Integrated Impact Integrated Impact Assessment of the Assessment of the

Association Agreement on Association Agreement on the Olive Oil Sector in the Olive Oil Sector in

LebanonLebanon Integrated Assessment and Planning Integrated Assessment and Planning

for Sustainable Developmentfor Sustainable DevelopmentSecond Review Meeting

Geneva, September 21-22, 2005

Ministry of Economy and

Trade

Scope of the Project

The project aims to undertake an integrated assessment of the trade component of the Association Agreement (AA), with particular emphasis on key economic, social and environmental factors

1995

Barcelona

Conference

2002

Association Agreementsigned, ratifiedby Lebanese Parliament

2003

Interim Agreement went into effect

2004 2005

EU Enlargement & European Neighbourhood Policy (ENP)

To launch negotiations on Action Plan for ENP

Scope of the Project (2)

The olive oil sector was chosen as a pilot product based upon a set of criteria. The sector must have:

1- Strategic linkage with the EU (Association Agreement/ENP) The EU and Lebanon have a strong business, investment, and

cultural relationship. And, under both the ENP and the AA, negotiations are expected regarding the bilateral agricultural policy

2- Social implications 57% of all farmers are involved in the olive oil sector, very high

tendency to youth migration, olive orchards are located in Lebanese poorest rural areas and across the country

3- Environmental implications In addition to pomace residues and poor agricultural practices, 1

ton of olive processing yields – on average - 1 m3 of wastewater,4- … and a cooperative private sector / NGO community

What has been done so far

• Finalize background paper• Assess the integrated impact of the Association

Agreement (including planning process)• Map and conduct an integrated needs

assessment of the agro-food initially, and the olive oil sector

• Assess the initial impact of the elimination of tariff barriers with the EU

• Identify key challenges and priorities• Conduct several meetings and focus groups• Develop policy scenarios and analyse potential

impact

Project Implementation

• Select a multidisciplinary team • Collect available data and documents• Identify key issues and stakeholders • Establish a steering committee• Conduct workshops, focus groups, consultations• Conduct price, trend and cost analysis• Derive main indicators, inter-linkages • Identify 3 scenarios and impact on selected indicators

Develop action plans and implementation process

Overview of Lebanese Olive Oil Sector

• Cultivation represents 21% of total area and is spread all over the country

Production fluctuates from year to year creating an irregular supply flow to sustain a level of export and domestic consumption

The percentage of extra virgin oil in Lebanon (5%) is low compared to int’l practices (Spain 40% and in certain parts of France over 90%).

Few labs are capable of certifying olive oil in accordance with international standards & proper enforcement regulations are lacking

Overview of Lebanese Olive Oil Sector (2)

Under Association Agreement, Lebanon can export duty-free up to 1,000 tons of olive oil while levying a 70% tariff rate (no change) on EU exports.

57% of all farmers are involved in the olive oil sector

Average age of the farmer is in the high 50s and their level of education is very low

Among the main derivatives of the olive oil production process with potential return: soap; compost ; eco-tourism

Overview of Lebanese Olive Oil Sector (3)

• Olive oil processing, as it stands, is a source of pollution: e.g., pomace , wastewater

Olive Oil Production Chain

Olive harvestingBy hand , or Beaten from the tree, or Mechanical tree shacking

CleaningLeave stripping (if required) Olive washing

MillingStone mill (traditional) Metal toothed grinder Hammer mill

Mixing

Olive Oil Production Chain (2)

ExtractionLiquid extraction

Oil storage Refrigeration in containers

Oil distribution

Olive oil separation

International

Local market

Stakeholders Actual Relationship Matrix

Farmers Millers Traders NGOs Govt. SILO

Farmers + X + + +

Millers + X + + +

Traders X X + X +

NGOs + + + + X

Govt. + + X + X

SILO + + + X X

+: positive, 0 : neutral, ?: uncertain, X : conflict of interest & objectives

SILO: Syndicate of inter-professional Lebanese olive oil producers

Policy Scenarios

Scenario 1: BaselineLebanon can export duty-free up to 1,000 tons of olive oil and still imposes 70% tariff rate on EU exports

Scenario 2: Quality improvement scenario Package of incentives (introduced in 2005) to improve quality and exports of extra virgin olive oil to the EU

Scenario 3: Forward-looking scenarioFurther bilateral and gradual liberalization of sector to be negotiated in 2008 + Scenario 2

Economic Impact

IndicatorsScenario 1 Scenario 2 Scenario 3

Larger domestic market share (by locals)

No impact Positive Negative

Exports of extra virgin olive oil

Minimal positive

Large positive

Positive

Employment Minimal positive

Positive Negative

National welfare Positive Positive Negative to zero

Environmental Impact

Indicators

Scenario 1 Scenario 2 Scenario 3

Waste water Negative Positive Positive

Solid waste Negative Positive Positive

Social Impact

IndicatorsScenario 1 Scenario 2 Scenario 3

Migration (from rural areas)

No impact Minimal negative (no migration)

Negative

Income of the farmer

Positive Positive Negative

(Agricultural) Know how

Positive Positive Negative

Quality of life (health) of the farmer

Positive Positive Negative

Impact of Scenario 1 on Stakeholders

Winners

The few extra Virgin olive oil producers and traders

Seasonal unkilled labour producing low-quality oil

Losers

• Consumers (no choice, high price)

• Communities using the wastewater (irrigation, tap water)

Policy impact is limited since only a small portion of total production is exported to the EU.

Impact of Scenario 2 on Stakeholders

Winners

• Skilled labor• Extra virgin olive oil

producers & traders• Communities

directly affected by the wastewater

Losers

• Unskilled labor• Women workers• Consumers (high

prices)

Policy impact is uncertain in short term but may be positive in medium to long-term with a shift towards premium oil and an increase in competitiveness

Impact of Scenario 3 on Stakeholders

Winners

Consumers Communities

directly affected by the wastewater

Losers

• Domestic producers of olive oil

• Domestic traders• Labor employed

Policy impact is no longer limited given the dynamic nature of the policy shock

Olive Oil Sector Inter-Linkages

EconomicProduction Un-sustainability

EnvironmentEnvironmental degradation

SocialPoor Living Conditions

Poor agricultural PracticesHigh input costsLow pricesYearly fluctuationsLow trade

Migration increaseIncome & employment lossHealth problems

Natural resources exploitationEcological degradationBiodiversity impactLack of planning

Secondary, Long-term Implications

Long term impact assuming no improvement in environmental indicators

Social Implications

Increase in migration, gradual disappearance of olive oil farming community, worsening of health conditions, and loss of income.

Economic Implications

Negative impact on export, employment, and national welfare as quality worsens of, productivity decrease, and competitiveness is lost

Secondary, Long-term Implications (2)

Long term impact assuming better environmental conditions

Economic Implications

• Sustain production

• Increase economic efficiency

• Increase exports

Social Implications

• Provide vocational training

• Improve heath conditions (reduces exposure to unsafe and polluted waters)

• Contain rural migration

Secondary, Long-term Implications (3)

Long term impact assuming better social conditions

Economic Implications

• More efficient production and management techniques

• Increase in income and volume of production

Environmental Implications

•Natural resource conservation

• Better wastewater and solid waste management

Domestic Challenges

• Limited control on the source of olive oil (e.g., black market)

• Few laboratories located in Beirut (testing is expensive)

• No national taste panel

• No geographic indication for Lebanese oil

• Lack of data, and access to information is limited and centralized

• Absence of awareness raising and marketing strategies

• No leading role for the private sector

Enabling Conditions (pre-requisites)

Olive oil sector considered as a strategic sector

Government commitment to enforce relevant regulations

Stakeholders commit to a public-private partnership

Continuing technical assitance from the EU

Recommendations

• EU contribution:• Remove EU subsidies and simplify regulations•Technical and financial assistance

• Lebanese Government contribution : • Upgrade and certify existing testing laboratories• Disseminate information and build database• Provide training and increase access to testing • Improve intra-ministerial coordination• Create an enabling environment • Facilitate by-product management• Provide access to capital

Recommendations (2)

• Private sector contribution• Organise to achieve economies of scale• Promote fair competition (e.g., inputs, fertilizers)• Disseminate information and proposals• Maintain competitive edge• Coordinate with NGOs and promote public- private partnership

• NGOs contribution:• Raise awareness• Train farmers• Enhance intra-NGO networking• Disseminate information and coordinate with private sector • Facilitate public-private partnership