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Iran Agribusiness Report Q3 2009Published by: Business Monitor International Published: Jun. 29, 2009 - 40 Pages Table of Contents
AbstractIranian agriculture has undergone many changes during the last thirty or so years. Since beingcharacterised by low productivity, import dependence from the 1970s through to the mid-'90s, thegovernment has actively sought the creation of a well functioning and self-sufficient sector, not least as away to diversify a largely fossil fuel reliant economy. Subsequent incentives and state supports - fuelledlargely by oil export revenues - contributed significantly to the development of the sector as we know ittoday; predominantly commercialised and accountable for roughly 80% of domestically consumed staplefoodstuffs. Yet, despite such improvements, a series of caveats to further growth must be overcome.BMI's latest Iran Agribusiness Report analyses industry dynamics, while looking at these various themes. High oil prices in recent years have enabled Iran to amass large foreign exchange reserves. However,such increases in overall domestic revenues have failed to ease the level of income disparity andunemployment within the country. In addition, the government's most recent five-year development planfrom 2006-2010 - in which agricultural development is a central theme- is seen to be underperforming. A combination of price controls and subsidies on agricultural exports weighs down the economy, whilereported incidences of corruption and inefficiency undermine the potential for the private sector act as astrong engine of economic growth. Consequently, informal market activity flourishes, while stockshortages are common, particularly in the rice and sugar industries, where the state has a significantlystronger presence. In March 2009, a crowd of disgruntled workers gathered outside the Haft Tapeh sugar grinding factory inresponse to non-payment for services rendered, in a row that has rumbled on for the best part of a year. According to sources, workers from the factory have demonstrated roughly 16 times since 2005, despitecontinued intimidation by state forces, and such destabilising fundamentals serve to hamper the greatpromise that exists within the industry. We do see sugar production expanding to 2013, although at a slowrate of 1.45% which is way below the level of the previous projection period of 23.35%, yet further unrestamong workers may tip the balance into negative growth. Another major concern for farmers is the drought that has raged through the region for the best part oftwo years, affecting Iran and neighbouring countries. Grains farmers have been the worst affected, withwheat in particular recording notable year-on-year (y-o-y) losses in 2008, falling by 33% as alreadyscarce water supplies became stretched to the limit. Despite the negative effects of the drought, the upsideis that it has strengthened the states resolve to develop irrigation. Domestic area under irrigatedcultivation has increased significantly over the last five years, thus helping to improve yields andlessening the severity of some of the negative effects associated with water scarcity. Wheat productionshould pick up to 2013 as such efforts leads to increased plantings, while greater use of inputs, such asfertiliser, will further augment the government's efforts to ease its staple import burden. As such, weforesee wheat imports playing a smaller role in the domestic food budget during the course of the outlook. Having said this, the effects of future droughts are unpredictable and provide an ever present risk. Iranian officials have held talks with other D8 members - most notably Turkey and Pakistan - in order tostrengthen trade ties. Turkey represents a particularly high potential trade partner, being self-sufficient inalmost all food groups and, more pertinently, some of those goods with which Iran still relies on imports.This is beneficial in that Turkey's proximity to Iran would allow for food shipments to be relatively easilyfacilitated, which for a country like Iran, which has alienated a large majority of potential trade partners,is a major bonus. Notwithstanding greater international co-operation, domestic issues remain the most pertinent concern inhelping to fuel sector growth. The state's continual overbearing presence in some subsectors is deemeddetrimental to private sector investment. BMI believes Iran's ability to fulfil its agricultural promise to2013 depends largely on its ability to attract outside interests, while potential suitors may becomeincreasingly attracted to investing in agriculture as a more favourable climate develops. Get Full Details About This Report >> |
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