KARACHI: At the Cancun ministerial conference Pakistan and other developing nations will ask the developed countries to make room in the agreement on agriculture (AOA) for reducing farm subsidies. If this demand prevails — developing nations should expect a surge in their agro-based exports from 2005. And that in turn would increase demand for agricultural credit in countries like Pakistan whose export basket is chiefly made up of agro- based products. Are the banks operating in the country prepared to give more loans to farmers — and if so — what are they doing to simplify agricultural loaning and credit marketing in the farming sector?

“Banks are keen to invest...in the agro-related sectors,” says state-run National Bank president Syed Ali Raza. He justifies this keenness on grounds that the rate of recovery of farm loans is quite high at 90 per cent and that banks have enough liquidity.

But Mr Raza admits that agricultural credit requirements are not being met adequately. He says according to some estimates only 10-15 per cent of the borrowing needs of the agricultural sector is met through banking channels, including Zarai Taraqiati (Agricultural Development) Bank. If lowering of farm subsidies in the developed world does take place — and that results in better pricing of agri-products “the probability of (loan) repayment by the farmers is also bright.”

That is why NBP plans to lend more to the farming sector — up to Rs15 billion this calender year against Rs8 billion disbursed last year. The bank is also hiring field officers to provide help to borrowers.

What is needed is that “the banks should promote and encourage lending to agri-processing units like rice milling and cotton ginning factories that are undertaking BMR and going for ISO certification.”

“Small farmers should be encouraged to grow contamination-free cotton and adopt better farming practices,” suggests Mr Raza.

At the Cancun conference Pakistan will also raise the issue of free movement of labour across countries. If the developed nations agree on liberalizing labour market under WTO regime from 2005 this would provide countries like Pakistan to get a bigger share in the pie of global workers remittances. But are the banks in Pakistan capable to keep the present pace of attracting home remittances or are they feeling threatened by hundiwalas again?

Answers country corporate officer of Citibank in Pakistan Zubyr Soomro: “The banking system’s ability to handle workers remittances has improved considerably over the last 4-5 years and with further investment in technology this will continue to grow.” He believes that “given the global emphasis on anti-money laundering legislation plus the liberalization of the forex regime the switch-away (of workers remittances inflow) from unofficial or hundi channels (to banking channels) is not a temporary one.”

But Mr Soomro admits that banks “still only capture a small fraction” of workers remittances. He suggests that streamlining the bureaucracy, simplifying investment procedures, improving the CBR and provincial excise and taxation departments “will encourage greater investment as such and particularly from our people overseas.”

At the Cancun ministerial conference the developed countries would reiterate their demand for further opening up of the services sectors in developing nations. How this is going to impact on Pakistan’s services sector in general — and on banking in particular?

Syed Ali Raza points out that in Pakistan the banking sector has already been in a situation described under Mode-3 of GATS agreement — i.e. foreign banks and other financial institutions can establish their branches here and supply financial service.

“Mode-4 would allow professionals and other skilled workforce in areas of construction/ engineering and medicine to work overseas.” Mr Raza does not comment on whether that would pose a problem for the country or not. But other bankers and services professionals say it depends on how Pakistan positions itself in the times to come.

They say if the government invests more in education and IT and produce a highly competitive workforce freer movement of workers across countries would bring in net benefits for the country.