Agri-food logistics in the Mediterranean region: challenges and opportunities

International Forum on Agri-Food Logistics

II Domestic Scientific Conference AGROLOGISTYKA 2014, Poznań, Poland.

48 www.agrifoodlogistics.eu

Agri-food logistics in the Mediterranean region: challenges and opportunities

Noureddin Driouech 1*, Amine Hmid 1, Hamid El Bilali 1, Izabela Lipińska 2 and Sinisa Berjan 3

1. CIHEAM- Mediterranean Agronomic Institute of Bari, Italy e-mail: [email protected]

2. Poznan University of Life Sciences, Faculty of Economics and Social Sciences, Poland e-mail: [email protected]

3. University of East Sarajevo- Faculty of Agriculture, Bosnia and Herzegovina e-mail: [email protected]

* Corresponding author Key words: agri-food logistics, mediterranean, trade, transport

Introduction

Food supply chains are now rapidly moving towards globally interconnected systems with a large variety of complex relationships. This is also affecting the ways in which food is produced, processed and delivered to the market so also agri-food logistics. In fact, demand and supply are no longer restricted to nations or regions, but have become international processes (van der Vorst, et al., 2007).

In a context of globalisation, the development agricultural trade is increasingly determined by the capacity of countries to develop modern infrastructure to facilitate exchanges and the movement of goods as well as to ensure better food security. Nowadays logistics is seen as a value-adding process that directly supports the competitiveness of agri-food firms. It also enables competitive price, quality and compliance with rules and regulations in the supply chain (van der Vorst, et al., 2007).

The strategic geographical position of the Mediterranean area, connecting three continents through trading routes and presenting potential growing markets, makes it one of the most important economic areas for trade in the world. Even though having these potentials, the Mediterranean area still cannot fulfil a key role in the global market (Gattuso, 2012). the minor role played by the Southern and Eastern Mediterranean countries (SEMCs) is mainly due to several challenges facing the logistics, breaking by consequence the agricultural sector development. In the heart of this trading economic activity, agricultural and agri-food commodities are of a particular importance. As the Mediterranean is an area with limited land and water resources and with a continuous slow deterioration of food security, it is of crucial importance to ensure a highly efficient agri-food logistics to guarantee food safety and security and to boost the economic development of the Mediterranean countries.

The paper aims at assessing the performance of logistics, exploring the main challenges facing the agri-food trade in relation to logistics, and giving a snapshot on the main opportunities to develop the logistics sector, especially transport and cold chain, in the Mediterranean region.

Methods

The present review paper is based on secondary data from different sources such as the International Centre for Advanced Mediterranean Agronomic Studies (CIHEAM), European Commission (EC), African Development Bank (AFDB), World Bank, etc. One of the




indicators considered in the present paper is the Logistics Performance Index (LPI) (World Bank, 2014).

Findings

Logistics performance in the Mediterranean countries According to the World Bank, in 2014 none of the Mediterranean countries could be

ranked among the top ten positions of the Logistics Performance Index (Tab. 1). Most of SEMCs, influenced by the political instability and the ‘Arab spring’, moved down in the ranking between 2012 and 2014 (World Bank, 2014). The low ranking of SEMCs reflects the poor logistics quality with regard to the trade and transport infrastructure, the efficiency of customs services, the level of organization and handling, and the deliveries competitive prices.

Table 1. Logistics performance of some Mediterranean countries.

Country LPI World rank % of highest performer

Country LPI World rank

% of highest performer

France 3.85 13 91.2 Cyprus 3.00 58 64.1 Spain 3.72 18 87.1 Egypt 2.97 62 63.0 Italy 3.69 20 86.2 Montenegro 2.88 67 60.1

Portugal 3.56 26 82.0 Bosnia-Herzegovina 2.75 81 56.0

Turkey 3.50 30 80.1 Lebanon 2.73 85 55.3 Slovenia 3.38 38 76.3 Algeria 2.65 96 52.8 Greece 3.20 44 70.5 Tunisia 2.55 110 49.7 Malta 3.11 51 67.5 Libya 2.50 118 47.9 Croatia 3.05 55 65.8 Syria 2.09 155 34.9 *LPI runs from 1 to 5; the highest score representing the best performance. *% of highest performer based on comparison with Germany (LPI=4.12, Rank=1 and 100% performance). Source: World Bank (2014).

Main challenges of the Mediterranean Agri-food trade and logistics

Trade in agricultural and agri-food products obeys greatly to last-minute changes and to rush orders. The perishable nature of such products from one hand and the specific requirements to guarantee their quality from another hand makes it more difficult for SEMCs to deal with. The high dynamics and uncertainty in supply and demand, the ambiguity covering the quality of fresh products, the availability of appropriate volumes in time and in a specific place are all additional factors breaking down the growth and development of agri-food trade (Verdouw, et al., 2012). In terms of trade value, the Mediterranean is among the leading areas for trade in fruit and vegetables with 23% of the global trade in fresh vegetables and 25% of trade in fresh fruit (Malorgio and Felice, 2014). This important trade value is mainly attributed first to the Northern Mediterranean countries (France, Spain, Italy…) and second to the rising SEMCs such as Egypt, Morocco and Turkey while the trade value for the rest of the Mediterranean countries remain very low.

The major constraints of the Mediterranean agri-food logistics are linked mainly to the maritime infrastructure presented by ports, to road and motorways transport, to rail transport and to several other aspects such as restrictive agreements and the misuse of available potentials.




A common feature characterizing most of the SEMCs ports is that the whole traffic is concentrated in a few ports leading to long waiting periods inside the harbor or alongside the quay. Loading and re-loading of ships and dockside warehouses with the intervention of several agents creates a source of conflicts and time wasting (Naïli, 2012). Further, most of the Mediterranean ports are not able to meet the specific requirements for the transport and distribution of fresh fruit and vegetables. The shipping of perishable goods in specialized ships has the drawback of concentrating a high volume of production in space and time, which implies a change in the starting price and makes it difficult for stakeholders to meet commercial and logistical requirements (López, 2012). In Tunisia, the agrifood trade sector faces an inadequate management and use of cold chains leading to higher electrical energy consumption and higher operating costs. The poor knowledge of optimal refrigerated storage conditions particularly for fruits and vegetables, the short supply of skilled labour for maintenance, the low technical support within the sector and the lack of trade organization seem to exert a negative impact on the country’s potential in agrifood export sector (Thraya, 2012).

Road transport is still by far more expensive than sea transport and only possible for intra-community goods transport. Even being time effective, road transport is faced with various external constraints such as traffic jams, pollution, highway maintenance, eco-taxes, time restrictions on truck movements and even the euro-vignette (Gattuso, 2012; López, 2012). In the Southern Mediterranean countries, road transport remains one of the low performing links in the logistics chains. Main operating agents are characterized by small scale transport companies with low investment power, poor quality fleets and non-qualified drivers. The lack of control and organization facilitated the development and domination of the informal activities (Ghzala, 2011; Santi, et al., 2012). In Egypt, the inadequate transport facilities cause considerable wastage of agricultural products. In the fresh fruit and vegetables sector, losses linked to transport and storage range from 25 to 50% of the total harvest. These high losses do not only break down export possibilities but affect also local market which suffers several shortcomings, and retail outlets to meet the required standards (Tawfiq, pers. Comm., in Abis, 2012).

The majority of the rail networks in the Southern Mediterranean countries are of average to poor quality with a single track rail and with no connections to the maritime ports thus slowing down their potential use for international rail trade. Besides some political issues such as the Arab uprisings and the closure of land borders between Morocco and Algeria made the rail networks use for trade a non-valuable option (El Khayat, 2014). Beside all these constraints, Northern Mediterranean European countries have adopted policies that cannot fit with the facts and realities of the regions of the South Mediterranean (Gattuso, 2012). Tariff protection mechanisms for agricultural products at the European borders, reaching 30%, applying a quota system for trade in agrifood products between the EU and the SEMCs and the level of customs duties applied at entry made it even more restrictive to agrifood exports from SEMCs to the Northern Mediterranean partners (Ben Zid, 2014).

Opportunities to improve the Mediterranean logistics to foster agri-food trade

The Creation of the Euro-Mediterranean Free Trade Area aimed at removing barriers to trade and investment between both the EU and SEMCs and between the SEMCs themselves. Trade partnerships and bilateral agreements between Mediterranean partners are related to further liberalization of trade in services, accreditation and acceptance of industrial products and regulatory convergence beside liberalization of trade in agriculture, which might




give a considerable boost to overcome the challenges and constraints facing the Mediterranean agrifood trade and food system sustainability (EU, 2013). For improving the shipping services, the EU is promoting a new service model known as the Short Sea Shipping (SSS). This model intends to create “Motorways of the Sea” between the European and riparian countries which might provide a great opportunity for agrifood importers/exporters allowing, by consequence, trade growth and sustainability (López, 2012).

In Turkey, considerable investments are being devoted to railway construction, electrification of the existing network and particularly rail links to port logistics areas. The increase in volume and value of fresh fruit and vegetable export in Turkey was one of the reasons behind inciting private companies in the logistics sector to open up and invest in RO-RO transport creating, by consequence, wider services offer and higher price competitiveness. Some agrifood companies have developed their own logistics allowing better control of their quality chain, transport and storage costs. Several ports managed by public State bodies were cede to private logistics companies investing massively in infrastructure to increase storage and maintenance capacity in the ports (Sakir Ersoy and Tozanli, 2012).

In Tunisia, to preserve perishable products, to allow products marketing under optimal conditions and to store products during transport and shipment, the government invested heavily in the cold chain sector to boost the export of agrifood products towards neighbouring and Northern Mediterranean countries (Thraya, 2012).

Some considerable efforts are being devoted from the SEMCs to develop and maintain their road and rail networks. At the continent political level, the African Union and the African Development Bank Group are seeking to improve the African Regional Transport Infrastructure Network (ARTIN) through the program for Infrastructure Development in Africa (PIDA) to link major African consumption and production areas with the rest of the world via modern and efficient regional transport infrastructure networks and gateways. The trade in the corridors is expected to grow from 13% in 2009 to 18% in 2040 (SOFRECO, 2011). Figure 1 shows the horizon 2020 and the outlooks 2040 corridors in the southern Mediterranean countries. Figure 1. South Mediterranean ARTIN Corridors in 2040.

Source: (SOFRECO, 2011)

At a national level, Morocco, Algeria and Tunisia are investing in building new roads

with high standards over long distances to create a wider national and international linkage. Promising projects are planned to expand and link the rail networks between Tunisia, Libya and Egypt. Algeria is planning to develop a high-speed network and Morocco is extending its network towards Nador and the new port of Tanger-Med (Ghzala, 2011; Santi, et al., 2012) while Egypt plans to expand Alexandria and Damietta ports (Lozano and Osman, 2012).




Beside these encouraging steps, the investments in modernization of the SEMCs ports and the creation of various partnerships between different agents involved in the whole supply chain activities would give more efficiency to the trade flow facilitating products transport, encouraging synergies between carriers and organizing the concentration of stocks in their most suitable logistics sites (Ghzala, 2011; Santi, et al., 2012).

The intelligence, efficiency, sustainability and performance of the agri-food sector can be enhanced by using information and decision support systems that are tightly integrated with advanced internet-based networks and services (Verdouw, et al., 2012).

Conclusions and implications

Several Mediterranean countries are implementing various port development initiatives: the Tangier Mediterranean Port in Morocco, the planned Enfidha deep Sea Port in Tunisia, and major improvements and expansion programs of Alexandria and Damietta ports in Egypt. These linked with improved road and rail networks as well as continuous improvements in cold chain and storage infrastructure and management, and customs reform and modernisation will play a key role in boosting the agri-food trade of SEMCs with the Northern Mediterranean countries and among themselves. To guarantee its prosperity and sustainability, the Mediterranean agri-food trade should rely on a flexible planning concept coupled with efficient logistics system to enable reallocations, last minutes changes and to provide a well structured commercial activity.

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Agri-food logistics in the Mediterranean region: challenges and opportunities

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