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Viewing cable 09BAGHDAD1351, RRT ERBIL -- AGRICULTURE POTENTIAL IN THE KURDISTAN REGION
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| Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
| 09BAGHDAD1351 | 2009-05-24 10:02 | 2011-08-24 16:30 | UNCLASSIFIED | Embassy Baghdad |
VZCZCXYZ0000
RR RUEHWEB
DE RUEHGB #1351/01 1441002
ZNR UUUUU ZZH (CCY ADX6BCD4F MSI7349 540A)
R 241002Z MAY 09 ZDS
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 3172
INFO RUCNRAQ/IRAQ COLLECTIVE
UNCLAS BAGHDAD 001351
SIPDIS
C O R R E C T E D C O P Y (RENUMBER PARAGRAPH)
E.O. 12958: N/A
TAGS: PGOV ECON EAID EAGR
SUBJECT: RRT ERBIL -- AGRICULTURE POTENTIAL IN THE KURDISTAN REGION
This is an Erbil Regional Reconstruction Team (RRT) cable.
¶1. (U) SUMMARY: A recent study by the Monitor Group highlighted
the potential for agriculture and processed foods to become a
lucrative, employment-generating growth cluster in the Kurdistan
Region. However, the mixed experience of one U.S. agribusiness
investor (including difficulties in accessing raw materials)
highlights some of the current challenges. The Kurdistan Regional
Government (KRG) is eager to restore agriculture to the position it
once held as the anchor of the Region's economy and has announced a
five-year strategic plan aimed at bringing together KRG ministries,
farmers and private sector investors in support of that goal.
Transforming a sector dominated by small farms into a modern,
agribusiness cluster will require targeted government support for
infrastructure and extension and extensive private investment. END
SUMMARY
¶2. (U) With an economy historically rooted in agriculture and
animal husbandry, the Kurdistan Region (KR) boasts some of the most
fertile land in Iraq. For decades, the KR provided vegetables,
fruits and grain to the rest of Iraq and the wider region. However,
the sector was decimated by the former regime's policy of destroying
villages and relocating families to "collective towns" where they
lost the use of their lands. The exclusively imported food provided
in the UN/OFF Public Distribution System (PDS) dealt another blow to
the region's farmers. Since that time, drought, antiquated training
and isolation from modern agricultural techniques (such as drip
irrigation, disease-resistant seeds and methods of processing) have
impeded the recovery of the KR agricultural sector. Today, the KR
agricultural sector is comprised of a few agro-businesses and
560,000 small-scale farmers producing limited amounts of
cereals/grains, oil seeds and industrial crops, poultry and cattle,
honey, vegetables, fruits and legumes. But local farmers are unable
produce enough food to meet regional demand; the KR still imports at
least 65% of the food that it consumes.
--------------------------------------------- -----
KRG Prepares for Agriculture to Take Center Stage
--------------------------------------------- -----
¶3. (U) In late 2008, the KRG announced that 2009 would be the "Year
of Agriculture." The Kurdistan Regional Government (KRG) released a
five-year, USD 10,221,297,000 strategic plan with input from the KRG
Ministries of Agriculture, Trade, Industry and Water. Hoping to
partner with the private sector to comprehensively revamp the
agricultural sector of the KR, the plan enumerated some 1865
projects designed to increase overall agricultural output and put
the KR on the path towards food security, self-sufficiency and
ultimately to an economy that can export food to the rest of Iraq
and the greater Middle East. The plan includes projects to improve
the irrigation system of the KR, build cold-storage and processing
facilities for leather, produce, grain and dairy products and
improve domestic and international marketing of Kurdish agricultural
products. Recognizing that the rest of Iraq is an excellent market
for its goods, the KRG Ministry of Agriculture (MoA) is already
working towards an agreement with the Government of Iraq (GoI)
Ministry of Trade to use Kurdistani chickpeas and lentils rather
than imported products in the national PDS baskets. How much of
this ambitious plan will be implemented will depend on the KRG's
success in securing the necessary funds. The plan was designed
during a period of record high oil prices. Budget allocations for
infrastructure will be adversely affected by decreases in oil
Qinfrastructure will be adversely affected by decreases in oil
revenues and the resultant decrease in the regional budget for 2009.
¶4. (U) In an effort to bring modern agricultural technology to the
KR and encourage private sector investment in the industry, the KRG
has hosted two agricultural expositions in Erbil since the strategic
plan was released. The first expo included a majority of foreign
vendors, while the second was billed as a "local agrofair."
Hundreds of vendors from Lebanon, Turkey, Iran, the UAE, as well as
other parts of Iraq, displayed products such as fertilizers, hybrid
seeds, drip irrigation systems, tractors and machinery, greenhouses,
and processing services for poultry, meat, fish and dairy items.
There is a market for such items, but the initial capital investment
needed to purchase such items is beyond the reach of many farmers.
Agriculture Ministry Director General (DG) Yahya informed RRTOff
that once a budget is allocated, his office hopes to be able to
operate an agricultural bank to which farmers will be able to apply
for loans up to USD 50,000 (based on approved business plans.) Until
this plan is approved, some Kurdistani farmers have begun to pool
their assets and collectively finance big-ticket items.
--------------------------------------------- ----------
The Vanguard: Private Investors Working in Agriculture
--------------------------------------------- ----------
¶5. (U) Private investors (both foreign and local) are beginning to
tap into the KR's agricultural potential, but are facing challenges
to their efforts. Private equity fund Marshall Fund is renovating a
local tomato and fruit processing plant in Harir, Sulaimaniyah
Province. Marshall Fund executives note that, aside from irregular
electricity, it has been difficult to convince local farmers to
change their focus from immediate consumption-focused (e.g.,
table-ready produce) to process-focused (e.g., produce grown to be
processed into paste or juice) farming. The Marshall Fund has also
struggled with getting the KRG to deliver on the cooperation it has
promised to them and their contract farmers. In one case, the KRG
promised to give a certain amount of fertilizer and pesticides to
farmers who signed contracts to grow raw products for the Marshall
Fund. The KRG ultimately failed to deliver and at the last minute,
the Marshall Fund was forced to pay for those chemicals out of its
operational budget. Despite these challenges, Marshall Fund
executives believe that these costs are well worth the benefit they
expect to receive both this year and further down the road. The
company is already considering ways to expand into the other
provinces of the KR.
------------------
No Easy Row to Hoe
------------------
¶6. (U) Farmers in the Kurdistan Region cite many barriers to making
agriculture a profitable and sustainable venture, including:
- Antiquated agricultural technology, growing methods and pest
control methods: The KRG has established agricultural training
offices throughout the Region which function as extension agencies,
but farmers and officials say that those offices are
under-resourced. Farmers confirm that crops are not rotated so as
to provide a steady stream of produce throughout the year, causing
gluts in the market. Cold-chain storage requires the 24-hour
availability of electricity, which is still not available in the
majority of the KR.
- The inability of local producers to compete with the cheap
imported produce: said Abdulsatar Hussein, an apple farmer in the
Amedi district of Dohuk Province, "Turkish and Iranian products are
a real challenge to our products. People prefer the products from
Kurdistan because they know no harmful chemicals are used. But
the low prices of the Turkish and Iranian products, plus the
continuous availability of all types of fruits and vegetables,
cause local farmers to stop trying to compete." Contacts confirm
that imported produce dominates the market. Farmers say that the
combined cost of harvest, fuel, and transportation are high enough
to discourage the effort associated with getting local produce to
market, leading to the rotting of tons of produce in the fields of
the KR. To protect the local poultry industry, the KRG recently
announced a number of measures to curb imports, including taxes on
poultry meat and egg imports, and increased controls at border
points.
- A dying farming culture: Governmental and private contacts
confirm that the future of agricultural industry is at risk because
many young people would prefer to work in government offices rather
than their fathers' fields. Furthermore, farming villages
frequently lack secondary schools, hospitals/clinics and other
resources that growing families need. Local university faculty
members express the concern that agriculture is considered an
inferior major to engineering, medicine or law because students do
not believe that they can earn money as farmers. The aversion to
studying agriculture will result in a dearth of scientifically
trained, local agronomists who will be able to maintain and improve
the sector's competitiveness within the greater Middle Eastern
economy.
- Drought and poor irrigation systems. Contacts report that the
annual level of precipitation received in the KR has steadily
decreased for the past decade. This crop cycle the province has
only received about half of this declining mean. According to the
DG of Agriculture for Semel district of Dohuk, Semel's grain farmers
QDG of Agriculture for Semel district of Dohuk, Semel's grain farmers
lost a cumulative amount equal to what they earned in 2007. The
problem is further exacerbated by the scarcity of efficient forms of
irrigation, such as drip and spray irrigation. According to the KRG
MoA, only 413,669 acres of the KR's 3,795,029 acres of arable land
are currently irrigated.
--------------------------------
Monitor Group Touts Agriculture
--------------------------------
¶7. (U) A recent KRG-commissioned study on private sector growth
potential in the Kurdistan Region completed by the Monitor Group
(associated with competitiveness "guru" Michael Porter) highlighted
two sectors in the KR as having strong growth potential:
construction and construction materials and agriculture products and
food processing. The study examined demand in Iraq and the region,
looked at the region's competitive advantage, and focused on those
areas with potential for high-employment and high growth. The study
will be used by the Enterra Group (under contract to the KRG) to
develop foreign investment strategies.
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COMMENT
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¶8. (U) The potential for agriculture is clear, and the fact that
the KRG is putting its own money into market research and efforts to
attract private sector investors is a positive sign. A viable
agricultural industry will help diversify the economic (exclusively
dependent on oil revenues) and encourage a shift away from public
sector employment to more productive areas. The real challenge for
the KRG will be getting the government side of the equation right
(particularly in a tough budget year and given the low levels of
capacity at the Ministry of Agriculture). At the university level,
there are already promising signs of cooperation with U.S.
universities, such as the recent (privately sponsored) visit of a
delegation from Texas A & M University to Erbil.
¶9. (U) The USAID-funded Inma program has recently stepped up its
activities in the Kurdistan Region and is focusing on providing
capacity building and training for farmers in horticulture. Inma
also offers some microloans to farmers and small businesses to
encourage local investment in crop production and post-harvest
processing. Under USDA's Iraq Agriculture Extension Revitalization
training program, 10 officials from KR provinces will go to U.S.
Land Grant Universities for short-term training in agriculture
extension and new agriculture production techniques. These are
positive steps, given the fact that heretofore USG agricultural
assistance programs have been largely absent from the region.
HILL