, Structure and Rivalry:
This includes how companies are created, organized and managed. In addition to this it
talks about the nature and extent of local rivalry.

These four factors promote the competitive advantages of firms, industries and nations.
Business leaders can use this model to determine competitive factors and create benchmarks
for their firms and industries. Furthermore the model can be used to analyze which countries to
invest in and which countries have more potential for development.

38

ADVANTAGES & DISADVANTAGES OF PORTERS MODEL:


The Porter Model has several advantages. They are as follows:
1.
2.
3.
4.
5.
6.

It helps a nation or a firm to utilize its resources to the best of its abilities
It helps a nation or a firm to be competitive
It helps a nation or a firm to streamline its natural capabilities and improve upon them
It brings about innovation and technology
It helps nations build up on their competitive advantage
It helps to open up nations and firms to global market and opportunities

The disadvantages of the model are as follows:


1.
2.
3.
4.

It makes the firms concentrate too much on particular resources


Diversification is promoted at a much later stage
Many implications depend on the element of luck
There is no guarantee that the application of the model will be successful as every
nation has a different case.
5. The model does not take culture history into account

ote odel a e applied to atio ao the gloe poided that the atio
concentrates on converting its basic resources into advanced ones. Pakistan can well focus on
its agricultural products as it has an advantage here. However the focus should be on making
the sector more technology and innovation savvy. Pakistan is still struggling in this aspect.
However according to recent research the industry has moved in a positive direction albeit
slowly.

39

THE DIAMOND MODEL FOR THE PAKISTANI RICE INDUSTRY


FACTOR CONDITIONS
Factor conditions in the diamond model can be categorized under human resources, material
resources, knowledge resources, capital resources and infrastructure. According to Porter it is
not necessary that these factors are naturally present in a country or inherited. They can
develop and change. Factor conditions provide initial advantages to the nation and industry
which are then built upon. Each nation has its own particular set of factor conditions hence the
development of each nation differs.
Pakistan is an agro based economy where rice plays a major role. Rice is a very important crop
for Pakistan for several reasons. Firstly, rice is second staple food and contributes more than 2
million tons to our national food requirement. Secondly, rice industry is a significant source of
eploet ad ioe fo ual people. Thidl, it otiutes to the out foeig
exchange earnings.
Research shows that rice is grown in three stages in Pakistan. The first stage is that the rice is
shelled when it is grown. This means that the eatable rice is taken out from the shell and the
shell is used as a by-product. Then it is re-processed to remove the bran from the rice making it
rough rice. Bran itself is a very useful byproduct. In the third stage the rice is transported to the
city and then polished after which it is exported.
Pakistan has been blessed with abundant natural resources that work in its favor where rice
production is concerned. These resources allow Pakistan to produce Basmati rice which is one
of the finest qualities of rice in the world. It is a non replicable variety and is grown in high
quantities in Pakistan due to the fertile Pakistani soil, humid climate and slit forming deltas
carrying high level of nutrients to the rice plains. Another high quality breed of rice that is
produced in Pakistan is the IRRI rice. This is hybrid rice and it is grown in Pakistan because of its
heat and salt tolerance. Rice growing season is fairly long and suitable for cultivating fine
aromatic Basmati as well as some IRRI varieties.
However limited water availability plays an adversary role to rice production as water is a major
component for production. When monsoon rains do come they bring much relief but they also
bring floods at time which ended up damaging 400,000 tons of rice paddies in 2011. When rice
is harvested it needs a proper storage place which unfortunately is not a concept developed in
Pakistan. If the rice is harvested and rainfall occurs then the whole crop is destroyed.
Technology is an important fato i toda old. Teholog otiutes heail toad
productivity and efficiency. In Pakistan the technology, with respect to the rice industry, is not
40

as progressed as it should be. Traditional and outdated post harvest practices have resulted in
substantial losses of output and quality of Basmati rice. However, big brands in Pakistani rice,
like Matco, are trying to solve this problem. Matco recently invested in the most modern agro
processing infrastructure that aims to correct the post harvest losses problem in the rice
industry. With the collaboration of the new Japanese and American technologies the Sadhoke
project of Matco contains the latest technology such as modern paddy dryers, rice parboiling
units etc.
There is also a transportation issue associated with the rice industry. USA uses cargo trains to
taspot ie. Hoee i a i ta tu ig is ail used fo taspotig ie although it
much cheaper to use trains. Even though train transport will benefit farmers more, it is still not
done in Pakistan. Another factor to consider is the law and order conditions of Pakistan. This
factor along with rapidly changing governments and their policies can hinder development of
any industry, the rice industry included.
Agriculture is the major industry for Pakistan and thus this sector provides employment to a
large number of the population. This applies to the rice industry as well thus we can confidently
say that the rice industry is highly labor intensive. However just like most other agricultural
sectors of Pakistan, the workforce in the rice industry is also largely unskilled. Only workers
hired in big rice mills have the appropriate training to function the machines. The workforce is
highly underutilized as a lot of potential exists for training and development. However as the
ie idu t is a lao ite ie idu t, it is suited to a i ta high populatio as oe
employment is generated through this sector.
As far as investment is concerned, the Pakistan rice industry seems to be an ideal place to
attract foreign direct investment. This is because of limited avenues of investment in the global
arena. The investment in infrastructure and technology is much needed as both these things
are traditional and outdated still in Pakistan. This is contributing to a decrease in the
competitiveness of the rice industry of Pakistan. There is huge untapped potential in this sector
but millions of dollars are required to modernize this industry.
As local demand is easily met rice millers and producers tend to be export oriented because this
reaps them higher profits than local markets. Good crop and competitive pricing is expected to
increase exports. International competition from India with regard to Basmati rice decreased
Pakistani Basmati exports in 2012. Even though Pakistan has better quality rice than India,
Idia pootio, a etig ad fii hig is ette hih esults i highe epots. Hoee
this competition should be used to further develop the industry so that Pakistan surpasses its
competitors.

41

DEMAND CONDITIONS
Demand conditions are the second element in the diamond model. Porter defines the demand
oditio as: The atue of hoe dead fo idu ts product or service demand
oditio de ie the leel of doe ti dead that a fi fae . Thus dead oditio
depend on not only the quantity of the demand but also the nature or sophistication of
demand. Porter points out that the primary source of competition between firms is due to local
demand. A high and sophisticated domestic demand drives firms within a nation to have higher
productivity and efficiency which further drives these firms to be competitive on a global basis.
The nature of local demand also makes domestic firms aware of the new and emerging trends
i the i iteatioal a ets. It also helps i hapig a fi e po iee toad ue
needs.
According to Michael Porter, the local demand should be anticipatory of the foreign demand
and it should be sophisticated. Competition at local level can lead to national productivity and
innovation. It also means that a country can achieve national advantages in an industry or
market segment, if the local demand provides clearer and earlier signals of demand trends to
domestic suppliers than to foreign competitors. Normally, local markets have a much higher
ifluee o a ogaizatio' ailit to eogize u toe eeds tha foeig akets do.
Pakistan grows high quality rice for local as well as international demand. Rice is a very
important crop for Pakistan. It stands second after wheat in crop production in Pakistan and is a
staple food for the Pakistani people. Rice is also an important source of foreign exchange
ratings. Foreign and local demand for rice is increasing and the rice industry has the potential to
produce more so production is expected to expand to 6.3 million tons of milled rice. There are a
number of associations such as REAP (Rice Exporters Association of Pakistan) that are
promoting Rice industry in the international arena.
Local demand for rice is easily met as production is very high due to favorable edaphic
conditions. From all the rice produced In Pakistan only 40% is locally consumed whereas 60% is
exported. The domestic demand for rice in Pakistan measured up to be 2.5 million tons in 2012.
As far as brands of rice are concerned, there is few branded rice present in the Pakistani
market. The three most well know are Falak rice, Guard rice and Mughal rice. However research
shows that recently the brand awareness has increased and the consumer base has widened
very significantly due to brand promotion in the local markets. This trend is seen in the
international market for rice as well.
Moreover as we have seen there is little investment in the rice industry but a huge potential for
development exists. Recently only there have been investments in modern agro processing
42

infrastructure and technologies which will result in higher quality rice to be produced which is
now being demanded locally. It will also lead to reduced post harvest losses. When we
interviewed Mr. Naveed from Engro, he even stated that the reason Engro entered the Basmati
rice industry is because they saw huge potential in the industry and a huge gap where there
were not many known firms present for trading. He stated that there is a need for more big
firms in the industry because investment is desperately needed.
Initially after the rice industry was privatized, the competition used to be on price rather than
quality. However, now a shift is seen in the local market towards quality. Now buyers in the
local as well as international markets are demanding high quality rice. Demand for parboiled
rice is also increasing day by day due to its nutritional value and high quality. Furthermore, the
price of rice in the local market has increased despite higher production. This is because there
has been an increase in the cost of cultivation as well as strong local demand for high quality
rice.
The demand for rice is also affected by the way our consumers market is segmented. According
to buying power of consumers, the market for rice can be divided into three broad groups.
These are:
1. Lower Income groups: This segment is the major market of broken rice and IRRI rice
2. Middle income group: This segment purchases good quality rice which is polished rice as
well as semi-polished rice
3. Upper income group: This segment prefers to buy high quality branded rice

Furthermore unethical practices also exist in the local market that affects demand. Firms in the
rice industry usually mix different varieties of rice to lower the net price rather than
transforming the value chain to ensure good quality rice at a lower price thus having a negative
impact on the market.
There are several possibilities through which we can achieve the targets of demand conditions.
Firstly, our local buyers are progressing towards the point where they display sophisticated
demand and responsive behavior. Secondly, the base for innovation, product improvement and
quality maintenance is coming from Foreign Markets. Many exporting companies have been
barred because of their sub-standard products. For them, getting a quality assurance certificate
is the first step and maintaining it is another. Pakistan has now become aware of the need for
such credible quality assurances.

43

RELATED AND SUPPORTING INDUSTRIES


As suggested by the Diamond Model, one internationally successful industry may lead to
advantages in other related industries. Competitive supplying industries promote innovation
and worldwide recognition in industries in the value system later on. Apart from suppliers,
related industries are also of equal importance. These are industries that use and work in
harmony with particular activities in the value chain, or those that are concerned to the
complementary products.
When national supporting industries tend to be competitive, home based companies will
automatically get more efficient, cost wise, and receive more innovative ideas and focus on
implementing them. This will eventually lead to an increased competition for national firms. For
example, the Italian shoe industry reaps benefits from a highly skilled pool of related businesses
and industries, which has increased competitiveness of the Italian shoe industry drastically in
the whole word.
Moreover spatial proximity of upstream and downstream industries helps in the exchange of
information and encourages a continuous exchange of ideas. Industries that are supporting
tend to form agglomerates where all the industries are close by in order to benefit from
interconnected and ancillary firms. Furthermore, there are other highly important benefits that
are availed by the horizontal and vertical linkages subsequently being formed among related
industries.
Shifting over to the related and supporting industries for the rice industry of Pakistan, there are
two major by-products of rice: Rice bran and Rice Husk. We shall focus on these two byproducts and their advantages and cons, if any, to the rice industry. We will also talk about how
Pakistan can take advantage of these raw materials as they are easily available in the country.
We also talk about the related and supported industries that can benefit from rice. The
information we collected was mainly from our empirical research.
BY-PRODUCTS OF RICE:
1.
RICE BRAN:
Being termed as a high end source of edible oil, protein and allied micronutrients, rice bran is a
major by-product of rice industry. In our nation, its capabilities are under estimated and it is
used as poultry feed or for fuel purposes. Its content comprises of about 20% edible oil. From a
research, it was concluded that rice bran has the capability of being used as a high source of oil
ad has the apait of alue additio. This ill ot ol fulfill the outs edile oil eeds ut
will also help in coping with protein deficiency problem that persists in our community.
44

2.

RICE HUSK:

One more important by-product of rice is the rice hulls or rice husks. Many rice-producing
countries, inclusive of Pakistan, are currently proceeding with research on vast, industrial uses
of rice husks. Rice husks are the outermost coating of the rice grain and come as organic rice
husks and natural rice husks. Rice husks are an inexpensive byproduct of food processing,
serving as a high source of fiber that is used as a filler component in cheap pet foods. It excels
in maintaining body temperature according to the need. Rice husks are used as pillow filling and
have a high lignin content which makes composting them a tedious and expensive process.
RELATED INDUSTRIES:
These industries are involved, some way or the other, with the rice industry and with proper
planning and R&D we can make an international market for these industries as well.
1.

Fertilizer:

We cannot neglect the role of the fertilizer industry. The objective behind fertilizer research
and development is to improve the efficiency which would result in an increased crop
productivity and minimization of effects on the environment.
Rice is the most suitable crop for alkaline soils for it being fairly tolerant to alkalinity in the soil.
On large areas of moderate alkaline soil, rice mono-cropping is a routine practice during wet
part of the year. But the productivity of rice is very poor due to the deficiency of basic nutrients
or fixation of applied nutrients.
Fertilizer cost has a direct relationship with gross revenue but in case of rice, it is statistically
unimportant whereas chemicals cost is highly important in case of rice crop. One percent
increase in the cost of chemical leads to an increase in the rice crop gross income by 0.02
percent and it is significant at 99 percent confidence level. One percent increase in the cost of
irrigation used shoots the rice crop income by 0.26 percent.
2.

Rice Bran Oil - Refined

Rice bran, which is formed in the milling process, is that part of rice that has high fat content.
This form of natural oil, which is pressed, has anti-oxidants which make it a suitable ingredient
for food and food-related products. It is suitable for high temperature cooking as the antioxidants are unaffected by high temperatures. It is not just delicate and flavorful but it also
helps to lower cholesterol, fight diseases and boost the immune system. Rice Bran Oil is
extremely delicious and low on cholesterol. It functions as a raw material to be converted to
several forms such as oil and wax. Rice Bran Oil is quickly gaining popularity in commercial users
as well.
45

3.

DIETARY FIBRE:

Although bran fills a tiny corner of baking ingredient usage, it serves the purpose of an
important nutritional function. Grain's outermost coating is rich in dietary fiber, protein and
minerals depending from where the bran has been obtained. Bran is an ingredient in all types
of cereal grains, inclusive of wheat, corn, oats and rice. It helps to provide a whole grain identity
to baked products.
There is one problem linked to Dietary Fiber as well. Due to refined flour being more readily
available and changes in dietary habits, consumption of dietary fiber has reduced by at least
half during the past two eras. Various studies link fiber consumption with a reduced risk of
cardiovascular disease. To further add on, fiber can cut down blood sugar levels for people with
type 2 diabetes.
So clearly the importance of this industry cannot be negated as it is highly nutritious and also
used in confectionary purposes.
4.

PADDY:

The main raw material, which is paddy, is normally purchased from local cultivators and some
time from wholesalers. Both these raw material suppliers are located within a cluster at Larkin,
which is famous for its paddy production. The millers, within the cluster, purchase raw
materials directly from the respective suppliers on cash which is loaned by the banks during the
season.
AVERAGE RETAIL PRICES OF FERTILIZERS- PAKISTAN (rs.50/bag)
2007-2008
2008-2009
2009-2010
UREA
581
751
799
DIAMOMIUM
1934
2578
2267
PHOSPHATE
NITROPHOSPHATE 1267
1700
1452

2010-2011
1035
3236

2011-2012
1705
4118

2108

2768

46

FIRM STRATEGY, STRUCTURE AND RIVALRY


Today's active markets and technological advancements have brought into question the
sustainability of competition on a global basis. Under the pressure to work upon productivity,
efficiency, and effectiveness, managers have entwined in using tools such as TQM and
benchmarking. Dramatic operational improvements have caused gains. But rarely can these be
translated into sustainable profitability. And subsequently, the tools have taken over the usage
of strategies. As managers struggle to improve on all lines, they tend to deviate from viable
competitive positions. Michael Porter states that operational effectiveness, although necessary,
is not sufficient for an industry. This is because the techniques involved are easily imitable. In
comparison, the basic focus of strategy is choosing an exclusive and valuable post rooted in
systems of activities that are more tedious to resemble.
In the Pakistani rice industry in order to increase the rice quality and thus sale at higher prices,
the Government has made changes, both administrative and structural, in order to closely
inspect the quality of exported rice. In order to make this possible, Rice Exporters Association of
Pakistan (REAP) have been experimenting with different seed varieties and trying to fix export
prices to a minimum. REAP has proved its capability back in 1996 when it assured the quality of
brown rice exported to Europe. Rice importers have started trusting the quality of Pakistani rice
and the exports seem to be going on an increasing trend.
One of the largest agro based processing industry in Pakistan is Rice milling industry which is
located in Sindh province of Pakistan. Rice crop in Sindh has been growing since centuries.
Sindh Province produces about 1.461 million tons from an area of 0.544 million hectors with an
average yield of 2.686 tons rice per hector. The quality of seed was not certified on the
international standard. The growers and millers were upset about the availability of quality
seed. If this position of seed would be continued in the Sindh, it will not only affect on
marketing of rice in Sindh but per acre yield will be declined. It has also found that the most of
rice industries in Sindh are using out-dated technology such as steel hullers or old rubber
shellers for de-husking around 54 percent amongst 850 rice mills of Larkana district. The most
of the owners of these rice industries became defaulters of various commercial banks.
COMPETITORS:
Due to commercial risks and brand to brand transportation differences, quality of rice can
differentiate allowing price differentials to inculcate. Keeping in mind the high demand in the
coming days, improvement in production techniques and appropriate post-harvesting
techniques are essential in order to reap benefits from the increase in demands. Nutritional
value of rice grain also needs to be increased as there is an increased need of it. Communities
that dwell in Asia and Africa can, as a result, reap benefits from rice grains which are enriched
47

with nutrients like Iron and Zinc. With this increase in sales, maintaining export levels would
also become tedious due to extensive marketing and technological involvement. It is essential
to perform analyses on rice production and marketing at world-wide level for both short as well
as the long term. This would in turn help develop a strategy that would not only stabilize the
present export levels but would also add to the value of Pakistani rice.
India, being the second largest producer of paddy rice in the world, has always been
competition for Pakistan. In 2009 it produced over 132 million ton of paddy rice. Bangladesh
also adds up to the list of being one of the most highly producing countries, growing over 38
million ton whereas Pakistan is subject to producing a little over 6 million tons. Together these
three countries contribute to about 30% in the total production of rice world-wide.
About 92% of Pakistan's rice production is concentrated in the Punjab and Sindh provinces and
nearly all the rice is grown on irrigated land. Punjab is the leading rice growing province with
about 61% rice area and concentrates on Basmati-rice for export, while Sindh produces high
yielding varieties and traditional varieties mostly for domestic consumption covering about 31%
of total rice area. Of the remaining 8% area under rice, 5% lies in the North-West Frontier and
3% in the Balochistan provinces, respectively. On the whole, Basmati-rice accounts for about
52% of the total rice area under cultivation.
Punjab is the largest rice-producing province and the Kala tat -the bowl of the world
famous Basmati rice is located between the Ravi and Chenab rivers. B.Natha Singh Karam Singh
(Pvt.) Ltd., incepted in the year 1895, laid the first rice mill at kamoki (Karachi), now in Pakistan.
They are the Pioneers in creating the brand. There are a total of 373 rice mills listed in Pakistan.
The government protects the farmer by setting a minimum price. However, the final price of
rice is not fixed by the government. Cost of oil amounts to 25% or less of the cost of rice
cultivation. Machinery is not imported, it is locally produced. Pakistan imports mainly from
China, Switzerland and Thailand. No licenses are required for importing, you need to be a
ee of EA ie Epote A oiatio of a i ta to import. REAP operates in Karachi
and Lahore.

48

PRODUCTION CYCLE OF RICE


To undergo the production of rice, it has to go through 8 stages. This completes the cycle of the
production of rice. The steps are as follows:
1.
2.
3.
4.
5.
6.
7.
8.

Seed Selection
Land preparation
Crop establishment
Water Management
Nutrient Management
Crop Health
Harvesting
Postharvest

The 8 processes above complete the Rice production cycle in Pakistan.


They are explained in detail below:
Seed Selection
It is a difficult task to choose a seed which suits the environment and will maximize the yield.
Choosing the right is seed is the most essential part of the process. This is because if the seed is
not wisely chosen, the entire other 7 stages cannot be put to effective use then. A good quality
seed can enhance the yield by 5%-20% if properly harvested; it also needs to be free of weed,
pests and diseases. Using good seeds leads to lower seeding rates, higher crop development,
reduced replanting, more constant plant stands, and more vigorous early crop growth.
Land Preparation
The seed should be placed in the best possible conditions to maximize the yield. For this the
land has to compliment the seeds. Land preparation involves plowing, harrowing, overturning
the soil and also to level it. The land preparation can differ from a lowland area to a high land
aea. This is eau e of the soil fetilit ad the altitude of the lad. It easie i a lo lad as
none of the hard features of the Earth are much affected e.g. Forests. Uneven lands results in
wastage of irrigation and more paddy being required.
Crop Establishment
There are two ways of establishing a crop; Transplanting and direct seeding. The one mostly
practiced in Pakistan is direct seeding of Rice. Direct seeding is when the seed is pre
germinated in the soil either by machines or by hand itself. It is incorporated in the soil and

49

then the land is ploughed. The soil is still kept dry. Transplating however is when seeds a re kept
in a nursery for 20-80 days (depending in the seeds) and then broadcasted into the soil.
Water Management
A necessity for rice production. Rice requires a large amount and a constant amount of
irrigation. When water levels in the soil fall, so does the quality of rice. Hence you will find rice
zones near rivers of in areas which receive ample of rainfall. Irrigation methods used in Pakistan
are handpumps, tubewells, Sprinklers (rarely) and raised water beds of the agriculture land.
Farmers keep their land flooded throughout the production period. This is very beneficial for
lowland areas which do not experience much of the rain.
Nutrient Management
This is not much taken into account in the rice production of Pakistan specifically. This is
insuring that he rice requires all the nutrients that it requires to grow in an effective manner.
The flooded soils have unique attributes each which differ from land to land. A targeted higher
yield would mean more nutrients. This relies on many scientific specific purposes. Because of
the prolong flooding, farmers can extract soil organic matter and it can be used for other crops
aswell. UREA and DAP are major nutrient providers for rice in Pakistan
Crop Health
The rice plant has a number of enemies on the field. These may include pests, weeds, rodents
and diseases. The farmers have to protect the crop from all these viruses. The best case
practice would be pest management, but this can be harmful for the crops if the doze of
pesticide exceeds its limit. Farmers fare weeds through water controlling and land preparation,
by hand weeding, and in specific cases herbicide application.
Harvesting
Harvesting is done around 115-120 days later the seed is sowed into the ground. It is picking of
the mature rice grains from the field. There are 2 ways of harvesting, either mechanically or
through the use of hands. Manual harvesting is very common in Pakistan and it also takes a lot
of time and labour. Mechanical harvesting can be done though harvesters. These are very costly
but also save time. Harvesting activities include cutting, stacking, handling, threshing and
cleaning.
Post-Harvest
Drying, storing, milling and processes, these are 4 stages of the post-harvest of rice. Drying
reduces grain moisture; if this process is delayed the grain loses its quality as the moisture
50