Mangoes: A medicine for Pakistan’s maladies?
As another mango season comes to an end and the flow of Pakistani mangoes to America ends (until the summer of 2024) amid massive political and economic upheaval in that country, a thought experiment comes to mind: Could mango exports help balance Pakistan’s chronic trade deficit (of ~USD 40 bn p.a.) and stabilize its economy?
Pakistan’s economic progress
Pakistan’s economy is in poor condition. Its GDP of USD 377 bn (current dollars) trails the likes of Bangladesh, Thailand, Malaysia, Vietnam, Philippines, and Egypt. Pakistan is experiencing rampant inflation of 30–40% yoy in recent months. Its currency has lost half its value over the last year or so. Despite that trade advantage, it also only exports ~USD 40 bn of goods and services (2022) [thereof 0.25% are mangoes] vs. imports of ~USD 80 bn and vs. exports of ~USD 60 bn for Bangladesh and USD ~760 bn for India (and ~USD 9 bn, or >10% of imports, are food-related). Furthermore, Pakistan relies on substantial remittances of ~USD 30 bn (7.9% of GDP, vs. 3.3% in India and 4.7% in Bangladesh) from ~9 m expatriates (or ~USD 3,333 per expat) to support its population of 236 m (USD 127 per capita in remittances).
The current state of Pakistan’s economy is not an aberration. Over the last ten years, Pakistan’s economy has performed relatively poorly. On a nominal basis, its current GDP of USD 377 bn has grown more slowly (6% p.a.) than neighboring India (7% p.a.) and Bangladesh (13% p.a.). In this past decade, India’s economy has gone from 8x the size of Pakistan’s to 9x, while Bangladesh has gone from 0.65x the size of Pakistan’s economy to 1.22x.
On a PPP basis, Pakistan’s economy may appear stronger (USD 1.5 tr in 2022). However, this relative PPP strength is a mirage as the collapsing currency and rampant inflation undercut the ability of Pakistanis to “purchase” anything (e.g., electricity inflation is now consuming dangerously high shares of pensioners’ incomes). Even on a PPP basis, Pakistan’s GPD per capita only grew at 5% over the last decade, vs. 6% for India and 8% for Bangladesh.
There are many reasons that could explain why Pakistan’s economy underperforms. Overspending on military (3.9% of GDP vs. 2.7% in India and 1.3% in Bangladesh). Ineffective land reform and concentration of land / wealth (feudalism). (Inefficient) military interference in the economy. Corruption. Political instability (and military interference in governance) and violence. Poor education / high illiteracy. No one solution can overcome all these challenges. But perhaps mangoes can help.
Planting in Pakistan
Agriculture is a key pillar in Pakistan’s economy, employing ~37% of the workforce and making up ~23% of GDP. It is essential to provide food security for the growing population, and it also provides critical inputs to local industries (e.g., textiles).
Nearly 48% of Pakistan’s land is used for agricultural purposes. This works out to about ~370 k sq km of agricultural land, or ~37 m hectares / ~91 m acres. ~22.1 m hectares / ~55 m acres are cultivated, and almost ~80% of that is irrigated. Nearly two-thirds of cultivated acreage is dedicated to wheat, corn, rice, and sugarcane.
Fruit cultivation is limited to ~853 k hectares / ~2.1 m acres, and mangoes are only cultivated on ~168 k hectares / ~414 k acres. Pakistan generates ~1,732 k tons of mangoes, so ~4,184 kg / acre of mangoes (with a wide range by province). This compares favorably vs. many other common crops in Pakistan in terms of volume output density.
Furthermore, the typical acre of mango cultivation could generate ~USD 4,184 on the export markets at typical current rates (by comparison, Pakistan generates ~157–260 kg / acre of cotton, a key crop and input for the local textile industry, worth only ~USD 110–182 at USD 0.70 per kg intervention price, or ~USD 300–500 at global commodity prices). On a financial basis, Pakistan could generate more value per acre if it cultivated mango than it could if it cultivated most other common crops.
These realities suggest there is substantial opportunity and reason for Pakistan to develop additional mango-growing capacity. For example, Pakistan could octuple its mango cultivation (from ~414 k acres to ~3,312 k acres) and output (from ~1.7 m tons to ~13.6 m tons) for the export market, it could boost mango-related trade to >USD 13 bn at current pricing. Even if the country repurposed acreage from other crops (e.g., cotton to mango), it could likely use the mango windfall to import any shortfall (e.g., for textile industry) and still come out far ahead. Such a crop conversion could even result in substantial water savings.
Global mango market
The global mango market now exceeds 40 m metric tons (>5 kg per capita). At a typical producer price of ~USD 1 / kg, this represents a >USD 40 bn market for mango producers. To little surprise, India leads global production of mangifera indica with output of ~20 m metric tons (~14.2 kg per capita), about half of the total. Pakistan is already a top 10 producer of mangoes with its ~1.7 m ton output (~7.4 kg per capita, and ~4% of global output).
What may be surprising is how small the global trade in mangoes is. Just ~2.1 m metric tons of mangoes (or ~5% of production) are traded each year. The vast majority of mangoes are consumed and/or processed in the country of origin. India only exports <1% of its mango crop and even export leader Mexico only exports ~21% of its mango output.
Pakistan currently exports ~100,000 (metric) tons p.a., which is worth USD 100 m to the country, and represents ~5% of the global mango trade. That represents only ~6–7% of Pakistan’s total mango output and works out to about USD 1 per kg of mangoes exported, or USD 0.45 per pound (comparable to India’s export value of ~USD 1.2 per kg of mangoes and the ~USD 1 per kg that US pays Mexico to import mangoes, and about half of typical US mango wholesale prices). In 2019, the country also exported ~100,000 metric tons and earned USD 80 m (USD 0.80 per kg), so producer prices have grown by 25% in that timeframe. The export of Pakistani mangoes does support the country’s economy, but not as much as it should.
Pakistani potential: Mangoes making a difference?
To balance its trade accounts with mangoes, Pakistan would likely have to simultaneously increase mango production, exports, and prices. For example, if it octupled mango cultivation, trebled realized prices, and exported all mango output, Pakistan could theoretically generate the necessary ~USD 40 bn to balance its trade deficit. Is this realistic?
The cultivation and export ratio elements are basically policy / investment decisions Pakistan would have to make. The value chain / pricing is contingent on market conditions, and while some exporting markets (e.g., India, Mexico) are only able to achieve the USD 1 / kg level, others (e.g., Thailand) are able to achieve modestly higher price levels. With new approaches, Pakistan should be able to as well.
In this regard, Pakistan should lean on its exporters to practice more pricing discipline. For example, in Qatar, Pakistani mangoes (USD 1.51 per kg) should not be retailing for ~1/3 the price of Indian mangoes (USD 4.12 per kg) or ~2/3 the price of Sri Lankan mangoes (USD 4.12 per kg vs. USD 6.39 per kg):
Similarly, in the UAE, Pakistani Chausa retail for USD 2.495 per kg and Pakistani Anwar Ratol retail for USD 4.99 per kg, vs. USD 19.06 per kg for Colombian mangoes and USD 14.97 per kg for Brazilian mangoes. Proximity and familiarity in the Middle East with high quality Pakistani mangoes should not breed such contempt.
Pricing for Pakistani mangoes can also be more consistent across varieties (like how they are priced in the US). For example, just like Anwar Ratol in UAE is nearly double the price of Chausa there, in KSA Pakistani mango prices currently vary from USD 2.39 per kg to USD 5.85 per kg across a couple of varieties.
If cultivation and modest pricing solutions are relatively straightforward, the real question is: Could Pakistan actually sell >13 m mangoes (136x current levels) to global buyers when only ~2 m mangoes are currently exported from all countries? Where could Pakistan find demand to buy all those mangoes?
Pakistan has a diaspora of ~9 m around the world, including >1.7 m in Europe and >0.7 m in N America. While not all emigrants from Pakistan are well off (e.g., many of the 2.6 m in KSA or 1.4 m in UAE are laborers), most appreciate mangoes. Arguably, the ~15 m Bangladeshi expatriates and ~18 m Indian expatriates are also a target market for premium Pakistani mango exports. The South Asian diaspora represents a ~42 m person priority target segment and likely drives the current demand for Pakistani mangoes in markets like the US. However, if this diaspora enjoys mangoes at a level similar to the average level in India, even if Pakistan captured the whole segment, this would represent only ~0.6 m tons of demand. Not enough.
Realistically, more of the demand would have to come from a broader consumer base in markets like the US and China, as mango consumption in the developed world catches up to that of the Global South. As US demand for mangoes grows to ~5 kg per person, it would represent an incremental 1.1 m mT opportunity. As China’s demand for mangoes grows to that global average, it would represent an incremental 4.4 m mT opportunity. As the European (EU27+UK) demand (484 k mT) per capita (446.7 m + 67.3 m) grows from 0.9 kg per capita to 5 kg per capita, it would represent an incremental 2.1 m mT opportunity.
100% capture of these four key opportunities (displacing others) would only get Pakistan to 8.2 m mT (~60%) of the 13.6 m mT volume objective (potentially worth >USD 24 bn) in this scenario. Unless the rest of the world starts consuming mangoes at levels enjoyed by mango-producing countries (or unless the rest of the world starts paying as much as diaspora buyers in the US), it is unlikely that Pakistan would be able to successfully export >13 m mT of mangoes and balance its current ~USD 40 bn trade deficit. On the other hand, just a few years ago, Pakistan’s trade deficit was closer to ~USD 20 bn…if the country can get some of its other affairs in order, it could be possible to substantially address the remaining gap with mangoes.
Capturing the value
So, how can Pakistan maximize its opportunities with mangoes? Amid the current political turmoil, perhaps it cannot today. However, it can take 4–8 years for a mango tree to bear fruit. In that timeframe, there are several steps Pakistan can take to reach its economic potential in this area.
- Raise the target (“Aim for the moon. If you miss, you may hit a star.” — W. Clement Stone): Of course, leveraging mango exports to enhance Pakistan’s economy is not a novel idea — Pakistani officials, the country should raise its objectives and prioritize the crop (e.g., in resource allocation, further research), and in the near term (while many Pakistanis unfortunately cannot afford staples, let alone mangoes), perhaps almost all of the >1.7 bn kg of mango output should be exported for foreign exchange.
- Expand the footprint: The national or provincial governments should judiciously review agricultural land use, designate suitable additional acreage for (premium) mango cultivation, and attract sufficient investment to the orchards, all while accounting for the domestic demand for basic food staples — significant increase in mango cultivation is necessary to overcome Pakistan’s chronic trade deficit (e.g., in a type of arbitrage, pivoting some cultivation from cotton to mango in appropriate areas could save water and increase productivity per acre, while importing any missing cotton could maintain textile jobs as it already does when needed).
- Control the supply: A central body, either a mango agricultural cooperative / association (e.g., PFVA) or government body (e.g., TDAP) should enact export price controls (cartel-style) to make sure Pakistani mangoes capture fair (higher) value in line with competing alternatives in different export markets — the current USD 1 per kg is insufficient value for Pakistan to receive, and while it may be difficult to capture more (given what Mexico, India receive on average), the ~USD 2/kg retail premium of Indian Alphonso vs. Pakistani Chausa suggests there is margin to take.
- Manage the value chain: To avoid ad hoc export arbitrage that undermines price controls, Pakistan could take a step further and manage initial elements of the the export / distribution networks (e.g., authorizing “franchise” distributorships for certain export markets; treating/irradiating in Pakistan and air shipping directly to end customers).
- Select the right segments: Other countries (e.g., Australia) have developed playbooks to help target the right markets with the right strategies, and Pakistan should do the same — For example, the >40 m strong global South Asian diaspora alone could be a prime target segment to take 200–600 m mT of Pakistani mangoes at a premium to current prices.
- Promote the product: Pakistani mangoes have received scant public promotion to consumers in Western markets other than the occasional niche article — As others have called for, stakeholders in Pakistan should make a concerted effort to make consumers aware of, and value, the product (e.g., by participating in and organizing mango trade events, or in any meeting between officials from Pakistan and other countries, the Pakistani representatives should be presenting mangoes and taking advantage of photo opportunities).
- Negotiate with scale: Whether it is for air freight or replacement cotton (USD 2.4 / kg vs. USD 0.7 / kg) or wholesale prices, the government can try leverage its economies of scale and support collectivized negotiations to secure better rates across the mango (and other) chains.
This path would not be without risk. Substantial agricultural land would be needed (perhaps more than initially estimated if not all mango production is export-grade) along with capital investment (in the trees and in the ecosystem). Any displaced crops (e.g., cotton) would now need to be imported. Climate change could further impact mango productivity prospects. Other supportive / complementary reforms will be also needed. But the payoff could be a positive trade balance, a stable currency, a growing economy, and, possibly, a stable country.
