Pesticides Industry in Pakistan

Summary The insecticides and pesticides market of Pakistan, valued at US$225 million, has been undergoing steady growth over the last 5-6 years. The local market offers substantial business opportunities for American as well as other foreign agricultural chemical companies. Forecasts contained in the Government of Pakistans (GOP) agriculture policy envision an increase in overall agricultural production, sustainable growth in annual crop yield, and enhancement in plant protection measures. Due to modest domestic production, the insecticides and pesticides market in Pakistan relies heavily on imports. Major international brands from the United States, Switzerland, and Germany have established their presence in the country and offer state-of-the-art products and value-addition services including mobile crop testing, plant and pest analysis, and insect-control training sessions for public-sector authorities and private farmers. Market Demand Agriculture is the mainstay of Pakistans economy and is by far the largest contributor to the national Gross Domestic Product (GDP), employment generation, and revenue collection. During FY 2006-07 (Pakistans fiscal year runs from July 1 to June 30), the agriculture sector accounted for approximately 20.9 percent of the countrys GDP; and employed 43.4 percent of the countrys total labor force. Over the past 5-6 years, the local agriculture sector grew at an average annual rate of 9.7 percent with fluctuations in its growth pattern mainly due to weather conditions including protracted droughts, floods, pest attacks on crops, and the impact of adulterated/non-patent insecticides and pesticides. According to available statistics, during the previous fiscal year, the cumulative growth of the agriculture sector showed a sharp recovery reaching nearly 5 percent as compared to 1.6 percent in the prior fiscal year. Major crops including wheat, cotton, sugarcane, and rice have posted sizeable growth rates of 7.6 percent as compared to 4.1 percent during the prior fiscal year. Pakistans insecticides and pesticides market, which has only modest domestic production, relies heavily on imports and offers promising business and sales opportunities to American manufacturers and exporters. The local market, valued at US$225 million in FY 2006-07, has been experiencing steady growth for the last 5-6 years and is expected to grow cumulatively at between 5-7 percent over the next 3 years. According to the GOPs Department of Plant Protection (DPP) statistics, during the current year, the consumption of insecticides and pesticides in Pakistan was 73,556 metric tons (MT), which includes 50,329 MT of local production and 23,227 MT of imports. The local market for insecticides and pesticides can be segregated into four major segments, which are (1) pesticides, (2) insecticides, (3) herbicides, and (4) fungicides (both in liquid and granule formulations). In terms of market size, cotton pesticides with a market share valued at approximately US$183 million dominate the local agriculture chemicals market. Insecticides with a US$23.61 million market share, herbicides with a US$13.38 million market share, and fungicides with US$4.76 million market share.

The local market is dominated by five (5) major international players, Syngenta Key Suppliers and their Market Share (Percentage) (Pakistan) Limited, a subsidiary of Syngenta Corporation of Switzerland having a 34 Bayer percent market share; Bayer Crop Science 11% (Private) Limited, a subsidiary of Bayer Syngenta Pakistan Syngenta 34% Crop Sciences, Germany with a 23 percent DuPont Bayer Crop Science 11% market share; FMC United (Private) FMC United Limited, a subsidiary of FMC United, USA FMC DuPont Pakistan Bayer with a 21 percent market share; DuPont 21% 23% Pakistan Operations, a subsidiary of DuPont, Bayer Das USA with an 11 percent market share; and Figure-1 Bayer Das (Private) Limited, a joint venture between Bayer, Germany and Das Sciences Pakistan with an 11 percent market share (Figure-1). The GOP places a high priority on the agriculture sector, especially the promotion of plant protection inputs. Current public sector plant protection measures are dependent on the use of high efficiency, easily accessible, and low-cost pesticides and insecticides. In Pakistan, the most intensely covered crop in terms of insecticides and pesticides utilization is cotton, which accounts for around 60 percent Crop-wise Usage of Agri-Chemicals of the consumption of agricultural chemicals in the country. Paddy rice comes second with Vegetables Cotton a 25 percent usage share; sugarcane follows 5% Paddy/Rice with a 10 percent usage share, while Sugarcane Sugarcane vegetables account for a cumulative usage 10% Vegetables share of 5 percent (Figure-2). The Cotton Government through its agricultural policy 60% Paddy/Rice maintains a strong commitment to promoting 25% agricultural business in the country and offers substantial incentives to both local and Figure-2 foreign agricultural chemical businesses under compliance with the WTO agreements and standards. Market Data The local insecticides and pesticides market with a total market size of US$225 million offers substantial business opportunities to American and other foreign manufacturers and exporters. During FY2006-07, the total consumption of pesticides (both liquid and granule formulations) in the country was approx. 73,556 MT, Table-1: Consumption of Pesticides in Pakistan which includes 23,227 MT of Quantity (MT) Value Year imports and Total Imports Local Production Total Quantity (US$ in millions) 50,329 MT of 2002-03 27,103 42,794 69,897 113.17 local production 2003-04 24,028 54,105 78,133 135.63 (Table-1). 2004-05 35,250 77,678 112,928 187.37 Switzerland 2005-06 35,363 82,150 117,513 197.02 dominates the 2006-07 23,227 50,329 73,556 225.78 local market in

terms of foreign direct investment with a 34 percent share, followed by the United States with a 32 percent share, and Germany with a 23 percent share. These companies offer state-of-the-art and highly price competitive products through their extensive and well-established distribution networks in both rural and urban areas of the country. Cotton pesticides are the most widely used agricultural chemicals in the country, accounting for 77 percent of total chemical use. The remaining 23 percent of agricultural chemicals used is comprised of various insecticides, herbicides, and fungicides.

Herbicides - Crop-wise Consumption Share 7% 2% 74% 16% 1%

Potato Wheat Sugarcane Maize Rice

Fungicides - Crop-wise Consumption Share 12% 21% 26% 41%

Rice Potato Orchard Others

Insecticides - Crop-wise Consumption Share 10% 12% 26% 2% 50%

Sugarcane Rice Vegetables Maize Orchard

Figure-3

Figure-5 Figure-4

Prospective Buyers Buyers in the local insecticides and pesticides market can be segregated into the following two major categories: Federal and Provincial Pest Control Departments: Federal and provincial pest control departments are the largest and most dominant consumer of insecticides and pesticides in the local market. According to industry sources, the cumulative market share of public sector utilization of agricultural chemicals is approximately 55 percent. These buyers re-offer these agricultural chemicals at a subsidized price to local farmers through a variety of public-sector schemes/programs. In addition, these authorities provide the purchased insecticides and pesticides free-of-cost to under-privileged farmers in less developed and rural areas of the country. Private-sector Distribution Companies: The second largest end-users in the local market are privatesector distribution and marketing companies. These companies through in-country retail networks offer highly competitive and technologically advanced products and services to both public and private sector clientele. In addition, this group mainly targets and caters to the needs of individual farmers and thus requires highly specialized and price competitive agricultural chemicals. Market Issues & Obstacles Duties and taxation: The GOP has increased the import duty on finished insecticides and pesticides from 5 percent to 10 percent calculated on a tonnage basis. Keeping in view the ongoing sector growth and public sector development initiatives, the imposition of this new taxation structure is hindering the demand and supply symmetry of insecticides and pesticides in the country.

List of Local Pesticides Producing Companies y y y y y y y y y y y y y y y y y y y Farmers Equity Pakistan Pvt Ltd Master Pack and Systems Naseer Enterprises Surfactant Chemicals Company (SCC) Green Technologies Pesticide Net work Total Pest Control Services Noor International Geo-Aqua Technologies Morgan Chemicals Commander Agro Pvt Ltd HLS International Cycon International Al-Rehman Traders Haazco Sar Sabz Zarai Markaz Global Chemicals The Planters Pvt Ltd Minerva Trading