Value Chain Development and Social Upgrading: A Case of Pakistan Mango Industry

Dr. Mubashir Mehdi, Bilal Ahsan, Dr. Burhan Ahmad

Institute of Business Management Sciences

University of Agriculture, Faisalabad, Pakistan

Paper prepared for presentation at the

“5th Conference of the Regulating for Decent Work Network”

At the International Labour Office Geneva, Switzerland

3-5 July 2017

Abstract

Pakistan is a country of over 190 million people and two-thirds of whom reside in rural areas. The agricultural sector is one of the mainstays of Pakistan's economy, contributing 21 per cent of GDP, employing 45 per cent of the country's workforce, and being a major source of foreign exchange earnings. Horticultural crops alone contribute USD 1.91 billion, which is 26 per cent of the total value of all crops and 81.8 per cent of the total value of minor crops. Mango (MangiferaIndica), commonly called ‘king of fruits’ has a prominent position among the commercial fruits grown in Pakistan. The local horticulture industry in general and mango industry in particular has been going a transformational process from the last one decade under the various development projects using value chain approach. Possibly the single most significant advancement made in the mango industry has been the setting up of modern infrastructure for grading, packing and cool chain logistics, along with quality and food safety management systems, to meet the need of high end consumer need both in the local as well as in the international markets. Under the globalised economy, technological advancement and competitiveness are bringing forth rapid changes in the organization of work and production. A value chain study conducted under an international project, “Decent work in the Global production system” funded by University Kassel Germany, identified various social and economic challenges to upgrade the existing mango value chain in Pakistan. High level of motivation is found along the value chain e.g. growers, traders and exporters, to adopt best practices. However, best practices spread slowly because wages remain low, neglect of health and lack of training of on-farm workers. In addition, regulatory gaps and absence of labor regulations at the farm level as well as other tax and social policies, have also inhibited the rapid expansion of standard forms of work. Overcoming restraints require awareness campaigns at the extensive level in the industry and state support to regulate the social upgrading in changing global competitive environment. The study is further extended to forecast the volume of business associated with the best practices and special upgrading in the improved mango value chain system in Pakistan.

Keywords: Value chain, Decent work, Livelihood, Pakistan, Mango Industry

Copyright 2017 by author(s). All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.

INTRODUCTION

Pakistan is an agriculture based country, have a population of 180 million, two-thirds of whom live in rural areas. It contributes 20.9% of total gross domestic product and 30% to gross national product (Government of Pakistan, 2014-15). Agriculture is considered as the engine for industry growth and scarceness reduction and, therefore, is given high priority in government policies and growth strategies in Pakistan (GoP, 2014). Nearly, 43.5% of the total workforce are directly involved in agriculture wherein half is women (Ghani, 2012). Rural areas have more than double share in total employment. However, majority of them are socially deprived and economically stressed in terms of low wage.

Agricultural industries in Pakistan such as horticultural industry have gained adequate attention both from the Government as well as the international development agencies such as USAID, UNIDO, and ACIAR etc. Value chain development strategy has been adopted to improve the competitiveness of the farmer enterprises in this sector. During the past two decades, a political opinion has developed a new food legislation which comprises the whole of value chain approach “farm to fork” from the pre-harvest areas of food production leading to the processing and marketing which has changed the agribusiness development in rural industry development contexts. Other than Quality, Consumers in developed countries are getting more conscious about conditions in which product is produced, processed, packed and transported as well as employment conditions of Labor (FAO, 2015; Hurst et al., 2007). For example, Global GAP, an international standard lead by top leading supermarket chains, set out comprehensive compliance criteria for farmers to become the part of competitive global value chain system. Consequently, certified farms in developing countries prefer to export instead of supplying to domestic markets and earning substantial gain in the overall price of their produce (Reynolds et al., 2004, Dunne and Collins 2014). However, there is a little evidence of inclusion of on-farm labor issues into global value chain system particularly in developing countries despite the fact it is highly emphasized under the quality assurance system such as Global GAP.

According to Sustainable Development Goal # 8 of the ILO, decent work implicates the “fair income,security in the workplace and social protection for families, better scenarios for personal development and social integration, the liberty to show concern, participate and organize in the decisions that affect their lives and equality for all women and men”(ILO, 2015).Global GAP have also developed standards for on-farm labor rights which are inspected by consultants after systematic intervals. It covers risk assessment for health and safety which includes trainings for occupational health and safety, hygiene management to keep labor apart from diseases, prevention from skin cuts by protective clothing which is common during on-farm practices, First aid boxes, warning signs etc. and other social and economic consents for labor welfare (Global GAP, 2016).

Low quality is one of the major problems being faced in horticultural exports due to their perishable nature and other issues. By minimizing pre and post-harvest losses, best quality fruits can be acquired by most efficient and productive labor which can only be conceivable by ensuing the decent work approach under ILO sustainable development agenda for their best satisfaction by making them a part of Global Value Chains. Hence, workers developments got prominence importance among the development agencies as well as global certification systems (ICDD 2014, ILO 2012, Global GAP, 2016) in order to ensure healthy and nutritious food to the end consumers. Our arguments is that if the Quality compliance standards are adopted in true letter and spirit the income of these farms will rise automatically that will indirectly improve the livelihood in terms of soci0-economic upgrading of the workers working on these farms.

The present case study was designed by assuming a hypothesis that through transformation of Global value chains through social up-gradation under food safety and quality standards there is enough potential for economic upgrading of on-farm workers by examining the impact of improved mango value chain on the livelihood of the value chain actors.

MANGO INDUSTRY OF PAKISTAN

Mango (Mangifera Indica) also called locally “king of fruits” is inherent to eastern India and Burma. After Citrus, Mango is the second major fruit crop in Pakistan. Pakistan is the 5th best producer of mangoes after Indonesia, Thailand, China and India (FAO, 2015). Many varieties are produced in Pakistan, which are Anwar Ratol, Dodheri, Langra, Malda, Siroli, Alphonso, Gulab Khas, Fajri, Golden, Began Phali and Swarnarika characterized by shape, size, acidity, aroma, taste and color. While two varieties, Chaunsa and Sindhri, are high commercial value both in the domestic as well as in the international markets.

Mango is being grown majorly in two provinces of Pakistan; Punjab and Sindh, while the other provinces are also cultivating mangoes in lesser quantities; Baluchistan and Khyber Pakhtun Khawah. During the year 2010-11, contribution of Punjab province to total mango production was 79.71 percent, while Sindh contributed up to 20.22 percent (GoP, 2012). The harvesting season for mangoes varies according to the climatic conditions of different regions. Sindh’s harvesting starts early to some level.

Pakistan is one the leading world exporting countries of mangoes. Pakistan was ranked 8th after The Mexico, Brazil, Peru, India, Peru, Philippines and Thailand. Pakistan has many export markets but mainly export to the United Arab Emirates, Saudi Arabia, Qatar, The United Kingdom, Afghanistan, Iran and Oman (Ghafoor et al., 2009; GoP, 2009). A lot of initiatives have been taken by Government of Pakistan and other International donor agencies to empower of Pakistani mango growers and exporters to meet the protocols of premium quality super retail stores in domestic and international markets especially USA and Europe. Nevertheless, there are many deterrents in terms of Global certification systems (HACCP and Global GAP), pest’s issues, worse employment conditions and lack of management consultancy services to farmers as well as workers.

Based on the mango quality produced in Pakistan, mango orchards can be classified into two broad categories such as certified and non-certified orchards. Mango from Non-certified orchards are specified by typical quality standards of size, aroma and appearance that are mainly sold out in the local markets. These traditional mangoes are infected by harmful chemicals and other pesticides which are used to improve production and protection from pests.

On the other hand, some certified orchards are creating a place in international markets as well as in premium quality outlets & super markets in big cities like Karachi, Islamabad, Lahore and Faisalabad due to extra features e.g. Prestige, blemish free, ethylene ripening, cardboard packaging etc. (Mehdi et al., 2014; ACIAR, 2007). These orchards take proper care of fruit under the compliance of Global GAP certification systems.These type of compliance not only convert fruits into organic consent but also decrease the post-harvest losses by improving fruit quality. These certified orchards are seen acquiring more benefits cost ratios for premium quality mangoes than the non-certified orchards(Mehdi et al., 2014). A comparative analysis of key activities performed on the certified and non-certified orchards are described in Table 1.

Table 1. Value Chain Activities

Non-certified orchards / Certified Orchards under Compliances
Harvesters:
Hand picking – collecting of fruit through hand results in sap burn, ugly blemishes on the mango covering. It also welcomes other insects to attack fruit.
Transmission of fruit from tree to pack house/ packing area for sorting purpose in done in a pannier with large quantity of fruits in many folds over each other which leads to post-harvest losses. / Rod harvesting (Safety equipment’s) -harvesting of fruit with a rod having variable length in order to reduce harvesting costs. It gives proper care of fruit in term of safety and a part of stem is cut with fruit for de-sapping.
Transport through special bucket with only one fold of fruits prevent the fruit from internal injury of mango as well as makes it easy to sort out.
De-Sappers:
Most of non-certified do not follow the protocols of export quarantine and modern retail stores like de-sapping which is a process of removing the plant sap from fruit. / Certified orchards de-sapped the fruit through many ways whereas, turning of mangoes on specially designed iron stands is frequently used method. Other methods involves the dipping in lime water for half an hour.
Ripenors:
Mangoes are ripened on non-certified orchards through traditional and health hazardous ways by using calcium carbide locally called Masala. Which increases the ripening process. / (Separate Chemical Rooms)
Whereas, on certified orchards ripening process has been shifted to organic consent to some level because of ethylene chambers ripening.
Packing Experts and Machine operators:
Packing experts have their specific identity in on-farm industry at non-certified as well as certified orchards. They pack mangoes in wooden boxes extra than their capacity which results in deterioration of fruits and chances of fungal infection are maximized. / (Hazard Signs)
In export value chains before packing some treatments are applied to improve the shelf life at certified orchards and to kill fruit fly in mangoes by hot water treatment by plant machine operators. Then packed according to the size, variety attributes set by buying firms.

Due to increasing pressure and market incentives for certified and standardized products, mango farms in Pakistan are acquiring certifications such as Global GAP (Good Agricultural Practices) certification system to become the part of global value chain system. Nearly, twenty mango farms have acquired Global GAP certification (PHDEC, 2016).

CONCEPTUAL FRAMEWORK

Numerous case studies can be found highlighting about problems of lack of access and deprived working conditions to decent work (Hale and Wills 2005; Smith et. al. 2004; Oxfam 2004; Collins, 2003). Both international compliances and institutional support contributes to socio-economic development of the value chain actors. Global Value chains whether these are driven by consumers or producers tend to adopt certification protocols and therefore, contributes greatly to functional upgrading of workers due to consumer’s concerns about production point and brand visibility especially in consumers’ driven value chains.

In case of fresh fruits and food commodities, quality and safety measures are of extreme concern for supermarkets in developed countries and also for their consumers (Humphrey & Memedovic, 2006). On-farm safety and quality standards as well as Social rights of labor are respected by Global value chains too because of their brand reputation and products quality which ultimately headed to economic upgrading in terms of premium quality products by improving economic value. International compliances enforce many restrictions for certified Mango farms in developing countries to follow decent work agenda for sustainable Mango value chain system which has implications for sustainable livelihoods improvements of on-farm workers.

Both private and public governance structures commend the occupational health and safety measures as well as other aspects of economic and social up-gradation. We can explain social aspect of decent work in terms of upgrading because of unionization but there are some factors which contributes to social downgrading. However, caste harassment (a variable used in the Model) was supposed to contribute to social and economic downgrading which is fewer in Pakistan but affect negatively to social and economic upgrading of workers (Best & Mamic, 2008). Private governance structures in global value chain system are the global GAP, ICDD and ILO while Ministry of Labor and Human resources Pakistan implicates as institutional support that may be economic or social policy measures as a public governance body.