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Channelizing Afghanistan to Pakistan informal trade into formal channels

2016 May 6
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by Yifei Liu

PSSP working paper 041, Channelizing Afghanistan to Pakistan Informal Trade into Formal Channels, focuses on assessing the possibility of bringing informal trade from Afghanistan to Pakistan into the legal channels by reducing tariff and tax differentials between Pakistan and Afghanistan. A basic model and illustrative example are presented that encompass the monetary incentives of smugglers and shows possible tariff/tax reductions that bring profits from informal trade below the breakeven point. The effects of price discounting of informally traded products in the Pakistan market and possible under-invoicing by traders are also taken into consideration. The analysis is applied to case studies for LCD TVs and tea, both of which have been identified as smuggling prone items. Very significant reductions are required in the tariff or taxes to eliminate the incentives and make informal trade unprofitable if informal traders are assumed not to sell at a discount.  Under-invoicing exacerbates this challenge, but a more substantial effect comes if there is price discounting by the informal traders. Two additional trade policy issues which could affect informal trade utilizing the APTTA are also briefly considered. First, trade facilitation measures that enhance the efficiency of the APTTA could make it more competitive with trade into Afghanistan through Iran but also may modestly add to the profits of informal traders. Second, we find only very limited scope, in our LCD TV and tea case studies, for a PTA between Afghanistan and Pakistan to channelize informal trade based on utilizing the APTTA and a formal channel coming back into Pakistan.

Pakistan’s fertilizer sector: Structure, policies, performance, and impacts

2016 April 26
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by Yifei Liu

The fertilizer industry in Pakistan, with US$3.74 billion per year in sales, now stands at a crossroads where, after an initial substantial contribution in boosting crop productivity, its future potential is being challenged. Fertilizer-responsive crop varieties, supplementary irrigation water, and a favorable policy environment in Pakistan have induced fast growth in fertilizer demand. On the supply side, the availability of gas at low prices along with a favorable investment environment resulted in the buildup of excessive manufacturing capacity. But recently, a shortage of gas and monopolistic behavior has led to underutilization and greater imports. Restrictive laws put fertilizer processing and marketing in a few hands, which has also affected its efficiency. Moreover, the yield response of fertilizer has tapered off and per hectare use is fast reaching its optimal level. The existing policy environment leads to higher costs, inefficient use, and a heavy burden on the government as it charges one-fourth of the market price for feedstock gas used in fertilizer manufacturing. In addition, the government imports urea and absorbs the difference in international and domestic prices.

Read the full IFPRI's discussion paper "Pakistan’s fertilizer sector: Structure, policies, performance, and impacts".

Potential of market discipline in Pakistan: The bank depositors’ perspective

2016 April 18
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by Yifei Liu

PSSP Working Paper 40 "Potential of market discipline in Pakistan: The bank depositors’ perspective" aims to ascertain whether Pakistan’s financial system is conducive to market discipline. We measure the potential of depositors to induce market discipline in the commercial banking sector. A comprehensive survey of over six thousand respondents was used to gauge their propensity to discipline bank management in response to deteriorating financial conditions. Our results portray that depositors are likely to withdraw funds in response to a reduction in profitability, an increase in non-performing loans, and a reduction in total assets. We identify that banks with better service quality are less sensitive to deposit withdrawals in the event of a reduction in their financial performance. Among other findings, the presence of contractual guarantees by the government desensitizes depositors to market information, making them less likely to be involved in imposing market discipline.

Pakistan’s changing demography: Urbanization and peri-urban transformation over time

2016 April 18
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by Yifei Liu

PSSP Working Paper 39 "Pakistan’s changing demography: Urbanization and peri-urban transformation over time" uses Geographic Information Systems (GIS) to evaluate improvements in transportation infrastructure and related urbanization over the last 40 years in Pakistan. In addition, we suggest a definition to measure peri-urban population using the agglomeration index methodology developed by Uchida and Nelson (2008). In doing so, we incorporate a series of GIS data including: travel time rasters, population density rasters and other nationally collected biophysical and infrastructure variables (i.e. roads, railroads, waterbodies) in order to construct measurements of urban agglomeration within Pakistan. We use road and population data from corresponding census years (and government growth rates for more recent population estimates) to model reductions in remoteness to urban areas over time.

Varietal integrity, damage abatement, and productivity: Evidence from the cultivation of Bt cotton in Pakistan

2016 April 11
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by Yifei Liu

Bt cotton remains one of the most widely grown biotech crops among smallholder farmers. Numerous studies, including those previously conducted in Pakistan, attest to its yield and cost advantages. However, the effectiveness of Bt toxin, which depends on many technical constraints, is heterogeneous. Furthermore, in Pakistan, the diffusion of Bt cotton varieties occurred despite a weak regulatory system and without seed quality control; evidence demonstrates that varieties sold as Bt may not contain the genes or express them effectively. We use data collected from a sample that is statistically representative of the nation’s cotton growers to test the effects of Bt cotton use on productivity in a damage control framework. Unlike previous studies, we employ five measures of Bt identity: name, official approval status, farmer belief, laboratory tests of Bt presence in plant tissue, and biophysical assays measuring Bt effectiveness. Only farmers’ belief that a variety is Bt affects cotton productivity. Although all measures reduce damage from pests, the biophysical indicators have the largest effect, and official approval has the weakest. For applied economists, findings highlight the importance of getting the data right concerning Bt. For policy makers, they suggest the need, on ethical if not productivity grounds, to monitor variety integrity closer to point of sale.

Read More: IFPRI Working Paper 1520 "Varietal integrity, damage abatement, and productivity: Evidence from the cultivation of Bt cotton in Pakistan"

Determinants of Entrepreneurial Behaviour in FATA Pakistan

2016 March 21
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by Yifei Liu

PSSP working paper 038, “Determinants of Entrepreneurial Behaviour in FATA Pakistan”, investigates determinants of entrepreneurial behaviour in one of the most impoverished areas of Pakistan, the Federally Administered Tribal Areas (FATA). Unlike the developed world, the scenario in emerging economies is quite different, where entrepreneurs have to rely primarily on socio-cultural factors that facilitate them to pursue entrepreneurship as a means to earn livelihoods. However, little predictive empirical work has investigated enterprising behaviour in the tribal areas of Pakistan. This study examines the relative strength of selected entrepreneurial determinant in the Pashtun tribal culture. Persistent wars, economic downturn, and strong cultural adherence have turned the Pashtun tribesmen into necessity entrepreneurs. Based on primary data from 462 respondents, entrepreneurial behaviour measured by self-reported views toward risk-taking and innovativeness are related to economic, institutional, and cultural constructs using logistic regression models. Different sets of predictors emerged for risk-taking and innovativeness. The study finds some, but limited support for hypothesized determinants of entrepreneurial behavior. This study informs academics as to how entrepreneurial behaviour of Pashtuns can be enhanced, setting up hypotheses and results for future research exploration, and can guide policy to stimulate underlying factors that will promote entrepreneurship in FATA.

Assessment of Water Allocations using Remote Sensing and GIS Modeling for Indus Basin, Pakistan

2016 March 21
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by Yifei Liu

PSSP working paper 036, “Assessment of Water Allocations using Remote Sensing and GIS Modeling for Indus Basin, Pakistan”, uses satellite imagery to estimate crop water use and corresponding water productivity for each canal command area of the Indus Basin Irrigation System. Three years were selected for the study and two representative canal commands (Lower Chenab and Muzaffargarh Canal) were selected for detailed analysis and ground truthing. Spatially distributed maps of land use, crop water use, groundwater use and quality, soil and water salinity, and crop yields at a pixel resolution of 250 m (6.25 ha) were prepared and then verified by field surveys. GIS maps of canal water availability/supply were also prepared to account for the volume of water supplied through irrigation, and this spatial database was used to evaluate and create maps of water productivity in the different canal commands. The analysis shows that the area affected by soil salinity (strongly saline) in the basin has increased by 2.5% during the last five years. The average crop water use is 342 mm and 516 mm for Rabi and Kharif season, respectively. The variation in wheat yield ranged between 5,280 to 423 kg ha-1, while rice yield varied from 3,312 to 1,925 kg ha-1. Water productivity of wheat is also variable with a maximum of 1.34 kg m-3 and minimum estimated at less than 0.2 kg m-3. The water productivity of rice shows maximum of 1.12 kg m-3 and minimum estimated at less than 0.4 kg m-3. The cost incurred to irrigate one acre of land with groundwater is around Rs. 4,000 and Rs. 9,000 for wheat and rice, respectively, while canal water costs are only Rs. 50 and Rs. 85. The total cost of production is also higher in areas where groundwater is being used.  Several rationalization policies based on cost and water productivity are suggested to reduce the cost gap between the two irrigation sources.

DNA Barcoding and Biochemical Profiling of Medical Plants of Northern and Desert Areas of Pakistan to Improve Rural Living Standards

2016 February 22
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by Yifei Liu

PSSP working paper 037, “DNA Barcoding and Biochemical Profiling of Medical Plants of Northern and Desert Areas of Pakistan to Improve Rural Living Standards”, focuses on the conservation of natural plant resources by using modern molecular techniques and creating awareness for determining the active ingredients of medicinal plants through biochemical profiling. Further objectives of the study were to identify marketing channels for medicinal plants, costs and margins of stakeholders involved in the marketing of medicinal plants, and factors responsible for the poor trade and decreasing population of these plants in the two study areas of Swat Valley and Cholistan Desert. Biochemical profiling of twelve selected plants, followed by their comparison with marketed products, revealed that they contain highly valuable compounds with possible commercial applications. Four DNA barcoding markers were evaluated for their amplification, sequencing, and species identification capacity, and TaxonID trees were generated for barcode sequence validation. DNA barcoding was successfully applied in testing for adulteration in the medicinal plants which could have a tremendous impact in checking the purity of traditional medicines.

Structured questionnaires were also used to collect descriptive statistics and cost related data from stakeholders in the medicinal plants trade. A total of 120 respondents, including 80 collectors (40 from each area) and 40 assemblers/shopkeepers (20 from each area), were selected for this purpose. Margin analysis was used to measure the revenues of collectors and assemblers/shopkeepers. Medicinal plants were an important source of income for locals, contributing about 32% and 29% in assemblers and collector’s income in Swat, respectively. Cholistani assemblers and collectors were getting about 25% and 18% of their per month income from medicinal plants, respectively. Collectors in Swat were selling on average 337 kg of plants in the market per month, as compared to 114 kg of plant parts sold per month by collectors in Cholistan. Assemblers had 2 to 7 times higher margins than collectors.

The main reasons reported for the declining plant population in both areas were overgrazing, increasing human population, unavailability of seeds, poor collection techniques, lack of awareness among people, removal of roots, deforestation, and rapidly increasing demand for medicinal plants. The main marketing problems faced by stakeholders were a lack of awareness regarding the importance of medicinal plants, no pricing policy, a monopoly of a few big dealers, and high transportation costs. Recommendations are made on the basis of the project outcomes and translated into policy implications for the establishment of well-structured markets along with conservation measures to make full use of the medicinal plants’ products and to raise the living standard of the people residing around this valuable resource.

The Pakistan remittance initiative and remittance flows to Pakistan

2016 February 18
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by Yifei Liu

PSSP working paper 035 ‘The Pakistan Remittance In-itiative and Remittance Flows to Pakistan’ investigates the impact of the Pakistan Remittance Initiative (PRI) on remittance flows to Pakistan. In 2009, the Government of Pakistan launched the PRI aimed at facilitating the flow of remittances sent home by non-resident Pakistanis. The PRI is comprised of multiple incentive schemes that are aimed at making remittance transfer faster, cheaper, and more convenient, and at increasing the attractiveness of formal channels of transfer relative to informal channels. It finds that the PRI is associated with a significant increase in the formal remittances sent to Pakistan as well as a strong shift in the channels used for remittance transfer. Estimates suggest that while the PRI led to a significant reallocation of remittances away from the informal channel to the formal channel, it is not clear that it has increased the total amount of remittances received.”

Release of Pakistan Rural Household Panel Survey (RHPS) 2012 Dataset

2016 February 2
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PSSPThe International Food Policy Research Institute (IFPRI) made public the dataset of Pakistan Rural Household Panel Survey 2012.  This data will be available for researchers to use by accessing the following link:  http://dx.doi.org/10.7910/DVN/28558

Pakistan Rural Household Panel Survey (RHPS) is the 1st round of the Rural Household Panel Survey, which aims to provide quantita-tive basis to identify and address urgent economic policy priorities. The RHPS covers 2090 households in 76 primary sampling units in the rural areas of three provinces namely: (i) Punjab; (ii) Sindh; and (iii) Khyber Pakhtunkhwa (KPK). The sample is nationally representa-tive of the rural areas of the three provinces. This survey collected information on a large number of topics, such as, sources of in-come, nature of employment, consumption patterns, time use, as-sets and savings, loans and credit, education, migration, economic shocks, participation in social safety nets, and household aspira-tions. Six survey instruments were developed to collect this infor-mation. These included three household level questionnaires (two were designed to collect household information on various house-hold and individual level aspect by males and females separately, and the third was an aspirations questionnaire, conducted on a household member between ages 18-35), a community question-naire, a price questionnaire, and a school questionnaire.

Download PSSP Data Brochure Brief