By Layth Mahdi, Agricultural Advisor. Any  opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Iraqi agriculture production and productivity has been on a linear decline since 2003. Despite this, it remains the second-largest contributor to Iraqi GDP after oil revenues. It has the potential role in decreasing unemployment, poverty and violence if essential programs are implemented in its restoration.

Iraqi people believe that the occupation severely damaged the agricultural sector. The reconstruction efforts that were led by USAID contractors failed to achieve any significant progress. This is because inadequate planning, management and an inefficient political situation in this country.

The country’s urban population makes up roughly 21.1 million (66% of total) compared to a rural population of 10.9 million (34%). Demographically 50% of the population is under the age of 18. Illiteracy rates are on the rise. Recent data indicates that over seven million Iraqis are illiterate, meaning 24% of the population are unable to read and write. Iraq’s literacy gender gap is significant, only 46% of adult females and 66% of adult male are literate. Education in Iraq is continuing to decline due to mismanagement of government funds. Over 15% of school aged children are not enrolled in any education program due to their obligation to help support their families.

One of the main challenges that the Government of Iraq (GoI) faces in rebuilding Iraq is high unemployment and poverty. The GoI cannot make a serious attempt at implementing programs to tackle these issues because the decision makers are not knowledgeable and they lack vision. They have attempted to provide aid and social welfare without addressing the root causes of the nation’s problem. For example, the GoI employed more than one and half million people from 2004 to 2010 in the government sector, primarily police and military.

In the next five years, oil production will triple and annual oil revenue is projected to increase to $200 billion by 2015. Currently, Iraq is still under Chapter 7 and huge amounts of money have been spent to cover military and security costs every year. High unemployment and poverty are among the main sources of social turmoil. Iraq is still politically, socially and economically unstable. If these issues are left unresolved, poverty, unemployment, and military operations will hinder growth in oil sales.

Unemployment and poverty are rising. The GoI must create jobs for more than three million citizens over the next three years (2014) in order to decrease the unemployment rate. Agriculture has traditionally been the largest employment sector in Iraq. It contributed more than 7.5% of GDP before 2003 and employed more than 25% of the total work force. Therefore, the agriculture sector needs to be restored in order to absorb the large number of unemployed people.

Current GoI employees lack working experience, management and are corrupt. These situations result in a lack of economic growth. Seven million people who live under poverty line ($2 per day). The private sector is not functional, and the government’s economic growth programs are either slow, ineffective or haven’t started. Therefore, I expect that about 10 million people will live under the poverty line by 2015. Iraqi leaders need to help people to overcome these social problems. PM Al Maliki MUST initiate a fund from Pertro-dollar (see my articles in Iraq Business News) and create International Working Groups in order to restore the agricultural sector in the coming years.

By Ronald P Verdonk, Agricultural Counselor at the U.S. Embassy in Baghdad.

Continuing with the theme of my last blog, I want to address other areas that the Iraqi public sector can tackle so that Iraqi agriculture can be more productive.

In this day and age, a critical component of public policy decision-making is data that is generally publicly available, good, sound numbers with which leadership in government can make more informed choices about the kind of support to target to producer groups.

The bureau in the Ministry of Planning responsible for statistics, COSIT (www. cosit.gov.iq) does a creditable job in terms of crunching some of the agricultural numbers although the timeliness of data remains a challenge. By and large, the availability of GoI-generated data across sectors remains a work in progress.

Another area in which the Iraqi Government can make a difference in agriculture concerns on-farm productivity. In fact, as the staff agricultural economist in my office, John Schnittker, points out, on a per hectare basis for about the last forty years, Iraqi farmers produce half as much wheat compared to the average output of their counterparts in Syria, Turkey, Afghanistan and Iran.

To what is that attributable? No doubt the vagaries of weather play a role in rain fed production and soil quality is also a factor. Fertilizer availability and improved seed are critical to getting better yields and both have been in short supply for years. The availability of the right kind of certified wheat seed available in the international marketplace could help address some of the shortfall, but Iraq needs to devote greater resources to the development of better local varieties just as the Ministry of Agriculture needs to overhaul its process for seed registration.

Iraq would do well to seek membership in the OECD Seed Schemes as means to shortcut the acquisition of a range of better, certified seed varieties.

By Layth Mahdi, Agricultural Advisor. The opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Agricultural development plays a key role in achieving human well-being, maintains food security, reduces poverty and mitigates violence. In addition, it contributes to the protection of natural resources, environmental stability and the balance between rural and urban populations as well as the protection of cultural heritage. The agricultural sector is essential to the provision of employment opportunities and the reduction of violence.

Prior to 2003, Iraq had imported about 30% of its food needs annually. The decline in agricultural production after this period, created the need for importing 90% of the food at a cost estimated at more than $12 billion annually. Due to the sudden shift in the agricultural policy from subsidized assistance to an immediate shift to a free market policy, the outcomes lead to a decline in production. The observed outcome resulted in many farmers abandoning the land and agriculture. The impact on natural resources results in an exploited and degraded environment leaving the land destitute and the people impoverished, unemployed experiencing a sense of losing their human dignity.

Despite the huge Iraqi budget (more than $ 90 billion/year), the trend of unemployment, poverty, malnutrition, among Iraq’s most vulnerable population-children; hunger and homelessness has accelerated in the past eight years. For example, unemployment reached more than 40%, and poverty up to 23% (7 million people) of the population. There are five million illiterate, eight million representing widows and spinsters. Additional, an estimated 2.7 million disabled Iraqis and more than two million displaced inside and outside the country. The average family size is large with 5 members per household in the urban sector and 8 members in the rural areas. Another issue that Iraqis face is their incomes per capita is low (300-400 dollars / month) contributing to deepening poverty.

Iraqi population birth rate has increased to more than 750 thousand per year. These worsening living conditions and the deterioration in the agricultural sector, education and health, poor services and increased violence coupled with the lack of or absence of economic development has increased the suffering of average Iraqis fomenting increased suffering from turmoil and political instability, social, and creates violence and terrorism.

Current Iraqi decision makers have exhibited a lack of vision for economic development due to their deficient skills, knowledge and the absence of leadership. Therefore, the performance of the GOI remains below par. Iraq is rich in natural resources and the government has all the administration, regulatory laws and funding, but lacks the political guidance and ability to reform and create economic development ultimately leading to unsustainable growth.

The Iraqi reconstruction efforts led by United State and the coalition have spent more than $60 billion to date. The goal has been to improve basic services, rebuild the economy, strengthen democracy, and improve the infrastructure, building capacity and legitimacy of the Iraqi government. USAID contractors have struggled and are perceived to have failed, unable to reach the full potential of their goals to improve economic growth. The projects were really quite simple and had little to no value in improving the local economy.

The U.S. government has a long-term strategic plan in the Middle East. At the same time the US government has many enemies. Tensions are rising (note recent ME riots) and more protests may be upcoming that will have a negative impact on GOI. The US military should consider initiating agricultural programs to assist GOI in creating jobs and reduce poverty which ultimately will enhance US-Iraqi relations. It is not in the best interest of America to keep the country impoverished and suffering from rising unemployment and poverty.

A presentation on the way ahead for Iraq’s restoration of the agricultural sector in job creation and reduction of poverty and violence is attached,

… also available in pdf format.

And please click here to download a spreadsheet calculating the profit projection for a typical farmer in Muthanna.

By Ronald P Verdonk, Agricultural Counselor at the U.S. Embassy in Baghdad.

In my last piece I made mention of a sizable irrigation equipment purchase by Iraq’s Ministry of Agriculture and underscored the role the private sector needs to play to contribute to the revitalization of the agricultural sector. In this edition of the blog, I’d like to address areas where government has an important role to play in supporting Iraqi farmers.

While much of the cropland north of Kirkuk receives sufficient rain, almost everywhere southward is irrigated. Without question, the irrigation infrastructure would benefit from a well-planned modernization program. One of the most pressing challenges is to ensure adequate water flow at the level of pumping stations, a number of which need new hardware, including the pumps themselves. In addition, it is generally accepted that considerable irrigation water is lost due to canals that are not lined to prevent seepage. Soil salinity and waterlogging must also be dealt with by rehabilitating drainage systems and on-farm canals.

And moving from the “big water” coming off the rivers to the “small water” at the farm level, producers would also be helped by increased electricity supply that can run the irrigation pumps necessary to move water into the fields, in addition to powering refrigeration equipment that would keep produce, meat and fish chilled or frozen. These are some of the fundamental services government can provide, and without a doubt, the Government of Iraq is spending huge sums of money to expand the country’s electricity supply, though it will take a few years to catch up to rapidly increasing demand.

As critical as the availability and quality of water and seed, another fundamental challenge for the Iraqi Government concerns fertilizer supply. For the past few years, the Government of Iraq has cited electricity shortages as a reason for fertilizer plants in Basrah and Al Qaim to run on a part-time basis, and the facility in Bayji has been out of production for at least four years. Iraq has the potential to emerge as a net exporter of fertilizers, but the country is currently dependent on imports, and the import volume not proven sufficient for optimal crop production.

I’m not advocating government fertilizer imports; that’s best handled on the private side, but it is clear that many of Iraq’s development challenges are interrelated. The agriculture sector will benefit as the electricity shortfall is addressed and fertilizer production expands to meet local farming needs.

The Iraqi Agriculture Minister has said that 470 billion Iraqi Dinars ($400 million) has been allocated to his ministry this year to develop the country’s agricultural sector, according to a report from AKnews.

Izzeddine al-Dawla [Izzuldin al-Doula] said that the implementation of an irrigation project using the latest techniques and covering an area of more than 3 million acres is the first strategic project of the ministry, adding that further investment projects are planned to help subsidise farmers’ incomes.

Dawla expressed however his disappointment with this year’s federal allocation.

“The amount allocated to the Agriculture Ministry is not sufficient to address the challenges faced by the sector.”

(Source: AKnews)

By Tariq Abdell, Iraq’s political risk analyst,  and Founder & CEO of  Mesopotamia Insight.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

 As Iraq-business news celebrates its one year anniversary, MENA region is witnessing a fundamental political upheavals and changes,  costing Mubarak of Egypt and Ben Ali of Tunisia their presidencies, as result of decades of unpopular and undemocratic policies and, most importantly,  for injudiciously disenfranchising  a crucial segment of their societies: their younger constituents.

  Unarguably, Iraq is undergoing major socio- economic changes, among them, the formation of a new and inclusive government, following months of political horse-trading, improved security conditions due to a strong and nonsectarian Army, and surge of foreign companies and investors’ interest in Iraq’s potentials. However, Iraq’s severely languished infrastructure,  lack of basic services, impoverished and disgruntle  population  – decades of wars and despair-  could easily jeopardize its hard-earned achievements.

 According to the Iraqi Institute for economic reforms, Iraq’s agricultural output had fallen from 8% to 3.5%, industrial output  from 7% to 1.5%,  estimated poverty rate  of almost 23%, unemployment still hover above 18%,  the appropriation of credit to the economy  as % of GDP is 3.37 % in 2008,  current power output at 6,5000 megawatts  is less than half of Iraq’s needs, national debt amounts to $33 billion.

 Given the aforementioned challenges, it’s an absolute imperative for the Iraqi government to devise a comprehensive and inclusive post-conflict reconstruction strategy, taking into account the aspirations of its people and current  budget constraints, which estimates overall expenditure at $81.86 billion and income at $68.56 billion, leaving a shortfall of $13.3 billion.  Drawing on past experiences (BRIC countries, for instance) and the support of the international agencies (IMF and WB, for instance), Such a strategy ought to:

• Create a conducive and transparent business environment, compatible with Iraq’s new constitution,  that is legally and politically permissive (adoption of a new investment law, for instance),  and susceptible to attract foreign capital, foster Iraq’s political capital, and reinvigorate the efficiency of its institutions .  According to the world bank, Iraq ranks 166 on the ease of doing business -next to Afghanistan.
• Institute an independent and inclusive  Petroleum Council — reflecting  the geographic distribution of Iraq’s energy resources — that is responsible for formulating oil strategies (hydrocarbon law, for instance), deflecting the politicization of the oil sector, enforcing transparency and accountability as bulwarks against corruption , and robust enough to reign in SOC, NOC, and IOCs.
• Set a mechanism that will allow for an equitable distribution of the oil revenues and avoid the resource-rich nations’ deleterious disease, the resource war. Historically, the bulk of Iraq’s oil revenues are distributed along ethno-sectarian, political, and tribal allegiances, as opposed to inclusive and growth-oriented economic policies.
• Foster strategic partnership with the private sector and academia. For instance,  GOI could seek foreign companies’ expertise to help revamp its oil sector by introducing technological know-how, the industry best practices, and foster a professionally literate workforce. With such perspicacious initiative, Iraqi government will definitely enhance its oil sector efficiency, boost production, and, eventually, spur economic recovery.
• Revive Iraq’s strategic industries(Petrochemicals, for instance) to curtail its dependence on a single commodity, fossil fuel, and, consequently,  avoiding its hasty depletion. Furthermore, given Iraq’s acute electricity and water crisis, direct solar energy is by far the most abundant renewable energy source in Iraq which can be used for power generation for domestic and international markets , and seawater desalination to help alleviate southern regions water shortage.

 Conversely, in the absence of a concerted and inclusive national development strategy that reflects the needs of the Iraqi people (e.g.,  more jobs, better wages,  universal access to basic services, health care, and education) and help resuscitate the country’s weakened economy, Iraq may risk reverting to its years of lawlessness, sectarianism,  and chaos, which is far worse than Egypt and Tunisia combined. Irrefutably, “A nation’ s strength ultimately consists in what it can do on its own, and not in what it can borrow from others.” Indira Gandhi

 The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

The author, Tariq Abdell, is an Iraq’s political risk analyst, and Founder & CEO of Mesopotamia Insight

He can be contacted at: atariq2000@hotmail.com

or

Followed on twitter: http://www.twitter.com/atariqx

With unrest in several Arab cities, many in the region are worried about the risk of contagion. The latest flashpoints are Egypt, Tunisia, Yemen, Jordan and Algeria; but is Iraq vulnerable as well? The people certainly have a lot to complain about.

Electricity

The heat and increased use of air conditioning put a major strain on the national grid last summer. Blackouts became increasingly common and hours with constant electricity supply became less frequent. For those who could not afford the exorbitant fees of private generators there were intense periods of difficulty, with high temperatures and no fans or refrigeration. Conditions were harsh enough to prompt unrest in several cities in the south of the country. In Basrah two protesters were killed when the police opened fire on a crowd in an attempt to control it.

Electricity projects are currently underway around the country but many are not likely to be completed for several more years. Shortages are therefore likely to persist. With Ramadan taking place in the summer in 2011, tensions are likely to be particularly high. Electricity usage increases during the religious period, particularly if it falls during warmer months, and power shortages can be more emotive during the month-long event than at other times of the year.

Water

Water supply also remains a major issue, with varying service quality in different parts of the country. Infrastructure is being improved in Baghdad but many outlining towns and rural areas remain without a reliable supply. In agricultural areas this has also led to demonstrations in the past. Shortages in provinces like Diyala have provoked local farmers into protesting against what they perceive as excessive usage of water further upriver – crucially, in areas predominantly inhabited by Kurdish Iraqis. Over-usage in the north and in Iraq’s neighbouring countries may not only harm yields later in the summer, it could even lead to inter-communal tensions between Kurds and Arabs in the mixed districts of northern Iraq.

Inflation

Another driver of current unrest in the Middle East has been the rising cost of living. Good agricultural performance in Iraq would help restrict domestic inflation in 2011, but difficult logistics and underdeveloped port facilities continue to push up the price of imported goods. This is something that affects all Iraqis, regardless of sector, location and community, and while it has not prompted any major demonstrations in the country so far, it will continue to put pressure on ordinary citizens and add to public frustrations.

Unemployment

Inflation woes are made all the worse by the high unemployment rate in the country. With a battered economy the job market remains poor and those of working age face a grim outlook when searching for employment. However, foreign firms will play an important role in addressing the underutilisation of the Iraqi workforce. Investment in key sectors and the employment of national staff will not only provide foreign companies with access to an important pool of workers, it will help cement a firm’s reputation in the emerging market and tackle a major source of discontentment in the country. As such, current joblessness is a crisis, but it could be viewed as an opportunity.

Congestion

In Baghdad a regular source of complaint is that of travel difficulty. Checkpoints, congestion and route closures clog the daily lives of the city’s traders and commuters. However, the removal of checkpoints and opening of roads makes it easier for terrorists, militants and criminals to move around the city. The authorities therefore face a delicate trade-off when considering their priorities. Frustrated drivers may be a better problem to face than a rise in violence in the city.

Violence

Although security conditions have gradually improved over recent years Iraqis continue to die on a daily basis. A suicide bombing against a Shi’ah funeral in the northern Baghdad district of Shu’lah killed dozens and prompted a sporadic protest by local residents on 27 January. Many are frustrated with the failure of the security forces to provide them with protection and further attacks may provoke a backlash against the police, military and government for their perceived failure at protecting the people.

One point to note in Iraq which sets it apart from North Africa is the fact that so many people have died in recent years. Unlike in Tunisia where the death of a market trader in December sparked the beginning of an uprising, the death of Iraqis is less emotive. To put it bluntly, it happens all the time. It is not that an Iraqi life is worth less than a Tunisian one, but the Iraqi public have grown more used to regular carnage. Indeed, this desensitisation, which affects an entire population may be one of the most tragic legacies of Middle Eastern turmoil over the past decade. The aftermath will almost certainly outlive the various authoritarian regimes still clinging to power in the region.

Politics

Seeking to distance himself from comparison to such regimes, prime minister Nuri al-Maliki has pledged to cut his salary in half in response to the latest regional unrest. Evidently the risk of Iraq becoming one of the ‘dominoes’ has not been lost on him, but his pledge has touched on an issue of particular embitterment amongst the Iraqi electorate. Many despair at the country’s high rate of unemployment, particularly when well-paid politicians take eight months to form a government. This delay alone hampered foreign investor confidence and arguably had more of an inhibiting effect on the jobs market than persistent terrorist attacks in the country. The fact that Iraqis had the right to elect these politicians to deliberate without conclusion for months does little to quell their animosity.

Even though Iraq may increasingly be viewed as a stable democratic state in the Middle East, the new regime should not consider itself infallible in the face of unrest in other cities in the region. Unless the Iraqi government can oversee the rapid expansion of services and development of national infrastructure it is likely that the coming year will see more protests in the country. What is perhaps important to note from the perspective of would-be foreign investors is that you will form a major part of the solution to Iraq’s current difficulties. The above outlook should not be taken as grounds for alarm. Instead, it should be taken as a call to action by those seeking to capitalise on Iraq’s many opportunities, whilst providing employment, development and opportunities for the Iraqi public.

AKE ltd

John Drake is a senior risk consultant with AKE Group, a British private security firm working in Iraq from before 2003. Further details on the company can be found at www.akegroup.com/iraq

You can obtain a free trial of AKE’s intelligence reports here http://tinyurl.com/245f9rm

You can also follow John Drake on twitter at www.twitter.com/johnfdrake

By Ronald P Verdonk, Agricultural Counselor at the U.S. Embassy in Baghdad.

Iraqi agriculture, like other sectors of the economy, has a lot of catching up to do in order to create jobs and play a more significant role in boosting GNP.

Production of grain, vegetables and fruit faces a range of challenges of which the following are the most significant:

• reduced water availability made worse by inefficient irrigation systems;
• intermittent electricity;
• substandard seed quality with few commercially appropriate varieties available;
• insufficient fertilizer, insecticide and herbicide supply;
• under-mechanized production;
• a land tenure system that precludes economies of scale; and
• time-consuming/costly import inspection procedures to the extent feed components like corn and soybean meal, for example, are needed.

Iraq is increasing its use of drip irrigation and greenhouse vegetable production and has an improved supply of locally grown fruits and vegetables though imports of cheap, good quality products from neighboring countries are widely available.

The animal production sector is a key resource base for food security and economic growth in Iraq. Small ruminants – sheep and goats – offer the ability to reproduce on poor quality forage and minimal water. The poultry and fish sector are also enjoying some resurgence but are limited by obstacles to imported feeds.

Due to the interruption in flow of technology and ideas that has occurred since the 1980s, Iraqi agriculture has been unable to stay abreast of agricultural technology developments both in terms of personnel and inputs, and Iraq has become more dependent on imports of agricultural products.

As Iraqi security strengthens and the economy regains its footing, there is little question that Iraqi agriculture can produce more to ensure a greater measure of food security, though under any realistic scenario Iraq will remain dependent upon food imports.

Ronald P Verdonk is an Agricultural Counselor at the U.S. Embassy in Baghdad. He has extensive experience in the agriculture sector, including placements in a wide range of developing economies.