January 01, 1998 | English
Strategic Options for the Agriculture and the Agri-Food Industry in a Dynamic Global Environment

In light of the local, regional and global changes the various economic sectors are facing challenges mainly in terms of competition at both local and foreign market levels. The industrial sector is one of the major sectors concerned with these challenges, and hence needs frequent reformation plans to keep up with the rapid changes affecting the world economy. The study elaborates on evaluating the comparative and competitive advantages of the agro-food sector in Lebanon relative to selected regional countries, and analyzes the conditions of the agricultural sector, being a potential source of inputs for the agro-industry.
A brief review of the Lebanese economy reveals that the agricultural sector is a basic productive sector, contributing 12.4% of GDP in 1995, and employing about 10% of total labor force. Meanwhile, the sector is facing difficulties, most of which are inherent, taking Baalbeck-Hermel region as a case study. Basically, the sector is suffering from the lack of agricultural policies and plans to enhance, among others, the irrigation system, importation of agricultural inputs, agricultural extension services, marketing channels, adequate replacement of crops, in addition to the need for financial support through agricultural micro-credits. As to the agro-food industry, a detailed analysis of the sector reveals that agro-food establishments represent around 20% of total industries, 94% of which are small - medium scale (employing less than 19 employees). It should be noted that a huge demand for agricultural and agro-food products is currently satisfied through imports.
At the local level, by analyzing the competitiveness of the agro-food sector, the study resulted in the following:
Regarding factor conditions, Lebanon is relying on its physical resources: soil, climate and water. Meanwhile, the weaknesses are many and are mainly related to capital resources, knowledge resources and infrastructure.
As to the demand conditions, Lebanese production of agro-food is relatively small compared to the neighboring countries, and the Lebanese consumers satisfy their needs for many products through importation
Meanwhile, the supporting and related industries affecting the competitiveness of the sector are facing difficulties: high cost and low quality of local agricultural inputs; distribution channels through which agricultural products are marketed; problems facing imports of inputs for agro-food sector ; high cost of marketing of agro-food products in the local market; and a relatively low volume of export
With respect to the structure of firms and rivalry, Lebanese firms are noted for having high percentage of family-owned and small-scale establishments, and a high concentration of market share among limited number of market players.
On the other hand, the government intervention is minimal as to the design of policies and its role is confined to the agricultural calendar and the five years plans, in addition to other agricultural plans.
Meanwhile, at the regional level, the study considered Israel, Jordan, Syria and Egypt to study the comparative advantage of the agro-food sector:
First Israel is characterized by a strong integration between agricultural production, processing and marketing. Also, agro-food products meet to large extent the internationally adopted standards, allowing the development of strong domestic and foreign markets. Also, the role of government is of great assistance for the sector to grow and compete by designing the necessary policies, mainly for marketing and for enhancing performance of the industrial enterprises by providing the necessary financial support.
Jordan agro-food sector is suffering from the lack of integration among agricultural production, processing and marketing, although each separate process is well integrated into some kind of organization. Also, the processing practices do not meet the internationally adopted specifications, coupled with weak intra-sectoral competition. The government policies assist in developing marketing institutions, however, failed to create the competitive environment by adopting subsidy and protection policies.
Syria is suffering from the lack of private sector initiatives, due to the overall investment climate (foreign exchange, high taxes, bureaucracy,..). Also, it suffers from poorly developed support institutions and the absence of intra-sectoral competition, the non-adherence internationally adopted specifications, and hence the incapability of the sector to penetrate international markets.
In Egypt, the agro-food sector is well protected, encouraging producers to satisfy local market demand which is relatively huge. Also, the industry has the necessary practices to meet the specifications of the Gulf and Eastern European countries. The sector in general has a potential to develop long-term production and marketing strategies.
Finally at the international level, the sector is facing the challenges of globalization, the GATT agreement, the environmental issues, the trends in global consumption and the trends in global agricultural marketing.Despite the lack of reliable and conclusive data regarding the individual products, the study attempted at evaluating the comparative advantages of Lebanon’s agro-food products following the qualitative approach of Porter and the quantitative approach of Balassa. It should be noted first that no clear conclusions could be deduced for several reasons: the agglomeration of several sub-sectors under broad categories, and the data for certain sub-sectors is missing. Applying Balassa models to particular products results in evaluating comparative advantages and disadvantages specific to certain time periods, relative to Egypt, Syria, Jordan, Israel, Turkey and Cyprus. Lebanon has a comparative advantage in fresh, frozen or chilled fish, cereals and cereal-based products, fruits and nuts, sugars, sugar preparation and honey, coffee, tea and cocoa, feeding stuff for animals. No clear conclusions were drawn with respect to fresh meat, beverages, tobacco, and dairy products.
The study concludes with four sets of recommendations addressing the three major parties concerned with the agro-food sector:
The first set of recommendations advises the government to act as a facilitator and promoter at an efficiently operating agro-food sector by providing basic infrastructure, such as water and electricity, regulating both the agricultural and agro-food sector, and providing institutional support in areas of credit, research and development and others.
Given the challenges facing the industrialists, the second set of recommendations propose that they adopt a strategy that focuses on the premium end of the market, establishes strong position in the export markets, and develops the potential of new markets processed produce.
The third set of recommendations encourages the establishment of cooperatives for farmers and the plantation of several crops, such as strategic plants, exotic fruits, and others.
A fourth set of recommendations encourages the establishment of a partnership between the industrialists and the farmers with the objectives to increase cooperation and integration, with direct and indirect involvement of the government