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Agro Outsourcing: Alternative Way to Ensure Food Security

Financial Tribune- Domestic Economy
June 29,2016

Agro Outsourcing: Alternative Way to Ensure Food Security

Agro Outsourcing: Alternative Way to Ensure Food Security

Food security refers to availability of healthy and sufficient food resources, which is a main concern of governments and policymakers worldwide.
Different countries have adopted different approaches to ensure food security. Some have tried to enhance agricultural productivity and increase infrastructure investments in the industry, while others seek a remedy by taking recourse to "agro outsourcing".
The term indicates the practice of purchasing, renting or leasing by one country of arable land for the cultivation of agricultural products in another country. These products are later imported to the country that has embarked upon the act, or alternatively, exported to other destinations by the same country. This process ensures food security and boosts agricultural production.
The US, the UK and China are among the first and leading countries that have carried out agro outsourcing projects and countries in Asia, Oceania and Africa have sold or rented out more lands than others, due to their vast arable land and favorable climate.
In Iran, President Hassan Rouhani's Cabinet officially approved the agro outsourcing program called "Beyond Border Farming" in mid-April, though the Ministry of Agriculture had already started activity in the field three years prior to this decision.
According to statistics released by the Agriculture Ministry, Iran has close to 1 million hectares of land under cultivation in other countries. Yet, due to the high sensitivity of the subject, no government announces the exact area of land it has purchased or rented overseas. The figure is estimated to rise to 2 to 3 million hectares in the near future.
The ministry is using the overseas land to cultivate rice, corn and oilseeds, the domestic productions of which do not currently suffice demand at home. Iran currently practices agro outsourcing in several regional countries, including Russia, Ukraine, Kazakhstan and Tajikistan. In addition to suitable climatic conditions and arability of land, these countries offer low irrigation costs.
Also, the proximity of Iran with these countries, as it has sea borders with Russia and Kazakhstan, makes transportation cost-effective. For instance, Ghana is among a few African countries Iran is engaged in the Beyond Border Farming program.
Economic and agricultural experts have enumerated the pros and cons with regard to the concept. Some are skeptical and raise questions about the feasibility of the goals while others believe the plusses outweigh the minuses.
> Cons and Challenges
Fatemeh Paseban, a researcher of agricultural economy, believes the issue of agricultural management has more urgency than agro outsourcing and needs to be addressed in the first place.
"Every year we have surplus production of some crops, including apples and potatoes, as well as dairy products. To solve the problem, export incentives are offered to foreign buyers of our products," she was quoted as saying by Tejarat-e Farda weekly.
"Not only have we spent on production and used our basic resources of water and soil, but also subsidies are given to foreigners to purchase our crops. So our country has the capacity for production, but mismanagement happens to thwart the farmers' efforts.
Mohammad Kazem Rahimi, a student of economy at Sharif University of Technology, said the main question is whether the government plans to carry out the projects itself or is it going to play the role of facilitator in the process and pave the way for the private sector.
"If the government is going to sit in the driver's seat then, unfortunately, we must expect nothing except another instance of our resources and investments going to waste. Our previous experiences with government management of resources attest to this claim."
Also, if the private sector is to take control, he believes, then what are the criteria by which potential investors are picked and chosen to carry out the projects and in what way rent-seeking under such circumstances can be avoided?
"Another challenge facing the project is whether long-term benefits can be derived from agro outsourcing. Different issues such as possible domestic and foreign political upheavals, changes in socioeconomic situations in the countries engaged in the project and unpredictable crises can all result in the failure of what the government has in mind," he said.
Rahimi said diversifying the list of countries that can serve this purpose can considerably help reduce the risks.
"Last but not the least, transferring and redirecting capital to other countries mean investments at home will decline. This way domestic production will decrease and subsequently jobs will be lost," he said.
> Pros and Prospects
Water shortage is at an alarming level in Iran and experts have time and again tried to raise awareness about the issue.
Rahimi blames the increase in population, traditional agricultural methods as well as mismanagement and erroneous policies for the ongoing water crisis.
"While only 12% of Iran's land is arable, the sector devours close to 93% of the country's water resources. This is while the agriculture industry accounts for only 10% of Iran's gross domestic product and employs 17% of the population. Cultivation of water-intensive crops in other counties with no shortage of water resources or precipitation can be beneficial," he said.
According to figures released by the Agriculture Ministry, some 90% of domestic demand for unprocessed vegetable oil and a considerable share of the consumed rice are now met through imports.
"Agro projects in other countries can help us meet the growing domestic demand and provide food security for our people," he said.
Ali Kiani-Rad, with the Ministry of Agriculture, says given the changes in world economy, there is a need for expansion of investments in the agriculture sector, especially agro outsourcing.
He refers to the creation of many farms in the host country, generation of jobs, increase in agro production and food security of the country that has embarked upon the project as the main benefits of this program.
According to the official, land outsourcing can lead to self-sufficiency in the cultivation of basic agricultural needs.
Kiani-Rad said since oilseeds, corn and livestock feed constitute Iran's main agricultural imports, they must be the country's main priorities for the Beyond Border Farming program.
"Member states of the Eurasian Economic Union are ideal targets. They enjoy favorable climates, suitable production resources—the main ones being water and soil, low production costs, food and social security as well as stable political situation and regulations, especially when it comes to investment, land possession, customs, tax and foreign exchange," he said.


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