Iran’s Agro Sector Dominated by Downward Trend of Social Capital: Deputy Minister

“Iran agriculture sector is dominated by peasant micro-cultures and the downward trend of social capital, consequently farmers are afraid of adopting the participatory approach in the production, and furthermore, they have neglected the branding and registering a business name for the agricultural crops. In fact, the share of agro-corporations in GDP is low and they are rarely active in the agricultural stock-exchange market,” Hossein Shirzad, who is also the chief executive of Iran’s Central Organization for Rural Cooperatives (CORC), said in a piece published on CORC news website recently.

Following is the full text of the article:

From the value-chain standpoint, the structure of agro-production in Iran suffers many shortages. The share of a public corporation and private joint-stock company in the agricultural sector are very low whereas the rate of informal family farming and subsistence agriculture is very high. Moreover, there are many semi-state owned dairy plants that could be assumed neither a state-owned nor a private enterprise.

Iran's agriculture sector is dominated by peasant micro-cultures and the downward trend of social capital, consequently farmers are afraid of adopting the participatory approach in the production, and furthermore, they have neglected the branding and registering a business name for the agricultural crops. In fact, the share of agro-corporations in GDP is low and they are rarely active in the agricultural stock-exchange market. These indicate the lack of "corporate governance" in the agriculture sector, while the rural and agricultural cooperatives along with their district and national unions are suffering the lack of appropriate and logical policymaking, as well.

Reviewing the adopted policies by the national unions during 1990-2011 reveals a list of failure and inefficiency which convince us that we have failed in policymaking.

We have acted incapable of enjoying the advantages of the capital market and agricultural value chain finance, therefore the concept of productivity has been neutralized and our competitiveness power in the global market has been drastically decreased.

The components of the agricultural chain production are acting as isolated parts with no technical and logical linkage. Adopting policies by an instrumental, contingent and hasty logic, rather than strategically and future-making, during the past three decades, has led to purchase two agro-industry companies (Jiroft and Shahid Rajaee), and a bankrupted transportation company.

While the neighboring countries are trying to purchase the most significant petrochemical plant of Iran, the question is that why we acted so illogical to buy two agro-industry companies? The answer is simple; first lack of strategically thought for adopting a national policy for unions and the second, non-understanding the necessity of locating in a value chain.

Today is the time of shifting from comparative advantages toward competitive advantages and this necessitates efficiency, logical management of the whole agricultural value chain and appropriate policymaking.

The national unions should endeavor to be engaged in the downstream and upstream parts of the agricultural value chain by purchasing the "agricultural support service company" as well as the petrochemical plants with more than 95 percent completed.

To tackle the challenge of "infrastructural obsolescence" and "lack of mainstreaming capital" it is necessary to redirect national unions toward the capital market.

The agricultural unions in Australia and Italy develop strong ties with the money market through purchasing the stocks of banks, chain stores, and hypermarkets to provide instant working capital for the cooperatives.

The major share of stock of agricultural input providing corporations is held by American and Netherlands national agricultural unions. The Canadian agricultural unions have a significant share of stock of producing corporations of agro-machineries. These national unions optimally enjoy the capital market capacity and potential.