Food Processing
Food Processing
Business Model Description
Establish or improve techniques and technologies applied in industrial food processing facilities with locally sourced products, notably dates, tomatoes, potatoes, sesame for tahini production, pomegranate and grapes for juice production. Smaller scale fruit processing plants could be established near the Internally Displaced People (IDP) camps and localities. The processing facilities along the dates value chain could produce molasses and peat and prioritize repurposing the date palm fronds and leaves to be used as organic fertilizers. Industrial processing of tomatoes could develop along post-harvest value addition (such as cleaning and weighing), conveying, grading and sorting, washing, crushing, pasteurization and (robotic) palletization. The end products would mainly target the domestic market but would have export potential given the growing international demand for organic and upmarket varieties of processed tomato products, such as sundried tomatoes, and dates.
Expected Impact
Advance rural livelihoods, food security, and domestic value added in exports, providing decent work opportunities and diversifying the economy.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Iraq: Central Provinces
- Iraq: Middle Euphrates
- Iraq: Northwestern Iraq and Anbar
- Iraq: Kurdistan Region of Iraq
- Iraq: Southern Iraq and Mesopotamian Marshes
Sector Classification
Food and Beverage
Development need
The climate change-induced weather extremes, droughts, decreasing soil fertility, and increased prevalence of sand and dust storms hinder agricultural production in Iraq. Around 65% of wheat and 90% of rice consumption are met with imports. Iraq would require an additional financing of about USD 41 billion, between 2022-2030, for achieving the SDG 2, Zero Hunger (1, 2, 3).
Policy priority
The National Development Plan (NDP) 2018-2022 aims to achieve sustainable food security, and secure annual demand for water for sustainable uses, including agricultural purposes, in the fields. It sets the objective of increasing the GDP contribution of the sector to more than 5%, achieving a sector growth rate of 8.4% during the NDP period (5).
Gender inequalities and marginalization issues
In Iraq, the poorest 20% of the population has about 10.5 persons, and the poor is disproportionately impacted by the food inflation. Benefits from the use of public goods for agricultural production such as irrigation canals are not equally distributed, as in long canal structures, amid limited water availability, upstream farms could only access adequate amount of water (7, 8).
Investment opportunities introduction
The government invested about one billion dollars during the years 2018-2022, by focusing on supporting production inputs (fertilizers and seeds), final production (subsidizing the prices of cereal crops), as well as attempts to develop irrigation methods that respond to water scarcity (10).
Key bottlenecks introduction
Decades of conflicts and sanctions had a major impact on food production in Iraq. Unstable prices, low water supplies, and lack of security contributed to the inhibited growth of the agricultural sector (6).
Food and Agriculture
Development need
The agricultural land in Iraq is underutilized, as only around 22% of land suitable for agriculture is cultivated. The agriculture production is characterized by prevalence of old farming techniques such as flood irrigation, poor management of post-harvest activities and inadequate large-scale farms. Exacerbated pressure on water supply in Iraq affects irrigation systems (3, 4).
Policy priority
In its Vision 2030, Iraq highlights the need to focus on supporting the producers of crops which are connected to food security, modernize the agricultural sector's infrastructure, adopt technological uses in irrigation and reclamation as well as secure strategic reserves of the staple crops (6).
Gender inequalities and marginalization issues
Women make up 53% of the agricultural workforce but are typically responsible for dairy production, while men are responsible for meat production. The increasing use of technology has resulted in lower participation of women in agriculture. However, there is an emphasis on the potential role of educated women in a capital-intensive agricultural system (4).
Investment opportunities introduction
Increasing productivity and efficiency, expanding market channels, promoting value addition and processing, encouraging sustainable farming practices, strengthening capacity of local actors, exploring agricultural tourism, and enhancing access to finance and credit for smallholders and agribusinesses (9).
Key bottlenecks introduction
Limited access to finance and credit facilities, weak market linkages and information asymmetry, limited access to inputs and technology, poor infrastructure and services, and political instability are the main deterrents to a conducive business environment in Iraq’s agriculture sector, undermining food security and the sectoral growth and development (11).
Processed Foods
Pipeline Opportunity
Food Processing
Establish or improve techniques and technologies applied in industrial food processing facilities with locally sourced products, notably dates, tomatoes, potatoes, sesame for tahini production, pomegranate and grapes for juice production. Smaller scale fruit processing plants could be established near the Internally Displaced People (IDP) camps and localities. The processing facilities along the dates value chain could produce molasses and peat and prioritize repurposing the date palm fronds and leaves to be used as organic fertilizers. Industrial processing of tomatoes could develop along post-harvest value addition (such as cleaning and weighing), conveying, grading and sorting, washing, crushing, pasteurization and (robotic) palletization. The end products would mainly target the domestic market but would have export potential given the growing international demand for organic and upmarket varieties of processed tomato products, such as sundried tomatoes, and dates.
Business Case
Market Size and Environment
> USD 1 billion
The demand for processed foods is expected to be around USD 1 billion, including USD 291 million for prepared tomatoes and USD 100 million for prepared potatoes (15).
Iraq is one of the world's leading producers of dates, producing in 2020 about 735,350 tons of dates, constituting 10.2% of the production of Arab countries, and 7.8% of the world's production of dates. The nation is home to more than 650 varieties of date and was used to be known to be the country of 30 million palm trees (15, 16).
A market for more than 43 million people, with population projected to be around 74.5 million by 2050, the demand is set to increase. Export opportunities are enhanced by easy road transport to neighbours. Increasing average income of individuals stimulates more spending on food and entertainment (34).
Indicative Return
20% - 25%
Benchmark from a prefeasibility study, with similar production capacity and SWOT analysis for Iraq, indicates an IRR of 21% for date processing. Increasing R&D investments and innovation in other food processing areas, such as in tomato, may generate IRR more than 30% (17, 35, 36).
Investment Timeframe
Medium Term (5–10 years)
Investments in food processing in Iraq are expected to generate return in about five years (for date processing benchmark), depending on the product and target market (35, 36, 37).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Capital - CapEx Intensive
Capital - Requires Subsidy
Impact Case
Sustainable Development Need
About 47% of suitable for agriculture land in Iraq is underutilized (26). There is a persistent need for demining and clearing of soil. Poor irrigation and reclamation technologies and insufficient management of post-harvest activities add another burden to the agriculture development (4).
Unfavourable weather conditions such as prolonged droughts or sandstorms affect the crop yield. Additionally, the two main rivers in country are expected to lose 50% of their flow by 2030 and the supply-demand gap in water resources is expected to reach about 11 million cubic meters by 2035 (3).
Import remains one of the main sources of food supply in the country. For example, fresh tomatoes have the highest projected import demand of USD 183 million. Subsidies, prevailing in energy, water and agriculture sector, slowing the natural development of the sector (15).
Gender & Marginalisation
Due to established gender norms, although women make up around 25% of the agricultural workforce in Iraq, they are often not included in off-farm activities that require leaving the farm grounds, such as processing, marketing, and retail sale (20).
Food inflation disproportionally affects the poor, internally displaced persons, returnees. In Iraq, the poorest 20% of the population typically have large families, averaging around 10.5 people per family. Additionally, shared resources such as irrigation canals are distributed unevenly (7, 8).
Expected Development Outcome
An analysis of input–output and employment data reveal that each additional USD 1 million of agricultural production could create approximately 138 new jobs in the processing sector in Iraq (20).
Food processing curbs harvest and food loss and waste, improves food affordability, boosts domestic food production, diversifying diets, and scaling up sustainable production practices (23).
Food processing rejuvenates agricultural sector, thus contributing to higher economic growth, diversity, food security and job opportunities generated.
Gender & Marginalisation
Food processing, particularly on-farm value addition opportunities, such as for tomatoes, may benefit women in gaining new job opportunities to form 60% of labor in the sector and provide income sources (6).
Food processing improves food supply and provides job opportunities, particularly benefiting conflict-affected areas such as Nineveh, most of the vegetable producers of which are internally displaced people returning to homeland after displacement.
Primary SDGs addressed
2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.4.1 Proportion of agricultural area under productive and sustainable agriculture
In 2020, there were approximately 920,000 food-insecure Iraqis (21).
In 2020, the average monthly income for farmers in Basra surveyed by the Norwegian Refugee Council (NRC) was only IQD 280,000 or USD 191 (22).
About 5 million ha are currently used for agricultural production (4).
In its Vision 2030, Iraq aims to achieve 0% of food unsecured population by 2030 (6).
N/A
Iraq has approximately 9.5 million ha of suitable for agriculture production (4).
8.6.1 Proportion of youth (aged 15–24 years) not in education, employment or training
According to the results, around 35.8 percent of the youth population was not in education, nor in employment or training (24).
N/A
12.3.1 (a) Food loss index and (b) food waste index
Five subnational food waste studies in Iraq give an insight into the possible range of household food waste, from 75 to 163 kg/ capita/year (25).
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
Waste generated by vegetables and fruit, if not treated properly, may cause environmental externalities and food loss.
Investments in agricultural activities in Iraq may aggravate the expansion of informal economy unless workers are formally registered.
Impact Risks
Given the large scale of the food processing plants, the possibility of using more resources than necessary or higher costs can occur, hence the business model might not achieve the expected impact.
If the food processing outputs are not distributed equally within communities or are exported instead, the social groups in dire need of a diverse and rich on nutrient food supply will be affected.
Impact Classification
What
Food processing diversifies the economy, enhances food security, industrial and export capacity and employment opportunities, and broadens the food mix for the population.
Who
Smallholder farmers, rural population, and general public, particularly internally displaced persons and returnees, and food processors are impacted by the improved food processing facilities.
Risk
Inefficient cost and resources management coupled with unequal distribution of outputs can limit the expected impact on beneficiary communities.
Contribution
Local production capacity decreases the overreliance (above 90%) of national budget on oil income. Food processing improves availability of vegetables and fruit, reducing food loss.
How Much
Food processing addresses a high demand for fresh tomatoes (USD 183 million). More than 170,000 jobs could be created by 2030 with a growth rate of 3% in agriculture production (15).
Impact Thesis
Advance rural livelihoods, food security, and domestic value added in exports, providing decent work opportunities and diversifying the economy.
Enabling Environment
Policy Environment
Vision 2030: is a comprehensive sustainable, and green development roadmap. The key areas of focus in agricultural sector are supporting the producers of the crops which are connected to food security, improve the farmers' access to the final goods and supply markets (6).
National Development Plan, 2018-2022: sets an objective to achieve sustainable food security, increasing the agricultural sector share in GDP from 4.5% in 2015 to 5.2% in 2022, achieving growth in the agricultural sector (5).
Poverty Reduction Strategy (PRS), 2018-2022: proposes interventions in regard to stimulating the increase of agricultural production and diversifying rural economic activity to include nutritious component to the agricultural production and generate new value added (27).
National Nutrition Strategy 2012–2021: defines a comprehensive framework for improving health and nutrition. The strategy ensures safe food availability and provision of food security for all (28).
Financial Environment
Financial incentives: Federal Budget 2023-2025 repurposes Agricultural Loan Fund for Farmers and Small Farmers, established in 2009 and attached to the Ministry of Agriculture instead of the Ministry of Finance, facilitating the launch of soft loans to support farmers and small farmers (32).
Fiscal incentives: Investment projects are eligible for tax exemptions up to 15 years, outlined by the Legal Guide to Investment in Iraq by the National Investment Commission (41).
Other incentives: National Investment Authority supports 195 investment opportunities in ten governorates with an area of agricultural land of 2.3 million dunums (33).
Regulatory Environment
Law No.2 on the Emergency Support for Food Security and Development, 2022: aims to transfer public funds (USD 17.14 billion) to meet the urgent needs of Iraqis for food security, particularly in staple food supplies, alleviating poverty, and achieving financial stability (29).
Law No. 46 Agricultural Materials Handling, 2012: organizes trade for agricultural materials, import control, sale of agricultural materials; increasing farm income by encouraging the cultivation of seeds and the use of appropriate fertilizer (30).
Law No. 50 on Seeds and Seed Tubers, 2012: aims at organizing and encouraging seeds production in both the public and private sector (31).
Marketplace Participants
Private Sector
Al Oweis, Noor Al-Kafeel, Green Iraq, Zakko Group, Vano Group, Al Awrad, Bakhteyare, Debbane Saikali Group, Nawras Tarım Ürünleri Tic. Ltd. Şti.
Government
Ministry of Agriculture, Ministry of Planning, Ministry of Health and Environment, Ministry of Higher Education and Scientific Research, Ministry of Trade, Ministry of Industry and Trade, Kurdistan Regional Government.
Multilaterals
Food and Agriculture Organisation of the United Nations (FAO), International Trade Centre (ITC), United Nations Environment Programme (UNEP), United Nations Development Programme (UNDP), World Food Programme (WFP), World Bank.
Non-Profit
Islamic Relief, Caritas Iraq, Al-Khiamiat, Al-Bayan Center for Planning and Studies.
Ministry of Education (MoE) is set to take over the School Feeding Programme, which has been provided by the World Food Programme (WFP) since 2013. Firms are contracted as service providers for sourcing, warehousing, and packaging the main food items (42).
Target Locations
Iraq: Central Provinces
Iraq: Middle Euphrates
Iraq: Northwestern Iraq and Anbar
Iraq: Kurdistan Region of Iraq
Iraq: Southern Iraq and Mesopotamian Marshes
References
- (1) Ministry of Planning, Republic of Iraq and UNDP. 2022. Financial Gap Analysis of Agenda 2030 and SDGs in Iraq. Baghdad.
- (2) International Trade Administration. 2021. Iraq – Country Commercial Guide. https://www.trade.gov/country-commercial-guides/iraq-agriculture
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- (4) FAO. 2021. Agricultural value chain study in Iraq – Dates, grapes, tomatoes and wheat. Bagdad. https://doi.org/10.4060/cb2132en
- (5) Ministry of Planning of the Republic fo Iraq. 2018. National Development Plan 2018-2022. https://andp.unescwa.org/index.php/plans/1139#:~:text=The%20National%20Development%20Plan%202018,ecological%2C%20psychological%20and%20spiritual%20levels.
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