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Understanding Market Drivers in Syria 2 Table of Contents

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Understanding Market Drivers in Syria 2 Table of Contents Prepared by the Syria Independent Monitoring (SIM) team, January 2018 Understanding Market Drivers in Syria 2 Table of Contents Abbreviations 4 1. Executive summary 5 2. Introduction 7 2.1. Background.......................................................................................................... 7 2.2. Scope................................................................................................................... 7 2.3. Methodology........................................................................................................ 7 .. 3. Macroeconomic environment 9 4. Market and trade in the northern areas of Idleb, Aleppo and Hasakeh 11 4.1. Main market fows: supply and demand of food commodities .............................. 11 4.2. Price fuctuations ................................................................................................ 11 4.3. Market performance and competitiveness .......................................................... 13 4.4. Processing capacity ............................................................................................ 14 5. Mapping of olives/olive oil and herb/spice market systems 15 5.1. Overview of the spice and olive market systems in northern Syria ....................... 16 5.2. Current market structure ..................................................................................... 19 5.2.1. Market environment ................................................................................ 19 5.2.2. Trade routes from/into the areas of study ............................................. 20 5.3. The market chain: actors, linkages and trade patterns ..................................... 20 5.3.1. Producers ............................................................................................... 20 5.3.2. Processors ............................................................................................ 21 5.3.3. Wholesalers ............................................................................................ 23 5.3.4. Retailers ................................................................................................. 24 5.3.5. Export share ........................................................................................... 24 5.3.6. Consumption .......................................................................................... 25 5.3.7. Means of payment ................................................................................... 25 5.4. Key infrastructures, support services, inputs .................................................... 25 5.4.1. Financial services ................................................................................... 25 5.4.2. Production inputs ................................................................................... 26 5.4.3. Storage ................................................................................................... 27 5.4.4. Transport services and cost of crossing lines ........................................ 27 5.4.5. Labour ......................,,.............................................................................. 27 5.4.6. Fuel .........................,,............................................................................... 28 5.5. Changes in market conduct, power and competition ......................................... 28 5.6. Impact on market performance outcomes ......................................................... 29 5.6.1. Seasonality of production and trade ....................................................... 29 5.6.2. Prices ...................................................................................................... 30 5.6.3. Margin analysis (large traders) ................................................................ 31 5.6.4. Capacity of market to expand if demand increased ................................ 32 5.7. Brief conclusion on market mapping .................................................................. 32 6. War actors and the market chain 33 6.1. Overall war economy trends ............................................................................... 33 6.2. War economy trends in Kurdish-controlled areas ............................................... 34 6.3. War economy trends in Opposition-controlled areas .......................................... 35 7. Implications for humanitarian aid 37 7.1. Existing aid ......................................................................................................... 37 7.2. Cash distribution assistance .............................................................................. 37 7.3. Smart procurement strategies ........................................................................... 38 7.4. Risks .................................................................................................................... 39 8. Recommendations 40 Annex 1: Methodology 41 Table of charts, fgures and maps 3 TABLES Table 1 : GDP and infation estimates between 2010 and 2016 9 Table 2: Commodities supported by the Kurdish self-administration 26 Table 3: Production inputs: availability and sources 26 Table 4: Diesel cost and sources 28 Table 5: Prices and demand across seasonal cycles 29 Table 6: SWOT analysis for both market systems 32 Table 7: Field research interviews (inside Syria) 42 CHARTS Chart 1 : Olive and olive oil market system 17 Chart 2: Spice market system 18 FIGURES Figure 1 : Evolution of median prices of SMEB (in SYP) 12 Figure 2: Evolution of median prices of vegetable oil (in SYP) 12 Figure 3: Evolution of median prices of cheapest kerosene (in SYP) 13 Figure 4: Share of processing costs per tonne of olive oil in Ain Al Arab 22 Figure 5: Estimated average volume of olive oil traded in Ain Al Arab 30 MAPS Map 1 : Areas covered by the feld research (August 2017) 8 Map 2: Flow of olives and olive oil from study areas (August 2017) 15 Map 3: Flow of spices from study areas (August 2017) 16 4 Market Drivers January 2018 Abbreviations BMI Business Monitor International CFW Cash For Work CTP Cash Transfer Programming DAESH Islamic State in Iraq and Syria DFID Department For International Development ESCWA United Nations Economic and Social Commission for Western Asia FGD Focus Group Discussion FSA Free Syrian Army GBP British Pound GDP Gross Domestic Product HRW Human Rights Watch HTS Hay’at Tahrir al Sham IDP Internally Displaced Person IED Institute for Economic Development IFPRI International Food Policy Research Institute IIED International Institute for Environment and Development IMF International Monetary Fund INGO International Non-Governmental Organisation KDP Kurdish Democratic Party of Iraq KII Key Informant Interview KRG Kurdish Regional Government of Iraq KSA Kingdom of Saudi Arabia LAC Local Administrative Council M&E Monitoring and Evaluation NASF National Agenda for the Future of Syria NGO Non-Governmental Organisation PYD Democratic Union Party SDF Syrian Democratic Forces SIM Syria Independent Monitoring SMEB Survival Minimum Expenditure Basket SWOT Strengths, Weaknesses, Opportunities, Risks SYP Syrian Pound UN United Nations UNHCR United Nations High Commissioner for Refugees USD United States Dollar Understanding Market Drivers inside Syria January 2018 1. Executive summary The Department for International Development (DFID) has commissioned a research report to provide evidenced • Agriculture is an important livelihood provider for recommendations on programmes and policy that can large numbers of locals and IDPs in northern and sustain markets inside Syria, as a means to increase northeastern Syria, and wages are kept high due food-insecure communities’ resilience to the confict. to a relative scarcity of labour; This report documents the fndings of an in-depth assessment of the olive/olive oil and spice/herb market • Cross-line and cross-border trade is lively, but it systems in northeastern and northwestern Syria. This has been monopolised by big traders with large specifc assessment helps illustrate market and trade fnancial capacity and ties to local power brokers patterns and dynamics that are relevant to other food and armed groups; commodities systems in the country. • Traders are highly infuential and can put pressure on The key fndings of this report are: producers to lower prices. The latter are particularly • The olive/olive oil market has been disrupted by vulnerable due to their limited fnancial capacity, the confict. However, trade channels have been which is exacerbated by the high cost of agricultural sustained through confict lines, and the potential inputs, equipment and fuel, unfavourable weather and will to rebuild the market remain embedded in conditions, and the devaluation of the Syrian pound; local communities; • Farmers and processors lack the capacity to expand • The production of traditional commodities has and modernise; disappeared (cotton) or signifcantly decreased (cereals), whereas farmers have turned to more • Producers have not received aid to sustain their proft-generating crops such as cumin and coriander, activities, apart from limited discounts provided by now produced on a larger scale; Kurdish authorities on fuel and agricultural inputs. Yet, demand for aid to the agricultural sector is high; • The collapse of central Government control over agriculture has facilitated the emergence of small • Regulatory bodies have been set up by the Kurdish businesses and agricultural entrepreneurs; self-administration to collect taxes, regulate prices, and support the development
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