Analysis of the Key

Value Chain Elements in Agriculture Food

Sector in Khanaqin – Diyala Governorate

1
Author: Francesco Cavalluzzo – Market Assessment Specialist Consultant

In cover picture is represented a moment of the Focus Group Discussion held with female consumers in Astira School in
Khanaqin

© Cover picture: Ibrahim Jamal

This report was produced under the United Nations Development Programme’s Iraq Crisis Response and Resilience
Programme (ICRRP). The views expressed in this publication are those of the author(s) and do not necessarily represent
those of the United Nations, including UNDP and the UN Member States.

Copyright © 2021 UNDP. All rights reserved

Acknowledgements

2
 This publication was compiled by Mr. Francesco Cavalluzzo, the Market Assessment
Specialist Consultant at Mercy Hands for Humanitarian Aid with valuable technical contributions
from the whole organization. The author would like to thank all the participants who took part into
the Focus Group Discussions, Key Informant Interviews and Questionnaires. This Value Chain Study
would have never seen light without their valuable insights. In addition, the author would like to
express his gratitude to the 12 enumerators who succeeded in gathering data despite challenges due
to COVID-19 and security issues. The author also is extreme grateful to the team that supported him
in Khanaqin during the data gathering, translation and data cleaning processes. The team is composed
of Karar Esam Talib (Project Manager), Taha Oday Muhi (Database Manager), Kardo Ali Abbas
(Livelihood Specialist) and Ahmed Khaleel Ibrahim (MEAL Officer). Finally, the author wants to
thank the whole staff of Mercy Hands for Humanitarian Aid for its support and assistance and in
particular (in alphabetic order by surname): Mohamad Ali (Emergency Response and Recovery
Department Director), Giovanna Bizzarro (Regional Coordinator for Center and South Iraq) and
Javier Setién (MEAL Manager). Finally, the author has special thanks to Sevinç Demirci (Director of
Livelihoods), who prepared the methodology and for her mentoring.

Table of Content

3
 List of Figures p. 5

List of Acronyms p. 6

1. Executive Summary p. 7
2. Introduction p. 8
3. Methodology p. 11
4. Limitations/Challenges p. 14
5. Findings p. 16
5.1. Production p. 16
5.2. Wholesale and Retail p. 19
5.3. Final consumption p. 24
6. Conclusions p. 28
7. Recommendations p. 31

Annexes p. 33
Bibliography p. 34

List of Figures

4
Figure 1. Participants p. 11
Figure 2. Demographic of the Participants p. 12
Figure 3. Age of the Participants p. 12
Figure 4. Key Informants p. 13
Figure 5. Which factors undermine competitiveness of agricultural production? p. 17
Figure 6. Which factors may upgrade production? p. 18
Figure 7. Select the main rehabilitation actions your area needs p. 19
Figure 8. Do you think that the COVID-19 pandemic has affected the economic p. 20
conditions?
Figure 9. Which elements may upgrade agricultural wholesale and retail p. 21
markets?
Figure 10. From 1 to 5 (where 1 means very bad and 5 very good) how would you p. 21
rank job opportunities in your area?
Figure 11. From 1 to 5 (where 1 means not interested at all and 5 very interested) p. 22
how would you rank the willingness/readiness of businesses owners to
support the job placement?
Figure 12. Which factors influence job placement in wholesale and retail food p. 23
sector?
Figure 13. Which kind of businesses could better ensure women empowerment? p. 23
Figure 14. Do you think that dollar exchange rise has affected final consumption? p. 24
Figure 15. People in your area prefer to buy local or imported goods? p. 25
Figure 16. Why do you buy imported goods? p. 26
Figure 17. Which are the most efficient sectors in terms of local need and job p. 27
placement?
Figure 18. Dairy Value Chain Gaps p. 28
Figure 19. Agricultural Food Production Value Chain Gaps p. 29
Figure 20. Which are the gaps and/or barriers in the food value chain? p. 30

List of Acronyms

5
FGDs Focus Group Discussions
GDP Gross Domestic Product
ID Iraqi Dinar
IDPs Internally Displaced People
IRFD Iraq Reconstruction and Development Framework
ISIL Islamic State of Iraq and the Levant
KIIs Key Informant Interviews
SMEs Small and Medium-Sized Enterprises
UNDP United Nation Development Programme

1. Executive summary

6
 This Value Chain Study is part of a project implemented by UNDP, in partnership with Mercy
Hands for Humanitarian Aid, with funding from the German Federal Ministry for Economic
Cooperation and Development (BMZ), provided through KFW Development Bank. The project,
entitled Sustainable Livelihoods and Economic Recovery – Khanaqin District, Diyala Governorate,
was launched in December 2020. Its overall objective is to facilitate the recovery and enhance the
resilience of vulnerable communities - mainly returnees, Internal Displaced People (IDPs) and
hosting communities - by providing short and medium-term employment opportunities to women and
men using the Cash-for-Work approach. This project aims to address the mutually reinforcing
challenges of widespread unemployment, youth radicalization and violent extremism by developing
ad-hoc vocational trainings, providing small grants to start-up businesses, supporting existing
businesses and creating new business and employment opportunities. It targets and benefits mainly
young and adult women and men of different population groups: returnees, IDPs and host
communities in Khanaqin, in Dayala Governorate. Finally, this project aims to enhance economic
and livelihood opportunities and strengthen long-term resilience among the target populations. As
such, this Value Chain Study seeks to improve Mercy Hands for Humanitarian Aid’s understanding
of the local agricultural food value chain and inform and guide feasible intervention in order to
identify and develop those activities necessary to strengthen resilience, ensure stability and social
cohesion and consequently trigger sustainable and long-term recovery in the region as well as restore
local livelihoods. In detail, this Value Chain Study aims to accomplish the following: identify gaps,
challenges, shortcomings and opportunities in the food value chain; provide an overall picture of the
food market system in Khanaqin and assess consumer preferences; identify sectors and income
generation opportunities that can create livelihoods for the different targeted population groups and
enhance the value of the food chain.

The assessment took place between January and February of 2021 and was based on a mixed
methodology approach. Indeed, qualitative and quantitative methodologies were deployed. The
qualitative approach included six Key Informant Interviews with local stakeholders: local authorities,
members of Chamber of Commerce, Mukhtar and members of financial institutions and vocational
training institutes. In addition to Key Informant Interviews, six Focus Group discussions with
consumers, traders and business owners were conducted. Finally, a quantitative survey was carried
out based on a purposeful sample of 22 interviewees among owners of registered companies and
small shops.

2. Introduction
7
 In the last years Iraq has faced two major challenges. The first one was the war against the
Islamic State of Iraq and the Levant – ISIL. The second was related to the outbreak of COVID-19
and its economic and social impact that heavily jeopardized the already disrupted Iraqi social and
economic tissue.

In December 2017, the Iraqi Government declared its official victory against ISIL. The price
of this war has been extremely high and Iraqi Government is still dealing with its legacy. The conflict
resulted in huge internal and external population displacement and a heavy loss of crops, personal
assets, food supplies and livestock production. Approximately 1.5 million people remain internally
displaced. Within the country, the governorates of Al-Anbar, Baghdad, Diyala, Kirkuk, Ninewa and
Salah Al-Din have been particularly affected. Indeed, it is estimated that in these governorates almost
4.1 million of people are in need, including 1.3 million IDPs. Moreover, among all people in need,
more than 1.77 million people have acute humanitarian needs. 1 In addition, the conflict caused
damage and heavy destruction to agricultural infrastructure, water systems and irrigation facilities.2
In response to these challenges, the Iraqi government has developed several programs in order to
restore livelihoods, rehabilitate infrastructure and reestablish economic activities and social services
that were severely affected during the conflict. In particular, the government has formulated the Iraq
Reconstruction and Development Framework – IRFD, which aims to rebuild the agricultural sector
and provide employment and income in rural and peri-urban areas, with a particular focus on those
five governorates that were all or partly under the control of ISIL: Anbar, Diyala, Kirkuk, Nineveh
and Saladin. 3 The IRFD contributes to and complements other programs developed by the Iraqi
government such as Iraq Vision 2030 and the National Development Plan (2018–2022). These
projects pursue the overall goal of reforming the governance and rebuilding the country, focusing on
human capital and creating job opportunities. Moreover, these projects pay particular attention and
give high priority to preventing extremism, restoring livelihoods, restoring agriculture and water
systems, promoting sustainable returns and supporting youth and women.4

1
United Nations Office for the Coordination of Humanitarian Affairs – OCHA, Humanitarian Needs Overview Iraq,
November 2019, p. 14, https://reliefweb.int/sites/reliefweb.int/files/resources/iraq_hno_2020.pdf (accessed February 21,
2021).
2
Food and Agriculture Organization of the United Nations – FAO, Iraq: Reinforcing Local Capacities for Stability,
2019, p. 1, http://www.fao.org/3/ca3868en/CA3868EN.pdf (accessed February 21, 2021).
3
Ibidem
4
Food and Agriculture Organization of the United Nations – FAO, Iraq: Restoration of agriculture and water systems
sub-programme 2018–2020, Rome, 2018, p. 1, http://www.fao.org/3/ca1511en/CA1511EN.pdf (accessed February 21,
2021).
8
 The second main factor that hugely jeopardized the Iraqi economic and social sectors is linked
to the outbreak of COVID-19 and its legacy. The global economic slowdown and reduced demand
have sharply undermined the already fragile Iraqi economic and productive sectors. The global
decline of oil-prices has put incredible pressure on the national finances of a country whose oil
revenues remain the largest contributor to the Gross Domestic Product (GDP), constituting more than
90% of total revenues. Moreover, COVID-19 has disrupted the market supply chain and produced
price increases of food items. The highest impact was registered in Diyala Governorate where 18
commodity prices rose including for food, hygiene products and fuel. Moreover, due to reduced
human activities and consequent delays on trade, COVID-19 resulted in increased transit times and
transportation costs that ultimately disrupted value chains and negatively impacted livelihoods. As a
matter of fact, prices of essential commodities and food items such as rice, wheat flour, sugar,
tomatoes and vegetables are still trending upward, reducing the purchasing power of vulnerable
people and leading to an overall deterioration of food security in the country. 5 In order to cope with
the challenges of COVID-19 and in response to the increasing needs of the population, the Iraqi
government established a new cash disbursement program called Minha. This decision follows other
measures previously introduced by the Central Bank of Iraq to mitigate the impact of the crisis on
households and businesses such as the stimulus package introduced following the demonstrations of
October 2019. However, the decline in global oil prices is putting severe pressure on the sustainability
of these measures.6

The effects of these challenges have been particularly severe in some Governorates such as
the Diyala Governorate and the city of Khanaqin. Khanaqin is the second largest district in Diyala
with an estimated population of 300.000 people as of 2017. Its population is mainly made up of Shia
Kurds, Turkmens and Shia Arabs. Due to the impact of ISIL in north-western Iraq, numerous people
had fled to Khanaqin and surrounding areas. Nowadays, almost 75% of IDPs are now returning to
Khanaqin. This twofold movement has been exacerbating the struggle to find sources of income due
to the lack of job opportunities and productive assets. Consequently, this is further damaging the
already fragile local livelihoods. The district is characterized by high levels of insecurity and
instability that have resulted in decreased investor confidence. Furthermore, as a consequence of the
conflict with ISIL, agricultural infrastructure and value chains have been highly damaged and

5
World Food Programme – WFP, Iraq Market Monitor Report, Issue No. 29, March 2020, p. 4,
https://docs.wfp.org/api/documents/WFP-0000114848/download/?_ga=2.267718734.1972874555.1614155771-
1904121626.1614155771 (accessed February 23, 2021).
6
World Food Programme – WFP, Food Security in Iraq. Impact of COVID-19, April-June 2020,
https://docs.wfp.org/api/documents/WFP-0000117361/download/?_ga=2.229883740.1972874555.1614155771-
1904121626.1614155771 (accessed February 23, 2021).
9
disrupted. Once the largest employer of the region, the agricultural sector has been decimated and is
no longer the largest source of employment, having been overtaken by private sector jobs such as
service and retail jobs.7

In addition to security issues, the fragile economic and social tissue of the Diyala Governorate
has been further undermined by the outbreak of COVID-19. The pandemic has heavily disrupted both
consumers and retailers. Most of the products have experienced an increase in price as compared to
pre-pandemic period. Moreover, the limitation of movement has caused shortages for retailers and
consumers. As a consequence, the pandemic has had a huge impact on already socio-economically
vulnerable households, reducing their purchasing power and undermining their ability to satisfy their
basic needs.8

Therefore, moving from these considerations, this Value Chain Study provides evidence-
based insights into the food supply-and-demand chain in Khanaqin. It aims to do the following:
review the local market’s capacity to absorb an increased supply of food items and services in
Khanaqin; analyze consumer preferences; explore new opportunities for items and service
productions in order to increase market demands and offers; examine opportunities for new
microbusinesses development. It is built upon quantitative and qualitative data that was gathered
during the months of January and February in the city of Khanaqin and in the surrounding areas of
Jalawla and Saadiya. The approach followed during this survey will be highly illustrated in the
methodology. Along with the methodology, this paper will also describe the limitations that were
faced while working on this report. Then, thanks to data triangulation, findings will be highlighted
and discussed. They will be incorporated into Mercy Hands’ project and will drive the planning of
activities such as the development of vocational trainings and the granting of loans for start-up
businesses. Finally, several recommendations will be presented in order to inform further activities
in the region and promote sustainability and improve livelihoods

3. Methodology

7
International Organization for Migration – IOM Iraq, Labour Market Opportunities and Challenges. Khanaqin
District, Diyala Governorate, April 2019, p. 9,
https://www.humanitarianresponse.info/sites/www.humanitarianresponse.info/files/2019/06/Khanaqin%2C-Diyala.pdf
(accessed February 23, 2021).
8
Cash Consortium for Iraq – CCI, Brief: COVID-19 Impacts on Prices and Markets, March-October 2020, p. 7,
https://reliefweb.int/sites/reliefweb.int/files/resources/cci_brief_-_covid-19_prices_and_markets_impacts_mar-
oct_2020.pdf (accessed February 23, 2021).
10
 The study is based on a mixed methodology that combined quantitative and qualitative data.
Furthermore, in order to gain a holistic understanding and obtain different, but complementary data
on the value chain in Khanaqin, data has been triangulated, compared and interpreted. The survey
was carried out from January 31st, 2021 to February 4th, 2021. It was informed by a gender-sensitive
lens in order to identify and pinpoint specific business opportunities for women. Moreover, in order
to ensure that gender dynamics were not overlooked, among the 12 enumerators, six were female.
High standards of ethical conduct in research were upheld. Enumerators received training and
supervision and were provided with a briefing about Mercy Hands’ policy and Code of Conduct.
Enumerators were trained not only on research techniques and data gathering methods, but also on
gender-based violence dynamics. This approach ensured the development of comprehensive and
inclusive practices that included gender-issues since the initial phase of the study and throughout the
full process. Quantitative and qualitative data was gathered in Arabic and then translated into English.
Thus, this report was written based on a translated version of the primary data gathered.

Turning towards the research methods, quantitative data was gathered through individual
interviews that addressed a purposeful sampling made up of 22 people (Figure 1). The majority of
participants were householders both female and male and members of different social groups: the
Host Community; Returnees; Displaced peoples (Figure 2). The age of the participants ranged
between 18 and 59 years old (Figure 3). This sample size represents members of registered companies
and small shops in Khanaqin and was identified through a multistage random sampling technique
among the 35 registered companies and 400 small shops that operate in Khanaqin. It provided
firsthand information on the food value chain in Khanaqin, input on value chain developments and
insights regarding gaps and shortcomings. Data was gathered through Kobo toolbox and was later
cleaned and analyzed within a 95% interval of confidence with a 5% margin of error.

Female Male Total Participants

9 13 22
Figure 1. Participants

Non-householder Householder Host Community Returnee Displaced

Female 7 2 7 2 0

11
 Male 3 10 8 3 2
Total 10 12 15 5 2
Figure 2. Demographic of Participants

40%

35%

30%

25%

20%

15%

10%

5%

0%
Female Male

18-29 30-59

Figure 3. Age of Participants

Qualitative data was gathered through two tools: six Focus Groups Discussions – FGDs and
six Key Informant Interviews – KIIs. Each Focus Group Discussion involved six participants, one
moderator and one note-taker. Four Focus Groups were conducted with consumers, one with business
owners and one with traders. Focus Group Discussions aimed at gathering information regarding the
level of satisfaction or dissatisfaction with the value chain with a view to the whole process of the
value chain from production to final consumption. Moreover, Focus Groups were used to gain
understanding on considerations regarding the quality of the chain and its gaps.

Finally, six Key Informant Interviews were carried out (Figure 4). As for the Focus Group
Discussions, Key Informant Interviews saw the participation of one interviewer and one note-taker.
Key Informant Interviews were used to gain in-depth understanding of market dynamics in Khanaqin.
In particular, they were used to identify distortion in value chains and market failures. Finally, Key
Informant Interviews provided useful insights for the planning of activities by highlighting the most
challenging and in-need sectors that require intervention.

12
 Full Name Job Position
Mrs. Zainab Fadil Abbas Local Authority
Mr. Firas Ali Latif Chamber of Commerce
Mr. Abdulamer Abdulrahman Mukhtar
Mr. Ali Rokhan Merza Mukhtar
Mr. Muathal Salman Najim Vocational Training Center
Mr. Waqas Saad Khalil Private Financial Institute
Figure 4. Key Informants

4. Limitations/Challenges

13
 This study contains three main limitations: First, a lack of data on currently operating
businesses in Khanaqin; Second, the report is written based on translated data; Thirdly, the issue of
biases from respondents. The precise number of companies registered in Khanaqin was crucial for
developing a sample and identifying participants that coherently depicted the business reality of the
Governorate. However, there is a significant lack of data regarding businesses operating in Khanaqin.
This is mainly due to the fact that since 2017 the Chamber of Commerce of Diyala has stopped
registering activities operating in Khanaqin. In order to overcome this lack of data, the Department
of Labour and Social Affairs in Diyala was contacted, in order to informally obtain the total number
of businesses and activities operating in Khanaqin. It estimated the number of companies to be around
35 and the number of Small and Medium Enterprises to be around 400. Then, in order to ensure the
validity of this informal information and disaggregate data, information obtained from the
Department of Labour and Social Affairs in Diyala was later confronted and compared to data which
stemmed from previous work. 9 Given the lack of official data and despite the accuracy of data
tracking, the total number of companies and SMEs may slightly differ.

The second limitation is due to the fact that data was gathered in Arabic and then translated
into English by our team. This survey is built upon translated data and as such, translators may have
interpreted and translated words or concepts differently from their real meaning. This consideration
may be particularly true in the case of the translation of transcripts of Focus Group Discussions and
Key Informant Interviews. Therefore, during the translation process, meanings of some conversations
may be distorted according to personal considerations, consequently reducing and/or missing
descriptive argumentations that emerged during the qualitative data gathering process. In order to
overcome this challenge and avoid that personal considerations or biases could affect the translation
process, data was translated through a collective method that saw the participation of four different
translators.

The last limitation is inherent to the nature of respondents. Indeed, they were informed that
the survey was developed to inform and drive activities that Mercy Hands for Humanitarian Aid will
implement in Khanaqin. Therefore, according to how participants perceive that Mercy Hands for
Humanitarian Aid will select beneficiaries and allocate resources, they may have modified their
answers in order to fall into one of the target groups. Therefore, their answers may be affected by

9
Mercy Corps, Youth Lead Market Assessment, Sulaymaniyah, Sulaymaniyah and Khanaqin, Diyala, November 2018,
https://www.humanitarianresponse.info/sites/www.humanitarianresponse.info/files/2019/05/Mercy-Corps-Youth-Led--
Market-Assessment---November-2018.pdf (accessed February 25, 2021).
14
personal biases. However, a mixed methodology and triangulation of data should provide a clear
picture reducing the impact of respondents’ biases on the report.

5. Findings

15
 In the following section, the findings of the Value Chain study will be illustrated. The findings
stem from a triangulation process that combined quantitative and qualitative data. The thematic
analysis method was used to analyze the qualitative data gathered during the KIIs and FGDs. Data
has been closely examined in order to identify common themes, topics, ideas and patterns of meaning
that repeatedly came up during the interviews. The flexibility of the thematic analysis allowed us to
grasp the different points of view that emerged from each of the KIIs and FGDs. Indeed, given the
different expertise of each key informant and the different composition of each FGDs, thematic
analysis enabled us to capture different views and highlight different aspects and sides of each theme.
Moreover, in analyzing the data an inductive approach has been pursued in order to develop a
framework based on data and information that emerged from the interviews, given the valuable
insights brought by each key informant.

The interviews provided a broad spectrum of data. Therefore, in order to manage all the
information, a previous step of coding of the information was carried out. This step made it possible
to highlight recurrent phrases, considerations and sentences. As a matter of fact, coding helped to
pinpoint patterns that emerged from each interview. Then, patterns were triangulated with the
quantitative data that emerged from the individual interviews carried out with the purposeful sample
made up of 22 people among companies and SMEs owners.

The result of the data triangulation led to the identification of several themes and elements
that characterize the food value chain in Khanaqin and in particular dairy production and food
production. These elements will be analyzed in the following paragraphs. Data analysis will be
structured along the three main steps of the food value chain in Khanaqin: Production; Wholesale and
Retail; and Final consumption.

5.1. Production

The agricultural sector is vital to the Iraqi economy, constituting the second largest contributor
to the national GDP. Agriculture has been hugely undermined in the past years because of population
displacement, looting and the destruction of infrastructures. Therefore, the revitalization of

16
agriculture is a key element in strengthening the livelihoods of the communities and rural population
in Khanaqin.10

The dairy and agricultural food production sector is mainly characterized by family-run
businesses and SMEs. Despite disruptions due to ISIL war, food production remains a vital element
for local economy, in particular the production of tomatoes and dates, that are consumed not only
internally, but are also exported mainly to Iran and other governorates. However, the agricultural
production sector is weak and lacks agricultural input and equipment as highlighted by the (28%) of
the participants. Moreover, the (30%) of interviewees considered lack of credit and another (30%)
pinpointed inadequate agricultural practices the main factors that undermine the competitiveness of
agricultural production (Figure 5). In addition to these elements, during FGDs, security issues and
lack of suitable places for business emerged as other important factors that undermine
competitiveness of agricultural production.

35%

30%

25%

20%

15%

10%

5%

0%
Lack of agricultural Lack of credit Security Inadequate
input and equipment agricultural practices

Figure 5. Which factors undermine the competitiveness of agricultural production?

Qualitative data highlighted that the production sector suffers mainly from a lack of credit and
lack of input. During the FGDs and KIIs it was suggested that local authorities should provide
financial assistance in order to increase competitiveness and production. Therefore, the local
authorities should develop grant mechanisms that will allow producers also to cope with the legacy

10
Food and Agriculture Organization of the United Nations – FAO, Iraq: Agriculture damage and loss needs
assessment, 2017, p. 1, http://www.fao.org/3/i7810e/i7810e.pdf (accessed February 25, 2021).
17
of COVID-19. Regarding a lack of inputs, participants to FGDs and interviewees highlighted the
necessity to modernize agricultural practices and tools. Moreover, there was an overall agreement on
the fact that local authorities should help farmers by providing them with animal feed, seeds,
fertilizers and raw materials. In addition to these elements, local authorities should facilitate provision
of medicines for animals and improve veterinary services. This is particularly important regarding
dairy production. Indeed, new and modern machineries and better veterinary services are needed in
order to preserve the quality of the products and ensure safety and health regulations.

Today, domestic production is also undermined by foreign competition, mainly foreigner

products coming from Iran and Turkey that are considered, as explained below, cheaper and better.
Therefore, it is thought that supporting domestic agriculture in order to increase production will push
prices downward and increase competitiveness compared to foreign products. In order to upgrade
domestic production, (47%) of interviewees underlined the importance of grants. (24%) stressed the
importance of machinery modernization through the provision of tools and materials. Finally, (16%)
highlighted the necessity to increase the qualified workforce through the development of ad-hoc
vocational trainings (Figure 6).

Other (please specify)

Mentoring/follow-up
Business license letter
Tools/materials
Business expansion
Job placement
Grant
Vocational training

0% 10% 20% 30% 40% 50%

Figure 6. Which factors may upgrade production?

Furthermore, in order to upgrade production, participants highlighted the necessity to restore

infrastructure and activities that were heavily damaged during the war. Indeed, interviewees
highlighted that in addition to grants and input, specific policies should be developed in order to deal
with the legacy of the war. Indeed, almost (80%) of the interviewees stressed that infrastructure and

18
agriculture rehabilitation is vital in order to ensure production increases and competitiveness (Figure
7).

Other

Business restoration

Agriculture rehabilitation

Infrastructure rehabilitation

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Figure 7. Select the main rehabilitations actions your area needs?

5.2. Wholesale and Retail

Agriculture, previously the largest employer in the area, is no longer the largest source of
employment. Private sector jobs, including service and retail jobs, are more and more common and
are overtaking agriculture as the largest source of work.11

Given its increasing role in terms of employment opportunities, wholesale and retail markets
represent an important asset in terms of the livelihoods and food value chain upgrading. In particular,
wholesale and retail markets represent an important asset in terms of trade opportunities. Indeed,
Khanaqin strategic collocation on the trade route between Iraq and Iran might play a key role in order
to increase trade and business opportunities for retailers and wholesaler. Despite this geographic
advantage, wholesale and retail sectors face several challenges that undermine their business
opportunities. FGD participants and key informants interviewed underlined that retail and wholesale
systems lack the necessary infrastructure in order to safeguard hygiene and proper conservation of
products. This is particularly important in the case of dairy products, where many of the participants
in FGDs underlined that they are not safe and properly stored. Indeed, FGDs participants agreed that
retail and wholesale actors cannot ensure proper storage and maintain the correct temperatures
necessary to safeguard the cold chain. According to them, this is mainly due to daily electricity

11
International Organization for Migration – IOM Iraq, Labour Market Opportunities and Challenges. Khanaqin
District, Diyala Governorate, April 2019, p. 9,
https://www.humanitarianresponse.info/sites/www.humanitarianresponse.info/files/2019/06/Khanaqin%2C-Diyala.pdf
(accessed February 26, 2021).
19
outages and inadequate storage machineries. Consequently, given retailers’ and wholesalers’ inability
to safeguard products, consumers highlighted during the FGDs that they prefer to bypass retailers and
wholesalers and buy products directly from the producers. Finally, in order to upgrade wholesale and
retail markets, qualitative data underlined two fundamental elements: the improvement of health and
safety controls by local authorities, and the modernization of storage machineries to ensure electricity
continuity.

Another element that emerged was linked to the impact of COVID-19 which, according to the
(95%) of the interviewed, highly affected the economic conditions of the region (Figure 8). The
impact of COVID-19 on wholesale and retail market actors was twofold. Indeed, because of curfews
and lockdowns, products went unsold and spoiled. Consequently, on the one hand this reduced their
income, on the other hand it undermined the quality of products, thus reducing consumption demand.

5%
yes
no
95%

Figure 8. Do you think that the COVID-19 pandemic has affected the economic conditions?

Given its gaps and challenges, upgrading wholesale and retail markets is considered vital in
order to enhance livelihoods and resilience in the region. In order to improve agricultural wholesale
and retail markets, (30%) of the interviewed highlighted the necessity of improving the job market
system by providing vocational trainings that can help to enhance skills necessary for trade and
broadening trade relationships. Regarding vocational trainings, (27%) of the interviewed stressed the
necessity of providing financial assistance in order to cope with the impact of COVID-19. (24%)
underlined the necessity of improving working environments and infrastructure in order to ensure
safer and better storage systems. Finally, (12%) highlighted the importance to recruit more women.
Indeed, according to them, increasing women’s participation could enhance social capital and
strengthen capacity building (Figure 9). However, given to customs and traditions, women’s access
to labor market is limited. Therefore, respondents highlighted the necessity to develop gender
awareness programmes to enhance labor market opportunities for women.
20
 Financial assistance

Support individual consumption

Improving working environment and

infrastructure

Vocational trainings

Gender awareness

0% 5% 10% 15% 20% 25% 30% 35%

Figure 9. Which elements may upgrade agricultural wholesale and retail markets?

Improving labour market dynamics is considered vital for boosting wholesale and retail
markets. Because of the disruption of war, the destruction of infrastructure and the economic impact
of COVID-19, the labor market in Khanaqin is highly jeopardized and weak. (64%) of the interviewed
defined job opportunities in the area as bad or very bad (Figure 10).

4% very bad
9% 23%
bad
23% neutral
good
41% very good

Figure 10. From 1 to 5 (where 1 means very bad and 5 very good) how would you rank job opportunities in your
area?

The participants’ claim of a lack of job opportunities in the area (Figure 10) finds confirmation
in the following figure that shows that the (36%) of the participants interviewed have no interest in

21
hiring, while (32%) are neutral (Figure 11). As confirmed during KIIs, business owners stressed that
nowadays they have little or no interest in hiring. This is due to economic difficult conditions that
they are experiencing because of the economic backlash of COVID-19 containment measures and the
absence of economic assistance policies from local authorities and government. Consequently,
entrepreneurs are facing dire difficulties and are unable to hire new staff and/or upgrade their
businesses.

40%

35%

30%

25%

20%
36%
15% 32%

23%
10%

5% 9%
0%
0%
not interested little interested neutral interested very interested

Figure 11. From 1 to 5 (where 1 means not interested at all and 5 very interested) how would you rank the
willingness/readiness of businesses owners to support the job placement?

Furthermore, looking into the dynamics of the job placement process, (39%) reported that the
recruitment process is impacted by informal hiring procedures and (25%) stressed that job placement
is influenced by gender biases and the lack of a qualified workforce. Informal hiring procedures such
the preferential recruitment of family members or friends prevent the hiring of employees who could
perform better in that position. This element is also further exacerbated by gender biases that may
prevent women from having access to certain jobs, instead favoring men who could be less qualified
(Figure 12).

22
 Other

Security consideration

Informal hiring procedures

Gender considerations

Lack of qualified workforce

The unwillingness of potential workers

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Figure 12. Which factors influence job placement in wholesale and retail food sector?

Finally, the retail market system emerged as a central element in terms of women’s
empowerment and job opportunities. Indeed, the (62%) of the interviewed declared that Retail stores
are the best business to ensure women’s empowerment (Figure 13).

70%
60%
50%
40%
30%
20%
10%
0%

Figure 13. Which kind of businesses could better ensure women empowerment?

23
5.3. Final consumption

As emerged during KIIs and FGDs, the agricultural food chain has been severely impacted by
a reduction in final consumption of food products. Two main elements emerged as main drivers of
final consumption decrease: COVID-19 and devaluation of the Iraqi dinar. Regarding COVID-19, its
impact led to the deterioration of livelihoods and consequently to a reduction of householders’
purchasing power and food demand for final consumption. Householders witnessed a deterioration
of their living conditions because of fewer job opportunities and unemployment. As a matter of fact,
they were forced to reduce their own food demands. Consequently, there has been an increasing
number of food insecure people in Khanaqin.

The second element that emerged during FGDs and confirmed by the totality of the people
interviewed was the impact of devaluation (Figure 14).

0%

Yes
No

100%

Figure 14. Do you think that dollar exchange rise has affected final consumption?

Indeed, following the decision of the Central Bank of Iraq on December 2020 to reset the
official exchange rate to ID 1.450 for $1, a devaluation of more than 20%, the price of imported goods
spiked upward.12 This is particularly damaging for a country like Iraq that imports almost 50% of its
food needs. As matter of fact, the region registered a contraction in food demand that also impacted
retailers and wholesalers, reducing their general income.13

12
Financial Times, Iraq devalues currency by a fifth as oil-price collapse hits, December 20, 2020,
https://www.ft.com/content/b8ceacab-b8af-4581-b687-f9495f5145aa (accessed February 26, 2021).
13
World Food Programme – WFP, Food Security in Iraq. Impact of COVID-19, April-June 2020, p. 9,
https://docs.wfp.org/api/documents/WFP-0000117361/download/?_ga=2.229883740.1972874555.1614155771-
1904121626.1614155771 (accessed February 26, 2021).
24
 Along these elements, Khanaqin recorded price surges as a consequence of value chain
disruption and increasing costs of materials and agricultural production inputs.14 Increasing prices of
domestic goods reduced the community purchasing power and disrupted local food chain, producing
a situation in which food supply is higher than food demand and leaving the supply offer unmet and
food demand unsatisfied.

One interesting element that emerged during FGDs was that despite devaluation, imported
goods are still cheaper than local products. For this reason, local consumers prefer to buy foreign
goods coming mainly from Iran and Turkey. This element was confirmed by the (64%) of those
interviewed (Figure 15).

36%
Local
Imported
64%

Figure 15. People in your area prefer to buy local or imported products?

Imported products are preferred because they are cheaper than local. This is mainly due to
inflation, collapse of oil prices (which provides almost 90% of government revenue) and higher cost
of production due to chronic inefficiency and corruption.15 Imported goods are preferred not only
because cheaper but also because they are considered to be of higher quality than local products.
Indeed, the (29%) of people underlined this element. Beside this, another (29%) said that they buy

14
World Food Programme – WFP, Iraq Market Monitor Report, Issue No. 29, March 2020, p. 1,
https://docs.wfp.org/api/documents/WFP-0000114848/download/?_ga=2.267718734.1972874555.1614155771-
1904121626.1614155771 (accessed February 26, 2021).
15
Foreign Policy, Iraq’s Economic Collapse Could Be Biden’s First Foreign-Policy Headache,
https://foreignpolicy.com/2020/12/14/iraqs-economic-collapse-could-be-bidens-first-foreign-policy-headache/
(accessed March 29, 2021).
25
imported products because of a lack of local products (Figure 16). As explained during KIIs and
FGDs, lack of local products particularly affects: construction and industrial material such as plastic;
electrical appliances; clothes; seasonal vegetable.

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%
Better quality Cheaper Lack of local products

Figure 16. Why do you buy imported products?

Communities living in Khanaqin witnessed a contraction in livelihoods that shrank their

purchasing power and affected the stages of production, as well as the wholesale and retail of the
agriculture food value chain. Indeed, production needs remain unmet and goods remain unsold.
Consequently, in order to strengthen food demands and broaden consumers’ purchasing power, KIIs
underlined the necessity to create new job opportunities and consequently improve livelihoods.
Therefore, in order to develop efficient job opportunities that can at the same time improve
livelihoods and increase local resilience, those interviewed were asked which main businesses
activities were necessary in Khanaqin and which sectors offered better and higher job employment
opportunities. This data was then combined in the following graph (Figure 17)

26
 Business needed hiring sector

35%

30%

25%

20%

15%

10%

5%

0%

Figure 17. Which are the most efficient sectors in terms of local need and job placement

Figure 17 shows in blue the businesses needed in Khanaqin and in orange the businesses that
nowadays present higher job opportunities. For each sector there is on the same vertical line a
combination of the values of businesses needed and hiring sector. For each sector, the closer the
values are, the more efficient the sector is. Indeed, on the opposite end we can see the case of retail
shops that are considered highly necessary, but offer few job opportunities. We also have, for
example, agricultural production that is less needed than retail shops, but offers more job
opportunities. A perfect match is regarding the option other, which includes private activities such as
beauty salons, barber shops and car maintenance activities.

27
6. Conclusions

This Value Chain Study provided an overall picture of the food value chain in Khanaqin. It
highlighted several gaps, challenges, shortcomings and opportunities that characterize the dairy and
agricultural food production value chain in the region.

The following figures (Figure 18 & 19) will show in detail the gaps that dairy and agricultural
food production value chain have at production, distribution and final consumption level.

•Lack of raw material

Distribution •Limited purchasing power
(milk)
•Unsafe storage because
of old machineries
•Inability to uphold cold
chain
•Lack of storage machinery
Final
Production
consumption

Figure 18. Dairy Value Chain Gaps

28
 •Lack of infrastructures
Distribution •Limited purchasing power
•Lack of economic support to •High prices
start activities •Price manipulation
•Inefficient agricultural •Foreign products
methods competition

Final
Production
Consumption

Figure 19. Agricultural Food Production Value Chain Gaps

In detail, gaps and barriers were identified throughout the value chain, specifically at the level
of production, wholesale, retail and final consumption. Regarding production, gaps were identified
in the lack of and/or high price of inputs and raw material. This lack reflects on the upward spike of
the final price of goods, which has generated a situation of mismatch between food supply and food
demand. Moreover, the study highlights that food production remains a vital element for local
economy, in particular the production of tomatoes and dates, that are consumed not only internally,
but are also exported mainly to Iran and other governorates. At the levels of wholesale and retail,
challenges have been identified in the inability to ensure safe storage for products, particularly
regarding dairy goods. This is due to electricity outages and inefficient storage machineries. Moving
towards the final consumption, data revealed the shrinking of purchasing power as a consequence of
COVID-19’s disruption and the deteriorations of livelihoods. These elements reflect the position of
participants when asked about the gaps and/or barriers in the food value chain in Khanaqin (Figure
20).

29
 40%

35%

30%

25%

20%

15%

10%

5%

0%
High cost of Decline in Lack of security Inability to store Price
production consumption safely manipulation

Figure 20. Which are the gaps and/or barriers in the food value chain?

This paper highlighted the necessity of improving livelihoods in order to increase food
demands, as well as modernizing and strengthening production in order to drive good prices
downward, ensuring a closer match between food supply and demand and upgrading the food value
chain.

On the production side, this study highlighted the necessity to increase and improve
production through infrastructure rehabilitation, the provision of inputs and development of modern
agricultural practices. Concerning food demands, it is necessary to improve livelihoods and increase
consumers’ purchasing power by providing better and needed job opportunities. Moreover, access to
grant and loans emerged as a key element in order to increase production and enhance agricultural
value chain in Khanaqin. Participants, from both gender, highlighted difficulties in access to credit
because of lack of governmental policies and complex administrative procedures. Therefore, the
necessity to develop and ensure easier and faster lines of credit for project development and business
establishment.

Finally, in order to upgrade the food value chain, the study pinpointed the necessity to invest
in sectors in which the local community can develop a competitive advantage. In this case, the value
chain study highlighted the opportunity to consider investment in agricultural foods such as dates and
tomatoes and fruits and vegetables that do not need to be stored at low temperatures given the local
difficulties in implementing the cold chain, because of inefficient storage machinery and electricity
outages.

30
7. Recommendations

Building upon the analysis performed and data collected, the report sets out several
recommendations for Non-Governmental Organization, International Organizations and
humanitarian workers and practitioners:

Promote Improved Agronomic Practices Among Farmers

 Train farmers in the application of modern agriculture techniques such as chemical pest
control, irrigation technologies, use of synthetic fertilizer
 Promote the use of organic fertilizer such as compost, humic acid, amino acids in order to
reduce soil degradation
 Restore irrigated water supplies across conflict-affected areas
 Restore and/or upgrade greenhouse technology in order to increase crop yield
 Ensure provision of vaccines, medicines and veterinary services

Promote and Strengthen Local Production and Marketing Opportunities

 Rehabilitate agricultural and food storage infrastructures across conflict-affected areas

 Given their importance in terms of local consumption and exportation, support the production
of tomatoes and dates
 Ensure easier and faster access to credit for smallholder producers and vulnerable family
farms, returnees, IDPs and female-led householders
 Improve the availability of seeds and inputs for vulnerable family farming, returnees, IDPs
and female-led householders
 Integrate agro-ecological systems for the valorization and management of natural resources
 Provide job opportunities in order to increase consumer purchasing power
 Invest in sectors that better match community needs and employment opportunities such as
agriculture, crafts and the construction sector

Improve Market Access and Linkages Across Value Chain

 Establish and/or strengthen linkages between smallholder producers and inputs suppliers
31
 Establish and/or strengthen linkages between smallholder producers and wholesaler and
retailers
 Strengthen cold chain in order to ensure better quality of food
 Ensure mechanisms of control in order to avoid price manipulation
 Encourage government authorities to improve security, invest in infrastructure and ensure
easier and faster access to bank loans
 Encourage government authorities to develop alternatives sources of energy supply such as
solar energy in order to cope with daily electricity cut

32
 ANNEXES

 List of companies and factories in Khanaqin

Private sector data

base RPA 73.xlsm

 VCS HH Survey

VCS HH Survey. | KoboToolbox (humanitarianresponse.info)

 KII questionnaire Value Chain Study

KII_Value Chain
Study.pdf

 Questionnaire FGD with Consumers Value Chain Study

FGD With
Consumers_Value Chain Study.pdf

 Questionnaire FGD with Producers Value Chain Study

FGD With
Producers_Value Chain Study.pdf

 Questionnaire FGD with Traders Value Chain Study

FGD With
Traders_Value Chain Study.pdf

33
 BIBLIOGRAPHY

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34
Mercy Corps, Youth Lead Market Assessment, Sulaymaniyah, Sulaymaniyah and Khanaqin, Diyala,
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Signed by Responsible Party Authorized Focal Point: Signed by UNDP Focal Point

Title: Regional Coordinator Title: Programme Analyst

Name: Giovanna Bizzarro Name: HyunKyung Park

Signature/Stamp: Signature/Stamp:

35