With international agricultural product prices the way they are, Pakistan can benefit significantly from good crops. Domestic wheat floor price has been raised to Rs 950 per 40 kg by the government recently and this will surely, if we have good weather and other conditions, create strong incentives for the farmer to benefit from. And if more people sow wheat and the weather is kind and we have a bumper crop, wheat will not only contribute handsomely to the growth of GDP, it could potentially give us exportable surplus or could, at the least, save us the foreign exchange that we spend on importing wheat. Similarly if rice, cotton and sugar do well, we could post strong agricultural growth and this could go a long way in arresting the fall in GDP growth and overall performance of the economy. And if sustained even for a couple of years, it has the potential of giving us the break that we need to improve the economy and move it to a sustainable growth path. But there are many things that have to go right before we can have this scenario being played out. The weather has to stay favourable, we have to manage supplies of other inputs (fertiliser, seed, pesticide, capital), we have to ensure availability of water at the right time and in the right amount, and we have to manage crops well when they come in. Still, the potential is there. High world food prices have made agriculture, relatively, quite lucrative again. And given the low elasticity of demand for most agricultural products, especially on the food side, we should be able to benefit significantly if things go well. Another area that has always been identified as having 'potential' has been livestock and dairy area. We have heard a hundred times and more that Pakistan is the fifth or the sixth largest milk producer in the world, that in terms of productivity we are not producing even half of what we could produce, that we are processing less than 5 percent of the milk produced, that we are not going into value-added diary products and so on. But we have been hearing these and related things for more than a couple of decades now. The obvious question is, if the potential is so clear, why have we been not able to achieve it? Both agriculture and livestock are very important sectors for Pakistan. Not only do they have the potential to give us substantial growth and exportable surplus, they have high employment and poverty reduction potential as well. Most of rural labour is still employed in agriculture and livestock sectors and is even trained for this work. If agricultural/livestock sector productivity increases, it will have substantial effect on rural employment as well as rural incomes. Furthermore, since most of Pakistan's poor live in rural areas, gains in agriculture/livestock sector could work as the strongest anti-poverty programme we could mount. At one level some experts hold that even allowing cows and buffaloes to roam around freely in enclosed spaces and allowing them to drink more water, or allowing them to drink when they want to drink water can increase productivity substantially. Many people have argued that even changing the feed a little, from traditional feed to widely available but better quality feed, would increase productivity substantially. Similarly, it has been argued that non-availability of high quality veterinary services is not an issue either. If the existing animals are well fed, and generally taken care of, and given basic care in terms of timely inoculations and so on, they will be a lot healthier and will require higher quality extension services that much less often. From this perspective, issues related to genetic stock are not even on the horizon as yet: if we can make the existing animals better fed and better taken care of, and can give them basic health services, the productivity increase will be substantial. We should tackle the genetic stock issue when we start hitting the limits of productivity with the existing stock. But if things have been and are indeed this simple, why have successive governments, despite rhetoric that they were interested in a 'white revolution', not been able to bring about the revolution? If the potential is so obvious, why have individual farmers and livestock owners not been able to make the changes? And, even more importantly and intriguingly, despite the fact that large milk processors have been in this business now for a couple of decades at least, why have they been not able to assist in the change? Why are they still looking towards the government to ban the gawala or impose taxes on him to affect the change? If the potential is indeed there, and the markets have been unable to tap it, it must be the case that there are market failures of some sort that are hindering progress in the desired direction. The key to the change might lie in identifying these failures or bottlenecks and in removing them. Some candidates are obvious. Most livestock holders have small holdings, do not have high incomes and most often do not have significant landholding as well. This means that switching to more costly feed or to higher quality more expensive extension services would not be possible for them. Furthermore, given fears of theft and lack of landholding, most of them cannot allow their animals to walk around freely and eat/drink as they desire. They have to keep them tied. Scattered and small holdings mean that cost of collecting milk, which is very perishable unless kept chilled, for any processor, is going to be quite high. And if road infrastructure is not good either, which is true for a lot of rural areas in Pakistan, the cost of collection would be even higher. And it could be high enough to be economically non-viable. If it was economically viable, the processing companies, literally hungry for more milk, would have gone into all areas to collect milk. Instead their expansion has been painfully slow and mostly in areas where concentration of animals, still in small holdings, is high. But the potential of livestock sector, even in South of Punjab and so on, is quite significant. How we resolve these issues, and who takes the lead in resolving them and manages the resolution efforts is the key here. Ideas for resolution are not that hard to think of. Government, with credible partners from the private sector, has to start an information campaign to inform the farmers and livestock owners about the expected benefits from better feeding/watering techniques/habits. Shift in habit requires the belief, on the part of the farmer, that increased output would be bought at reasonable prices as well. This will come through having chillers in the area (discussed below). They have to encourage medium to larger holders, who have some land, to move to enclosures for keeping animals free within these enclosures instead of keeping them tied. For those who do not have land and have small holdings, they have to encourage concepts like community enclosed spaces for keeping animals. This could require some cooperation on the part of the holders, but not a whole lot of it. For reducing the cost of collection, at least till the time that productivity effect makes it economical, chillers might have to be subsidised by the state or by the collective of milk processors (or the cost shared). A network of chillers, across areas with some potential, would encourage farmers to make the needed changes as well. They will get assurance that their increased output will sell as well. The key question is who is going to take the lead in pulling these solutions together and in implementing them. Successive governments have either not even tried these solutions or have not been able to manage them well. The milk processors have also not been able to solve these issues cooperatively and on their own. Could the new government evolve a better way of doing this? It does appear that the issue is not simply about quantum of investment needed as that does not seem to be much. It is much more an issue of managing the process, creating the right partnerships and levels of trust, and in offering the right package of incentives. Pakistan badly needs growth. It badly needs exports. And it needs sustained GDP and export growth. It also needs growth in sectors that have a high employment elasticity and potential, and have a stronger base in rural areas. Agriculture and livestock fit the bill nicely. Both sectors, given low current productivity levels, offer substantial potential. And it seems we could start seeing change, with reasonable investments, fairly quickly if some bottlenecks could be removed. But these bottlenecks, especially in dairy sector, have been quite persistent. Our ability, to move to a sustainable growth path, might crucially depend on removal of these bottlenecks though. The writer is an associate professor and Head of Department of Economics, LUMS and senior economic analyst E-mail: faisal@nation.com.pk