The agri-food sector in the mediterranean region

Publisher : Anima Studies n° 16, january 2006

Author : Fabrice Hatem

The agri-food sector in the mediterranean region

Any analysis of the current situation agro-food (AFI) industries in the MEDA countries leads to a contrasted diagnosis. Certain weaknesses are a cause for concern: production which represents hardly 1. 5 % of the world total, to feed nearly 4 % of its population; a trade deficit which increases regularly, and which in 2003 came close to 10 billion dollars; a particularly shocking imbalance for oil seeds and cereals especially, basic elements for the poor populations of these regions; a rather strong food independence for certain countries, such as Egypt and Algeria; a very poor market share in « downstream » goods – which provide a better return – of the sector (processed products), despite the important potential of MEDA…

As for the long term perspectives, they remain a continuing cause for concern, with demographic growth increasing needs while the environment is being degraded (growing shortages of water, desertification of land and sea). A threat to ecology and food clearly highlighted by the work of the «Blue Plan for the Mediterranean», a UNO programme based at Sophia Antipolis, the consequences of which in terms of social and political instability could be very serious.

Guaranteeing the autonomy in food of these countries and better exploiting the agro-food industry (AFI) potential of the region therefore constitute a major human and political challenges. Nevertheless, certain facts stand out as being relatively encouraging. Firstly, two countries, Turkey and Morocco, are already net exporters, making a large contribution to the positive balance of the region in three segments: fruit and vegetables, bottled or canned goods and meat and fish. Other countries, overall in deficit, make significant surpluses in certain segments, such as Israel for fruit and vegetables and Tunisia for animal foodstuffs.

As for the potential, it is considerable: 23 million hectares (c. 57m. acres) of irrigated arable land in Turkey; a real dynamism in the agro-food sector in Morocco, which alone represents one third of the country’s industrial production and one fifth of its exports. In the other countries, more limited but nevertheless real opportunities exist. One example? The production of dried fruits and vegetables (asparagus, dates), flowers or aromatic plants in Jordan, including certain regions in the West, once suitably irrigated, offer a real agricultural potential. And was not Numidia (the current Tunisia and Eastern Algeria) in olden times nicknamed the «grain store» of the Roman Empire?

A favourable evolution has already been observed over the past 20 or so years. Certain countries like Turkey or to a lesser extent Morocco, give the example with the gradual building of a real agro-food sector. The progressive liberalisation of regulations, the dynamism of the local market, the improvement in the technical and industrial environment explains this progress.

There remain the handicaps, which are: drought, low level agricultural productivity, unbalanced quality of the tools of industrial production, non-standardised products, weakness in the logistics chain and the packaging industry, atomisation of the offer, shortage of financing means, isolation of certain agricultural areas linked to the mediocrity of the infrastructures. So as to face up to these challenges, a policy of modernisation and promotion of the small producers may play an appropriate role by exploiting the traditional products for which a demand exists on the markets in the North: artisanal production of olive oil, cheese, organic farming… but this alone will not suffice. Companies with a real industrial dimension must also be encouraged, and in fact a private local capitalism is starting to appear in countries the likes of Turkey, Israel, Egypt and Morocco, which alone represent almost three quarters of the agro-food production in the region.

But the need to call upon foreign investments would appear equally necessary. In fact, only the large multinationals have the financial, technical and industrial means large enough to face up to this challenge: feed 320 million people in 20 years. Efforts must therefore be made to attract them.

On this level, the results are so far limited: the top 100 food industry multinationals today only have 160 subsidiaries in the countries south of the Mediterranean, compared with more than 2,000 in Western Europe and 400 in Eastern Europe: modest figures which have furthermore progressed more slowly than in Asia or in the CEEC countries over the past few years.

The assets are, however, equally numerous: the size and the dynamism of the market, the specificities of the local dietary regimes, the availability of an abundant labour force in the rural or peripheral urban areas represent particularly powerful incentives for relocations in the area. Firms such as Sara Lee, Unilever, Pepsico, Procter and Gamble, Nestlé, have already developed active strategies in the region. The privatisation programmes under way or already carried out (Régie marocaine des tabacs, Brasseries du Maroc…), the liberalisation of investment rules, in particular for the acquisition of arable land (Morocco, Turkey), may entice foreign firms, many of which are already present in Morocco, Turkey and Israel.

In this domain, as in others, the competition from other developing regions (Asia and the East European countries notably) is very much alive. So as to improve their attractiveness vis à vis the multinationals, the MEDA countries may be able to orient their action, in co-operation with their partners from the North, around four central themes: the gradual creation of a Euro-Mediterranean trading and co-operation space; the modernisation of the local business environment and the upgrading of the enterprises; an inventory and the exploitation of the local agro-food potential for export and for domestic needs; finally, the implementation of a promotion-prospecting policy based upon the exploitation of the Mediterranean potential in its entirety.

The present study focuses on the activities of food processing, only incidentally touching upon the upstream (agriculture) and downstream (distribution) domains of the sector. After having analysed the overall trends of the world market, and the strategies of the players, a detailed presentation will be made, in a second part, of the problem of the attractiveness of the MEDA countries for these activities, concluding with a certain number of recommendations and proposals for action to improve this situation. Given the close links which exist between the two shores of the Mediterranean, this analysis will be set within the wider context of a large Pan-Euro-Mediterranean region which also incorporates the countries of Eastern and Western Europe.

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