Economy, Business And Markets

Australia Offers Big Opportunity for Iran’s Agro Sector

Australia Offers Big Opportunity  for Iran’s Agro SectorAustralia Offers Big Opportunity  for Iran’s Agro Sector

The Iranian government would like to attract foreign partners and import new technologies and standards in several sectors, an international business development manager said.

Ali Mirmohammad, who is also a senior consultant at Frost & Sullivan, says, “While the Iranian government will use these incentive plans, remove export duties and grant export funds, the three key concerns of the manufacturing sector are innovation, efficiency and quality.”

Frost & Sullivan is a consulting firm that provides market research and analysis, growth strategy consultancy and corporate training services across multiple industries. Its headquarters are located in Mountain View, California, with offices in over 40 countries, wrote New York City-based news agency PR Newswire.

In 2015, to reduce economic dependence on oil and gas, Iran’s government announced a roadmap for several manufacturing sectors expected to play key roles in Iran’s economic development. The plan outlines increasing capacities of some industries within the next ten years to derive more high value products and boost gross domestic product. One of these is the agribusiness and beverage sector.

Iran’s National Vision Plan (2005-25) includes various strategic measures, such as adopting advanced manufacturing technologies to increase efficiency, becoming a member of World Trade Organization to increase the share of global trade, developing international trade through liaising with foreign companies, increasing direct foreign investment and promoting privatization.

Removal of barriers, assessment of international markets for trade and investment opportunities and focusing on joint ventures and foreign partnerships for key industries and export based products have also been placed high on the national agenda.

 Iranian Landscape

Iran has a population of almost 79 million and is one of the largest food and beverage markets in the Middle East.

In 2014-15, based on constant prices, gross household expenditure on food and beverages reached $8,900 compared to $1,750 in 2005 (CAGR 20%). In 2014, the annual growth for agriculture was recorded at 3.8% and is expected to go up to 7% within the sixth five-year development plan (2016-21).

The agro products and animal husbandry export market is expected to increase from $5.4 billion in 2015 to $12 billion by 2025. Also, it is expected that the total export market of processed food and beverages will increase from $1.48 billion in 2015 to $5 billion by 2025.

In 2015, processed food and beverages generated about 3% of total GDP (7.4% of total GNP) and is expected to grow at a CAGR of 11.2% over the next 10 years.

“Due to droughts over the past decade, Iran cannot meet demands for crops such as wheat, corn and oilseeds locally. In 2014-15, Iran imported over $10 billion (21 million tons) of agri-products and food and beverages, over 6 billion of which (16 million tons) were crops, such as wheat, corn, rice and oilseeds,” said Mirmohammad.

“Because of the lack of oilseeds, as well as weakness in utilizing oil extraction technologies, of these total imports, over $1.2 billion (1.1 million tons) were crude edible oils and about $0.4 billion (0.7 million tons) were unrefined sugar. The market is also heavily dependent on animal feed imports to supply the required meals and supplements for livestock and poultry.”

About 84.5% of Iran’s total land (more than a fifth of the total 165 million hectares of land) has arid and semi-arid climates, and 15.5% have humid and semi humid climates. Over 20% of Iran’s total land, equivalent to 35 million hectares, are suitable for agricultural purposes. Currently, less than 18.75 million hectares are identified as agricultural land. Of this, over 4 million hectares are barren due to aridity or abandonment. Yet Iran has the 15th largest agricultural and irrigated landmass in the world.

 Agro Challenges

Iran’s agricultural sector suffers from low efficiency of water and soil utilization, lack of diversity in crops, obsolete and traditional technology and equipment in both cultivation and harvesting, inappropriate distribution channels and lack of downstream industries.

Agricultural efficiency is less than 40%. In 2014-2015, out of nearly 74 million crops and 16.5 million garden products, 30% were wasted. In order to boost the agricultural economy and production, the government called for many initiatives that requires technology, engineering and know-how.

In 2015, over 2.7 million hectares of land were under gardening and 12 million hectares under cultivation. Annually, Iran receives almost 413 billion cubic meters of rainfall (rain, snow & hail), 72% of which evaporate because of the arid climate. Despite the fact that Iran has over 4,600 km of trans-boundary waters, currently, total available water is less than 120 billion cubic meters. Over 2.8% of total consumed water in Iran (95 billion cubic meters) goes into agriculture, while the average world standard is not more than 70%. This is mainly due to lack of appropriate irrigation systems and low productive soils as a result of low quality fertilizers.

Iran’s government plans to increase the current water efficiency from 36% to 70% by funding modern irrigation technologies across the country. The over 30% wastage in agricultural products means over 12 billion cubic meters of water are wasted as a result of the lack of appropriate agro processing industries and poor harvesting. The country is among 24 countries facing a water crisis and will face water stress by 2025. As a result, the Iranian government aims to review the agricultural policies to manage this.

Based on Iran’s agricultural policies in the 6th development plan, out of the 18.75 million hectares of land, Iran plans on increasing total agricultural products from 90 million tons in 2015 to 170 million tons in 2025, and fruit and vegetables from 16 million tons to 30 million tons in the same period.

 Why Australia?

Australia also has an arid climate, acidic and salty soil, and lack of water resources, but has effectively managed these challenges to avoid a negative impact on agricultural land and is experienced in managing drought using innovative methods and modern irrigation systems to produce more agro products with the lowest water usage.

Iran plans on importing technology and engineering to produce downstream products and Australia is well experienced in both areas. Australia utilizes modern technologies in irrigation systems and produces biological fertilizer and pesticide, which are all areas Iran has earmarked to develop. While Iran is heavily dependent on imports of animal feed and supplementary products, both are established home industries in Australia.

Agribusiness is the second largest business after mining in the Australian economy. With a variety of botanical products and over 25,000 plant species, it is among the five largest agriculture-based countries, producing crops in various grades and producing intermediate products like essential oils.

A combination of innovative techniques, scientific developments in areas such as plant and animal breeding, management of crops, livestock, land, water and pests, and application of sophisticated machinery and information technology has developed smart farming in Australia-a view Iran is looking to advance toward.

Iran is looking to improve the quality of its products and Australia has a good reputation for offering clean, green and fresh products with few pests in crops and diseases in livestock.

Whereas Iran is a major importer, Australia is one of the world’s largest producers of cotton, wool, sugarcane, meat and leather. Iran plans to expand its dairy market and stands to gain much from Australia, renowned for its dairy products and boasting many large, famous and reputable brands like Devondale, Dairy Australia and Fonterra.

Iran has big plans to enhance its farm exports that are currently less than $4.1 billion, against Australia, which has an export market worth over $37.9 billion. Mirmohammad concluded, “Because of their similarities, Iran could benefit greatly from Australia’s advanced know-how and because of its vast need, Iran holds many business opportunities for Australian companies.”