The recently launched e-commerce policy is expected to open the floodgates of opportunities in all sectors, including food and agriculture. Now it’s up to farmers, financing institutions and entrepreneurs to exploit those opportunities.
The government has already asked the Ministry of Information Technology and the State Bank of Pakistan (SBP) to reach out to PayPal and other global payment gateways to facilitate e-commerce in the country. The central bank is also supposed to issue a set of guidelines on e-commerce for banks.
Foodpanda, a food-delivery app, has now become quite a household name in big and small cities of Pakistan. Hotels and restaurants get themselves registered on this app and cater to large numbers of home-delivery orders received online. This is an example of the great scope for e-commerce in food retailing.
In farming, Ricult Pakistan is already connecting small farmers with industrial purchasers of their produce. Guard Rice is one of the several partners of Ricult. It uses its services to purchase quality rice from farmers. According to media reports, thousands of paddy farmers in Pakistan and Thailand are currently using Ricult services. Essentially a fintech, the brainchild of some MIT graduates of Pakistani origin also provides farmers with finances to purchase inputs like fertilisers.
It charges a high interest rate but the company clams it sells inputs to farmers at lower rates — thanks to its partnership with leading input-producing companies, including Fauji Fertiliser.
E-commerce should be used for the procurement of farm produce by provincial food departments and federal agencies
These and similar examples show the food and agriculture sector is already exploiting the potential of e-commerce on a limited scale. The purpose of the newly designed e-commerce policy is to provide existing and future e-commerce entities with the regulatory and facilitation umbrella. Besides, it also aims at monitoring their activities and taxing them appropriately.
The use of fintech in agricultural lending and the promotion of virtual markets for agricultural produce can help address two chronic issues of our farmers: a lack of formal finance and the absence of nearby markets for agricultural products. Local online payment systems, however, need to align themselves with international payment gateways to take e-commerce to the next level. That is where the SBP and the Ministry of Information Technology need to work together.
The rapid evolution of e-commerce around the world and Pakistan’s efforts to catch up with this trend are encouraging signs for farmers. But can it address structural issues of Pakistan’s agricultural marketing and pricing to the satisfaction of millions of farmers? More web portals and apps linking producers and buyers of agricultural goods will not immediately ensure fair prices for farmers. Nor will it ensure the supply of fairly priced agricultural inputs in the short run.
There are several models of e-commerce in agriculture. But the one that is most needed in Pakistan and, thus, has greater chances of flourishing quickly aims at enabling farmers to sell their produce to targeted companies instead of end-consumers.
Sustaining e-commerce entities requires a rapid and constant increase in sales volumes. And that means a sizable investment in technology, logistics and human resources at the initial stage.
That is why collaboration among stakeholders, including investors, entrepreneurs and banks offering venture capital, is a must. The federal government, through the central bank and relevant ministries, can reach out to international payment gateways. Or it can help importers and exporters make the most of evolving e-commerce.
Provincial governments also need to work closely with individual farmers and their cooperative societies. Besides, brick-and-mortar setups, warehouses, logistics and transportation will be needed to support e-commerce of agriculture, livestock, fisheries and food. The provincial governments will need to work with the private sector to help and facilitate it in each of these areas.
In some cases, particularly in the development of warehouses, new projects can be undertaken under public-private partnership. E-commerce can be employed also for the procurement of farm produce by provincial food departments and federal agencies like the Pakistan Agricultural Storage and Services Corporation (Passco). But federal and provincial authorities will have to develop new procedures and dedicate qualified human resources for this purpose.
In e-commerce, volumes of transactions matter a lot. You cannot survive on meagre margins earned on agricultural goods and services offered online if your websites or apps continue to attract low traffic for long. So it is possible that venture capitalists — i.e. founders and developers of web portals and apps and large companies that join them as commercial partners — try to set pricing trends through cartelisation. This is a real danger in online sales of agricultural inputs, manufactured by big companies, to small farmers. Similarly, the peril of price manipulation exists for consumers in cases where e-companies collude with their bulk suppliers.
As part of the e-commerce policy, such entities are required to get registered with the Securities and Exchange Commission of Pakistan. This can somewhat mitigate the possibility of cartelisation, manipulation and tax evasion. But creating greater awareness about e-commerce among individual farmers and consumers is a must so that they can protect themselves from e-business malpractices.
The e-commerce policy proposes the establishment of consumer courts and inclusion of e-commerce disputes in the draft Trade Dispute Resolution Act, according to a Dawn report. Crucial aspects of consumer protection and trade-dispute resolution in e-commerce have been taken care of. E-commerce in agriculture can also benefit from them. —MA
Published in Dawn, The Business and Finance Weekly, October 14th, 2019