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Lebanon: Lower yields

Lebanon's government is struggling to strengthen the country's agriculture sector, with a lack of investment by successive administrations, a preference by many Lebanese for imports and political uncertainty across the region all contributing to a general production decline.

Agriculture's economic contribution has been falling for many years, with services, construction and even manufacturing all eclipsing farming's share of GDP. According to the International Monetary Fund (IMF), agriculture's contribution to GDP has slipped in the past 15 years from just under 7% to less than 5%. In part, the IMF said the retreat is due to infrastructure shortcomings, relatively high costs and an uncertain political environment.

Though its GDP contribution is slowly dwindling, the number of people employed in the sector remains high, with estimates putting the rate at around 25-30% of the total Lebanese workforce. Due to the reduced cash flow into the agriculture community, there has been an increase in rural poverty, aggravated by a lack of investment in infrastructure and services in some regions.

Yet there is hope for the sector, with the Ministry of Agriculture having successfully argued for an increase in its budget allocation for 2012. Under the government's draft budget, the ministry will have its funding increased in the coming year to $54.4m. While this sum is double the ministry's 2011 allocation, it is still only a fraction of the almost $14bn the government plans to disburse next year.

However, there are also no guarantees the additional funds will be released on schedule. Finance Minister Mohammad Safadi's draft has come under fire from many quarters, with criticism that the slowing economy cannot sustain the 6.24% increase in spending. There has also been opposition over plans to raise the value-added tax and impose higher duties on income from interest and real estate transactions.

Another concern for Lebanese farmers are increasingly strident calls for stiffer sanctions against neighbouring Syria. Not only is Syria an export market for Lebanese agricultural products, particularly processed foods, but it is also the only country sharing an open land border with Lebanon. As such, if the Arab League or the broader international community calls on Beirut to impose sanctions against Damascus, Lebanon's farmers would be directly affected.

On November 14, Antoine Howayek, the president of the Federation of Agricultural Producers in Lebanon, told a Lebanese daily that should trade sanctions be imposed, this could deal a blow to the agricultural sector. Sanctions would not only cut export trade to Syria, but also sever Lebanon's trade routes to the rest of the Arab world, Howayek said. However, having voted against suspending Syria from the Arab League on November 12, it is unlikely Lebanon would move to enact stringent sanctions against its neighbour.

Despite the many obstacles, the government continues to push for improvements in the sector. In late October, soon after having gained the funding increase for his portfolio, Hussein Al Hajj Hassan, the minister of agriculture, said it was crucial to overhaul agriculture-related legislation and to bolster scientific research to improve output and promote cooperation between public and private sectors.

"I stress the importance of food security and safety in the development of the agricultural sector and to guarantee sufficient production and high productivity at reasonable cost, as well as adequate prices for both consumers and farmers," Hassan told a regional conference on food security.

Among the minister's suggestions is for Lebanon to become a centre for seed production, rather than a net importer of seed stocks. To achieve this, the country needs to invest in research facilities and draft new legislation, he said.

"Lebanon has the ability to become a seeds and saplings exporter. We have the suitable climate, water and soil needed, but we lack appropriate policies," said Hassan.

With so many issues to be dealt with, including a chronic electricity shortage, a stalled privatisation programme, a contentious budget and a fragile political environment, it may be some time before the government can implement the policies both Hassan and the agriculture sector at large would like to see.

© Oxford Business Group 2011