02 May 2003
U.S., Australia to Help Rebuild Iraq's Farm Sector
(USDA envoy says oil for power is immediate agricultural need) (5420) The United States and Australia will jointly help rebuild agricultural production, the food delivery system and the agriculture ministry in Iraq, says J.B. Penn, U.S. under secretary of agriculture for farm and foreign services. Penn in Washington briefed reporters in a telephone conference call May 2, joined by the Department of Agriculture's newly named senior ministry advisor Dan Amstutz in Kuwait. Amstutz had been meeting with Trevor Flugge, Australia's agriculture representative in Iraq. Getting more oil flowing to power flour mills and pump irrigation water is one of agriculture's immediate needs, Amstutz said. Harvesting summer cereals in May and June and planting rice in irrigated land are additional short-term concerns, he said. There is enough wheat in Iraq being distributed by the U.N. World Food Program (WFP) or ready to be shipped to last until fall, Amstutz said. The United States has provided nearly 600,000 metric tons of food aid to the WFP for Iraq. Iraq historically is a rich agricultural area, but in recent years agriculture has deteriorated from a lack of machinery, little maintenance of irrigation systems, soil salinity and animal health problems, among other factors, Amstutz said. Only half of the country's three million hectares of irrigable land is being irrigated, he said. The centrally planned agricultural system also lacked incentives for farmers to increase production, he added. "With better inputs and machinery updates, and some new practices regarding salinity ... it's not overly optimistic to say that they can double their wheat and barley and rice production," Amstutz said. The official said that within two to three years, weather permitting, Iraq can begin to see greater agricultural productivity. The Iraq agriculture ministry has proposed establishing a poultry industry to add to the country's protein supply and will receive support for the project from the U.N. Food and Agriculture Organization (FAO), Amstutz said. Amstutz will move into Baghdad to begin work as soon as the area's security situation improves, Penn said. (Note: In the following text, "billion' equals 1,000 million.) Following is the transcript of the telephone press briefing: (begin transcript) [U.S. Department of Agriculture] Teleconference with USDA Under Secretary for Farm and Foreign Services J.B. Penn and Dan Amstutz, U.S. Senior Ministry Advisor for Agriculture Regarding Agricultural Rebuilding Efforts in Iraq OPERATOR: I would now like to introduce your host for today's conference, Alisa Harrison. Ma'am, you may begin your conference. MODERATOR: Thank you, Operator, and welcome, everyone, for joining us today. Before we begin, I wanted to lay out our agenda for today. Dr. J.B Penn will make a few opening remarks followed by Mr. Amstutz, and then we'll open it up for questions from reporters. I would ask that when the questioning begins, if you would state your name and the news outlet that you are with, that would be most appreciated as we will be providing a written transcript of this session after the call today. So with that, I will turn it over to Dr. Penn. PENN: Thanks, Alisa. We appreciate the opportunity to visit with you today. I will be brief in a few opening remarks here. The topic of course is Iraq reconstruction and the efforts that are focused around agriculture. As all of you know, a transitional government is being put in place in Iraq, led by General Garner who is now in Baghdad. USDA has been actively involved in this effort from the inception. We've had people who have been involved, first, here, and then in Kuwait, and, now, in Baghdad. We have an FAS [Foreign Agricultural Service] staff member, Mr. Lee Shatz, who is with General [Jay] Garner [head of the Defense Department's Office of Reconstruction and Humanitarian Assistance] in Baghdad now, and as you know, last week [Agriculture} Secretary [Ann] Veneman named Dan Amstutz as senior ministry advisor to coordinate USDA's activities and to be her liaison with the military authorities. We're very pleased to have Mr. Amstutz in this role. His background is unique, I think. He has a long stint of government service. He has a long stint in the private sector, very knowledgeable of the grain trade, very knowledgeable of economic development activities, and has a broad understanding of the resources that we have in the Department to make available for an activity of this kind. For rebuilding agriculture and for rebuilding the ministry of agriculture in Iraq, we are conducting this activity, jointly, with Australia as has been reported. The Australians have named Mr. Trevor Flugge to have a joint role with Mr. Amstutz. Both governments have lots of expertise, knowledge of the region, knowledge of agriculture, both have resources that are complementary, and so our objective is to bring both of these resources to bear, to try to rebuild the agricultural capability as quickly as is possible. Now there are two sets of objectives, the immediate one which, is with the end of hostilities and the end of the Saddam Hussein regime, to try to get society functioning again, and that includes, of course, food and the food delivery system, and then to get the agricultural plant itself operating again. Our longer-term objectives of course are to develop a market-oriented economy, to have a very vibrant private sector, to have a competitive economy, one that is market-driven. Now Mr. Amstutz is now in the region. He is in Kuwait. He has been there, getting briefed by the people that we've had in the region. He's been meeting with Mr. Flugge. He'll be returning home in a few days and then he'll be going back to Baghdad when the security situation is such that it's okay to go there. We wanted to have this little session today to make Mr. Amstutz available, so that he could report on his firsthand observations and impressions and the activities that he's coordinating with Mr. Flugge. We're going to try to do this on a regular basis, I don't know how frequently, but as this will be an ongoing process and as we work toward both the immediate and the longer-term objectives that I mentioned, we want to try to keep everybody posted on that. So with that, I will stop and turn this over to Dan. AMSTUTZ: Thank you, J.B., and good afternoon. As J.B. has said, there are several steps to this overall process and you're familiar with the important elements of what I consider the immediate steps, the food distribution operation underway, that has been ongoing and managed by the World Food Program, and then the process of getting the oil flowing again, turning on the power, and getting water available throughout the country. Obviously, all those things are important and they're interrelated. We need the oil, the fuel, the turbines to generate the power and we need power to mill the wheat into flour, and to pump the water in the irrigation areas. During the early meetings between Trevor and me, we also identified several other areas that we considered to be of immediate importance. One of these is the summer cereal harvest that's going to begin in the irrigated areas in mid-May and continue into June as the harvest moves farther north. This is for barley and wheat, and, secondly, the planting of rice in irrigated land that is also an immediate concern and needs to be done. Now each of these elements requires various inputs for the summer harvest to be successful. The ability to pay farmers for their production is needed and that problem is now being addressed by the financial members of General Garner's team, and on the rice we have to get some pumps working and the Corps of Engineers is working on that. So in these two areas that Trevor and I identified, they are known to General Garner's people and they are part of the immediate package. The ministry of agriculture in Baghdad has also proposed beginning, development of a poultry industry to augment the supply of protein, obviously super important in the diet, and fortunately, the FAO [U.N. Food and Agriculture Organization] has done some work on this, has a plan, has funds to help support it that were generated via the food for oil program. So I think we'll see progress in that area in the relatively near future. Now as far as what I consider the next step, the beginning of this transition to a market economy, and the revitalization and the restructuring of Iraq's agriculture, it's of key importance that the leaders of the ministry of agriculture, the ministry of irrigation, and the ministry of trade are selected so that we can begin a dialogue with them, and I can tell you that this is an ongoing process as we talk. Our agriculture guy up there, Lee Shatz, is working on the ministry of agriculture complement and others are working on the ministry of irrigation. Some of that, incidentally, is spearheaded by the Corps of Engineers, and the ministry of trade is being worked on by State Department people. It's important to identify these people because the role of Australia and the U.S. in this revitalization process is to facilitate the planning of the Iraqis. I don't have to go into detail on this, I'm sure. That this is Iraq's country, the country is the Iraqis, and we want to facilitate the development as they view it. I'm hopeful that we'll have leaders of vision and ambition, that occupy these jobs in these ministries, and that we'll have exciting planning sessions in the weeks ahead. I don't want to be presumptuous and get ahead of events here, but let me just repeat what others have said. Culturally and historically, this is a rich agricultural area. Iraqis were irrigating production in the Tigris/Euphrates area prior to the Greeks and Romans, thousands of years ago. In recent years, their agriculture has deteriorated. There's been a lack of agricultural inputs, a lack of machinery, they haven't really adequately dealt with the problem of soil salinity, and all these things must be addressed, as they are addressed. Both Trevor Flugge and I are very optimistic that agricultural output can and will increase. For instance, even though I know that most of Iraq's wheat acreage is dry land, in areas akin to our Great Plains, incidentally, but still I think with better inputs and machinery updates, and some new practices regarding salinity, that it's not overly optimistic to say that they can double their wheat and barley and rice production. They were producing that much prior to the Gulf War and with the rehabilitation of their irrigation system and dealing with animal health problems, I'm really optimistic that we can see the building of good animal, agriculture industries, not only poultry that will be beginning shortly, but perhaps we'll see the Iraqis feeding sheep in feedlots, develop some cattle feeding, and develop a dairy industry, which had been tried before, and perhaps a resurgence in palm oil production. It's likely that Iraq will continue to be an importer but it is also highly possible that they will produce more of their food needs indigenously, and that they'll have a far more prosperous agriculture than has been the case during the Saddam Hussein regime. That's certainly the hope of Trevor Flugge and I, and we're quite optimistic. That was a longer statement than I was going to make, so I'm open for your questions. MODERATOR: Operator, we will start the questioning session now, and if I could remind the reporters to please state your name and your news organization for the transcription purposes. Thank you. So Operator, we can begin. OPERATOR: Thank you. Our first question comes from Peter Shinn. Sir, your question, please. QUESTION: Thank you very much. Mr. Amstutz, could you give us an idea of how long a process this may be in terms of getting agriculture to a position where Iraqis are self-sufficient to a degree? AMSTUTZ: Well, remember, I didn't say that they would become self-sufficient, but I thought they could produce more of their needs. I think this can happen relatively quickly. The planning part of this and the development of the inputs that will be provided as desired, that can happen quite quickly. And then over the next several years, we can see the results of this -- obviously, weather permitting in the dryland areas. So I think two or three years out, you can see the beginning of the results of this, this greater productivity. MODERATOR: Operator, before we take the next question, again I remind folks to please state your news outlet as well before you ask your question. Thank you. OPERATOR: Thank you. Our next question comes from Paul Singer. Q: This is Paul Singer with Inside U.S. Trade. I have two questions for you, sir. The first is I have heard some concern from U.S. agriculture producers that there are barriers in U.S. law preventing them from either going to Iraq or being held from the development markets there. The second concern is that they are concerned that Australia is getting the upper hand and will be in some way elbowing U.S. exports out and cornering the market for grain in Iraq. AMSTUTZ: Well, I think on your first question, the request by the president of the U.N. really answers it. He has asked for the removal of all sanctions that had been imposed on Iraq. And with that process under way and completed, with the removal of those sanctions, all American industry would have freedom to do business in Iraq. On the question of exports, I should have added when I talked to the immediate situation and what is ongoing and being done now, that via the food distribution program managed by the World Food Program there are plentiful supplies of wheat, for instance, either in-country or committed for shipment to-country by the expiration of the Oil For Food Program, which comes June 3rd. And those supplies should be enough to handle needs, probably, through the summer into the fall. And by that time, I would trust that the Iraqis, to the extent they decide to enter the market then, that they would consider buying from all areas, that market conditions would dictate who does the business. The market would be free and open. Q: And you see a concern that Australia is going to in some way cement the market for their product and not for American product? AMSTUTZ: Oh, I think what's always important is the quality, the timeliness of shipments and arrivals, and the price. And that's what being competitive is all about. We have had no discussions about exports because it's so premature. Q: Thank you, sir. OPERATOR: Thank you. Our next question comes from Bill Tomson. Your affiliation and question, please. Q: Hello. My name is Bill Tomson. I'm with Oster Dow Jones. You mentioned possibly a blossoming poultry industry in Iraq. We shipped over a lot of wheat and other commodities. Will the U.S. be providing poultry to Iraq to help get this industry growing? And second of all, you said that Iraq has plenty of wheat. The United States has dedicated at least 200,000 tons of wheat from the USDA account, and possibly an extra 400,000 tons. It seems to me what you're saying is that 400,000 tons might not be needed. AMSTUTZ: Well, I'm not sure what all the World Food Program has stirred into their supply picture. So I don't want to be incorrect here, but with acquisitions that they have seen and know are there, this adequacy is real. What was your other question? I'm sorry. Q: Oh, about the poultry industry. You mentioned a possible poultry industry growing there. I'm just wondering if U.S. poultry producers, chicken-raisers will be helping out with that. AMSTUTZ: Well, that would be up to the FAO, because they would be managing that immediately. And I would -- I'll just guess. I would guess that they would start with chicks, not with hatcheries. And the chicks have to come from somewhere. Q: Thank you. OPERATOR: Thank you. Our next question comes from Richard Cowan. Your affiliation and question, please. Q: Hi. I'm with Reuters. You had mentioned a possible doubling of Iraqi grain production. And later on, you'd mentioned two or three years before productivity started having some noticeable increases. Are you saying that there is the possibility that in two or three years its grain production could double to 1990 levels? And the second part of the question is can you envision a resumption of the USDA Export Credit Guaranty Program to facilitate U.S. sales to Iraq? AMSTUTZ: Well, the answer to your first question is yes. In several years' time I can see a return to those pre-Gulf War production figures on wheat and barley, and rice. And those, in round numbers, are about double what is forecast to be this year's production. Q: Is "several years" meaning two or three? AMSTUTZ: Yes. Obviously, I can't be sure, but logic tells you it can't happen immediately. And then it depends on how quickly new processes, new techniques are employed and new inputs are supplied. But it certainly is possible. PENN: On the second question about the eligibility for credits, let me take a stab at that if I can. There are a number of steps that have to be taken before Iraq can become eligible for CCC [Commodity Credit Corporation] export credit guarantees. The first step in that direction, of course, is resolving the U.S. sanctions against Iraq and the U.N. sanctions which Dan mentioned. The second point is that Iraq has not serviced its external debt for probably 15 years, and there are questions about the total size of that debt. Some estimates suggest it might be more than $100 billion, excluding claims for reparations connected with the Kuwait Gulf War. Now, we do know that CCC has paid over $2 billion in claims resulting from Iraq's default on commercial credits and credit guarantees in the early 1990s. So to become eligible for new credits, Iraq, of course, would have to become current on its existing debt obligations. And there are a number of ways to do that, but the IMF [International Monetary Fund] and the Paris Club would be crucial to that process. And Iraq must complete that process and then have sufficiently high credit rating that would allow CCC to provide guarantees again for commercial exports. We expect that the U.S. government's review of the Iraq credit situation will be ongoing, and the Treasury Department will have a lead role in carrying that out for the government. So we have to just wait and see how that process plays out before we can talk about when Iraq might be eligible for the Export Credit Guarantee Programs again. OPERATOR: Thank you. Our next question comes from Emily Gersma. Your affiliation and question, please. Q: Hi. I'm with the Associated Press I just was curious, I'm not really aware of how Iraq's land, if it would be able to produce enough for the country to be pretty self-sufficient. Will it be self-sufficient once production is back up to par, and perhaps doubles as you say? Or is -- AMSTUTZ: "Doubling?" Q: Yes. Is it going to continue to be reliant on food aid? AMSTUTZ: "Well, first, doubling production does not make it self-sufficient. Right now, in round figures, it imports between 60 percent and two-thirds of its food needs. So doubling its production makes it more self-reliant but not self-sufficient. That's important. My hope is that we'll see all sectors of the Iraq economy start growing and expanding as we see a realization of this transition to a market-driven economy, and that Iraq will be able to buy what import needs it has commercially, without the need for food aid. Let me just add this, too, that I did mention earlier, that the dry land, the wheat area in the north of Iraq is somewhat similar to our Great Plains, which is true, but also the central and southern irrigated areas are really somewhat similar to the Central Valley of California. So by thinking of those comparisons, you see that there can be richness in agricultural production in this country. OPERATOR: Thank you. Our next question comes from Matt Kay. Your affiliation and question, please. Q: Yes. This is Matt. The Burns Bureau. Ambassador Amstutz, in a recent press conference, here, in Washington, Australia's trade minister, Mark Vaile said: We ought not just accept that this is a 2 million ton market for wheat. He said I mean with a properly operating economy, it may be a 3 million ton market. So he says it is not a zero-sum game, and therefore the piece of the cake, once this market becomes commercial, may be bigger than it is now and may provide ample opportunity for both the Australians and Americans to compete there. Would you agree with his assessment, that this could be a larger market than, let's say it was post, or before the Persian Gulf war? AMSTUTZ: Well, anything is possible, but what I've said is I don't think it will be as large, if we see the generation of more supplies produced in Iraq, which I think is possible, and I might add, Trevor and I agree on that, and I sense that perhaps the minister, when he was talking, was not aware of what kind of production potential might exist in Iraq." PENN: I think Minister Vaile was also trying to make a larger point and the larger point was that if we do a good job in helping jump-start the Iraqi economy, that as the economy grows and consumer incomes grow, that this is going to be a much larger market for food and agricultural products generally than it was in the "pre" period, and I think we find that true everywhere. That "dirt poor" countries are not very good markets. The better markets are countries that have a vibrant, growing economy, and I think that's what the minister was saying, that if we can do a good job in getting this one off to a good start, that it'll become a much bigger market overall, over the longer term. AMSTUTZ: And I agree with that a hundred percent. What J.B. says is absolutely correct. That the richer the country, the greater expendable income the citizens have, the greater variety of foods they desire, and the bigger the market, the broader the market for all manner of food product exports. And I agree with that. Q: Just a quick follow-up. What about the debt that you mentioned before, $100 billion outstanding debt and the need to use a lot of that oil revenue for reconstruction? Won't that exert a downward pressure on their ability to purchase those imports? AMSTUTZ: Well, let me just say this, and I am not in any way involved with the finances -- but when the oil starts pumping freely again and when the control of it is with the industry, the oil industry of Iraq, they'll be generating some $25 billion a year in oil export revenues. Now that's a gross figure. It doesn't have subtracted from it the cost of production and so forth. But just looking from a cash flow standpoint, a $100 billion debt with cash flow income running $25 billion, seems to me to be something that could indeed be manageable. It takes some restructuring, as J.B. has said, and I saw somewhere where J.B. said that Iraq is not Afghanistan, and that's such an important point. That this is a country that has natural resources and can generate wealth, and has a cultural history where it has been at the vanguard of things. That Iraqis are well-educated people. They are eager and ambitious, and I think Iraq can be a marvelous example to other countries in this Mideast. OPERATOR: Thank you. Our next question comes from Philip Brasher. Your affiliation and question, please. Q: Yes. I'm with the Des Moines Register. Could you talk a little more about the current yields or production that you're talking about doubling, and also a little bit about the state of the livestock, agriculture there, and finally, can you address at all the prospects for exports of other commodities, farm equipment, that sort of thing? AMSTUTZ: Let me try to address it this way. That under Saddam Hussein and particularly since the Gulf War, when the food for oil program began, several things existed. First, that agriculture was a central plan industry. Decisions were made at the top and sifted down, and Iraq clearly had a low food price policy. I'm told that individual Iraqis paid 12 cents, not $12, 12 cents a month for their food basket, which included flour, rice, vegetable oil and poultry. Clearly, price level dictated by the government like that drains agriculture of incentive and drains it of the ability to purchase and apply inputs, whether that input is phosphate and potassium fertilizer, or whether it's saline-resistant feedstock, or whether it's good veterinary practices, the whole gamut, and so we have here -- Saddam has been around for what? Thirty years. We've just drained agriculture of resources and incentives, and with a transition into a market economy, we can see health returning to agriculture and incentives to employ good farm practices and modern techniques. So that's the sort of macro overview of that. I don't have all of the statistics in front of me but, for instance -- and obviously production differs each year because roughly two-thirds of the wheat is produced on dry land, one-third on irrigated land, and I think it's about the same percentage on barley, I'm not sure, and of course rice is all irrigated. But in 1990-91, Iraq produced 1.8 million tons of barley. This year, the latest estimate I've seen is 700,000 tons. In 1990-91, Iraq produced 1.2 million tons of wheat and the latest figures I've seen this year are between 800- and 900,000 tons. Iraq has something like 11 million hectares of arable land. There are different figures floating about as to how much of that is actually cultivated today and one figure that I keep seeing, and again, we don't know for sure, we'll learn these things as we go along, is maybe about half of that is being cultivated today. About half of the three or so million hectares that are irrigable are being irrigated today. Partly this has to do with probably a lack of farm machinery and equipment, deteriorated. I'm sure there's a need for replacement parts in both the machinery and the irrigation equipment, and again it's a question of are there incentives to encourage farmers to modernize, and do they have the wherewithal? I might add also here, another reason for my optimism is that under Saddam Hussein Iraq tried collective farming. Interesting. They tried it. They tried to be Marxist. But they discovered it didn't work. And so they transited to a leasing and, I'm told, a sales-of-land effort, although I have a feeling that the land that was sold went to the hierarchy of the Baath party -- which is perhaps a little bit misleading. But with leased land, farmers have, obviously, more incentive when they're farming it than under a collectivized system. So this is perhaps a very disjointed answer to your question, but I hope it provides some of the flavor. Q: How about the livestock agriculture? Is any much functioning there? AMSTUTZ: It's just been depleted. And poor pasture conditions -- there again, these things can be improved. The sheep are raised by nomadic tribes. There is no such thing as a sheep feedlot, that I'm aware of. And not much beef production. I don't have figures, but -- and poultry has been tried. And as you probably know, Iraq has a history of importing chicken parts, for instance. They are meat eaters. It's not a vegetarian society. And dairy has been tried. Back in my time as under secretary, we shipped some dairy cattle over, but the management of the herds was lacking knowledge and it just didn't do well. So they are a dairy product importer right now. MODERATOR: Operator, we have time for two more questions. OPERATOR: Thank you. Our next question comes from Sonja Hillgren. Your affiliation and question, please. Q: Farm Journal. Ambassador Amstutz, congratulations on this post. I can't think of a better person to do it. I wanted to ask you about the livestock that you're talking about. Do you see a, maybe, change in the crop mix in Iraq to provide more feed, or do you see them maybe importing feed grains? And also I wanted to ask, there's foot and mouth in Iraq. Is that any bit of a problem in developing their livestock or maybe in personnel coming back? Are there protection methods around to keep the foot and mouth from coming to the U.S.? AMSTUTZ: Well, one of the important notes on our list of notes relates to veterinary assistance and animal health issues. I'm confident that we can get the expertise over here to deal with this subject and that the problem, to the extent it exists, can be managed and controlled. This whole area of animal health and veterinary assistance, I think, is -- you will find is an important area that the Iraqis want to address and that, certainly, the expertise exists in the United States as well as Australia to do that. Iraq, incidentally, does produce some corn and some sorghum. I didn't mention those because they are of lesser importance, and when we were focusing on the harvest there -- of course, it's not going to be harvested for a quite some time. So it's possible that in some irrigated land we see more corn production, but it's also possible, as animal agriculture increases, that we see feed ingredients coming in here as imports by Iraq. I think that's one of the areas we could see growth in trade. OPERATOR: Thank you. Our final question comes from James Webster. Your affiliation and question, please. Q: Hi, Dan. I'm from the Webster Agricultural Letter and Agri-Europe. I've got a political question or two. There's a lot of undercurrent, really, of political criticism, some of it just sort of an ad hominem attack on you spurred by Oxfam in the U.K. [United Kingdom] I don't know what you did to them when you lived in London. But they seem to think that you're not qualified to do this because, number one, you have a lot of free-market rhetoric, you used to work for Cargill, and you wrote the GATT [Generalized Agreement on Tariffs and Trade] proposal for Ronald Reagan. Now, my questions are is it true that you believe in the free market and will not advance Marxist ideology over there? Number two, when did you leave Cargill -- was it more than 20 years ago? And -- well, go ahead with it. AMSTUTZ: Well, thank you, Jim. It is absolutely true that I advocate free markets for healthy agriculture, a market-oriented system. I left Cargill in 1978 and have had no affiliation with them whatsoever. I can tell you I have never been accused of showing favoritism to any company all the time I was in public service, and the time I was in governmental service, people that know me and know my record know that comment by Oxfam published in a broad sheet press that is similar to some of the other press over there, is just not true. MODERATOR: On that note, I want to thank everyone-- PENN: A high note, we might add. MODERATOR: Yes, that was a high note. I want to thank everyone for their participation today. I just want to reiterate what Dr. Penn said earlier, we do hope to hold these regularly. So again, thank you for your participation today and we will bid you a good day. (end transcript) (Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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