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Regional Market Survey and more-
A field mission to the Russian Federation ( Moscow and Ingushetia and Chechnya) Azerbaijan, Georgia and Armenia was undertaken by AA International Ltd during March and April 2008. Field vists were made and detailed discussions held with some 100 key participants in the agricultural sectors of these areas. Reviews of reports and statistics were conducted and recommendations made accordingly. This report is available from the UN World Food Programme Regional Office in Cairo. The Executive summary is reproduced below
Executive SummaryA field Mission to the North and South Caucasus Republics was undertaken on behalf of WFP Regional Office, Cairo, from March 14th to April 20th 2008, by a consultant from AA International Ltd, UK. Activities included a briefing in Cairo by WFP- Regional Bureau followed by contiguous field visits to the Russian Federation (Moscow, North Ossetia, Chechnya, and Ingushetia), Azerbaijan (Baku, Mingevecir, and Ganja), Georgia (Tbilisi, Kakeheti, Ozurgeti, and Zugidi), and Armenia (Yerevan, Lori, Shirak).The purpose of the Mission was to conduct a Regional Market Survey following general Terms of Reference which were prioritised, after the briefing in Cairo, to a final checklist of concerns to be addressed The approach adopted included a) detailed discussions using a basic but flexible checklist with some 100 key informants comprising, market traders, wholesalers, millers, importers, farmers, farmers’ association leaders, mayors, officials from Ministries of Finance, Agriculture, Social Affairs and Labour, Customs, Emergency Commissions, National Statistics Agencies, National Banks, Credit Agencies and NGOs, World Bank, USDA, UNDP, FAO and WFP staff; b) collection and review of reports collated by the WFP offices; c) downloading of official statistics from official websites, d) review of reports, press releases and summaries of international grain board information obtained by the Mission. The findings of the Mission identify the Russian Federation as responsible for fiscal activities in the North Caucasus and confirm the strong influence of Russian Federation regarding food security in all South Caucasus Republics. Regarding the North, the two Republics reviewed are part of the economy of the Russian Federation. Given the information available, only partial GDPs were constructed by the Mission, however, the oil-based revival of Chechnya since the end of the war is apparent in both the figures and rebuilding of Grozny. Income generation, by contrast, in Ingushetia is far lower. Regarding the South Caucasus States, recent consistent double-digit GDP growth signals economic recovery in the sub-Region from the doldrums of uncertainty in the early-mid 1990s. The anticipated closure of all WFP Country Offices and the associated run-down of acquisition and delivery of food aid to very low levels over the past years, means that cessation of WFP food aid from a 10 year low is unlikely to cause widespread hardship. The transfer of the much reduced caseloads to local welfare services is perhaps untimely, given global concerns regarding price hikes, but is also very timely insomuch as government attention is presently focussed on improving social support in each Republic. Revisions and extensions of social support services are in-hand and the transfer of responsibility of the much reduced WFP caseload is being conducted alongside such revisions. By the same token, the changed condition of the sub-Region up to and including March- April 2008, compared to the mid-1990s, does not, in the Mission’s opinion, signal the need to restart food aid interventions. However, WFP continued involvement, possibly through nationally-based proxy organisations monitoring and analysing food security indicators, preserving and building capacity, encouraging and supporting the development of small-scale farming and reducing vulnerability to wheat price hikes at a national level, is highly recommended, The Mission constructed a national vulnerability index cVI, linking wheat import requirement, GDP and population for each Republic. In the North Caucasus, Ingushetia appears in a far more vulnerable position than Chechnya due to Chechnya’s significant oil wealth; however, fiscal support from the Russian Federation presently evens out the differences. In the South Caucasus, Georgia is by far the most vulnerable to wheat price increases (and is likely to remain in that position), followed by Azerbaijan then Armenia. The least vulnerable position currently occupied by Armenia is likely to change given Azerbaijan’s programme to exploit vast reserves of oil with western company assistance and Armenia’s dependency on inward investment and its war legacy of closed borders with resource- rich neighbours (Azerbaijan and Turkey). In any event, the Mission notes a universal absence of strategic stocks of wheat which places the food security of the three bread- staple, wheat- importing South Caucasus Republics ( Ingushetia and Chechnya are covered by Russian Federation stocks), squarely in the hands of commercially- motivated, large-scale millers. Given the global wheat price hikes noted in the past year and the prognoses of grain futures markets world- wide, the Mission feels that the absence of strategic stocks in the South Caucasus should be addressed and that the WFP Regional Office has a role in this regard. Food price increases from January 2007 to January 2008 ranging from 11% (Georgia) to 20% (Azerbaijan) have prompted all governments to increase significantly pensions, allowances, supplementary benefits and salaries in a series of events continuing into 2008. At the same time, the approach to import duties and taxes differs within the Caucasus. All taxes have been removed on wheat / wheat products in Azerbaijan while Georgia retains 18% VAT on local and imported wheat / wheat products and Armenia presently imposes 12% import duty and 20% VAT on wheat / wheat products. In keeping with all Republics in the Russian Federation, no import or export tariffs exist between the member Republics; and Ingushetia and Chechnya impose the Federation’s 10% VAT on wheat and wheat products.Mission analyses show near perfect levels of market integration for all indicator commodities within Ingushetia and Chechnya, and for all commodities except diesel and sugar between the two North Caucasus Republics. Very high levels of market integration for wheat flour, vegetable oil and wage labour occur within and between the South Caucasus Republics. There are also strong positive correlation coefficients between the universally highest price- increasing indicator, wheat flour (range from 40%-80 %) and wage labour in each data set studied. As might be expected from a spectrum of visits comprising oil and gas-producing and fuel-importing republics, there is no apparent market relationship between Republics regarding diesel fuel.Regarding market data generally, without WFP-collected information, food-security related market data are only available from official sources in each Republic in cleaned and summarised form. Upon WFP Country Office closure, all independent sources of regularly collected market data will disappear at a time when they are most needed. Regarding agricultural data, Mission transects and farm visits suggest that production is underestimated, mostly because of the hearsay methods used by surveyors i.e. lack of objective assessment and measurement; lack of equipment and training and the baggage of analysts committed to agricultural yields of the Soviet era not the yields of the highly-productive, sustainable systems used by smallholders in the newly-allocated plots (PHPs) and backyards that presently make up the post- privatisation agricultural sector in each Republic. The Mission suggests that WFP Regional Office’s need for regular accurate reports on the market, production and social situations is beyond the scope of any single national WFP Assistant Representative attached to a suitable Ministry or UN agency. Such work requires the immediate establishment of a network of trained, equipped and motivated assessors to replace and develop the information gathering and processing role of the Country Offices. The Mission recognises that such a network already exists in the form of the staff and other assets of the Country Offices in the throes of disestablishment. As a means of preserving this capacity in the most sustainable fashion, local staff in the Country Offices should be invited to form independent NGOs and commissioned, by the WFP Regional Office, to work in the domain of food security to provide the information required; to build the capacity of governments regarding accurate information retrieval, analysis and interpretation particularly at field level; and to implement/ supervise food-security-linked interventions for other donors on contract, as a network of linked local NGOs with common goals, objectives and working practices.Regarding other roles, the Mission suggests a) reducing national vulnerability to global wheat price hikes and export restrictions by promoting local production on unused arable land connected with the establishment of strategic reserves and b) stimulation of local economies through support to small farmers and improving access to local products in urban areas. The Mission connects these suggestions to two local purchasing initiatives:- LPO 1 contract growing of wheat by emerging medium-sized enterprises on unused ex- state farm arable land-connecting to the creation of strategic food stocks in each Republic (special attention Georgia and Armenia). LPO 2 contract growing of field crops, vegetables and fruits-connecting to the formation and support of a) smallholder producer pre-cooperatives (rural) and b) urban- based, vulnerable group, consumer pre-cooperatives; and c) brokering commercial activities between the two groups. The Mission urges WFP Regional Office senior staff to join the UN Special Rapporteur on the Right to Food and the Head on UNEP in lobbying against food commodity speculation; and for the removal of VAT and import taxes on imported wheat/ wheat flour and vegetable oil in the countries where they still exist.
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