JORDAN'S FEED SUBSIDY PROGRAM: ANIMAL CENSUS IS FIRST STEP

UNCLAS AMMAN 003584 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/ELA FAS FOR OFFICE OF TRADE PROGRAMS AND OFFICE OF GLOBAL ANALYSIS CAIRO FOR FAS AGMINCOUNS PKURZ E.O. 12958: N/A TAGS: EAGR ETRD EFIN PGOV SOCI JO SUBJECT: JORDAN'S FEED SUBSIDY PROGRAM: ANIMAL CENSUS IS FIRST STEP IN PHASING OUT THE PROGRAM Sensitive but unclassified. Not for internet distribution. REF: AMMAN 3557 ¶1. (SBU) The Ministry of Agriculture (MOA) recently concluded a livestock census, the first serious attempt since 1998 to determine the number of ruminants - sheep, goats, camels, and cattle - in Jordan. Officials told the press the survey was part of a broader effort to establish the geographical distribution of livestock and to control the spread of disease, but the driving force was the increasing cost of feed, particularly barley, and the consequent strain feed subsidies are placing on the budget. The one-day survey was conducted by 1,250 eight-member teams comprised of personnel from the MOA, the Jordanian Armed Forces, the Ministry of Interior, and representatives from local governorates at a cost of $2 million. ¶2. (U) The Ministry of Industry and Trade (MoIT) subsidy policy has been based on, and the GoJ has budgeted for, not more than 3 million heads of livestock. In practice, farmers, mostly semi-nomadic herders who must present a certificate to receive subsidized grain, often falsify their claims to limit their personal expenses and increase the amount of subsidized feed received, resulting in a skewed livestock population count. Census results revealed a count of approximately 4.2 million ruminant animals. ¶3. (SBU) Regardless of the actual head count, any increase over the budgeted amount represents a fiscal challenge for the GOJ. Jordan imports the bulk of its barely consumption, expected to reach 850,000 MT in 2007; only 35,000 MT is produced locally. The most recent barely tender awarded was priced at $340 per MT, which the GOJ subsidizes at $200 per MT. The high cost of barley triggered concern about the effect of the subsidy policy on a budget already burdened by rising oil prices. NOTE: See reftel regarding Jordan's fuel subsidies and the recent resignation of the Deputy Prime Minister/Finance Minister over a decision not to raise fuel prices. END NOTE. The cost of the GOJ's direct barley subsidy increased from $40 million in 2002 to $85 million in 2006. Absent immediate change, the 2007 subsidy cost is expected to exceed $160 million, an amount which is "killing the budget," according to MoIT Secretary General Montasser Okla. In addition to barley, the GOJ also subsidizes wheat bran at an annual cost of approximately $13 million. ¶4. (SBU) Not all of the budget increase is due to underestimating the size of livestock herds. Okla claimed that farmers from neighboring countries send their livestock to feed in Jordan. He also reported that because of the Jordan's cheap barley prices, much of the grain is smuggled out of the country or used to supplement liberalized feed, such as corn, given to other animals. In his assessment, 40 percent of the subsidized barley was being squandered through waste, illegal trade, or employee graft. Rather than completely eliminating the subsidy program, he favored tighter controls, or switching to a subsidy for livestock feed that contains other, more economical grains or grain derivatives, and less barley. Okla also requested U.S. assistance in identifying scientifically proven, more efficient feed formulas. ¶4. (SBU) COMMENT: Rising prices have made the GOJ aware that its subsidy policy is not sustainable, especially for an agriculture sector that contributes only $274 million -less than 3 percent - to GDP. There is apprehension about changing course in an election year, but several senior officials are convinced change is both necessary and imminent. Dr. Hamad Kasasbeh, Finance Ministry Secretary General, told EconCouns the Cabinet was expected to make a SIPDIS decision in the coming weeks to phase out the agricultural feed subsidy, opting for cash transfers to, or the creation of a "national safety net" for, the most needy farmers. Foreign Minister Abdulillah al-Khatib also predicted the end of the subsidy policy. Nevertheless, the decision not to raise fuel price and the resulting August 21st resignation of Deputy Prime Minister/Finance Miniser Ziad Fariz calls into question the GOJ's willingness to risk highly unpopular moves among Jordan's vulnerable classes when elections are just around the corner. Visit Amman's Classified Web Site at http://www.state.sgov.gov/p/nea/amman HALE