Developing Marketing Strategy for Food Products in International Markets (To Enable Market Access for Local Products under the Activity AA 4c)

A Study Conducted for:

EV-K-2-CNR AND BALTISTAN CULTURAL DEVELOPMENT FOUNDATION

Under the Framework of Social, Economic and Environmental Development (SEED)

By:

KARAKORAM NATURAL RESOURCES (PVT) LTDGILGIT, GB

June 2014

ACKNOWLEDGMENTSThis report was prepared with invaluable knowledge and ground support from a diverse group of stakeholders. The authors are grateful to Ev-K-2 CNR and BCDF staff for furnishing relevant material on time and for facilitating field visits. The report has benefitted immensely from the knowledge and views of project participants and ultimate beneficiaries. Support and technical assistance provided by professional organizations and experts in both public and private sectors are greatly appreciated. However, the contents of this report are based on the findings of the study team and do not necessarily reflect the views or policies of Ev-K-2 CNR or BCDF.

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LIST OF ACRONYMS

AKRSP Aga Khan Rural Support ProgrammmeABC Apricot Business CoalitionADP Annual Development PlanASF Agribusiness Support FundBCDF Baltistan Culture Development FoundationCEO Chief Executive OfficerCKNP Central Karakoram National ParkDOA Department of AgricultureEU European UnionFAO Food and Agriculture OrganizationFEGs Farmer Enterprise GroupsFGDs Focus Group Discussions GB Gilgit-BaltistanGBLA Gilgit-Baltistan Legislative AssemblyGLOF Glacial Lake Outburst FloodsHKH Hindukush-Karakoram-HimalayaINGO International Non Governmental OrganizationKKH Karakoram HighwayKNR Karakorum Natural ResourcesKPK Khyber-PakhtunkhwaLSO Local Support OrganizationMARC Mountain Agricultural Research Center MFL Mountain Fruit (Pvt) LimitedNGO Non Governmental OrganizationCLA Protein and conjugated linoleic acidR&D Research and DevelopmentRPM Regional Programme MangerSDP Sadpara Development ProjectSEED Social, Economic and Environmental DevelopmentTORs Terms of ReferenceUC Union CouncilUNDP United Nations Development ProgramUSAID United States Aid for International Development

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TABLE OF CONTENTS

ACKNOWLEDGMENTS................................................................................................................................... 2

LIST OF ACRONYMS........................................................................................................................................ 3

EXECUTIVE SUMMARY.................................................................................................................................. 6

CHAPTER 1: INTRODUCTION...................................................................................................................... 71. BACKGROUND TO THE STUDY........................................................................................................................ 72. PURPOSE OF THE STUDY.................................................................................................................................. 73. RESEARCH METHODOLOGY.............................................................................................................................74. RESEARCH FRAMEWORK................................................................................................................................. 95. GEOGRAPHICAL FOCUS OF THE STUDY....................................................................................................10

CAPTER 2: SITUATION ANALYSIS............................................................................................................ 111. OVERVIEW.......................................................................................................................................................... 112. SOCIOECONOMIC CONDITIONS.................................................................................................................... 113. CROPPING PATTERNS..................................................................................................................................... 124. FOOD SECURITY VS COMMERCIALIZATION.............................................................................................125. BIODIVERSITY................................................................................................................................................... 136. PRODUCTION AND TRADE ESTIMATES.................................................................................................... 147. ACCESS TO PUBLIC AND MARKET SERVICES...........................................................................................148. KEY CHALLENEGES........................................................................................................................................... 15

8.1 Specialization or Improvisation?.............................................................................................................................168.2 Small Units of Production...........................................................................................................................................168.3 Poor Crop Management...............................................................................................................................................168.4 Low Volumes and Lack of Uniformity and Quality..........................................................................................168.5 Lack of Research and Access to New Technology............................................................................................168.6 Higher Failure Risks......................................................................................................................................................178.7 Poor Infrastructure........................................................................................................................................................178.8 High Postharvest Losses..............................................................................................................................................178.9 Weak Governance.......................................................................................................................................................... 17

9. POTENTIAL EXPORT PRODUCTS.................................................................................................................18

CHAPTER 3: MARKET ANALYSIS............................................................................................................. 191. OVERVIEW.......................................................................................................................................................... 192. MARKET CHARACTERISTIC...........................................................................................................................19

2.1 Market Access.................................................................................................................................................................. 192.2 Growth Trends.................................................................................................................................................................192.3 Market Actors...................................................................................................................................................................192.4 Support Actors.................................................................................................................................................................20

3 EXPORT MARKET STRUCTURE..................................................................................................................... 213.1 Market Segments............................................................................................................................................................223.2 Price Structures...............................................................................................................................................................23

4 POTENTIAL EU BUYERS................................................................................................................................... 234.1 Producers/ Processors................................................................................................................................................234.2 Retailers..............................................................................................................................................................................234.3 Brokers/ Agents..............................................................................................................................................................244.4 Traders................................................................................................................................................................................24

5 OTHER USEFUL RESOURCES.......................................................................................................................... 24

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6 FINDING TRADING PARTNERS......................................................................................................................246.1 Interesting Trade Fairs For Specialty Foods......................................................................................................246.2 On-Line Company Databases....................................................................................................................................256.3 Business-To-Business Sources.................................................................................................................................25

7 PACKAGING AND LABELING........................................................................................................................... 258 EXPORT LOGISTICS........................................................................................................................................... 25

8.1 Export Companies..........................................................................................................................................................258.2 Key Steps in Export........................................................................................................................................................26

9 OPPORTUNITIES AND THREATS.................................................................................................................. 27

CHAPTER 4: STRATEGIC PLAN................................................................................................................. 281. OVERVIEW.......................................................................................................................................................... 282. STRATEGIC FRAMEWORK............................................................................................................................. 28

2.1 Vision................................................................................................................................................................................... 282.2 Mission................................................................................................................................................................................ 282.3 Strategic Objectives.......................................................................................................................................................28

3. THE FUTURE OF MOUNTAIN AGRICULTURE...........................................................................................293.1 Enhancing Food Security............................................................................................................................................293.2 Commercialization, Specialization and Branding............................................................................................303.3 Maintaining Resilience.................................................................................................................................................31

4 PRIORITIZATION OF EXPORTABLE PRODUCTS......................................................................................324.1 Dried Apricots..................................................................................................................................................................324.2 Apricot Culture................................................................................................................................................................ 334.3 Apricot Economy............................................................................................................................................................33

5 APRICOT VALUE CHAIN................................................................................................................................... 346 NEXT STEPS......................................................................................................................................................... 357 GOVERNMENT POLICY IN HORTICULTURE MARKETING.....................................................................35

CHAPTER 4: BUSINESS PLAN FOR 2014................................................................................................ 361. COMPANY SUMMARY...................................................................................................................................... 362. COMPANY OWNERSHIP.................................................................................................................................. 363. TARGET MARKET............................................................................................................................................. 364. MARKET SEGMENT.......................................................................................................................................... 365. BUSINESS DESCRIPTION................................................................................................................................ 36

5.1 Business Objectives.......................................................................................................................................................375.2 Product................................................................................................................................................................................37

6. COMPETITION AND MARKETING STRATEGY..........................................................................................377. TARGET MARKET............................................................................................................................................. 378. SUPPLY LOGISTICS........................................................................................................................................... 38

8.1 BCDF.....................................................................................................................................................................................388.2 KNR....................................................................................................................................................................................... 38

9 SCALING BUSINESS OPERATIONS.................................................................................................................38

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS...................................................................391. STUDY FINDINGS.............................................................................................................................................. 392. RECOMMENDATIONS...................................................................................................................................... 39

ANNEXES......................................................................................................................................................... 40ANNEX A: EU IMPORT STANDARDS FOR DRIED PRODUCE.........................................................................41ANNEX B: PURCHASE AGREEMENT..................................................................................................................... 53

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EXECUTIVE SUMMARYThe governments of Pakistan and Italy have mandated the Ev-K-2 CNR Committee (Bergamo, Italy) to implement the project “Social, Economic and Environmental Development” (SEED). The five–year project started on November 11, 2009, and aims at supporting the development of Central Karakoram National Park (CKNP), located in the northeast of Pakistan’s northernmost province of Gilgit-Baltistan (GB), as well as foster social, economic and environmental development in the Park’s buffer zone.

This study, “Marketing Strategy for Food Products in International Markets” contributes to activity AA 4c, under the SEED Framework. Its purpose is to identify promising products from and around CKNP and its buffer zone, and map out marketing strategies for exporting them to international markets.

The context is remote and isolated mountain valleys of Gilgit-Baltistan (GB), a semi-autonomous province at the junction of Pamir, Himalaya and Karakoram mountain ranges. Poverty and population pressures are forcing these mountain communities to over extract, under manage and under value their natural resources.

Physical isolation, compulsions of food security (self-sufficiency), and agro-ecological conditions have combined to create a complex mountain farming system that is resilient but subsistence-oriented. Mountain farming in GB can be characterized as small-scale, traditional and low tech. Too many varieties, too little output, high post-harvest losses in perishable products, and lack of technical and institutional capacities and under developed markets are some of the key challenges for market development.

Over the last three decades, improvements in road access and information technology have increased GB’s exposure to market forces. As a result, GB’s agriculture is changing through trial and error, and without any research, technical guidance or planning. The first challenge for the stakeholders of GB agriculture is to come up with a shared vision of agriculture, and a sector strategy for horticulture. The opportunities for export will increase manifold if the proposed Kashgar to Gawadar Economic Corridor project in implemented by the governments of China and Pakistan, as planned.

The long term strategy should take a number of considerations into account and try to balance: 1) food security needs, 2) the imperative to ‘modernize’ mountain agriculture for accessing new markets with high value food products and, 3) maintaining the resilience underlying the resource base through biodiversity and crop diversity.

The implementation of this long-term strategy can begin with apricots, one of the most well established and widely cultivated fruits in GB. There are many advantages in selecting apricots, especially dried, as a flagship export product from GB. Almost all farmers grow them, so there are significant production volumes with high post-harvest losses, which can be saved through good processing practices. Dried apricots value chain is already much ahead of other products, and small quantities are already being test-marketed and accepted in the Western markets.

A major issue is that local apricot cultivation is dominated by too many traditional varieties that have little market value in the current bulk markets. However, this weakness can be turned into a business opportunity by targeting specialty food industry, especially the ingredients segment in EU. The marketing strategy proposed in this report recommends a range of product development initiatives, including propagation of best local varieties as ‘natural’ and ‘un-tempered’ food ingredients, as well as growing globally selected well known varieties in the natural environment of GB.

To test this hypothesis, KNR has contacted a food industry buyer in Italy, Noberasco, Pvt, Limited, and negotiated and secured an import demand for 2 containers of dried apricots. The purpose is to initiate an export business, with Baltistan Culture Development Foundation (BCDF) in the lead, The basic idea is to learn from this experience, and forge a cooperative and collaborative long-term partnership with a long-term buyer, as a practical approach to developing apricots and other high value sectors in GB, both as a socioeconomic development driver and a culture based-conservation tool.

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CHAPTER 1: INTRODUCTION

1. BACKGROUND TO THE STUDY

EV-K-2-CNR is working in CKNP buffer zone since 1987 and providing specialized scientific support to key sectors, with a mission to contributing to sustainable development of this area. Under the SEED Framework, it has established a fruit-processing factory in Skardu Town for processing high value horticultural products, which is being implemented by BCDF.

This study, “Marketing Strategy for the Food Products in International Markets” contributes to activity AA 4c, under the SEED Framework. Its purpose is to identify promising products and map out marketing strategies for accessing local, national and international markets, for selected products from and around CKNP.

2. PURPOSE OF THE STUDY

Specifically, the consultant was asked to develop a practical marketing and business development strategy for BCDF, the implementing partner for SEED Project in Baltistan. The focus of the study is dried apricots, dried apples, apricot oil and black currents.

In order to understand the potential for export, the study looks at production and marketing processes, the so-called ‘value chain’ from producer to export destination. It then considers various supply/demand side issues. It provides data on land use patterns; production and trade estimates, marketing trends, potential export markets and export standards and procedures. As a value added, the research has actually identified a buyer of dried apricots in Europe and secured demand for 30 ton of Turkish dried apricots to be delivered by November 2014. The paper concludes with a set of recommendations for expanding the volume of exports and product mix

The detailed objectives and scope of the study are given in the Terms of Reference (TOR) provided in Annex 1, and summarized as following:

Assess current situation, including cropping patterns and farming practices, production and trade estimates, supply /demand constraints, marketing opportunities, intermediaries and potential buyers in different export markets, define product attributes, including packaging, transportation, documentation, traceability and promotion requirements, and propose a pricing policy that covers costs and ensures a reasonable profit for producers and suppliers

Devise a strategy for the marketing of selected high-potential products, especially dried apricot, apricot oil and current, in the international market, which are produced at food processing factor in Skardu, executed by BCDF, and other sources

Enhance knowledge and expertise of local producers and suppliers of the food safety requirements, regulation, consumer preferences, presentation, positioning and promotion of local products in export markets

Make recommendations for developing an export-oriented production, processing and marketing system for high value products, and identify gaps and remedial actions to support an export sector in GB.

3. RESEARCH METHODOLOGY

At the planning stage of the study, the consultants held a series of consultative meetings with the staff of SEED Project at Islamabad, to discuss the key expectations from this study, and to get clarity on the objectives, scope, organization and deliverables of the study. Soon after the signing the contract, the research team convened a meeting in Gilgit to fine-tune the research methodology, determine data needs and identify sources of literature and data sources as well identify the areas where data gaps existed. The team also contacted with the Chief Executive Officer (CEO) of BCDF, and scheduled field visits.

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During field visits to Skardu, the team met with BCDF staff and visited the processing facilities. The team also met with the Regional Programme Manager (RPM) of Aga Khan Rural Support Programme (AKRSP), and his market development team, as well as the staff of USAID-funded Sadpara Development Project (SDP), implemented by AKRSP. During the same visit, the research team participated in a workshop hosted by AKRSP/ SDP for Farmer Enterprise Groups (FEGs) and local traders of fruit and vegetables. The daylong meeting provided an opportunity to interact with primary stakeholders and to assess their current activities, capacity and constraints and opportunities, in production, value addition and marketing of horticultural products.

Since BCDF, AKRSP and SDP were all engaged in similar activities, the participants of the workshop agreed to form coordination group around apricot production, processing and marketing, called Apricot Business Coalition (ABC). The immediate objective of ABC would be to take apricot as the flagship product from Baltistan, and to work together to export about 30 ton in 2014, and use that learning to develop other high potential products, such as apricot oil, dried cherries and dried apples.

During the field visit, the research team held Focused Group Discussions (FGDs) with the relevant stakeholders including officials in the Department of Agriculture (DoA), the field-based staff of Mountain Agricultural Research Center (MARC) in Skardu, progressive farmers, women and private traders and business leaders.

In addition to these consultations, the research team has reviewed existing reports and collected data available with AKRSP, DoA, SDP, BSDF, as well international literature on food safety, certification regimes, export procedures, and requirements of international importers. The research methodology used for this report is summarized below.

Figure 1: Research Methodology

Synthesis of the Report Analysis and tabulation of data from primary and secondary

sources Preparation of draft report for the review of client Preparation of Final Report incorporating the feedback and

comments received from SEED

Primary Sources Discussions with and data collection from

AKRSP, DoA, MARC, BCDF, SDP on key themes: i) socioeconomic conditions, ii) horticultural Production and Processing, & iii) Horticultural Marketing

Focus group discussions with experts, FEGs, traders, and transporters

Rapid investigation of wholesale market for dry fruits and nuts

Telephone and email interactions with international buyers, and logistics experts

Secondary Sources Published and unpublished data of DoA,

AKRSP, GBER (World Bank), BCDF Various Research Studies and Policy

Documents Online research on dry fruit marketing

trends, packaging and shipment procedures

Presentations prepared by SPD and AKRSP staff

Reports on international standards and certification regimes

Data Collection

Study Planning Fine-tuning the objectives, contents and structure of the report in

close consultation with the client Stocktaking of existing sources of data on production and

marketing of key horticultural products Consultations with experts and key informants to select the

appropriate tools and methods for data collection Designing of checklists and questionnaires for data collection

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4. RESEARCH FRAMEWORK

The research framework tries to capture present baselines of what products are available for export in the required quality and quantity, assess future potential and suggest all the steps that it takes to reaching export markets with initial products. The questions are designed to seek answers needed to achieve the study objectives.

Table 1: Research Framework: Objectives of the study and pertaining research Questions/Instruments

Objective 1: Assess demand/supply situation for national and international marketing of on dried apricot, apricot oil and current, produced at food processing factor in Skardu, executed by BBCDF, and other sources

#. Research Questions Research Tools

1. What are the current estimates on production, wastage, and surplus volumes available for marketing?

Review of farming practices, varieties/ cultivars currently used, access to technology, management practices, productivity levels, quality issues

2. What facilities, expertise and services are available for product development and export processing?

Review of post-harvest methods and survey of processing facilities and technologies used, and assessing gaps

3. Who are the key market players in apricot trade, and what are their business strategies, experience and profitability?

Quantitative and qualitative assessment of the apricot value chain, and survey of traders, promoters and service providers.

4. Who are the main producers, suppliers and service providers of dry fruit chains in CKNP buffer zone?

Stakeholders analysis, survey research, including stakeholders interviews, survey questionnaires, collection of data on production, wastage, and trade

5. What are the gaps/ missing services in the supply chain of horticultural products?

Review of technical issues at supply/demand side, including processing facilities, standards, packaging and market linkages

Objective 2: Devise a strategy for the marketing of selected high-potential products in national and international markets

6. What, and in what quantity and quality, are export-ready products available in the study area?

Estimating surplus volumes, assessing quality standards, and identifying services providers.

7. Who are the international buyers of GB products, what product attributes they are looking for, and what are essential export requirements for food products?

Identifying potential buyers and adapting to their demand and required product attributes

8. How to enhance and retain the value of export products for primary stakeholders?

Finding convergences among development, equity and conservation goals

9. How to brand and market GB products in premium markets nationally and overseas?

Exploring product development, branding and certification options

10. Why products and specializations are relevant and important for CKNP buffer zone, in the long-term?

Developing smart marketing options, targeting ethical markets and specializing, based on natural and human advantages

Objective 3: Enhance knowledge, expertise, and collaboration among all primary and support actors in the value chain.

11. What are the baselines and learning carves in terms of technical and institutional capacity for supporting an export-orientated cottage industry?

Review data and literature, and qualitative assessment of capacities. Review of past, present and ongoing initiatives on horticultural development and marketing. Short case studies on lessons learned.

12. How to promote a participatory and holistic planning approach, integrating technical knowledge with enabling policy and transparent markets?

Brief review of key development support (NGO & Gov) agencies and primary stakeholders (market actors, farmer groups and traders’ associations), and their mandates and working methodologies.

13. How to increase the size of the cake for all stakeholders? Identifying strategies for generating marketable surplus and developing suitable high quality natural products for premium markets

14. How to incentivize collaboration across technical sectors, Exploring ways in which primary stakeholders benefit from collaboration

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support market actors, and primary stakeholders?

Objective 4: Make recommendations for developing an export-oriented production, processing and marketing system sector in GB.

15 What are GB’s long-term comparative advantages, and where apricots should rank in the product mix?

SWOT analysis

16. How specialization in high value products can be achieved? Criteria for selecting and specializing in a few high potential products. Developing a Mountain GAP

17. Which market segments best match GB’s natural and human advantage?

Exploring methods to enter emerging ethical markets for certified natural/organic and ethically produced products

18. How to link up with knowledge and technology leaders? Suggesting strategies for networking and use of social media

19. How to create an enabling policy environment? Outlining policy guidelines and sector strategies for legislators and supporting policy dialogue among stakeholders. Capacity building methods for business and rights associations for advocacy

20. How to fund participatory R&D? Exploring funding strategies for innovative and collaborative R&D projects

5. GEOGRAPHICAL FOCUS OF THE STUDY

The primary focus of the study is CKNP and its buffer zones, a large area stretching over 72,000 sq. km. The study aims to contribute to maintaining ecological health of the Park area and to improve socioeconomic conditions of the communities living in and around CKNP. However, to generate sufficient volumes for export and support and sustain a robust export-oriented cottage industry in the region, the study looks at the entire GB as a high-potential economic area. This approach is also necessary to internalize the benefits of the proposed Kashgar-Gawadar Economic Corridor planned by the governments of China and Pakistan.

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CAPTER 2: SITUATION ANALYSIS

1. OVERVIEW

This chapter briefly describes the context of the study area, including its socioeconomic conditions and potential for adopting modern food production and marketing systems. It takes a quick review of how mountain agriculture is changing, what are the driving forces, and provides baselines for current production and trade volumes, and access to public sector and market services.

2. SOCIOECONOMIC CONDITIONS

The context is a beautiful mountain environment, but people live under very harsh physical and socioeconomic conditions, and are marginalized in almost every respects, and least served by market and public services.

Table 2.1 explains the overall socioeconomic situation of the region on the basis of a few economic indicators. The per capita income of the population of the region as a whole is roughly half of the national average. There is considerable disparity in incomes among the districts. The analysis shows that per capita income is much higher in the Gilgit district than rest of the districts, while the per capita income in the Diamer district is only half of the Gilgit district.

In some social indicators, such as education and gender equality, GB may be ahead of other comparable regions in mainland Pakistan. Intra-GB educational differences are now closing, except in Diamer, where overall and particularly female literacy is very low.

Table 2.1: Per Capita Incomes, Poverty, and Household Consumption-2008

The workforce of GB is young and educated, by unemployed. Tourism, which was a source of employment in the CKNP area, has declined due to deteriorating security situation in the country, especially after targeting of international expedition team at Nanga Parbat base camp in 2012.

Major food crops include wheat, maize, barley and potatoes. Horticultural crops

include apricot (diverse cultivars/ varieties and most widely grown), potatoes, apples, cherries, almonds, walnuts, and a host of others. Almost all of these crops are traditional crops, diminished in genetic prowess, but well adapted to the unique mountain ecology of GB.

Table 2.2: Land Utilization in Gilgit-Baltistan (000 ha)

Land resources in GB are limited. Only 2% of more than 72,496 sq km area is cultivable, of which about 1% is currently under cultivation and another 1 % is still barren and it can be made available for agricultural production. Approximately 4% of the GB area is under natural forests and, 53% under rangeland. Agro-forestry and

horticulture (6%) are other important uses of the land. The rest of the land area is rock and under glaciers and permafrost. Tables 2.2 and 2.3 give a general overview of land utilization in Gilgit-Baltistan.

Districts Nominal PCI

Poverty (HCI)

HH Expenses (Rs)

Gilgit-Baltistan 29,426 25 161,613Gilgit* 41,334 18 196,112Ghizer 30,366 29 147,933Astore 25,183 35 175,029Diamer 21,546 24 126,357Skardu 30,339 17 179,706Ghanche 27,790 35 115,353*Includes Hunza-Nagar district. Source: SESGBC 2008

Type of Land Area %

Mountains/Lakes/Rivers/Glaciers 4,810 66Forests: a) protected (1%), b) Private (3%), c) social Agro/Farm (5%)

646 9

Rangeland 1,646 23Cultivated Area 58 1Cultivable barren lands 90 1Total 7,250 100Source: Background paper on Agriculture and food security NASSD, 2003

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The average cultivable land owned by households in GB is about 0.73 ha, and diminishing through division and sub-division through generations. Agricultural land is used for cultivation of food and fodder crops; fruit and vegetable, particularly seed potatoes; agro-forestry and livestock rearing. Urban development is also putting pressure on cultivated land. Given natural limitations, further development of land is difficult and expensive, thus the focus needs to be on increasing productivity and value-addition in agriculture.

Mountain farming systems have evolved to ensure food security by maximizing, regulating, preserving, and storing food supplies, through trial and error. Diversity and spreading maturity timing of crops was central to reducing postharvest losses and cost of labor, processing and storage.

3. CROPPING PATTERNS

Subsistence, mix farming is the most common economic feature of GB. Most of the population lives in transitional or single cropping zones, where crop production is exposed to early and late frost, spring drought and late summer rains.

Since the opening of the Karakoram Highway (KKH), many new varieties have been introduced. UNDP, FAO, DoA and AKRSP have introduced commercial varieties of apples, cherries and apricots in the region. Though, the exotic varieties have increased production per unit of land and the nutritional value, but decreased the number of disease resistant indigenous varieties. Introducing new varieties/ cultivars is deemed necessary from a commercial point of view, but their success depends on management capacity of farmers and support services. Specialization in both traditional and new products is possible through R&D and access to technology and new markets.

Considerable scope exists for introducing new high value cultivars, across all fruit and vegetables. This is needed to get to the next level of mountain horticulture by specializing in high value products and producing specialty crops for premium export markets. However, this is a slippery slope, as preserving the genetic diversity of local varieties, is equally important.

A useful approach would be, selected breeding of local cultivars for commercial purposes, and highlighting their natural attributes for marketing purposes. These options are discussed in more detailed in the section on marketing strategy.

Table 2.3: Land Utilization for various categories of Agricultural Crops (ha)

District Wheat Maize Barley Buck wheat Potato Fruits Vegetables

GB 18176 17719 4875 947 8421 20901 6526

Gilgit 4122 4334 218 24 4256 2835 1306

Ghizer 2250 3333 409 72 679 3260 785

Astore 652 589 158 85 882 1337 1651

Diamer 5726 8046 73 0 126 2970 122

Skardu 4247 1417 2259 245 1510 7388 1651

Ghanche 1179 0 1758 521 968 3111 1011

Source: Agriculture Statistic 2007

4. FOOD SECURITY VS COMMERCIALIZATION

GB is a net food deficit area and the population depends on subsidized wheat from the federal government. Recently, when the government decided to remove this subsidy, people reacted strongly, forcing the authorities to step back, for now. This is a critical issue for the people, as wheat subsidies were given to encourage small farmers to shift to commercial crops, which they have done at the cost of reducing their food crops. People are

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now dependent on subsidized wheat for 70% of their consumption needs. So should they go back to growing food crops again, or should they grow and sell commercial crops, and use the money to buy wheat?

Commercialization is already happening, but in a haphazard manner. At the policy level, the provincial government lacks a vision for mountain agriculture. More discussion on what ought to be the best compromise and way forward in the section on strategy.

Table 2.4 below presents the shares of various crops in the overall household farm income. The Agriculture Sector had a share of 54 percent in the farm sector that includes agriculture, forestry and livestock sectors. Overall share of farm income in household earnings is roughly the same, 50%. This explains that the livelihoods of the population of the region depend greatly on the earning from the Agriculture Sector. The share of farm sector in overall household income is believed to be less than 50% and declining.

Table 2.4: Share of Constituents in Farm Incomes 2008

Constituents Gilgit-Baltistan Skardu Ghanche Gilgit Ghizer AstoreIncome from Agriculture 57,069 77,186 56,226 72,553 32,520 38,351Income from Forest 12576 18187 13335 9389 10884 9841Income from Livestock 48229 59795 42003 36259 43901 68316Total Income 117,873 155,168 111,564 118,201 87,306 116,508Source: SESGBC 2008

Table 2.5 explains share of cereals and horticulture in household farm income. As can be seen, the share of horticulture is 83% overall in GB, and 78% and 87% in Skardu and Ghanche districts, which form the buffer zone of CKNP.

Table 2.5: Percentage Share of Cereals and Horticulture

Table 2.6 shows share of income of different horticultural products. The share of income from fruits is 60 percent in GB, followed by potatoes. Moreover, the share of incomes from fruits is overwhelmingly higher than that of earned from vegetables and potatoes. Horticulture appears to be emerging as a key cash earner in GB, with highest share, accounting for 83 percent of the entire household farm incomes earned from the horticulture. Across the district this percentage share ranges from 76 percent in the Ghizer district to 91 percent in the Astore district.

Table 2.6: %Share of Constituents in Horticulture Incomes

5. BIODIVERSITY

The mountain ecology of GB provides a numbers of goods and services to the inhabitants of the area. This includes forests, water and agriculture products, and tourism recreational opportunities. The various zones of GB have distinct flora and fauna, which is important for the economy of whole country.

The area is native to some of the rare flora and fauna. Others species are brought into these areas by traders, missionaries and invaders. All the introduced animal and plant species surviving in the area for centuries now

Region/District Agriculture ConstituentsCereal Horticulture* Total

Gilgit-Baltistan 17 83 100Gilgit 11 89 100Ghizer 24 76 100Astore 9 91 100Diamer 47 53 100Skardu 22 78 100Ghanche 13 87 100* Potato, Vegetable and Fruit Source: SESGBC 2008

Region/ District Horticulture Constituents

Vegetable Potato Fruits Total

Gilgit-Baltistan 11 29 60 100

Gilgit 12 37 51 100

Ghizer 21 11 68 100

Astore 26 52 22 100

Diamer 10 16 74 100

Skardu 7 31 62 100

Ghanche 6 25 69 100

Source: SESGBC 2008

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possess the genetic basis for tolerance to extreme climate, diseases and pests and represent a unique genetic base for future horticultural development.

The agro-ecology of GB is highly suitable for production of a number of deciduous fruits and vegetables. Fruit production has been a vital source of food security in the region since ancient times. Fresh and dried apricots, apples, grapes, almonds and walnuts have been the main source of nutrition for the population mainly in winter months when food is normally in shortage. GB also lies close to the two major centers of fruit diversity, namely, Central Asia and China. The ancient trade routes from China to India passed through GB, and traders, traveling on the ancient Silk Route, originally introduced many of the region’s present fruit species here. Fruit crops have been grown here for centuries and now possess the genetic basis for tolerance to extreme cold, heat, frost, drought, diseases and pests.

6. PRODUCTION AND TRADE ESTIMATES

Table 4.8 below gives estimated volumes of major fruits crops produced and traded. These are 2007 figures, but still convey a picture of an economy in transition. It shows more than one third of production going waste, and more interestingly, a larger proportion than consumption being sold. In the dried category, apricot is the sole product marketed. The current figures may be considerably higher for marketed.

Table 4.8: Fresh Fruits production and utilization in GB (Tons)

Fruits ProductionConsumption

WastageMarketed

Fresh Dry Fresh DryApricot 108588 2444 3514 42273 2941 5149Apple 19054 9120 0 3968 5809 0Grapes 6413 3059 0 1362 2203 0Pears 2579 1285 0 594 696 0Peaches 3308 2016 0 999 294 0Pomegranate 4287 1673 0 885 1729 0Cherry 2256 1110 0 362 757 0Mulberry 9092 1154 226 5144 0 174

Source: JICA Study on Horticultural products in GB

Apricot is the most widely grown traditional crop with over 60 varieties, but presently only a handful of varieties are marketed, which raises the question, how to utilize the wastage and add value to the rest of the varieties. Apricots are an important food staple especially in Baltistan and Hunza, and many new products can be made for local market. Apple is also significant, presently only marketed fresh, but also holds potential as a dried item. Other crops have also captured local and down country markets.

7. ACCESS TO PUBLIC AND MARKET SERVICES

The farmers of GB are small landholders and lack resources and capacity and need coordinated assistance, market facilitation and good research in increasing the productivity and profitability of their produce by adopting new technologies and accessing new markets.

During the last 30 years, several government and donor funded projects have been implemented in this region. Under these projects, trails on introduction of new technologies in crop production, processing and marketing, and training of the farmers in use of these technologies have been conducted. This has yielded some important successes. For example, the introduction of potato seed production technology by FAO in early 1980s has established seed potatoes as a major cash crop in GB. The investment from AKRSP in Cherries and dried apricot value chain development helped the farmers to link with high-end domestic and international markets. Despite these successes in introduction of technologies, enormous space for improvement in agriculture management practices at farmer level exists across all districts of GB.

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There is limited potential for developing more land and water resources for agricultural production. Also, the use of chemical fertilizers and pesticides cannot be sustained beyond certain limits due to economic and environmental reasons. In this situation, the only option available is to depend more heavily on in-situ research and use of appropriate advance technologies in organic production and biological pest-control methods, to bring about rapid improvement in local mountain horticulture.

However, such technological change in the area can only be brought about through participatory research and development (R&D) efforts made through public sector institutions. Private entities like AKRSP can contribute to such efforts in GB, to some extent, but eventually it has to be the more permanent government institutions.

The adoption and rational use of new technologies and market services require continuous flow of information, proper infrastructure, quality inputs and regular capacity building of potential farmers and entrepreneurs, including women and youth.

The information given in Table 2.9 shows the number of mother fruit nurseries managed by DoA and MARC.

Table 2.9: District-wise Horticulture Nurseries and Seed Farms

Districts Fruit Nurseries (#) Area (ha) Seed Farms (#) Area (ha)

GB 49 130.97 11 63.70 Gilgit 6 10.50 2 11.00Hunza-Nagar Ghizer 5 7.75 3 6.00 Diamer 10 6.85 3 21.00Astore 4 2.65 0 0.00 Skardu 17 92.75 2 41.25Ghanche 7 69.65 1 12.45

Source: DoA Presentation, 2013

Table 2.10 shows the scale and range of research and extension facilities maintained by department of agriculture at district level. The numbers of these facilities are much smaller than the requirement and the technology used in the facilities is obsolete and does not cater the needs of the current day. During the field visits, it was observed that majority of the facilities are not utilized or underutilized due to capacity and funding issues.

Table 2.10: District-wise technical Facilities in Department of Agriculture.

Districts Extension Offices TC Lab Food Processing Soil Lab IPM lab Seed Processing

GB 7 3 2 1 1 1 Gilgit 1 1 1 0 1 1Hunza-Nagar* 1 0 0 0 0 0 Ghizer 1 1 0 0 0 0 Diamer 1 0 0 0 0 0Astore 1 0 0 0 0 0 Skardu 1 1 1 1 0 0Ghanche 1 0 2 0 0 0

Source: Directorate of Agriculture, Gilgit

8. KEY CHALLENEGES

The state of agriculture described in the preceding sections show that traditional mountain agricultural is exposed to new forces of technology and markets, and it is changing. The construction of KKH has opened a new era of commercialization of agriculture in GB. Improved road access has played a major part in the trade of agriculture commodities within the region in addition to linking it to the down country markets. Many more opportunities than KKH are expected on the proposed Economic Corridor.

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However, there are many issues in the supply chain, which need attention in crafting a futuristic strategy. These are summarized as following:

8.1 Specialization or Improvisation

The key question is this: should farmers try to market whatever they are already producing, or should they work back from the market demand and specialize in a few specialty products based on their comparative advantage? It may well be that if there are regular flights into the area, or a reliable road transportation system, such as the up-gradation of KKH, which is underway, or a rail link, as proposed under the economic corridor, farmers should switch to off-season strawberries and asparagus, rather than dried apricots or bulky potatoes. At the moment, no one has answers to these questions. In the meantime, there is an opportunity to adapt to market demand, at least in one or two products. Once the market linkages are created, the market forces will determine what areas to specialize in.

8.2 Small Units of Production

In GB, landholdings are small, and farming decisions are made on many household considerations, such as growing food, fiber, fodder and fruit and vegetable crops for own consumption, yet also producing small quantities of commercial crops to earn cash income. This means very few products that are available in marketable volumes.

8.3 Poor Crop Management

The farmers in GB currently lack modern knowledge regarding crop husbandry and they use their traditional low-input methods even for new varieties introduced, which leads to lower yields and poor quality in crops produced. In general, local production suffers from the following problems:

Low productivity resulting from use of traditional farming practices Little or no use of production inputs and improper use of farmyard manure Lack of knowledge of crop pests and resultant poor pest management practices Allowing weeds to grow between the main crops to use it as fodder for animals Under or over irrigation, resulting from poor knowledge of crop water-requirement Wrong harvesting methods which substantially reduces the quantity and quality of produce, and Crop-livestock competition: open grazing of animals.

8.4 Low Volumes and Lack of Uniformity and Quality

The above requirements leave very little space for growing commercial crops. In addition, the bulk of the horticultural crops produced are from traditional mixed plantations, which cannot be marketed, at least not in the current undifferentiated markets. After grading, the actual volumes of a particular variety may not be there to meet large orders, and to cater for regular demand. One way of dealing with this problem is pooling and grading of market bound products at accessible locations, which requires planning and creating market infrastructure and services, such as mandis at UC level.

8.5 Lack of Research and Access to New Technology

Lack of context specific research and poor access to technology has limited the farmers’ ability to adopt standard crop management practices, which are critical to obtain a good harvest. The R&D needs of mountainous GB are different from the plains of Pakistan. The agro-ecological conditions here support growing temperate and off-season horticultural products. The national research orientation in Pakistan is primarily to support main export commodities, such as mangoes and citrus, while GB needs research in temperate fruit, such as apricots, cherries, and nuts. Access to production inputs and extension services is also limited. Common limiting factors include:

Lack of institutional capacity and coordination for R&D Lack of technical capacity to produce suitable hybrid and synthetic varieties Lack of training for the technical staff and low quality extension services

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Absence of soil, water and diseases diagnostic facilities with trained technicians Poor technical information-base and lack of linkages with the national and international knowledge

sources; Lack of quarantine services and certification systems

8.6 Higher Failure Risks

GB’s mountain ecology is very fragile and prone to many natural and man-made risks. Its climate is already extreme, from minus 40 to plus 40 ºC, and it is impacted more severely by climate change. Early rain during blossoms has reduced cherry production by half, this year. Last year, rains had affected apricot production. Similarly a landslide has submerged entire villages and KKH by blocking Hunza River and creating and chain of lakes. GLOFs are common features of GB, and air and land transportation can be disrupted for weeks. The security level of KKH, the only outside access to GB, has also deteriorated in recent years. The risks are higher for production, market or system failure.

8.7 Poor Infrastructure

The area of GB is vast and villages are scattered over difficult terrain and far away from market centers. The road infrastructure has improved from what it was 20-30 years ago. But roads are in poor state of maintenance, susceptible to frequent mud/landslides, and not designed to cope with the forces of destruction in mountain areas. Even small distances take hours of travel, and a truck from Skardu to Rawalpindi reaches in 2-3 days. Poor and unreliable road infrastructure is a major limitation on marketing of fresh off-season products, which have a good demand and better prices.

8.8 High Postharvest Losses

The postharvest losses in fresh products are between 30-40%. Therefore, processing becomes an important consideration. Major processing-related issues and constraints common to all three agro-ecological zones are as under.

Limited local culture of fruit and vegetable processing, other than drying Extremely low exposure of the farmers to modern fruit processing environment Lack of opportunities to learn modern fruit processing techniques; and Quality and technology issues in the available training opportunities Lack of financial resources to adopt improved processing technologies

8.9 Weak Governance

Absence of policies and sector strategies are key handicaps for developing mountain agriculture in GB. It has a quasi-provincial status, and does not have either authority or capacity to create conducive policy environment. The following elements are missing.

• Absence of Agriculture Policy to bring focus and effectiveness in the Government’s efforts• Inadequate provision of funds for Agriculture in the Annual Development Plans (ADP)• Weak departmental capacity to establish a research system to address the mountain specific agriculture

issues• Lack of incentives to encourage the private sector to invest in agro-processing and storage systems• Inadequate efforts to strengthen the GB brand as an ideal area for production of high quality fruits and

vegetable seeds• Poor property rights regime leading to slow resolution of issues surrounding the development of land

and irrigation water resources• Un-planned urbanization and its adverse implications for agriculture in the form of contamination of

irrigation water, squeezing of agriculture land, and access issues for crop inputs and farm machinery• Absence of laws and capacity to monitor the quality of crop inputs and food quality• Absence of farmers voice in government policy

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9. POTENTIAL EXPORT PRODUCTS

Technically, GB can produce a range of high value products, but volumes and quality standards are constraining factors. At present, dried apricots, apricot oil, almonds, walnuts and pine nuts are being exported in small quantities. In all these categories, only dried apricots and, to some extent apricot oil, have gone through a process of product refinement based on market demand, when Turkish drying methods were introduced by AKRSP in 1995. All other products are sold without any significant processing or value addition. Even in dried apricots, a finished product for retail export market is not available, and almost all of the exported quantities are supplied as ingredients to food processing companies in the West, or for further processing for retail marketing.

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CHAPTER 3: MARKET ANALYSIS

1. OVERVIEW

This chapter describes the recent birth and growth of agricultural markets in GB, and exposure to outside markets. It summarizes information and analysis of the market, key segments, actors and step involved in export of local products, using the example of EU dried fruit market.

2. MARKET CHARACTERISTIC

2.1 Market Access

For centuries GB remained cut off from the outside world due to its physical constraints. Isolation created the concept of self-sufficiency, which gave birth to a complex system of production, processing and storage system that could optimize their returns from their short agricultural season. The basic denominator of this system may be subsistence farming, but trade offs are based on larger agro-ecological calculations, from soils to seasons. With the construction of the all-weather KKH the physical isolation ended, and the local economy became exposed to larger food production and supply systems in mainland Pakistan, and over time came face to face with Chinese melons, grapes, and pears, and learned their first lessons in competition. The KKH opened up new opportunities for the local people to enter into market transactions for the purchase of goods and sale of their surplus produce.

The new market access was complemented by investments made by international donors through local development support organizations in improving rural infrastructure, productivity and capacity of community members to learn and participate in market activities. Access to rural finance was made possible through a broad-based and successful savings mobilization program of AKRSP. Unfortunately, this program has been replaced by a private micro finance bank that charges upward of 26% on loans with tight security requirements.

Access to new technology and market information has increased awareness and contributed to the emergence of robust, if nascent micro market economy in GB, primarily around agriculture, particularly in horticulture sectors (i.e., potato, cherry, dried apricot and apple). Increased migration to major towns from the rural areas and cash income from trade, small business, employment and sale of cash crops also improved the demand for market-based products and services, mainly fresh vegetable and fruits. Relatively small population in the urban areas and production of fruits and vegetable at household level however made markets of GB less attractive and economical for traders and suppliers of horticulture.

2.2 Growth Trends

Key markets and business growth polls have emerged mostly in the district headquarters as well as along the KKH, where apart from other commercial activities, agriculture-related produces are also traded. The recent AKRSP Regional Market Analysis 2010 indicates that in GB more than Rs.1500 million worth of horticulture products were supplied to the market annually. Most significantly, out of the total annual market supply is 59% of the produce consisting of dry fruits largely comprised of walnuts, almond, apricot kernel and dried apricot.

Local markets are largely dominated by down country business people who are very experienced and savvy. The concept of marketing did not exist 30 years ago. Many people who had initially started a small agro-business, failed, but now a new generation of business cadres has emerged. Now, young and educated people are learning from their exposure to Pakistan and China markets.

2.3 Market Actors

Over the last 10 years, a mushrooming of service providers and emergence of local companies, including export companies, have been observed in GB. An interesting aspect of this trend is that many of these new entrepreneurs have a background in ‘tourism’ and ‘hospitality’ marketing, but have switched to agricultural marketing when the tourism industry collapsed after 9/11, and never recovered ever since. Others have a

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background in ‘development’ sector, including technical staff and marketing specialists, and trained community members.

A short list of market actors in GB is given below.

Producers: they harvest and dry their own produce, before selling it to an agent or contactors

FEGs: Farmer Enterprise Groups, promoted by USAID, are a collection of farmers, both men and women who have some sort of collective harvesting, processing and marketing plan, and have been assisted by the support agency in creating a common asset, or piece of technology for processing.

Contractors: They buy all varieties of fresh crops in the field, months before they are harvested, also undertake picking, grading

Group Marketers: These are interest groups of small entrepreneurs and deal marketing as joint venture.

Agents or local collectors: They are seasonal laborers and facilitate the buying process on pre-agreed commission at the farmer’s field, filling of the bags and transportation of the produce from field to truck road.

Commission agents or auctioneers: They are based in the main markets of the country and auction the produces in wholesale markets on commission basis.

Wholesalers: They sell produces on consignment or commission-basis and they are based in the wholesale market;

Secondary wholesalers who buy at the wholesale market and transport the produces either to sell to retailers or at another wholesale market where prices are higher;

Retailers who sell to the final consumer such as street-hawkers, stallholders, retailers etc.

Processors. They generally deal in processing and drying apricots and oil extraction of walnut, almond and apricot kernels

Exporters: undertake any export activity, and provide export services to others firms.

Table 3.1: Marketing Actors in Dry FruitMarketing Actors GB Gilgit Hunza/

NagarGhizer Astore Diamer Skardu Ghanche

Firms 54 25 12 10 1 1 4 1

Group Marketing 15 2 2 1 4 2 2 2

Local Traders 40 8 6 2 6 4 4 10

Commission Agent 36 6 8 4 2 6 6 4

Wholesaler 60 10 10 8 8 8 10 6

Self Marketer 54 4 4 10 10 10 8 8

The Table above shows the ranking of market actors for fresh and dried fruit sectors. The Table reveals that marketing services are relatively more developed in more accessible areas, such as Gilgit, Ghizer and Hunza Nagar. There is a growing trend in purchasing of pre-harvest crops by both local and national traders particularly in fruit sector.

2.4 Support Actors

GB has a good base of support organizations, both in the public and civil society sectors. The primary mandate for agricultural development lies with public sector agencies, but marketing and entrepreneurship development

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is their weakest point. Other NGOs and INGO, including UN agencies have either in the past or presently providing key support services.

Over time, more and more support actors are emerging and that surely is creating a multiplier effort. But coordination and harmony is needed around key priorities, such as developing a common vision of mountain agriculture in GB, and pooling of experience, expertise and resources. The number of support organizations is too long to be listed here, but at the community level, Local Support Organizations (LSOs) have emerged as good platforms for delivery of key market services and making transactions, such as pooling and processing of market bound, provision of production and post-harvest services. Table 3.2 provides a generic summary of support actors.

Table 3.2: Stakeholders in the Horticulture MarketingStakeholders Key Role Issues

Department of Food & Agriculture, Govt. of Gilgit-Baltistan

Policy making for agriculture related sub-sectors. Research & Development (R&D) for new products. Extension services to producers. Key services, like storage and seed provision. Capacity building of producers and marketing groups

Low capacity and lack of resources Role in marketing not defined No facility and plan for marketing and

promotion.

Federal Seed Certification & Registration Department

Registration of Companies involved in Seed Business, Certification of crop and vegetable seeds. Testing and laboratory services. Implementation of seed policy in GB

Low capacity and lack of resources No clear mandate in promoting seed

marketing

Chamber of Commerce & Industries, GB

Linkage to main marketing actors at national and international level.

Membership for marketing group. Support to get government subsidy for export and import.

Low capacity and lack of resources Politicized, membership dominated by

non-business people

NGOs and CSOs Organizing marketing groups. Capacity building Linkage with market. Support in business planning Link with financial services in the market. Help in collective marketing and input supply

Low capacity and lack of resources Limited mandate and boundaries High turnover of human resource

Transporter/communication, inputs, credit institution, input suppliers etc.

Service provision in their respective sector on market terms.

Major sources of market information Provide informal linkage with the market players

Weak infrastructure Low capacity for investment. Lack of lead enterprise.

Entrepreneurs/Marketing Associations processors, wholesaler, retailing

Main actors who under take buying and selling functions Provide embedded services to market agents and

stakeholders. Main actors to determine the price. Packaging services to producers and consumer.

Lake of capacity, entrepreneurship, resources etc.

Lack of linkage, MIS and market access. Availability of inputs Scale and quality of the produce Weak market infrastructure

Producers Associations Primary place to pool, grade and packaging of product Effective role in pricing of the produces.

Lack of knowledge on pre & post harvest management.

Lack of entrepreneurship ad market led horticulture production

3 EXPORT MARKET STRUCTURE

Globally, major export markets for dried apricots are in EU countries and Russia, whereas nearly half the dried fruit consumed in these countries come from developing countries. Major suppliers are Turkey, China and Iran. Pakistan and Afghanistan also export dried fruit to western markets. Wide fluctuations in global food prices are a major deterrence in export of local products to export markets.

A variety of dried fruits and nuts, including dried apricots, walnuts and almonds, are regularly exported to EU by Pakistani exporters, usually to a single centrally located EU country, from where they are re-exported and distributed to other EU countries.

GB started exporting small quantities of dried apricots to UK, in mid 1990s1, under a new project by AKRSP, focusing on promising food value chains. These were two varieties, one from Baltistan and another from Hunza.

1 ‘Hunza Apricots’ were sold in Europe and America, before that, but it was a brand name not a product of Hunza

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The project was spun off as a social enterprise in 2004, and it continued exporting the product under fair trade certification. The enterprise was sold to the manager and UK based importer by AKRSP in 2007. The strategy was to foster a relationship between local processor and suppliers and buyer in UK, who is a food manufacturer and distributer of whole food products in UK. This is a demonstrated success, worth replicating. This enterprise is now called MFL, pvt Ltd, and it employs nearly 170 workers in their two processing factories. Not surprisingly though, MFL has largely exited from dried apricots and focusing on more lucrative walnut and almonds under Faire Trade label.

Most of the exports from Pakistan are wholesale to agents or food industry importers, who use them as ingredients of repackage them according to their buyers’ specifications.

Even in wholesale supply there are many food safety and quality and safe transportation issues, which need close attention.

Figure 1: Flow chart depicting export of dried apricots to Europe

Source: own compilation

A processor/packer may carry out some processing and conditioning of product, but is mainly involved in re-packing dried fruit into smaller packs for the food processing, retail and catering sector (the same procedures are also frequently undertaken by importers). The imported product is mainly repacked in Europe. The size and branding of these products depends on the marketing strategy of the processor/ packer. Some will have their own brand, while others are also or exclusively contracted by supermarkets to pack a branded consumer product (private labeling) on the supermarkets’ behalf. Larger packers/processors are increasingly buying directly from processors/exporters in the countries of origin.

Retail sector sales are dominated by the supermarket sector, but health stores increasingly gain market share. In the retail sector, "loose" dried/dehydrated fruit is hardly sold anymore, being found only in health food shops, specialist dried fruit and nut shops, and in stalls at street markets in the southern EU countries. Supermarkets prefer to ‘tailor’ their own mixtures of dried fruit, for various reasons, among which increased value addition.

3.1 Market Segments

The food processing industry is by far the largest (nearly 80%) market segment for dried fruits. They are used as raw material input for breakfast cereals, bakery products, desserts and confectionery products. The catering sector is a small buyer of dried fruit.

Food processors are the most ideal business partners for GB exporters, because they are mostly interested in specialty products, such as organic and lesser-known varieties. Once a link is created, the quality control staff of the buyer then steps in and helps in processing and packaging and other aspects of product development and

Exporter

Importer/ Agent

processor/packer

Food processing

Industry

Consumer

Retail sector/cateri

ng market

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packaging.

3.2 Price Structures

Because of the wide variations in availability caused by fluctuating harvests, weather conditions or disasters, changes in supply have a much larger effect on price levels than changes in demand. Other factors which have a significant effect on prices are the exchange rate of the dollar, quality, grade, presentation (whole, shelled, pitted, broken etc.) and the method of drying/processing which has been used prior to export. The major country of origin for a particular product often determines the basic reference price for that product worldwide. For example, Turkey is the reference for apricots in global markets.

The following calculations show rough costs of primary product, cost of processing, handling and shipping, estimated selling price, and rough gross profit.

4 POTENTIAL EU BUYERS2

4.1 Producers/ Processors

a) Noberasco. Dal 1908 un mondo di frutta a colori; Regione Bagnoli 517031 Albenga (SV) Italy; http://www.noberasco.it/

b) Laparre et Fils Pruneaux, France, manufacturer of frozen and dried fruits. Their main activity is supply to the retail sector in France: http://www.laparre-europe.com

c) The Dutch Nut Group, specialist in importing, exporting, trading, packaging and roasting of a wide range of nuts and dried fruits. Has its own production facilities: http://www.dutch- nut-group.nl

d) The Weetabix Food Company, accounting for about 8% of UK’s total cereal sales: http://www.weetabix.co.uk

e) Whitworths, UK’s largest manufacturer of dried fruit: http://www.whitworths.com f) Eat Natural, UK manufacturer of mixed nuts and fruit bars and cereal, under its own brand. Supplies the

UK retail market: http://www.eatnaturalstore.com g) Importaco, leading Spanish importer and producer: http://www.importaco.com

The above-mentioned producers and exporters can be competitors to developing country suppliers. However, at the same time, these companies can also import dried fruit, making them a potential trade channel for developing country suppliers aiming to enter the EU market. Depending on the fruit you produce, companies could either be competitors, buyers, or are active in entirely different trade channels/industries. Please refer to chapter 2 for a more complete list of interesting players in the EU dried fruit market.

4.2 Retailers

h) Greenline, UK web shop supplying organic and Fair Trade food products, among which a wide range of dried fruit: http://www.greenol.co.uk/organic-a01.php

i) Greenways Natural Food Stores, based in the UK: http://www.greenwaystores.co.ukj) Rapunzel Naturkust, Producer, wholesaler and web shop offering various organic food products. Market

leader in Germany: http://www.rapunzel.com

4.3 Brokers/ Agents

k) Torriglia Vincenzo, import agent for dried fruits and nuts, Italy, Genoa: http://www.torrigliage.com

2 Source: CBI Market Information Database www.cbi.eu. Contact: marketinfo@cbi.eu • www.cbi.eu/disclaimer

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l) Activa, international brokers and agents for edible nuts, dried fruits, dehydrated fruits etc. Italy, Genova: http://www.activabrokers.com

m) Eurobroker, International brokers and agents of edible nuts and dried and dehydrated fruits etc. located in Paris, France: http://www.eurobroker.fr

4.4 Traders

n) Catz International BV, Rotterdam, The Netherlands. Importer and distributor of dried fruits: http://www.catz.nl

o) King Nuts & Raaphorst, importer and distributor of dried fruit. Located in The Netherlands: www.kingnuts-raaphorst.com

p) The Dutch Nut Group, specialised in importing, exporting, trading, packaging and roasting of a wide range of nuts and dried subtropical fruits. Located in The Netherlands: http://www.dutch-nut-group.nl

q) Trading Organic, importer, wholesaler and distributor of a wide range of organic commodities, among which dried fruits. Based in The Netherlands: http://www.tradinorganic.com/

r) Daras, shipper, packers and traders of a variety of products, among which dried fruits. Located in the port of Marseille, France: http://www.daras.com/

s) Palm Nuts & More, Germany, specialized in nuts and dried fruit, supplies the German industry and retail: www.palm-nutsandmore.de

t) Community Foods, specialized in the procurement, sales and marketing of organic and conventional dried fruits, and branded health foods: http://www.communityfoods.co.uk

5 OTHER USEFUL RESOURCES

FRUCOM, is the umbrella organization of the European Institutions of the European Federation of the trade in dried fruit, edible nuts, honey, spices, canned fruits and vegetables and similar foodstuffs: http://www.frucom.org

Organization of the European Industries Transforming Fruit and Vegetables (OEITFL): http://www.oeitfl.org

International nut and dried fruit Foundation: http://www.nutfruit.org Confederation of the Food and Drink Industry in the EU (CIAA): http://www.ciaa.be EUROPA - Eurostat - Data Navigation Tree - Crops data: http://epp.eurostat.ec.europa.eu

6 FINDING TRADING PARTNERS

Selecting a suitable trading partner depends on the dried fruit one can offer and whether or not it is organically certified. European food trade fairs are in general the best place to meet buyers, to gain insight into trends unfolding in the segment branch and evaluate whether or not your product is ready for the market, or if minor adjustments first need to be made.

6.1 Interesting Trade Fairs for Specialty Foods

BioFach, Nuremberg, Germany: http://www.biofach.de SIAL, Paris, France: http://www.sial.fr IFE: International Food and Drink Trade Exhibition, London UK: http://www.ife.co.uk Healthy foods summit Europe, London, UK, www.healthyfoodssummit.com Food Ingredients Europe, natural ingredients, Frankfurt, Germany. http://www.fi-events.com

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6.2 On-Line Company Databases

Food world is an extensive online food business directory with full EU coverage. Fruit products are a separate product group: http://www.thefoodworld.com/food_exporters_importers

6.3 Business-To-Business Sources

Agronetwork.com: http://www.agronetwork.com/global

7 PACKAGING AND LABELING

Once a buyer has been identified, sample approved and demand for a specified quantity is secured, the processing should strictly follow product specifications provided by the buyer. This requires using food grade processing standards, implemented under the supervision of qualified food technologists and experts.

In most EU countries there is a trend towards recycling of product packaging. The EU legislation requires that packaging for consumer products is collected by retailers and returned to wholesalers and suppliers for safe disposal. If the products are packed in a material, which is not recyclable, a contribution has to be paid.

Generally, packaging policy does not affect foreign producers because the importer will be held responsible for the packaging. Bulk-packaged, dried fruits are usually packaged in export carton boxes lined with polyethylene, containing 5 kg of product in each carton, (bag-in-box system) or multi-wall sacks. Polyethylene liners may be heat-sealed to give an airtight closure, although some air permeates gradually through the polyethylene itself. Vacuum packaging is also used, but on a small scale. Packages suitable for pallets are gaining in popularity, since they reduce handling costs and damage to the product. Rectangular boxes are more suitable for pallets than paper sacks or drums. Packages normally vary between 5 kg and 25 kg.

EU rules and regulations are very strict for trade in food products. The most important ones for dried fruits are:

Maximum Residue Levels (MRLs) / Pesticides. Regulations on the approved level of pesticides found in imported dried fruits on the EU market are stated in Council Directive 90/642/EEC. For a comprehensive overview of the approved levels of pesticides, please refer to: http://europa.eu.int/comm/food/plant/protection/pesticides/index_en.htm.

Approved Additives Regulation. This regulation is based on Directive 95/2/EC and deals with the non-nutritive substances, which can legally be added to some or all food products. Sulphur dioxide (for lightening and to help preserve color) is permitted for certain groups of dried fruit, but limited to a certain concentration. Apricots may contain 2000 mg/kg3. The additives should be mentioned in the list of ingredients on the label of the dried fruits in the consumer packs.

8 EXPORT LOGISTICS

8.1 Export Companies

Export of agricultural products is a specialized discipline and it should be done through specialized intermediaries, with knowledge and experience in food export. There are a number of companies in GB that directly export or facilitate export of food products to EU market. These include, among others:

A. KNR Pvt Limited

Phone: +92 5811 440099Fax: +92 5811 455422Cell: +92 346 9868406

3 Source: CBI Market Information Database • URL: www.cbi.eu • Contact: marketinfo@cbi.eu • www.cbi.eu/

25

Cell: +92 312 9934590Email: knr.gbc@gmail.comEmail: salmanmilad@gmail.com

Exports fresh cherries and fresh strawberries to Dubai, Malaysia and Thailand, and dried apricots to EU markets. KNR also provides technical and export logistics support to other companies.B. MFL Pvt Limited

Near Old China BridgeDAnyore, Gilgit

Sher.Ghazi@mfl.com

Exports walnuts and almonds to USA under fair trade label, and dried apricots to UK.C. Hashwan Traders

Gadi BAgh, Gilgit, GB, Tel: +92-5811-452853: Exports dried apricots to retail market in Turkey

D. Hunza Dry FruitsVillage and Tehsil Aliabad, District Hunza Nagar, GBTel: +92-346-9749449

Deals in wholesale, retail and export of dry fruits.

E. Soghat-e-BaltistanKushoobagh Skardu Baltistan, Pakistan+92-345-5200513+92-312-5200513soghat@keesar.com

Deals in Wholesale, retail and export of dry Fruits.

8.2 Key Steps in Export

To find out the particular market and select a product in demand, search the Internet to contact buyers/ agents. Quote the price for the selected product as following:

FOB: means “free on board” the delivery of the cargo is given till the same is loaded on to the vessel. All future expenses like freight, insurance will be to the account of the buyer.

C&F: means cost & freight. The price includes the freight charges till the destination. The buyer has to bear only the insurance and other delivery charges, at the port of destination.

CIF: means cost, insurance and freight. The price includes all expenses till the port of destination.

Once the price is acceptable to the buyer, he will ask for a sample. Sending samples is tricky from Pakistan, as Courier services don’t entertain food samples. The best option is International Air Parcel, using Pakistan Post. Upon approval of the sample, the buyer will send a draft product purchase agreement (PPA), specifying product attributes, packaging and shipment methods, quantity, price and credit period. Upon signing of PPA by both parties, the buyer will open the letter of credit or will send an advance remittance through the banking channels to the seller’s account.

The letter of credit should be always in the form of irrevocable and sight letter of credit.

Once the lC is opened the seller has to prepare the cargo as per the quality, packing specifications mentioned in the lC/ PPA and send the consignment to the port of loading so that the C&F (clearing and forwarding) agent

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will do the rest of forwarding the consignment to the buyer.

C&F agent will prepare all the shipping documents called for in the lC/PPA. Once these original shipping documents are received, seller has to prepare his commercial invoice, packing list, and bills of exchange and submit all the documents along with the original lC/PPA received from the buyer to the bank for payment.

The banker will thoroughly scrutinize the documents strictly as per the terms and conditions of the lC/PPA and give credit to the sellers account and send the documents to buyers’ bankers for getting the payment. Normally the payment is received within 30 days time.

9 OPPORTUNITIES AND THREATS

+ More than half of EU dried fruit imports comes from developing countries (DCs) and imports from these countries increased on average by 9.2% over the last 3 years

EU countries produce and process huge quantities of temperate fruit themselves. Their major food imports consist of fresh and dried tropical fruit, not temperate fruits

GB’s advantage in not in quantities or price, but product differentiation. The implication may be not competing with Turkey, Chia and Iran on quantities and price, but meeting certain niche/ demand for ‘natural varieties’ among EU consumers

Export market is a high value, but low margin business. Sometimes prices may be better in local markets than in export

Exports should start with small quantities of dried apricots that are in demand, say one or two containers initially, and increasing the volume and product range, with experience.

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CHAPTER 4: STRATEGIC PLAN

1. OVERVIEW

Based on the previous discussions on contextual conditions and market analysis, this chapter outlines a long-term vision, mission and a strategic framework for developing mountain agriculture in a sustainable manner. The strategy covers key objectives, such as enhancing food security for local population, cash income and employment from production and marketing of high value products, and biodiversity and crop diversity, to maintain the intrinsic resilience of mountain agriculture. Next, it describes implementation steps for achieving those objectives.

2. STRATEGIC FRAMEWORK

It is a critical time for the future of agriculture in GB. Like the KKH, the Economic Corridor project is throwing up new and much greater opportunities. However, this time around, an integrated effort is needed involving all the key stakeholders, especially keeping the needs of small farmers and the private sector partners as frontline players. For this, a shared vision is needed for developing mountain agriculture in GB that is accepted and aspired by all stakeholders. This vision has to take into account all the peculiar conditions, such as smallholdings, off-season advantage, and expected improvements in infrastructure and access to new technology and markets, through the Economic Corridor. The following is proposed as a draft statement of that vision for GB.

2.1 Vision

In 2030, the mountain agriculture in GB is researched-based and market driven; it is optimally productive, specialized and resilient. It is contributing more than USD 100 million to local economy from domestic marketing and export of high value products, while also meeting 50% of local food needs.

2.2 Mission

The public and private sector actors, supported by national, regional and international partners, are committed to developing technical and institutional capacities for conducting strategic research on suitable technologies and generating knowledge for GB agriculture to provide food and livelihood security and to develop a dynamic commercial sector of high value mountain specific products.

2.3 Strategic Objectives

The following strategic objectives are proposed for repositioning mountain agriculture for the future opportunities expected in GB, with a time horizon until 2030:

R&D: creation of high-quality technical and market research facilities, serving private agribusinesses, farmer organizations, NGOs and public extension services with relevant research services, to access national, regional and international premium markets

Specialization: promoting specialization through undertaking agro-ecological zoning of the area, and selecting and adapting traditional and improved varieties and developing production and marketing systems for food and market-demanded products, suited to different niches in GB

Income and employment: developing value chains of commercially high potential crops in GB, and making a recognizable contribution in increased income and employment attributed to high value agriculture

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Resilience: reducing vulnerability in the face of climate change by developing necessary strategies for maintaining biodiversity and crop diversity to create a balance between food production needs and high value crops for the market.

3. THE FUTURE OF MOUNTAIN AGRICULTURE

In order to achieve the above objectives, consolidation of technical and market research and development interventions are proposed, using the following framework. The following strategic framework essentially focuses on three domains: a) food security, b) commercial agriculture and, c) reducing vulnerability through enhanced resilience.

Table 4.1: Strategic Development Framework

Domain Strategic Purpose Scope

Livelihoods and food security Increasing productivity and production in food crops, primarily for self-provisioning

Adaptive research to increase productivity and production in food, fodder, vegetable and fruit crops

High-value commercial agriculture Seeking market opportunities for earning cash income and employment generation

Developing appropriate cash crops and value chains, based on natural comparative advantage and market demand

Reducing vulnerability Promoting wise use of natural capital, primarily for self-provisioning Hedging against crop/ market failure, by enhancing biodiversity and crop diversity

Research on traditional resilient crops and farming systems

Source: Own compilation

3.1 Enhancing Food Security

The opening of KKH has brought about major changes in the agricultural economy of GB. With increased road access with mainland Pakistan and China, cropping patterns have changed. In the 1990s, the federal government introduced subsidized wheat with the objective to encourage cash crops, such as seed potatoes and horticulture. Even before these developments, population growth was outpacing productivity increases in local food crops. Even though important efforts have been made to increase production by increasing arable land by building irrigation infrastructure, to increase productivity through improved varieties and technologies, agricultural production could not keep pace with the growing food demands of the area. Today more than 80% of all foodstuffs, consumed in GB, are imported from down country mostly in the form of subsidized wheat.

Box 4.1: Potential for self-provisionProvided a prudent and overarching agriculture development plan, there is potential for substantially enhancing the self-sufficiency of the region, boosting the productivity and production. Bottlenecks, that hinder GB agriculture to take off, are of course specific for

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Wheat, presently grown on an area of 18,000 ha, with an average yield of 1.5-2 t/ha is contributing to about 20% of the provinces’ food needs. Increasing average yields to realistically achievable 5 t/ha, the same area under wheat would cater for almost 50% of the totally needed amount.

1Not to speak of 7-8 t/ha harvested in Punjab

each crop. However, there is consensus among experts that through intensive and extensive farming, the yields can be increased to at least 5 t/ha (Box 1). Key interventions to achieve this target include:

Investments to increase arable land through irrigation and land development Public-private arrangements for input supply, especially developing certified seed

supply systems Public/community extension services to increase uptake of agricultural

technologies

In order to implement such as strategy, there is a need to integrate federal and provincial research efforts (MARC and DoA), and linking up with regional and international partners, such as FAO/UNDP/ICIMOD and Chinese Academy of Agricultural Sciences, in the neighboring Xingjian province of China. In the long-term, local agricultural development must be done through international cooperation and strong linkages with technologically advanced and regionally well connected mountain agricultural research systems. The mission of this integrated agricultural research system must be to conduct strategic research on suitable technologies and generating knowledge for GB agriculture to provide food and livelihood security.

3.2 Commercialization, Specialization and Branding

Nature has gifted GB with a number of comparative advantages, including seasonal differences and a climate that is ideal for the cultivation of a number of high value crops, which can be sold fresh, and can also be exported after processing. The prospects for processing the fruits and vegetable have already improved after KKH, and this trend can be supported through developing specific products for premium export markets. At present, very small quantities of fruits and vegetables are processed and much of what is processed is consumed at home and is not marketed or marketable. The following Table has been developed during discussions with growers, traders and experts, and it clearly shows good potential developing the horticulture sector in the area.

Table: 4.2 Utilization of major products made from horticultural crops in GB

Fruit/Vegetable Product Household Consumption%

Marketed%

Apricot

1. Sun dried Apricot 10 90

2. Sun dried Apricot Kernels 40 60

3. Apricot Kernel Oil 25 75

4. Apricot kernel Cake 100 0

Grapes

1. Black Currents 95 10

2. Grapes Concentrate 80 20

3. Vinegar 95 5

Mulberry 1. Sun dried mulberry 90 10

2. Mulberry Concentrate 90 10

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Apple

1. Sun dried Apple 100 0

2. Dried Apple Powder 100 0

3. Jam 90 10

Tomato1. Dried tomato 40 60

2. Tomato Puree 30 70

Nuts1. Walnuts 40 60

2. Almonds 30 70

Source: Focus Group Discussions (FGDs)

The data above clearly depicts the overall situation at household level, which eventually is translated at GB level. Only dried apricot and other products made from apricot are sold in the markets, while remaining fruits are largely consumed at home. In vegetables only tomato is sold in dry and processed form.

The potential is even higher if other mountain products, such as potato and vegetables seed, livestock products, honey, strawberries, blackberries, blueberries, asparagus and other specialty products are added to the product mix in future. The key to success would be specialization and product differentiation, and accessing premium markets.

Specialization can be achieved in the following ways:

Introduction of new fruit and vegetable varieties with high market demand, and growing them under the pristine natural environment. This potential is already well established for basic and pre-basic potato and vegetable seeds. Other candidates include alpine flower seeds, cold day neutral varieties of strawberries, blackberries, blueberries, grapes, asparagus, and cultivation and in-situ and ex-situ cultivation of rare medicinal and aromatic plants

Selection and propagation of ‘natural varieties’ of apricots, apples and nuts, for specialty health food industries. The marketing advantage and value in these products is ‘naturally grown’ food with no tempering whatsoever—i.e., more nutrition less toxins. Examples include wild varieties of apricots, low cholesterol yak meat, sea buckthorn berries, etc., which contain rare minerals and in the case of yak meat, omega-3 protein and conjugated linoleic acid (CLA)4.

Adopting ‘good agricultural practices’ and certification regimes, including the following, among others:

4 Omega-3 aids body responds to stress and control numerous other metabolic processes.  Most people eat too many omega-6 fats and not enough omega-3; CLA is a type of naturally occurring trans-fatty acid that improves brain function, causes weight loss, and reduces risk of cancer. http://www.bulletproofexec.com/grass-fed-meat-part-1/

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Building and maintaining long-term relationships with food industry buyers in the West will be key to developing technical capacities and market-orientation.

3.3 Maintaining Resilience

The Hindukush-Karakoram-Himalayan (HKH) mountain landscape is a unique environment, with great social and natural diversity. The entire region, including Gilgit-Baltistan (GB) and Chitral (C) District of Khyber-Pakhtunkhwa (KPK), is part of the larger Tibetan Plateau that provides critical ecological services to billions of people living in China, South and Southeast Asia. This whole region is known as the Towers of the World’s Fresh Water resources, Roof of the World (Bam-e-Dunya), High Asia, the Third Pole, and much more by poets, naturalists and social scientists.

Hundreds of millions of people living in lowland areas depend on the water and other environmental services generated within these mountains. Global changes in these mountains will not only affect mountain dwellers, but also the livelihoods and welfare of a considerable portion of humanity.

This region is prone to earthquakes and erosion and coming under increasing pressure from fast growing population, overgrazing, and mega development projects, such as big dams, roads, and a future rail link, which are expected to accentuate the impacts of natural disasters, climate change, urban development, and changing cropping patterns.

Over millennia, the ecological and social systems in this mountain region have developed robust adaptive strategies to withstand a number of environmental stresses, through bio-diversity and crop diversity, and controlled access to natural resources through local customary rules. The adaptive knowledge and skill of mountain people are increasingly recognized as key tools for coping with current and forecasted changes in climate – namely the exacerbation of extreme weather events, which are already evident in GB.

Ev-K-2-CNR is undertaking pioneering work in the mountain ecosystems of this region, and may well become global change laboratories for monitoring the combined effects of climate and socioeconomic changes, assessing the effectiveness of adaptation options, and proposing responses at local, regional and global scale.

The implication of this new understanding is this underlying resilience can be enhanced through ‘smart development’ options, creating a balance between the regenerative capacity of natural systems and the need to

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increase productivity and incomes and employment in a sustainable way.

In terms of strategy, the following steps are proposed:

Provide an overall vision of the ecological, social and cultural features of mountain socio-ecosystems, highlighting those processes and elements which have determined their resilience to past and present disturbances

Describing current and future impacts, offering a perspective on conservation and sustainable development based on successful examples from within and across the HKH mountain landscape

Integrate ecological knowledge and adaptation and mitigation techniques, both practiced based and research based, in local development strategies

Raise the awareness of development experts, donors and policy and decision makers about the relevance, extent, main challenges, solutions and good practices developed to address key problems, such as land erosion, overgrazing and over use of chemical inputs

Engage communities in adaptive research and select best management techniques for wise use of natural resources

The ultimate objective should be to demonstrate the importance of investing in human and natural financial resources in mountain areas in the framework of the global effort to limit the impact of global change on the livelihoods of upstream/ downstream people, and on the natural and cultural wealth of mountain communities.

4 PRIORITIZATION OF EXPORTABLE PRODUCTS

4.1 Dried Apricots

Based the above assessment of existing production and surplus volumes, a number of crops can be prioritized for marketing in export markets. The criteria for selection include natural advantage, and wider social and economic benefits, including market demand, and ease of postharvest handling, etc.

As can be seen in the following comparison, apricots are at the top of the list of many items that can be selected for export from GB. This comparison allows to ‘zero in’ on dried apricots as a flagship product for export, assess the current gaps in the value chain and develop a strategic plan and a business plan. Once this plan is successfully executed, the lessons can be applied to other products, such as dried apples, black current, apricot oil and other potential products.

Table 4.3: Comparative Analysis and Prioritization of Fruits in GB

Factors

Drie

d A

pric

ot

Alm

ond

Wal

nut

Drie

d B

lack

cu

rren

t*

Drie

d A

pple

s

Geography and ClimateGeo-distribution H M H H MResource base H M M L HOff season M N/A N/A M HEconomicVolume H L L M LIncome M H M H HProcessing/Value Addition H M M M LTransport volume H L L M MMarket demand H H M H HMarket potential under future improved cross-border trading conditions M H H H HEmployment generation H M M M L

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Food Security H M M L LRegional experience with production and marketing H H H M LSocialCollective action H L L L LWomen involvement H M M L LYouth involvement M L L L LPoor involvement H M L M LEnvironment H M M M M

Source: JICA, 2011, own compilationKey: H= High, M= Medium, L=Low, N/A= Not Applicable. * Production data for black current are not available

4.2 Apricot Culture

Apricot cultivation in GB goes back centuries. Apricots fit neatly into local food production cycle, and food security strategies, as well as in the agro-ecological logic. Early maturing varieties provided high value nutrition to landlocked people during famine-like conditions in early summer, when last year’s stored food was already exhausted, and harvest of main food crops was weeks away.

Apricot, especially dried, was used as part of the ‘energy-rich morning food’ throughout the year. In winters, dried apricots were cooked as soup or broth, and were fed to children along with nuts, to ‘boost’ their bodies to face sever winters. Apricot kernels and oil were also used for cooking high-energy food items, needed to sustain physical strength for hard labor on daily basis, for women and men. People in the West now increasingly include dried fruit and nuts in their morning meal, which accepted as the most important meal of the day.

Apricot trees did not compete with staple crops for scarce land and water, as they were largely grown on marginal slops, not in terraces, and were allotted junior irrigation rights after cereals. Apricot cultivation provided multiple benefits, at little input and management cost. People did not invest much in apricot, because they did not want to produce more. They were maintaining a balanced approach.

This helps in understanding why farmers today are reluctant to adopt new varieties, growing and managing trees scientifically in proper orchards, or reducing the number of varieties. These are serious questions and must be placed in their proper context, in devising strategies for further development of apricot value chain.

4.3 Apricot Economy

Almost all farmers produce apricots in all parts of GB, except in elevations beyond 3000 m, where slow growth rates and early or late frost act as upper agro-ecological limits. Production and trade estimates have already been shared in the previous chapter. Those figures are five years old, and the current figures would be in the neighborhood of 150,000 t fresh and about 10,000 dried. Only about 10% of the fresh is sold in major towns and limited quantities are sold in mainland Pakistan. Of the 10,000 t dried, about 69% is marketed locally and in national markets, and the rest is consumed. Local prices are reasonable and have appreciated over the last few years along with other food items in Pakistan. A kilo of ‘A grade’ dried apricot fetch almost $3 at a retail shop in Skardu, and more in Islamabad during winters. Less than 1% is presently exported. The export segment has diminished over the last few years, and other high value products, such as walnuts and almonds, and fresh cherries have become preferred local export items. Dried apricots do have export potential, but in certain niches, such as high quality ‘Turkish Style dried’, fair trade and organic. Demand also exists, especially in food industry in the West for ‘exclusive’ and ‘natural varieties’, produced and processed in natural environments, with low carbon footprint.

5 APRICOT VALUE CHAIN

As the following map shows, the supply chain is active and quite dynamic. There are three types of collectors operating the value chain. The local collectors and representatives of wholesalers do most of the collection; small quantities also go to the representative of processor. These wholesalers generally supply to the local as

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well as national markets.5 The role of the processors (mainly drying) is slightly different from others. They go for pre-agreed agreement with the apricot farmers for drying the fruits as per their specifications. They also provide the inputs like drying trays, plastic for sulfur drying tents and sulfur whose cost is deducted from the sale of their produces. The representative of the processors collect the produces from the individual farmers and according to the quality of the produce, the payment is made to the farmers. The produce is then reprocessed (washing, grading and packing) under the supervision of technical hands and supplied to the national and international markets.

Figure 3.1: Supply Chain of Dried Apricots In Gilgit-Baltistan

Major FlowMedium FlowLimited Flow

6 NEXT STEPS

The strategy is to focus on the export niche for dried apricots, finding a foothold in EU market and then expanding and developing other products. Part of this strategy is to work with a food industry buyer in EU and fostering a long-term relationship for joint efforts to develop a range of new products, previous unknown to consumers in EU market. The next chapter provides a business plan on how to start this process.

7 GOVERNMENT POLICY IN HORTICULTURE MARKETING

The Department of Agriculture has the overall mandate for increasing productivity and improving the supply side of the horticulture services. In the public sector, marketing support was never considered a priority area by assuming that private sector is primarily responsible for marketing. As a result, there is no policy or regulation for marketing of agricultural products is GB. The stakeholders have identified four major areas where the government policies could be affective. Broadly speaking, these areas area; a) pricing, b) subsidy, c) certification and, d) promotion.

There is currently no pricing policy for horticulture products and services in GB—even the national Agriculture Pricing Policies, developed from time to time, have also not been adopted. The government has a pricing authority headed by a magistrate, who sets the retail price of imported agriculture items. However, there is no formal mechanism and policy in place for pricing of horticultural crops.

From time to time the Federal Government announces subsidies for agriculture produces purchase, export and input supplies; but none of them have been implemented in GB, except the wheat subsidy provided nationally. During FGD, one of major demands from producers and marketing groups were that government should provide subsidy for sales and marketing of horticultural produces after assessment of the market in line with national policy.

Certification and standardization policy is the most priority area, which the respondents identified to promote. Apart from Seed certification, there is no certification and standardization policy, protocol and services available in GB. After WTO regime, there have been efforts at national level to develop certification and standardization policy, but because of peculiar climatic condition of GB and its mountain specific arrangements for GAP (Good Agriculture Practices), the region remains out of the national certification and standardization policies and services.

Recently the Department of Agriculture, with the support of USAID funded Agribusiness Support Fund (ASF) has developed a draft Horticulture Policy for the region. This policy primarily focuses on the production side, with only general references for promotion, certification and subsidy for marketing of horticulture produces.

5 A good account of local and national marketing is provided in “MARKET RESEARCH REPORT” ON DRIED APRICOTS AND APRICOT OIL, DONE FOR BCDF, BY IMPRESA, AND IT IS NOT REPATED HERE.

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CHAPTER 5: BUSINESS PLAN FOR 2014

1. COMPANY SUMMARY

BCDF is a social enterprise, based in Skardu, Baltistan, GB. It promotes ethical businesses around cultural resources. It has successfully developed traditional stone and woodcrafts through market interventions. It has developed a knack for marketization of ethnic and ethical products. It has a strong policy for empowering women through market participation. BCDF wants to use this experience to introduce GB’s natural apricots in EU market, as a new business line. BCDF will initially export dried apricots to Italy, with assistance from KNR Pvt. Limited, which is an export oriented firm based in Gilgit, GB.

2. COMPANY OWNERSHIP

BCDF is a Trust established by prominent citizens of Baltistan, representing a broad shade of civil society activists, all determined to use culture as a tool for adaptation and local community development. Its philosophy is to harness culture for sustainable development. The Board of Trustees is chaired by Fida Moummad Nashad, a former Deputy Chief Executive of GB, and serving Member Gilgit-Baltistan Legislative Assembly (GBLA). A fulltime CEO and a small professional team are responsible for the day-to-day management of BCDF, reporting to the Board of Trustees.

3. TARGET MARKET

Dried apricots are well established in global trade. EU, Russia and USA are major producers, exporters and importers. More than half of their imports are from developing countries, such as Turkey, Iran and China. Pakistan and Afghanistan are also significant producers, but exports are minimum and dominated by Afghan varieties. The bulk of EU imports from developing countries is used by the food industry, as ingredients to customized food products. This segment is growing by 9.1% annually since 2005.

GB’s current production is about 150 t fresh, of which 80% is dried and sold in local and national markets. Exports are less than 1% of the marketed volumes. The reason is too many traditional varieties, which cannot compete with commercially developed varieties in the mainstream export market. The business plan is to turn this disadvantage into a market opportunity.

4. MARKET SEGMENT

By default, GB holds a large and well-preserved gene pool of apricot cultivars that may be called ‘traditional’ and ‘un-tempered’ varieties. This can be a market advantage in the EU’s growing ingredients’ segment. GB can sell its ‘natural’ attributes and add other labels, such as organic, fair trade and low carbon footprint. The market for such ‘novel’ products would be specialty food industry in EU, where suppliers are competing to provide differentiated and customized products to their discriminating customers. The large pool of traditional varieties found in GB, can be a good source of ingredients for such customized products.

5. BUSINESS DESCRIPTION

The starting point of the business is to export two containers (about 30 tons altogether) of dried apricots to Italy. The export is the first step in developing and marketing more products, and becoming a specialized export oriented social business in the dried fruit sector in the coming years. Lessons learning from this first export will be applied to other suitable products in future.

The core business philosophy is sharing food globally, earning and learning together. The business is about people, profit and planet (3P). Promotion strategy is ‘customer education and empowerment’, which comes from broad choices and information. Product development philosophy is ‘packing value with transparency’. Business development strategy is collaboration and partnership with progressive buyers in the food industry in

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EU.

5.1 Business Objectives

The long-term objective of BCDF is to become as a lead enterprise in transforming GB agriculture into a modern, technology and market-driven high value sector, with broad benefits for the people and ecology. The business objective is creating a Local Food Company (LFC) that exports specialty food products to few long-term buyers in EU.

5.2 Product

The main product is dried apricot ‘wholes’ in two categories. One is sulphur dried, using Turkish method, and another non-sulphur, using traditional drying methods. In addition, the company markets, apricot oil, dried black current, and dried apples for the local retail market. These are also potential export products, but the business will start with the export of dried apricots in year one.

6. COMPETITION AND MARKETING STRATEGY

As a commodity, dried apricots face strong competition in the export market, from well-established suppliers from Turkey, Armenia and other developing countries. GB cannot compete in this undifferentiated commodity market, because it does not have the volumes to justify lower margins. The marketing strategy is to present a differentiated product, with attributes, such as ‘natural’ and ‘traditional’ varieties from “Karakorum’ mountains, and down the road adding other attributes, such as organic and fair trade certification.

7. TARGET MARKET

As part of this research, we have contacted Noberasco Pvt Limited, a leading dried fruit company in Italy, EU, and secured an order for 30 t of dried apricot at Euro 3/kg C&F Genova Port, Italy. The purchase agreement is attached as Annex 2. The product will be shipped in the first week of November 2014. Based on this business agreement, the following rough calculations are presented on the cost/benefit of the business in year one.

Table 5. 1: Rough Estimates of cost/benefit (PKR)

Description Quantity (kg) Unit cost/price /kg (PKR) Total (PKR)

Fresh apricots, at farm gate 150,000 40 6,000,000

Collection, processing and grading*

150,000 20 3,000,000

Packaging (dried) 30,000 10 300,000

Handling and shipping 30,000 10 300,000

Total Cost of goods sold (dried) 30,000 225 9,600,000

Gross sales @ Euro 3/kg 30,000 404.4 12,132,000

Gross profit - - 2,532,000

Exporter’s commission (10%) - 253,200

Net gross income before taxes - - 2,278,800

Gross margin (71) - - 23.7

Source: own compilation. *100 t of fresh apricots yields about 20 ton of dried matter, after grading

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8. SUPPLY LOGISTICS

8.1 BCDF

BCDF will be the supplier, and responsible for purchasing raw product from FEGs, collection to its processing plants located at Skardu and Shigar towns. Processing will be done according to product specifications (Turkish style), and under the supervision by a rained food technologist, in this case, Mr. Qayyum Ali Shah will be the technical Advisor to BCDF processing and packing operations. BCDF will finance the whole operation, including settling the price and terms of payment with the suppliers of the raw material. BCDF will assume all risks related to the product and product quality.

To make this a success, AKRSP and its SDP will also assist in technical matters, and a forum will be created around apricot business called Apricot Business Coalition (ABC) in Baltistan.

Action Plan and suggested steps for BCDF staff to follow:

• Identify apricot growers, FEGs and other organized producer groups, and create a database, incorporating information such as the name of their group leader, telephone contact, location, quantities that they can supply of the required varieties, and training needs

• Initiate a dialogue with these primary stakeholders, and explain the purpose, product specifications, and mutual responsibilities and obligations, and invite them to participate in the proposed export venture

• Prepare a leaflet in Urdu, specifying product attributes, such as variety, size, color and texture, ripeness, quantity, agreed price, payment schedule, and date and place of delivery

• List down capacity, training and other support activities needed by each group and follow up with necessary backstopping, as well as provide them with a hotline number where they can call if they do not understand anything or need urgent help in any related matter

• Make a fulltime staff member responsible for relationship management with primary stakeholders, who should have all the contact numbers and personally visit the orchards and oversee harvesting, grading and other functions

• Prepare written guidelines in Urdu on all aspects of product handling from harvest to post-harvest, grading and transportation to the processing units

• Establishing and maintaining close business relationships and contractual agreements with the buyer

• Utilize existing processing facility in Skardu to maximum production capacity by ensuring highest standards

• Positioning as a differentiated supplier of natural apricot ingredients

8.2 KNR

KNR will provide all the logistical support for export, including handling of transport to Karachi Port, export processing and documentation and coordination with the client, and will be paid 10% commission for its services from the gross income. BCDF and KNR will sign a B2B agreement to formalize the mutual responsibilities and obligations.

9 SCALING BUSINESS OPERATIONS

All lessons from this experiment will be documented at the end of the transaction in December, and lessons learnt will be incorporated in next year’s cycle of business, which may include larger volumes and other products, such as black currents, apricot oil, apricot kernels and dried apples.

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CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS

1. STUDY FINDINGS

There are challenges and opportunities in creating an export-oriented horticulture sector in GB, which could drive local development process, particularly, in and around conservation areas. The potential is highest in specialization and smart development and servicing premium food industry market segments in EU. The disadvantages include small scale, low R&D capacity and under-developed markets.

Following is a summary of the key findings of this report.

1.1 Overall Findings

a) The ecological fragility, socioeconomic poverty and vulnerability to man-made and natural disasters, pose a great threat to conservation efforts in the Central Karakoram area

b) Natural resources are under pressure; arable land is short and diminishing through division and sub division in generations and urban sprawl and infrastructure development are putting additional pressures on limited land resources

c) GB’s socioeconomic and agro-ecological imperatives require a holistic approach, combing the objectives of food security, marketization, and bio-diversity

d) The agro-ecological conditions of GB support production of high value horticultural products, some of which are already reaching Western markets

e) The physical isolation of GB is coming to an end, and its location as the northern tip of the proposed economic corridor offers new opportunities; but there are also significant risks associated with mega development

f) The traditional mountain agriculture in GB is undergoing a rapid process of change, and has come in direct contact with larger production and marketing systems.

g) The challenge is to benefit from globalization through creative businesses ideash) The change process is currently chaotic and without planning, direction and strategy i) GB has natural constraints but also unique advantages that can be developed through research,

collaboration and long-term business partnerships j) GB’s ecology, geographical location, and a young and increasing literate population can support a high

value horticulture export sub sector, through R&D and business integrationk) Establishing long-term business relationships with market players in EU is key to success

1.2 Specific Findings

a. Given the constraints of small-scale, there are only a handful of agricultural products that are produced in marketable volumes or in the required standards

b. Fresh off-season produce, especially highly perishable items such as cherries, strawberries and blackberries can be most profitable, but there are significant gapes in technology and collection and transportation costs and risks are high. The phytosanitary certification facilities are also not available in GB, which acts as a barrier on export

c. Basic and pre-basic seed production of high-yielding varieties of fruit, vegetable and flowers, is another high-end niche. However, this requires corporate sector’s involvement, which may come when time comes

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d. Nuts and dried fruit are export ready products for a number of reasons, including demand for diverse food ingredients in developed markets, broad-based supply and surpluses, and relative ease of storage and transportation to end markets

e. All of the above options provide an initial set of high value products that GB can specialize in as part of its long-term ‘smart agriculture/development’ strategy

f. Export of dried apricots can be a good entry point to EU food ingredients market segment.

2. RECOMMENDATIONS

1. The first recommendation calls for a sector strategy for developing a futuristic agriculture in GB2. Related to this recommendation is harmonizing and incentivizing collaboration among institutional

actors for R&D, product and market development3. Social and business mobilization of producers and service providers at every level, and promotion

of FEGs, and producers and traders’ Associations and interfacing with community organizations, such as LSOs, for economies of scale

4. Specialization in production, processing and other market services5. Product development through long-term business partnerships with food industry leaders and

benefiting from research, technology and skill transfer6. Following a learning by doing approach, starting small, with one product, and one buyer, and then

enlarging the product range and volumes7. Pushing institutional boundaries and working as stakeholders8. For apricot export, combining the knowledge, resources and experience of multiple partners in

Baltistan is a must9. ABC (Apricot Business Coalition) can work like a good dialogue forum for all stakeholders in the

value chain10. BCDF should focus initially on the supply side for the order that has been secured, and outsource

export logistics to a specialized firm

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ANNEXES

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ANNEX A: EU IMPORT STANDARDS FOR DRIED PRODUCE  I. Definition of Produce This standard applies to {name of produce} of varieties (cultivars) grown from ... {Latin botanical reference in italics, followed where necessary by the author’s name}, intended for direct consumption or for food when intended to be mixed with other products for direct consumption without further processing. This standard does not apply to {name of produce} that are processed by salting, sugaring, flavoring, or roasting or for industrial processing. II. Provisions concerning Quality The purpose of the standard is to define the quality requirements of {name of produce} at the export-control stage, after preparation and packaging. However, if applied at stages following export, the holder shall be responsible for observing the requirements of the standard. The holder/seller of products not in conformity with this standard may not display such products or offer them for sale, or deliver or market them in any other manner. A)Minimum requirements

 In all classes, subject to the special provisions for each class and the tolerances allowed, the {name of produce} must display the following characteristics: {the appropriate section should be included in the standard}

B) Characteristics of the product

The shell must be: Intact: however, slight superficial damage is not considered as a defect, provided the kernel is physically

protected {Depending on the nature of the produce} Clean: practically free of any visible foreign matter, including residues of adhering hull affecting in aggregate

more than … per cent of the total shell surface Free from blemishes, areas of discolorations or spread stains in pronounced contrast with the rest of the shell

affecting in aggregate more than … per cent of the surface of the shell Well formed; not noticeably misshapen.

The kernel must be: Free from rancidity Sufficiently developed. Shrunken or shriveled kernels which are extremely flat and wrinkled, or with desiccated

[dehydrated], dried out or tough portions affecting more than … per cent of the kernel and empty shells, are to be excluded

Free from blemishes, areas of discoloration or spread stains in pronounced contrast with the rest of the kernel affecting in aggregate more than … per cent of the surface of the kernel

Well formed; <twin or double kernels, i.e. kernels of characteristic shape with one side flat or concave, as a consequence of the development of two kernels in the same shell, are not considered as a defect>.

The whole produce (shell and kernel) must be: Sound; produce affected by rotting or deterioration such as to make it unfit for human consumption is excluded Free from mould filaments visible to the naked eye Free from living pests whatever their stage of development Free from damage caused by pests, including the presence of dead insects and/or mites, their debris or excreta Free of abnormal external moisture Free of foreign smell and/or taste.

C. Moisture contentThe {name of produce} shall have moisture content not exceeding x % ( 20-22%) for dried apricots. {The percentage should always be given with one decimal place, e.g. 10.0 per cent. For inshell dry produce the moisture

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content may be fixed for the kernel or the whole produce.} D)Classification

 In accordance with the defects allowed in section “IV. Provisions concerning tolerances”, {name of produce} are classified into the following class(es): <“Extra” Class>, Class I <and Class II>.The defects allowed must not affect the general appearance of the produce as regards quality, keeping quality and presentation in the package. III. Provisions concerning size Sizing is <optional/mandatory>. Size is determined by one of the following:

Screening, i.e. minimum diameter (mm, inch) Count, i.e. the number units/pieces per unit of weight <and larger/smaller, if specified> Size range, i.e. minimum and maximum diameter (mm, inch); the size is determined by the maximum diameter of

the equatorial section

{Any definition using fixed size scales or size codes should be avoided so that the standard can be used in different countries with different trade and sizing habits.} IV) Provisions Concerning Tolerances Tolerances in respect of quality and size shall be allowed in each lot for produce not satisfying the minimum requirements of the class indicated. A. Quality tolerances 

(i) Table for inshell produce 

Defects allowed

Tolerances allowedPercentage of defective produce, by number or weight (with regard to the total inshell weight basis)

Extra Class I Class II

(a) Tolerances for produce not satisfying the minimum requirements

Of which no more than

- Not sufficiently developed or empty shells 1 2 2

- Mouldy 0 1 1

- Rancid or damaged by pests, rotting or deterioration 0 1 1

- Living pests 0 0 0

{Specify special tolerances where necessary}

(b) Size tolerances

- For produce not conforming to the size indicated, if sized

5 5 5

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(c) Tolerances for other defects

- Foreign matter, loose shells, shell fragments, fragments of hull, dust (by weight)

0 0 0

- {name of produce} belonging to varieties or commercial types other than that indicated

0 2 2

 {Note: The defects and the tolerances can be combined or separated based on the attributes of the product and trade practices.Note: Total tolerances for defects allowed in each class can be used solely for defects affecting the shell, provided no other defects are present.}  (ii) Table for kernels {dry produce presented without the shell} 

                     Defects allowed Tolerances allowed% of defective produce, by number or weight

Extra Class I Class II

(a) Tolerances for produce not satisfying the minimum requirements,

Of which no more than

- Not sufficiently developed, shrunken and shrivelled 1 2 2

- Mouldy 0 0 0

- Rancid or damaged by pests, rotting or deterioration 0 1 1

- Living pests 0 0 0

{Specify special tolerances where necessary}

(b) Size tolerances

- For produce not conforming to the size indicated, if sized 1 2 2

(c) Tolerances for other defects

- Foreign matter, loose shells, shell fragments, fragments of hull, dust (by weight)

0 1 1

- {Name of produce} belonging to varieties or commercial types other than that indicated

1 2 2

 {Note: The defects and the tolerances can be combined or separated based on the attributes of the product and trade practices.} (iii) Table for dried produce 

Defects allowed Tolerances allowed% of defective produce, by number or weight

Extra Class I Class II

(a) Tolerances for produce not satisfying the minimum

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requirements,

Of which no more than

- Not sufficiently developed (optional) 1 2 2

- Mouldy

- Fermented or damaged by pests, rotting or deterioration

- Living pests 0 0 0

{specify special tolerances where necessary}

(b) Size tolerances

- For produce not conforming to the size indicated, if sized 1 5 5

(c) Tolerances for other defects

- Foreign matter, loose capstems, rachis, pits, fragments of pits and dust (by weight)

0 2 2

- {name of produce} belonging to varieties or commercial types other than that indicated

2 2 2

 

V. Provision concerning presentations A. Uniformity The contents of each package must be uniform and contain only {name of produce} of the same origin, quality, size (if sized) and variety or commercial type (if indicated). {In addition, for individual standards, uniformity concerning variety and/or commercial type may be laid down, depending on the nature of the produce.}

{Other possible provisions, depending on the nature of produce} <For “Extra” Class and Class I, the produce must be of the same variety and/or commercial type.> {In addition, depending on the nature of the produce, the standard may require that the produce shall be of the same crop year, shape and/or color}.The visible part of the contents of the package must be representative of its entire contents. B. Packaging{name of produce} must be packed in such a way as to protect the produce properly.

The materials used inside the package must be clean and of a quality such as to avoid causing any external or internal damage to the produce. The use of materials, particularly of paper or stamps bearing trade specifications, is allowed, provided the printing or labeling has been done with non-toxic ink or glue.

Packages must be free of all foreign matter in accordance with the table of tolerances in section “III”. 

C. Presentation{name of produce} must be presented in bags or solid containers. All sales packages within each package must be of the same weight.

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{Specific provisions relating to the presentation of the produce may be included at this point.}

<The shell may be cleaned/treated with authorized agents, provided that they do not affect the quality of the kernel.> VI. Provisions concerning marketing

Each package 3 must bear the following particulars in letters grouped on the same side, legibly and indelibly marked and visible from the outside: A. Identification Packer and/or Dispatcher: Name and physical address (e.g. street/city/region/postal code and, if different from the country of origin, the country) or a code mark officially recognized by the national authority. B. Nature of produce

Name of the produce Name of the variety and/or commercial type (optional){according to the nature of the produce} Type or style {according to the definitions of the standard}.

 C. Origin of produce

Country of origin and, optionally, district where grown or national, regional or local place name. D. Commercial specifications

Class Size (if sized); expressed in accordance with section III Crop year {according to the nature of the produce} “Best before” followed by the date (optional).

E. Official control mark (optional) Methods of Inspection The following methods of inspection are based on the provisions of the guide for the implementation of quality control of fresh fruit and vegetables adopted by the OECD Scheme for the Application of International Standards for Fruit and Vegetables. 1. Definitions

1.1. PackageIndividually packaged part of a lot, including contents. The packaging is conceived so as to facilitate handling and transport of a number of sales packages or of products loose or arranged, in order to prevent damage by physical handling and transport. The package may constitute a sales package. Road, rail, ship and air containers are not considered as packages. 1.2. Sales packageIndividually packaged part of a lot, including contents. The packaging of sales packages is conceived so as to constitute a sales unit to the final user or consumer at the point of purchase. 1.3. Pre-packagesPre-packages are sales packages such as the packaging enclosing the foodstuff completely or only partially, but in such a way that the contents cannot be altered without opening or changing the packaging. Protective films covering single produce are not considered as a pre-package. 1.4. ConsignmentQuantity of produce to be sold by a given trader found at the time of inspection and defined by a document. A consignment may consist of one or several types of produce; it may contain one or several lots of fresh, dry or dried fruit and vegetables.

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 1.5. LotQuantity of produce, which, at the time of inspection at one place, has similar characteristics with regard to:

Packer and/or dispatcher, Country of origin, Nature of produce, Class of produce, Size (if the produce is graded according to size), Variety or commercial type (according to the relevant provisions of the standard), Type of packaging and presentation.

However, if during the conformity check of consignments as defined in point 1.4 it is difficult to distinguish between different lots and/or presentation of individual lots is not possible, all lots of a specific consignment may be treated as one lot if they are similar in regard to type of produce, dispatcher, country of origin, class and variety or commercial type, if this is provided for in the relevant marketing standard. 1.6. Sampling

Collective samples taken temporarily from a lot during conformity check 1.7. Primary samplePackage taken at random from the lot, in case of packed produce or, in case of bulk produce (direct loading into a transport vehicle or compartment thereof), a quantity taken at random from a point in the lot.EN 15.6.2011 Official Journal of the European Union L 157/117 1.8. Bulk sampleSeveral primary samples supposed to be representative for the lot so that the total quantity is sufficient to allow the assessment of the lot with regard to all criteria. 1.9. Secondary sample

An equal quantity of produce taken at random from the primary sample

In the case of packed nuts, the secondary sample shall weigh between 300 g and 1 kg. If the primary sample is made up of packages containing sales packages, the secondary sample shall be one or more sales packages that in aggregate are at least 300 g.

In the case of other packed produce, the secondary sample shall comprise of 30 units, in case the net weight of the package is 25 kg or less and the package does not contain any sales packages. In certain cases this means that the whole content of the package has to be checked, if the primary sample contains not more than 30 units. 1.10. Composite sample (dry and dried produce only)A composite sample is a mix, weighing at least 3 kg, of all the secondary samples taken from the bulk sample. Produce in the composite sample shall be evenly mixed. 1.11. Reduced sample

Quantity of produce taken at random from the bulk or composite sample having a size, which is restricted to the minimum quantity, necessary but sufficient to allow the assessment of certain individual criteria.

If the inspection method would destroy the produce, the size of the reduced sample shall not exceed 10 % of the bulk sample or, in the case of nuts in shell, 100 nuts taken from the composite sample. In the case of small dry or dried products (i.e. 100 g include more than 100 units) the reduced sample shall not exceed 300 g.

For the assessment of criteria on the degree of the development and/or ripeness, the constitution of the sampling shall be done according to the objective methods described in the Guidance on Objective Tests to Determine Quality of Fruit and Vegetables and Dry and Dried Produce.

Several reduced samples may be taken from a bulk or composite sample in order to check the conformity of the lot against different criteria.

 

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2. Implementation of conformity check 2.1. General remarkA conformity check shall be made by assessing samples taken at random from different points in the lot to be controlled. It is based on the principle of presumption that the quality of the samples is representative of the quality of the lot. 2.2. Place of controlA conformity check may be carried out during packing operation, at the point of dispatch, during transport, at the point of reception, at wholesale and retail level.

In cases where the inspection body does not carry out the conformity check in their own premises, the holder shall provide facilities enabling the conduct of a conformity check. 2.3. Identification of lots and/or getting a general impression of the consignmentThe identification of lots shall be carried out on the basis of their marking or other criteria, such as the indications laid down under Council Directive 89/396/EEC.In the case of consignments which are made up of several lots it is necessary for the inspector to get a general impression of the consignment with the aid of accompanying documents or declarations concerning the consignments. The inspector shall then determine how far the lots presented comply with the information in these documents. If the produce is to be or has been loaded onto a means of transport, the registration number of the latter shall be used for identification of the consignment. 2.4. Presentation of produceThe inspector shall decide which packages are to be checked. The presentation shall be made by the operator and shall include the presentation of the bulk sample as well as the supply of all information necessary for the identification of the consignment or lot.If reduced or secondary samples are required, these shall be identified by the inspector from the bulk sample. 2.5. Physical check

Assessment of packaging and presentation: The packaging, including the material used within the package, shall be tested for suitability and cleanness according to the provisions of the relevant marketing standard. This shall be done on the basis of primary samples, in case of packed produce and in all other cases on the basis of the transport vehicle. If only certain types of packaging or presentation are permitted, the inspector shall check whether these are being used.

Verification of marking: The inspector shall check whether the produce is marked according to the relevant marketing standard. This shall include a check on the accuracy of marking and/or the extent of any amendments required.

 In case of packed produce, this check shall be carried out on the basis of the primary samples, in all other cases on the basis of the documents attached to the pallet or the transport vehicle.Fruit and vegetables individually wrapped in plastic shall not be considered as pre-packed foodstuff in the meaning of European Parliament and Council Directive 2000/13/EC and shall not necessarily need to be marked in accordance with the marketing standards. In such cases, the plastic wrapping may be considered as a simple protection for fragile products.

Verification of conformity of the produce: The inspector shall determine the size of the bulk sample in such way as to be able to assess the lot. The inspector selects at random the packages to be inspected or in the case of bulk produce the points of the lot from which individual samples shall be taken.

Care shall be taken to ensure that the removal of samples does not adversely affect the quality of the produce.Damaged packages shall not be used as part of the bulk sample. They shall be set aside and may, if necessary, be subject to a separate examination and report.

The bulk sample shall comprise the following minimum quantities whenever a lot is declared unsatisfactory or the risk of a

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produce not conforming to the marketing standard has to be examined: 

Packed produce

Number of packages in the lot Number of packages to be taken (primary samples)

Up to 100 5

From 101 to 300 7

From 301 to 500 9

From 501 to 1 000 10

More than 1 000 15 (minimum

  

    

 

Produce in bulk (direct loading into a transport vehicle or compartment thereof)

Quantity of lot in kg or number of bundles in the lot Quantity of primary samples in kg or number of bundles

Up to 200 10

From 201 to 500 20

From 501 to 1 000 30

From 1 001 to 5 000 60

More than 5 000 100 (minimum) In the case of bulky fruit and vegetables (over 2 kg per unit), the primary samples shall be made up of at least five units. In the case of lots comprising fewer than 5 packages or weighing less than 10 kg, the check shall cover the entire lot.If the inspector discovers, after an inspection, that a decision cannot be reached, another physical check shall be undertaken and the overall result reported as an average of the two checks. 2.6. Control of produce

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In case of packed produce, the primary samples shall be used to check the general appearance of the produce, the presentation, the cleanliness of the packages and the labelling. In all other cases, these checks shall be done on basis of the lot or transport vehicle. The produce shall be removed entirely from its packaging for the conformity check. The inspector may only dispense with this where the sampling is based on composite samples.

The inspection of uniformity, minimum requirements, quality classes and size shall be carried out on the basis of the bulk sample, or on the basis of the composite sample taking into account the explanatory brochures published by the OECD Scheme for the Application of International Standards for Fruit and Vegetables. When defects are detected, the inspector shall ascertain the respective percentage of the produce not in conformity with the standard by number or weight.

External defects shall be checked on the basis of the bulk or composite sample. Certain criteria on the degree of development and/or ripeness or on the presence or absence of internal defects may be checked on the basis of reduced samples. The check based on the reduced sample applies in particular to checks which destroy the trade value of the produce.

The criteria on the degree of development and/or ripeness shall be checked using the instruments and methods laid down to this end in the relevant marketing standard or in accordance with the Guidance on Objective Tests to Determine Quality of Fruit and Vegetables and Dry and Dried Produce. 2.7. Report of control resultsDocuments mentioned in Article 14 shall be issued, where appropriate.If defects are found leading to non-conformity, the trader or his representative shall be informed in writing about these defects and the percentage found as well as the reasons for non-conformity. If the compliance of produce with the standard is possible by a change in marking, the trader or his representative shall be informed.If defects are found in a product, the percentage found not to be in conformity with the standard shall be indicated. 2.8. Decline in value by conformity checkAfter the conformity check, the bulk or composite sample is put at the disposal of the operator or his representative.The inspection body shall not be bound to hand back the elements of the bulk or composite sample destroyed during the conformity check. 

F) General labeling requirements

Labeling of food products may not:

Mislead the EU consumer as to the characteristics, effects or properties of the product Attribute health claims to a food product without EU authorization.

The following information is considered essential and must appear on a food product label:

1. Name of the product: 

The name, which is laid down by specific EU legislation. In case there is no specific EU legislation, the (customary) name under which the product is sold in the perceived

EU Member State(s). In all cases where omission of such information could lead to confusion, the particulars as to the physical

condition of the food product or the specific treatment that it has undergone (powdered, freeze-dried, deep-frozen,

52

concentrated, smoked, etc.) must be included in the name. Ionising treatment must always be mentioned. 

2. List of ingredients:

 All ingredients, preceded by the word ‘Ingredients’ (in the language of the perceived EU Member State), must be listed in descending order of weight (if less than 2%, no specific order is required) and designated by their specific name. Ingredients that are derogated from the requirement to be designated by their particular name are mentioned in the following Annexes of Directive 2000/13/EC:

3. Quantity of an ingredient or category of ingredients (QUID)

QUID information is mandatory in the following cases:

When an ingredient or category of ingredients is included in the name of the product (e.g. tomato soup - the percentage of tomatoes must be indicated, fish fingers – the total content of fish must be indicated).

When an ingredient or category of ingredients is usually associated with that name by the EU consumer (e.g. Chilli con carne – the content of minced beef must be indicated).

When the ingredient or category of ingredients is emphasized on the labelling with words (e.g. ‘made with butter’), pictures (e.g. the image of a cow to emphasize dairy ingredients) or with graphics (different size, color and/or style of print).

When the ingredient or category of ingredients is essential to characterize a food product and to distinguish it from similar products (e.g. mayonnaise or marzipan).

 

The requirement does not apply to constituents naturally present in a food product (e.g. caffeine in coffee or vitamins and minerals in fruit and vegetables).

4. Net quantity (the amount of food in the container or package):

The requirements relate to nominal quantities which are: Equal to values predetermined by the packer Expressed in units of weight or volume Not less than 5 g or 5 ml and not more than 10 kg or 10 l

 

 

Usually indicated with the estimated sign: Indicated in units of volume for liquids (e.g. liter and milliliter). Indicated in units of mass for other products (e.g. kilogram and gram).

 

5. Date of minimum durability:

The date consists of the day, month and year. Except for food products: That will not keep for more than three months (day and month are sufficient) That will not keep for more that18 months (month and year are sufficient) That will keep longer than 18 months (year is sufficient).

 

There are two durability dates:         

Use by’ date: used on food products, which from a microbiological point of view, are highly perishable (food that

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spoils quickly e.g. dairy products). ‘Best before’ date: used on food products that can be kept longer (e.g. cereals, rice and spices). It is not dangerous

to eat the product after this date, but it may begin to lose its flavor and texture.The durability date is not required in the case of:

          6. Special storage conditions or conditions of use: When appropriate (e.g. for certain perishable products storage at a maximum of 4°C).

7. Name and address of the manufacturer or packager or EU buyer/retailer: In case EU consumers may seek more information or file complaints.

8. Place of origin or provenance of the product: In case the absence of such information may be misleading to the EU consumer.

9. Instructions for use: In case it is impossible to make appropriate use of the food products without those instructions.

10. Indication of the alcohol strength by volume: For beverages containing more than 1.2% of alcohol by volume.

EU Food Agencies

European Food Safety Authoritywww.efsa.europa.eu

World Health Organization - Regional Office for Europewww.euro.who.int/

DG XXIV Consumer Policy, Consumer Health Protection inc. Food Safety http://ec.europa.eu/dgs/health_consumer/index_en.htm Scientific Committee on Food, DG XXIV European Commissionhttp://ec.europa.eu/food/fs/sc/scf/index_en.html

DG XII Biotechnology, European Commissionhttp://ec.europa.eu/food/food/biotechnology/index_en.htm

EC Evaluation of Food Control Systems in Member Stateshttp://ec.europa.eu/food/food/controls/foodfeed/index_en.htm

European Food Information Councilwww.eufic.orgwww.foodexperts.net

European Unionhttp://europa.eu/index_en.htm

Austria - Austrian Agency for Health and Food Safetywww.ages.at

Belgium - The Food Agencywww.afsca.be

Czech Republic - Czech Agriculture and Food Inspection Authorityhttp://www.szpi.gov.cz/

Cyprus - Cyprus Safety & Health Association (CySHA)www.cysha.org.cy

Denmark - The Danish Veterinary and Food Administrationwww.fdir.dk

Estonia - Veterinary and Food Boardwww.vet.agri.ee

Finland - Finnish Food Safety authorityhttp://www.evira.fi/portal/en/

France - L'Agence Française de Sécurité Sanitaire des Alimentswww.afssa.fr

Germany -Bundesamt für Verbraucherschutz und Lebensmittelsicherheit (BVL)www.bvl.bund.de/Federal Institute for Risk Assessmentwww.bfr.bund.de

Greecewww.efet.gr

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Hungary - Department for European Integrationwww.fvm.hu

Iceland - National Environment Agency of Icelandwww.ust.is

Ireland - Food Safety Authority of Irelandwww.fsai.ie

Italy - Istituto Superiore di Sanitàwww.iss.it

Latvia - Latvian Food and Veterinary Servicewww.pvd.gov.lv

Lithuania - State Food and Veterinary Service of the Republic of Lithuaniawww.vet.lt

Luxembourg - Le Gouvernement du Grand-Douché de Luxembourgwww.etat.lu

Malta - Malta Standards Authoritywww.msa.org.mt

Netherlands - The Dutch Food and Non-Food Authoritywww.vwa.nl

Norway - Matportalen (the Food Portal)http://matportalen.no

Poland - Ministry of Healthwww.mz.gov.pl

Slovak Republicwww.svssr.sk

Spain - Ministerio de Sanidad y Consumowww.msc.es

Sweden - National Food Administrationwww.slv.se

UK - Food Standards Agencywww.foodstandards.gov.uk

EU Directives and Regulations

COUNCIL REGULATION (EC) No 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation)

COMMISSION IMPLEMENTING REGULATION (EU) No 543/2011 of 7 June 2011 laying down detailed rules for the application of Council Regulation (EC) No 1234/2007 in respect of the fruit and vegetables and processed fruit and vegetables sectors

2004/0176 (AVC) DECISION OF THE COUNCIL AND OF THE COMMISSION on the conclusion of a Partnership and Cooperation Agreement between the European Community and the European Atomic Energy Community and their Member States, of the one part, and the Republic of Tajikistan, of the other part

STANDARD LAYOUT FOR UNECE STANDARDS ON FRESH FRUIT AND VEGETABLES 2010

STANDARD LAYOUT FOR UNECE STANDARDS ON DRY AND DRIED PRODUCE 2009

Interim Agreement on trade and trade-related matters between the European community and the European Atomic Energy Community, of the one part, and the Republic of Tajikistan, of the other part Official Journal L 340 , 16/11/2004 P. 0002 – 0020

DIRECTIVE 2000/13/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILof 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs

COUNCIL DIRECTIVE of 26 July 1971 on the approximation of the laws of the Member States relating to common provisions for both measuring instruments and methods of metrological control

882/2004 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 29 April 2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules

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COUNCIL DIRECTIVE 2000/29/EC of 8 May 2000 on protective measures against the introduction into the Community of organisms harmful to plants or plant products and against their spread within the Community

COUNCIL REGULATION (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code

USEFUL WEBSITES

Official European Union Delegation website. http://eeas.europa.eu/delegations/tajikistan/index_en.htm

The Export Helpdesk is an online service, provided by the European Commission, to facilitate market access in particular for developing countries to the European Union. http://exporthelp.europa.eu/thdapp/index_en.html

Official UNECE website cover a wide spectrum of the information regarding agricultural products: fresh fruit and vegetables (FFV), dry and dried produce (DDP), seed potatoes, meat, cut flowers, eggs and egg products etc. http://live.unece.org/trade/agr/welcome.html

EU Guidance documents:http://europa.eu.int/comm/food/food/foodlaw/guidance/index.htm Official guidance documents on food law, clarifying the requirements for food businesses

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ANNEX B: PURCHASE AGREEMENT

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ANNEX 3: PROCESS FLOW FOR EXPORTS

1. REGISTER YOUR BUSINESS NAME (Company Formation) and get NTN, Sales Tax No certificate

2. OPEN A BANK ACCOUNT

3. REGISTER WITH CONCERNED ASSOCIATION/CHAMBER OF COMMERCE

4. SELECT A PRODUCT FOR EXPORT

5. IDENTIFY POTENTIAL MARKET

6. DO SPECIFIC COUNTRY RESEARCH including Size of the Market, Unit price, Import regulations, certifications required, etc

7. QUOTE A PRICE including packing cost, insurance, credit, agent’s commission, octroi duties, documentation fee, marking charges, transportation charges, export duties, etc

8. PACKAGING should be strong and as per client’s requirements

9. SELECT A MODE OF TRANSPORT keeping in view the perish ability of the product

10. For FINANCING pre-shipment or post-shipment credits are also available

11. INSURANCE to recover cost in case of loss

12.SIGN A CONTRACT with the prospective Buyer including names of

exporter/importer, unit price, total quantity, terms of delivery (FOB, C&F etc), currency and terms of payment (Cash Against Documents or through Letter of Credit), mode of shipment, etc

13. Phyto-sanitary inspection certificate (through Plant Quarantine Department.)

14. PREPARE SHIPPING DOCUMENTS

15. SELECT FREIGHT FORWARDER

16. TRANSPORT THE CONSIGNMENT

17. Data to be provided to the bank through which export has been made within 14 days of transaction/exporting of consignment.

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18. Form-E (4 Copies) one copy to be retained by Customs Department at the time of export, 2 copies with file to be returned to bank-SBP and one copy for the exporter.

6.4 Signing Of a Contract

When prices are accepted to export / import horticulture then a contract is signed with the firm for supply of horticulture which becomes binding on both the buyer & seller. Contract is a document, which normally contains.

a. Name of exporter of Horticulture

b. Name of importer of horticulture

c. Variety of horticulture

d. Unit price

e. Total quantity

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6.5

f.

Terms of delivery (FOB, C&F, CIF etc.)* Incoterms (international commercial terms )deal with the questions related to the delivery of the products from the seller to the buyer. This includes the carriage of products, export and import clearance responsibilities, who pays for what, and who has risk for the condition of the products at different locations within the transport process. Incoterms are always used with a geographical location and do not deal with transfer of title.

When the exporter is making an offer, he quotes the price of his product. If the offer is accepted then a contract is signed between the buyer & the seller. The contract includes terms and conditions under which goods are delivered.

The buyer sitting in the overseas market is normally not interested to receive charge of goods at one's factory site but he may be interested to get charge of goods on FOB basis which means free on Board at airport or seaport. It means that charges of the consignment are fully paid up to that point and the rest of the freight is paid by the buyer. Terms of delivery are not only important for quoting price but it also makes clear as to who is responsible for the goods if anything goes wrong.

Terms of payment (There could be basically two arrangements for payment; first being through direct funds transfer without involving any credit facility. This funds transfer could be both before the shipment of goods or after the shipment of goods generally referred as Cash Against Documents (CAD). Second arrangement is through the Letter of Credit (LC). The customer’s bank provides a ‘letter of credit’, which promises to pay the supplier as long as the terms are met. There are two types

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of LC, LC at sight and LC Deferred payment. The payment may be paid immediately at sight or at a later date).

Mode of shipment (Sea, Air, Road)Currency in which transaction will be made. Validity period of a contract & delivery period. Shipping marks if any.Arbitration clause.

Required Documents

g.

h. i. j. k. l.

The following documents are required while undertaking exports from Pakistan:

1. Invoice

2. Form V 19

3. Form V 18

4. E-form (To claim duty drawbacks etc)

5. Packing list ( in case of Horticulture variety /variety of Horticulture )

6. Verified Certificate of Origin

7. Release Order issued by the Plant Quarantine Department.

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6.6 Post Shipment Documents

BCA (Bank Credit Advice) to be received from commercial banks after foreign exchange is received. The BCA is considered proof for the purpose of rebates, refinance scheme etc.

6.7 How to Claim Duty Drawbacks

Duty Drawback is the most commonly availed incentive by exporters. It is the amount reimbursed by the government to exporters as compensation for Customs Duty collected at the time of import. For the purpose, FBR sets aside a certain percentage of customs duty collected on imported raw material for appreciating Horticulture production. The following documents must be in order when Exporter, files the claim for export rebate and submits the file to the customs rebate section

1. Bank Credit Advice ( B.C.A )2. Bill of Lading (First Original).3. Transportation Receipt (Attested by the relevant Transport authority ).4. Customs Signed Invoice with Two Photocopies.5. Packing list ( in case of Horticulture variety of Horticulture )6. Exchange Rate Certificate7. Copy of Shipping Bill.8. Photo Copy of Form “E”.9. Laboratory Test Report. (if required)10. Photocopy of SRO. (relevant to exporter’s product)11. Copy of Cross Border Certificate (In case of export through land route).

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12.Sales Tax Returns.

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