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Import ban hits consumer pockets

Abbas Sarhan
Abu Jamil al-Khamis went to buy vegetables from a market place near al-Ahyaa bus station in Karbala and was shocked by the prices. One kilo of tomato was selling for a price of 1,250 Iraqi Dinars (over US$1).
27.04.2010  |  Karbala

“How is this possible?” he wondered. The price had doubled.

He asked the greengrocer, who was busy arranging the display of his pricy tomatoes, about the reason for the price increase. The salesman didn’t seem interested in Jamil’s question but said: “These are Iraqi tomatoes.”

Vendors get the same question about price increases every day. The reason for the rises in price is that the Iraqi Ministry of Agriculture banned the import of tomatoes, cucumbers, eggplant, onions, green beans and trees in April this year. So Iraqi tomatoes are now the only choice.

The Ministry of Agriculture said they decided to ban imports to protect local farmers and allow them to sell their locally-grown vegetables for fair local prices, without being squeezed by cheaper imported veg.

Iraq’s dependence on agricultural imports has gradually increased since 2003. Imports poured into the market, attracted by the lack of customs duty and taxes and sold very well at low prices compared with local Iraqi products. Like many farmers in the new Iraqi market, Ridha Abd Awn, who lives in al-Husayniyah area 15km to the north of Karbala, surrendered to the realities he faced. Ridha owns a piece of land with 200 palm trees and dozens of citrus trees and vineyards. He uses part of the land to grow some vegetables such as tomatoes, cucumbers and watermelons. In 2004 he stopped planting these vegetables because it was no longer feasible to sell his vegetables at a profit.

He believes that the cost of agricultural production in Iraq has become rocketed because of the use of machinery and fuel to pump irrigation water from the depths of wells, where it sits because of the current water shortage in the country. On top of this is the high cost of fertilizers, seeds, and transport.

The government has given loans to farmers to try to help them compete better, however, they were not always used properly and many people who received them used them to start other businesses by, for example, buying taxi cabs or for renovating their homes. The conditions on the loans were not strict enough and it was easy for them to be mis-used.

Engineer Razzaq al-Taei, the director of Karbala’s agricultural department, said that the Ministry’s import ban is a ‘courageous one’. He thinks the step will support local agricultural production and encourage farmers to grow because it will increase demand for local products. Farmers will have a golden opportunity to expand and test their capacity to market local products.

The optimism, however, did not translate into effective results and there has been no increased supply of local products so far. Instead, with the small number of local products entering the market, prices rose. Like many, Muhsen al-Musawi, a professor in economics, questioned the government’s decision.

“There should be other steps to be taken,” he says, arguing that banning import of commodities for the sake of encouraging local production, in itself, is not enough.

He believes that production needs to be increased through more plantation of crops. This way the ministry can ensure that its decision is realistic and that its aims can be achieved. Fertilisers and seeds should also be subsidised to enable farmers to overcome financial difficulties during harvest time. He also thinks that a government body promoting the export of Iraqi foodstuffs should be set-up to help protect the industry.

Dr. Ahmad Bahidh, another economics professor agreed with Musawi. He believes agricultural production has been abandoned because of the lack of export opportunities. In recent years, local fruit and vegetable production exceeded demand, leading to a decrease in price of these products because of a lack of export opportunities. Bahidh believes Iraq can make better use of its surplus in agricultural products by exporting them and also using them to make byproducts, such as molasses, honey, jams, pickles or tomato paste.

Iraq desperately needs a well-though through and carefully constructed agro-industrial plan. Decreases in water levels and increased salinity have caused many problems and have made the build-up of an agro-industrial sector a risky venture.

An effective irrigation system is key for future growth in Iraq’s agriculture sector. “This irrigation system should reach arable land through dams and waterways,” said Bahidh. Apart from protecting Iraqi agriculture, the sector needs to be made truly competitive against future competition from abroad. A decision such as the one to protect farmers by banning imports must be accompanied by other plans that protect consumers, too.

The Karbala Agriculture Department asserts that the decision to ban imports is constantly being assessed. They submit a weekly report to the ministry of agriculture on vegetable prices in Karbala. In other provinces too, similar reports are sent back to help assess the situation and decide whether consumers are burdened too much by the aid given to farmers. The ban is not something that will stay in place forever. A similar ban put into place two years ago was removed when prices rocketed. Perhaps this time, the balance can be found sooner