COMPETITIVENSS AND COMPARATIVE ADVANTAGE OF LIVE ...
Competitiveness and comparative Advantage of Tomato in Syria
Basima Atiya [email protected]
Paper prepared for presentation at the I Mediterranean Conference of Agro-Food Social Scientists. 103rd EAAE Seminar ‘Adding Value to the Agro-Food Supply Chain in the Future Euromediterranean Space’. Barcelona, Spain, April 23rd - 25th, 2007
Copyright 2007 by [Basima Atiya]. All rights reserved. Readers may make verbatim copies of this document for noncommercial purposes by any means, provided that this copyright notice appears on all such copies.
Competitiveness and comparative Advantage of Tomato in Syria By: Basima Atiya
NAPC
Abstract
The paper investigates Syrian tomato to asses the efficiency and sustainability in the use of domestic resources and tradable inputs, in order to identify new and more stable opportunities for Syrian exports. In this study, the commodity system has been broken down into four representative systems: packed open field tomato exported to regional markets, packed greenhouse tomato exported to regional, packed greenhouse tomato exported to EU, and tomato paste. Private and social profitabilities are assessed using the Policy Analysis Matrix (PAM). All results indicate that the Syrian tomato has a comparative advantage for the four representative systems, both under the current policies and in the absence of government intervention. Moreover, the results indicate that the systems of fresh greenhouse packed tomato and tomato paste display negative transfers, meaning that these systems are taxed. Explicit taxes are applied mainly on the packaging materials, whereas implicit taxes are imposed by the high transaction costs and the presence of non-tariff barriers. The sensitivity analysis indicates that fresh tomato and tomato paste enjoy comparative advantage under all prices and yields observed over the last decade, and parity prices of the main output and yield are the crucial parameters influencing the value of the DRC. Finally, despite the implicit taxation of tomato sub-sector, it still has a strong comparative advantage, and this report stresses the importance of improving and diversifying Syrian tomato industry to cope with the evolving demands of international markets.
COMPETITIVENSS AND COMPARATIVE ADVANTAGE OF TOMATO IN SYRIA
2006
1. INTRODUCTION 1.1 Background of the Research In 2005, the agricultural sector contributed to 24% of total GDP, in which the vegetable and fruit sector increasingly plays a crucial role. During the last three decades, vegetable production has significantly improved due to the expansion of cropped area and the intensification of cropping practices. Therefore, it accounted for a good share of total plant production (10.8%). Supplies of such crops have significantly increased responding to increasing consumption caused by population growth1. In 2004, the total cultivable area of vegetables accounted 170 thousand ha from which 11% was under tomato. The total production of tomato increased from 409 to 965 thousand metric tons (MT) during the period 1996-2004 with an annual growth rate of 10%. Moreover, it accounts for about 30% of the value of the total vegetable production. Indeed, this high growth rate has caused a saturation of the local demand leading to a significant surplus of tomato products (Figure 1). New export market opportunities are emerging in the region and beyond, which might contribute to income growth of the sector particularly rural population. Furthermore, the domestic demand of processed food (such as tomato paste and other processed tomato) is also likely to grow at a rapid pace as a result of population and income growth. The changing patterns of consumption in urban areas (where female employment is increasing and time for processing food at home is reduced), the increase in consumption of fast food and food outside the households will most probably boost demand for processed tomato. The agro-industry should, therefore, expand considerably to cope with the growing demand.
1
Estimated at 2.45% per year.
3
Figure 1 Tomato production, import, export and total supply,local& total demand 1996-2004
1 200
1 200
1 000
1 000
800
800
600
600
400
400
200
200
20 04
20 03
20 01 20 02
19 99 20 00
19 98
0
19 97
19 96
0
production
import
ex port
total supply
local demand
total demand
Production In 2004, 98% of tomato output was produced using irrigation, while the rest (2%) was from rainfed tomato fields. Irrigated tomato is grown in three seasons (summer, autumn, and spring) to meet the high growing local demand for fresh and processed consumption. Besides, there is a high demand of tomato from foreign markets, especially from the neighboring countries. Syrian farmers have therefore strong incentives to grow tomato, in both irrigated and rainfed area. Tomato harvest results from two types of production systems namely open field and greenhouse tomatoes. Field Tomatoes Open field tomato is grown in different climates from June to October. It spreads out from the Yarmok basin of Dara’a in the south, to Aleppo in the north. The total area under irrigated field tomato accounted for 7.6% of the total irrigated vegetables. Farmers have recently been using intensification and diversification strategies instead of expansion. Yields per hectare have grown substantially, and the value of production per hectare rose from SP 158 thousand in 2000 to SP
4
221 thousand in 2004. The area under field tomatoes shares about 68% from total area of tomato. There are two major utilizations of field tomato; field tomato is either consumed fresh or processed into tomato paste. Each product is retained in the study as a main final output. Greenhouse tomatoes Tomato is also grown in greenhouses adopting new irrigation technologies and high yielding varieties. This production activity provides high returns to farmers. The growing local demand for fresh tomato consumption and the high tomato demand from foreign markets, especially from the neighboring countries (for early season tomato), caused a 15% increase in the total number of greenhouses. As a result, the production increased by 72%, (from 1997-2004), greenhouse tomato contributes by about 42% to total tomato production due to the high yield of greenhouses. Greenhouse tomatoes is consumed as fresh and mainly exported as packed fresh tomato.
Processing Tomato is a delicate and a very perishable commodity and must be handled with care. For this reason, it is packed in the same region of production. In addition, the increase in tomato production necessitates improving its marketing and processing activities. Indeed, this improvement will serve to get good fresh product suitable for ultimate consumption, to supply good raw material for processing, to improve the quality of the final product, to minimize losses, and to increase the income of all economic agents dealing with this product. Figure 2 shows the main channels of tomato commodity system in Syria.
5
Figure 2 Tomato commodity chain, 2004
Open field 62% of total tomato
63%
Green house 38% of total tomato 3%
2%
80%
35%
Wholesale market
Wholesale market
Middlemen 2%
100%
2% Processors
Exported packed fresh open field & tomato paste
Note Means out of chain Processors means both packed and tomato paste
Policy issues Syria has been performing relatively well in exporting fruit and vegetables especially to the Arab countries. Currently, Syrian Government interest is devoted to improve its export performance to other countries; for example, EU, eastern and central Europe markets. To this end, Government has removed all the taxes related to the agricultural production and the tax on export profit2. The Government supports local production of tomato (and other vegetables) by a favorable trade policy through the Agricultural Calendar of the Great Arab Free Trade Area (GAFTA). In 1998, GAFTA agreement approved a gradual elimination of tariffs between 1998 and 2007. This tariff elimination is to be applied by an annual tariff reduction of 10% until 2007, when all tariffs should be eliminated. In the last two years, and before the full implementation of GAFTA, 20% 2
Decree no. 15 dated 3/7/ 2001.
6
of tariff reduction has been applied. In fact, only in given periods during the year, tomato is exempted from import tax, while outside such periods, tomato imports are subject to a tax of 29%. Noticeably, tomato paste imports are subject to a 102% tax3. The Syrian-EU Partnership Agreement has allowed Syria to take significant shares of tomato (about 15000 tons) to be exported to the EU and exempted from the custom duties. This is expected to be applied as soon as the Agreement is signed.
1.2 Research Objective The questions underlying the investigation are: 1) how competitive is tomato business, 2) what impact does the Government intervention have on the competitiveness of tomato operations, 3) does Syria have a comparative advantage in tomato (fresh and tomato paste), 4) to what extent Syria still has comparative and competitive advantage in the regional and international markets. Tomato commodity system has been broken down into representative systems on the basis of the following criteria. The type of the main output produced: Tomatoes are being processed into different final outputs that don't have the same importance in the system such as packed fresh tomato and tomato paste. Farm level technology: Tomato can be produced through two different techniques at farm level namely open field and greenhouse. Targeted Market: Tomato is exported to Gulf and EU markets. Therefore, this paper is focused on analyzing the comparative advantage for four systems: packed open field tomato exported to regional market, packed greenhouse tomato exported to regional market, packed greenhouse tomato exported to the EU, and tomato paste exported to regional market. 3
Ministry of Finance - General Customs Department . Customs tariff spreadsheet by harmonies system.
7
2. Research methods 2.1 The Policy Analysis Matrix Approach In this study, the PAM methodology is used to examine the economics of packed field tomato, greenhouse tomato and tomato paste systems. PAM can also be used to investigate the entire commodity system including farmer, processor and trader. Measures of profitability both social and private and net transfers are the most important results of the PAM analysis. However, the matrix format makes it possible to break down the end of results into the various components including output transfers, tradable input transfers, and domestic resource transfers. These can be presented in ratio forms such as the DRC, the PCR and the NPC.
2.2
Data collection
To obtain the estimates of private and social profitability, data of farmer, processor and exporter budgets are needed. Both primary and secondary sources are used. The former are obtained through interviews and structured questionnaires at farm level data gathered from the two governorates mainly producing tomato: Dara’a for open field and Tartous for the greenhouse tomatoes. Data on post-harvest operation concentrated in three governorates: Latakia, Tratous and Damascus.
2.3
Budget
Three budgets have been constructed (farmer, processor and exporter). These budgets present revenues, costs and profits. Costs are disaggregated into three main groups: fixed costs, intermediate input costs, and direct labor costs. Also, budgets distinguish, within each cost category, tradable goods and domestic resources (labor and capital).
8
2.4
Macro economic environment
The PAMs are computed in Syrian Pound (SP). Therefore, the exchange rate is an important determinant of the value of tradable input on the world market because it has to be converted into SP. No distortion is observed between the current and social exchange rate: Lebanon border exchange rate is 51.5 SP/US$. Given the relative stability of this rate in the past years, it was applied to estimate the private and the social value of the tradables. For the capital market, the private rate of return is 5.5% representing the official interest rate offered by the Commercial Bank of Syria, while the social one is 3% (equivalent to the weighted rate computed by the International Monetary Fund). For labor market, it is assumed that there is no distortion and the current wages correspond to the real value of labor. A correction factor of 22.5 is applied to the value of skilled labor to take account of the pension effect and health insurance fee on the value of this domestic factor. For major tradables such as agricultural inputs, the latest uniform duty is used to compute the social price after deduction of the taxes applied whenever imported. For composite good or services, such as building or mechanized labor a weighted rate is computed using the standard budget developed to compute the disaggregation coefficient. For energy, a comparison between the current market price for fuel in Syria and that prevailing at the international market results in a difference of 40% to the benefit of the Syrian operators. It means that there is a transfer of 40% from the oil-producing sector to the other sectors of the economy.
2.5
Parity prices
Parity prices are calculated as FOBs. The FOB price at the Syrian border for packed fresh open field tomato equals 195 US$/ton , while the FOB price at the Syrian border for packed fresh greenhouse tomato equals 283 US$/ton, and Price of tomato paste at the Syrian border equals
9
980 US$/ton. With reference to the EU market, the parity price is calculated for packed greenhouse tomato and equals 775 US$/ton.
3 PAM analysis results The first step in the PAM analysis of packed and processed tomato was to construct an inputout put table showing the physical inputs that were required to produce a unit of out put. Private and social prices were then used to construct budgets that showed private and social profits. The results of PAMs analysis of tomato systems are shown in the following tables. Table 1 PAM of Packed field tomato
Item
Revenue
Profits
Costs Tradable inputs
Domestic factors
Private Price
A
15133
B
4732
C
4446
D
5955
Social Price
E
11661
F
4603
G
3802
H
3256
Divergences
I
3473
J
129
K
644
L
2699
Table 2 PAM of Packed Greenhouse EU
Private Price
A
25182
B
5956
C
6331
D
12895
Social Price
E
45504
F
6755
G
5516
H
33233
Divergences
I
-20322
J
-798
K
815
L
-20339
Table 3 PAM of Tomato paste
Private Price
A
40000
B
14054
C
9826
D
16119
Social Price
E
48925
F
14664
G
8956
H
25305
Divergences
I
-8925
J
-610
K
870
L
-9186
10
Table 4 Packed Greenhouse Regional
Private Price
A
25182
B
5851
C
6257
D
13074
Social Price
E
20284
F
6627
G
5440
H
8217
Divergences
I
4898
J
-776
K
817
L
4857
Table 5 Indicators
Fresh open field regional market
Fresh greenhouse regional market
Fresh greenhouse EU market
Tomato paste open field low concentrate
FCB
0.427
0.324
0.329
0.379
DRC
0.539
0.398
0.142
0.261
NPC
1,298
1.241
0.553
0.818
EPC
1.474
1.415
0.496
0.757
PS
0.231
0.239
-0.447
-0.188
PSE
0.178
0.193
-0.808
-0.230
Main Indicators
3.1
Profitability
The financial cost-benefit ratios (FCB) computed for each system are below 1, indicating that for 2004, all the systems are profitable. The most profitable systems are in decreasing order are fresh greenhouse regional, fresh greenhouse EU market, tomato paste regional, fresh open field regional. 3.2
Economic efficiency
Looking at the profit obtained at social price, the systems maintain their profitability under the new policy and market environment. In terms of return to Domestic Factors invested at social price, all systems had strong comparative advantage (DRC is below 0.5) and the most efficient systems in decreasing order are fresh packed greenhouse tomato EU market (DRC=0.142), tomato paste (DRC=0.261) fresh packed greenhouse tomato regional (DRC=0.398) fresh packed regional (DRC=0.539).
11
3.3
Transfer of resources •
The lower FCB ratios obtained from both packed open field and greenhouse regional market systems compared to the DRC indicates that both systems are more profitable at private price than they are at social price. However, for the other systems (packed greenhouse and tomato paste), the FCB is higher than DRC indicating that both systems are more profitable at social price than at private price.
•
Both fresh systems at the regional market have an Effective Protection Coefficient (EPC) above the unity, and accordingly, the benefit on aggregate from a positive transfer of resources from the rest of the economy.
•
The Producer Subsidy Equivalent (PSE), which compares the share of the revenue earned by each system due to transfer of resources from the rest of the economy, is positive for the packed field and greenhouse regional systems indicating a transfer of resources from the economy to these systems. For the remaining systems, the PSEs are negative indicating a transfer of resources from these systems to the whole economy.
•
Regarding the structure of these transfers of resources, the largest share of the transfer is due to price distortions affecting the revenue of the systems (62% on average for all the selected systems), while distortions induced by the current policy environment and market imperfection have a more limited impact on the value of tradable input (17% on average for all the systems).
•
The ratio of the EPC to the NPC can be used as an indication of the respective impact of the current policy on the prices of tradable outputs and tradable inputs. For most of the systems, the ratios of NPC to EPC are rather small, meaning that most of the distortion between the private price and the social price situation is due to divergence on tradable outputs.
12
3.4
Analysis of sensitivity
The DRC is on average highly sensitive to the value of the main final output parity price (β = 0.7) for tomato paste and to the yield achieved at the farm level (β=0.5) for the greenhouse system. Table 6 Probability of having a comparative advantage.
Lowest DRC
Highest DRC
Probability for a DRC
Basima Atiya [email protected]
Paper prepared for presentation at the I Mediterranean Conference of Agro-Food Social Scientists. 103rd EAAE Seminar ‘Adding Value to the Agro-Food Supply Chain in the Future Euromediterranean Space’. Barcelona, Spain, April 23rd - 25th, 2007
Copyright 2007 by [Basima Atiya]. All rights reserved. Readers may make verbatim copies of this document for noncommercial purposes by any means, provided that this copyright notice appears on all such copies.
Competitiveness and comparative Advantage of Tomato in Syria By: Basima Atiya
NAPC
Abstract
The paper investigates Syrian tomato to asses the efficiency and sustainability in the use of domestic resources and tradable inputs, in order to identify new and more stable opportunities for Syrian exports. In this study, the commodity system has been broken down into four representative systems: packed open field tomato exported to regional markets, packed greenhouse tomato exported to regional, packed greenhouse tomato exported to EU, and tomato paste. Private and social profitabilities are assessed using the Policy Analysis Matrix (PAM). All results indicate that the Syrian tomato has a comparative advantage for the four representative systems, both under the current policies and in the absence of government intervention. Moreover, the results indicate that the systems of fresh greenhouse packed tomato and tomato paste display negative transfers, meaning that these systems are taxed. Explicit taxes are applied mainly on the packaging materials, whereas implicit taxes are imposed by the high transaction costs and the presence of non-tariff barriers. The sensitivity analysis indicates that fresh tomato and tomato paste enjoy comparative advantage under all prices and yields observed over the last decade, and parity prices of the main output and yield are the crucial parameters influencing the value of the DRC. Finally, despite the implicit taxation of tomato sub-sector, it still has a strong comparative advantage, and this report stresses the importance of improving and diversifying Syrian tomato industry to cope with the evolving demands of international markets.
COMPETITIVENSS AND COMPARATIVE ADVANTAGE OF TOMATO IN SYRIA
2006
1. INTRODUCTION 1.1 Background of the Research In 2005, the agricultural sector contributed to 24% of total GDP, in which the vegetable and fruit sector increasingly plays a crucial role. During the last three decades, vegetable production has significantly improved due to the expansion of cropped area and the intensification of cropping practices. Therefore, it accounted for a good share of total plant production (10.8%). Supplies of such crops have significantly increased responding to increasing consumption caused by population growth1. In 2004, the total cultivable area of vegetables accounted 170 thousand ha from which 11% was under tomato. The total production of tomato increased from 409 to 965 thousand metric tons (MT) during the period 1996-2004 with an annual growth rate of 10%. Moreover, it accounts for about 30% of the value of the total vegetable production. Indeed, this high growth rate has caused a saturation of the local demand leading to a significant surplus of tomato products (Figure 1). New export market opportunities are emerging in the region and beyond, which might contribute to income growth of the sector particularly rural population. Furthermore, the domestic demand of processed food (such as tomato paste and other processed tomato) is also likely to grow at a rapid pace as a result of population and income growth. The changing patterns of consumption in urban areas (where female employment is increasing and time for processing food at home is reduced), the increase in consumption of fast food and food outside the households will most probably boost demand for processed tomato. The agro-industry should, therefore, expand considerably to cope with the growing demand.
1
Estimated at 2.45% per year.
3
Figure 1 Tomato production, import, export and total supply,local& total demand 1996-2004
1 200
1 200
1 000
1 000
800
800
600
600
400
400
200
200
20 04
20 03
20 01 20 02
19 99 20 00
19 98
0
19 97
19 96
0
production
import
ex port
total supply
local demand
total demand
Production In 2004, 98% of tomato output was produced using irrigation, while the rest (2%) was from rainfed tomato fields. Irrigated tomato is grown in three seasons (summer, autumn, and spring) to meet the high growing local demand for fresh and processed consumption. Besides, there is a high demand of tomato from foreign markets, especially from the neighboring countries. Syrian farmers have therefore strong incentives to grow tomato, in both irrigated and rainfed area. Tomato harvest results from two types of production systems namely open field and greenhouse tomatoes. Field Tomatoes Open field tomato is grown in different climates from June to October. It spreads out from the Yarmok basin of Dara’a in the south, to Aleppo in the north. The total area under irrigated field tomato accounted for 7.6% of the total irrigated vegetables. Farmers have recently been using intensification and diversification strategies instead of expansion. Yields per hectare have grown substantially, and the value of production per hectare rose from SP 158 thousand in 2000 to SP
4
221 thousand in 2004. The area under field tomatoes shares about 68% from total area of tomato. There are two major utilizations of field tomato; field tomato is either consumed fresh or processed into tomato paste. Each product is retained in the study as a main final output. Greenhouse tomatoes Tomato is also grown in greenhouses adopting new irrigation technologies and high yielding varieties. This production activity provides high returns to farmers. The growing local demand for fresh tomato consumption and the high tomato demand from foreign markets, especially from the neighboring countries (for early season tomato), caused a 15% increase in the total number of greenhouses. As a result, the production increased by 72%, (from 1997-2004), greenhouse tomato contributes by about 42% to total tomato production due to the high yield of greenhouses. Greenhouse tomatoes is consumed as fresh and mainly exported as packed fresh tomato.
Processing Tomato is a delicate and a very perishable commodity and must be handled with care. For this reason, it is packed in the same region of production. In addition, the increase in tomato production necessitates improving its marketing and processing activities. Indeed, this improvement will serve to get good fresh product suitable for ultimate consumption, to supply good raw material for processing, to improve the quality of the final product, to minimize losses, and to increase the income of all economic agents dealing with this product. Figure 2 shows the main channels of tomato commodity system in Syria.
5
Figure 2 Tomato commodity chain, 2004
Open field 62% of total tomato
63%
Green house 38% of total tomato 3%
2%
80%
35%
Wholesale market
Wholesale market
Middlemen 2%
100%
2% Processors
Exported packed fresh open field & tomato paste
Note Means out of chain Processors means both packed and tomato paste
Policy issues Syria has been performing relatively well in exporting fruit and vegetables especially to the Arab countries. Currently, Syrian Government interest is devoted to improve its export performance to other countries; for example, EU, eastern and central Europe markets. To this end, Government has removed all the taxes related to the agricultural production and the tax on export profit2. The Government supports local production of tomato (and other vegetables) by a favorable trade policy through the Agricultural Calendar of the Great Arab Free Trade Area (GAFTA). In 1998, GAFTA agreement approved a gradual elimination of tariffs between 1998 and 2007. This tariff elimination is to be applied by an annual tariff reduction of 10% until 2007, when all tariffs should be eliminated. In the last two years, and before the full implementation of GAFTA, 20% 2
Decree no. 15 dated 3/7/ 2001.
6
of tariff reduction has been applied. In fact, only in given periods during the year, tomato is exempted from import tax, while outside such periods, tomato imports are subject to a tax of 29%. Noticeably, tomato paste imports are subject to a 102% tax3. The Syrian-EU Partnership Agreement has allowed Syria to take significant shares of tomato (about 15000 tons) to be exported to the EU and exempted from the custom duties. This is expected to be applied as soon as the Agreement is signed.
1.2 Research Objective The questions underlying the investigation are: 1) how competitive is tomato business, 2) what impact does the Government intervention have on the competitiveness of tomato operations, 3) does Syria have a comparative advantage in tomato (fresh and tomato paste), 4) to what extent Syria still has comparative and competitive advantage in the regional and international markets. Tomato commodity system has been broken down into representative systems on the basis of the following criteria. The type of the main output produced: Tomatoes are being processed into different final outputs that don't have the same importance in the system such as packed fresh tomato and tomato paste. Farm level technology: Tomato can be produced through two different techniques at farm level namely open field and greenhouse. Targeted Market: Tomato is exported to Gulf and EU markets. Therefore, this paper is focused on analyzing the comparative advantage for four systems: packed open field tomato exported to regional market, packed greenhouse tomato exported to regional market, packed greenhouse tomato exported to the EU, and tomato paste exported to regional market. 3
Ministry of Finance - General Customs Department . Customs tariff spreadsheet by harmonies system.
7
2. Research methods 2.1 The Policy Analysis Matrix Approach In this study, the PAM methodology is used to examine the economics of packed field tomato, greenhouse tomato and tomato paste systems. PAM can also be used to investigate the entire commodity system including farmer, processor and trader. Measures of profitability both social and private and net transfers are the most important results of the PAM analysis. However, the matrix format makes it possible to break down the end of results into the various components including output transfers, tradable input transfers, and domestic resource transfers. These can be presented in ratio forms such as the DRC, the PCR and the NPC.
2.2
Data collection
To obtain the estimates of private and social profitability, data of farmer, processor and exporter budgets are needed. Both primary and secondary sources are used. The former are obtained through interviews and structured questionnaires at farm level data gathered from the two governorates mainly producing tomato: Dara’a for open field and Tartous for the greenhouse tomatoes. Data on post-harvest operation concentrated in three governorates: Latakia, Tratous and Damascus.
2.3
Budget
Three budgets have been constructed (farmer, processor and exporter). These budgets present revenues, costs and profits. Costs are disaggregated into three main groups: fixed costs, intermediate input costs, and direct labor costs. Also, budgets distinguish, within each cost category, tradable goods and domestic resources (labor and capital).
8
2.4
Macro economic environment
The PAMs are computed in Syrian Pound (SP). Therefore, the exchange rate is an important determinant of the value of tradable input on the world market because it has to be converted into SP. No distortion is observed between the current and social exchange rate: Lebanon border exchange rate is 51.5 SP/US$. Given the relative stability of this rate in the past years, it was applied to estimate the private and the social value of the tradables. For the capital market, the private rate of return is 5.5% representing the official interest rate offered by the Commercial Bank of Syria, while the social one is 3% (equivalent to the weighted rate computed by the International Monetary Fund). For labor market, it is assumed that there is no distortion and the current wages correspond to the real value of labor. A correction factor of 22.5 is applied to the value of skilled labor to take account of the pension effect and health insurance fee on the value of this domestic factor. For major tradables such as agricultural inputs, the latest uniform duty is used to compute the social price after deduction of the taxes applied whenever imported. For composite good or services, such as building or mechanized labor a weighted rate is computed using the standard budget developed to compute the disaggregation coefficient. For energy, a comparison between the current market price for fuel in Syria and that prevailing at the international market results in a difference of 40% to the benefit of the Syrian operators. It means that there is a transfer of 40% from the oil-producing sector to the other sectors of the economy.
2.5
Parity prices
Parity prices are calculated as FOBs. The FOB price at the Syrian border for packed fresh open field tomato equals 195 US$/ton , while the FOB price at the Syrian border for packed fresh greenhouse tomato equals 283 US$/ton, and Price of tomato paste at the Syrian border equals
9
980 US$/ton. With reference to the EU market, the parity price is calculated for packed greenhouse tomato and equals 775 US$/ton.
3 PAM analysis results The first step in the PAM analysis of packed and processed tomato was to construct an inputout put table showing the physical inputs that were required to produce a unit of out put. Private and social prices were then used to construct budgets that showed private and social profits. The results of PAMs analysis of tomato systems are shown in the following tables. Table 1 PAM of Packed field tomato
Item
Revenue
Profits
Costs Tradable inputs
Domestic factors
Private Price
A
15133
B
4732
C
4446
D
5955
Social Price
E
11661
F
4603
G
3802
H
3256
Divergences
I
3473
J
129
K
644
L
2699
Table 2 PAM of Packed Greenhouse EU
Private Price
A
25182
B
5956
C
6331
D
12895
Social Price
E
45504
F
6755
G
5516
H
33233
Divergences
I
-20322
J
-798
K
815
L
-20339
Table 3 PAM of Tomato paste
Private Price
A
40000
B
14054
C
9826
D
16119
Social Price
E
48925
F
14664
G
8956
H
25305
Divergences
I
-8925
J
-610
K
870
L
-9186
10
Table 4 Packed Greenhouse Regional
Private Price
A
25182
B
5851
C
6257
D
13074
Social Price
E
20284
F
6627
G
5440
H
8217
Divergences
I
4898
J
-776
K
817
L
4857
Table 5 Indicators
Fresh open field regional market
Fresh greenhouse regional market
Fresh greenhouse EU market
Tomato paste open field low concentrate
FCB
0.427
0.324
0.329
0.379
DRC
0.539
0.398
0.142
0.261
NPC
1,298
1.241
0.553
0.818
EPC
1.474
1.415
0.496
0.757
PS
0.231
0.239
-0.447
-0.188
PSE
0.178
0.193
-0.808
-0.230
Main Indicators
3.1
Profitability
The financial cost-benefit ratios (FCB) computed for each system are below 1, indicating that for 2004, all the systems are profitable. The most profitable systems are in decreasing order are fresh greenhouse regional, fresh greenhouse EU market, tomato paste regional, fresh open field regional. 3.2
Economic efficiency
Looking at the profit obtained at social price, the systems maintain their profitability under the new policy and market environment. In terms of return to Domestic Factors invested at social price, all systems had strong comparative advantage (DRC is below 0.5) and the most efficient systems in decreasing order are fresh packed greenhouse tomato EU market (DRC=0.142), tomato paste (DRC=0.261) fresh packed greenhouse tomato regional (DRC=0.398) fresh packed regional (DRC=0.539).
11
3.3
Transfer of resources •
The lower FCB ratios obtained from both packed open field and greenhouse regional market systems compared to the DRC indicates that both systems are more profitable at private price than they are at social price. However, for the other systems (packed greenhouse and tomato paste), the FCB is higher than DRC indicating that both systems are more profitable at social price than at private price.
•
Both fresh systems at the regional market have an Effective Protection Coefficient (EPC) above the unity, and accordingly, the benefit on aggregate from a positive transfer of resources from the rest of the economy.
•
The Producer Subsidy Equivalent (PSE), which compares the share of the revenue earned by each system due to transfer of resources from the rest of the economy, is positive for the packed field and greenhouse regional systems indicating a transfer of resources from the economy to these systems. For the remaining systems, the PSEs are negative indicating a transfer of resources from these systems to the whole economy.
•
Regarding the structure of these transfers of resources, the largest share of the transfer is due to price distortions affecting the revenue of the systems (62% on average for all the selected systems), while distortions induced by the current policy environment and market imperfection have a more limited impact on the value of tradable input (17% on average for all the systems).
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The ratio of the EPC to the NPC can be used as an indication of the respective impact of the current policy on the prices of tradable outputs and tradable inputs. For most of the systems, the ratios of NPC to EPC are rather small, meaning that most of the distortion between the private price and the social price situation is due to divergence on tradable outputs.
12
3.4
Analysis of sensitivity
The DRC is on average highly sensitive to the value of the main final output parity price (β = 0.7) for tomato paste and to the yield achieved at the farm level (β=0.5) for the greenhouse system. Table 6 Probability of having a comparative advantage.
Lowest DRC
Highest DRC
Probability for a DRC
