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March 2022 - The European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization of the United Nations (FAO) held a virtual round table to discuss options for sustainable development in the olive oil sector. The event was organized as part of the FAO-EBRD collaboration on olive oil in the West Bank and Gaza Strip funded by the Netherlands through EBRD’s Multi-donor Trust Fund.

Speaking during the event, Mr. Ciro Fiorillo, the head of the FAO Office for the West Bank and Gaza Strip (FAO WBGS) said the olive oil industry is very important to local farmers and that this dialogue is a welcoming move to harness the sector’s potential for the country.

“Utilizing more than 50% of total cropland, the olive oil sector remains an important sector for the West Bank and Gaza Strip, and olives are a strategic crop from an environmental, political and socio-economic perspective. The sector supports the livelihoods of at least 75,000 farmers and 100,000 seasonal jobs, and contributed to 15% of agricultural GDP in 2020,” said Mr Fiorillo.

The valorisation of olive oil residues into by-products, the improvement of water management, the manufacturing of sub-products and the introduction of renewable energy, were all discussed as potential ways for fostering sector growth during the discussions. In addition to this, monitoring and dissemination of data to support evidence-based policy and empowering private sector associations was also discussed.

The olive sector in the West Bank and Gaza Strip: one sector, many different realities  

Between January 2020 and March 2021, the EBRD and FAO conducted a review of the olive oil value chain to identify opportunities for growth along the value chain.

The findings of the study show that the West Bank and Gaza Strip operate as two very different markets: the production of olives is concentrated in the West Bank, where small-scale extensive farming remains predominant. The lack of modern farming practices, land fragmentation and absence of irrigation are some of the factors that are having a negative impact on production efficiency at the farm level.

While yields are higher in the Gaza Strip region due to, among other things, more intensive farming practices, the overall productivity of olive farming remains low compared to international standards. In addition, the increasing water salinity in the Gaza Strip and climate change could put further pressure on water availability and challenge productivity of the sector in the coming years.

The West Bank and Gaza Strip have a modern processing sector, which is a key factor for producing extra virgin olive oil. There are opportunities to scale-up the adoption of good production practices and structure the organization of the sector to increase the processing efficiency and quality of olive oil.

In comparison to international standards, the cost of production in the West Bank is still high. This is due to the high cost of fertilizers, water and labour. Trade policy provides protection to olive oil producers in both areas, which results in domestic prices being substantially above international prices. They have consolidated their exports to specific international markets that look for olive oil from these areas and in 2019 this amounted to USD 52 million in revenue.

“The EBRD has been supporting the olive oil sector in Southern and Eastern Mediterranean countries, including Morocco, Tunisia and Jordan, due to the commodity’s domestic and international economic prospects and its agro ecological suitability in a region increasingly impacted by water scarcity,” said Iride Ceccacci, Associate Director, Head of Agribusiness Advisory at the EBRD.

A sector at a crossroads

The olive oil sector in the West Bank and Gaza Strip has the potential to contribute towards improved socio-economic outcomes, but it faces many serious challenges. The sector’s stagnant productivity is linked to sub-optimal farming practices and use of water resources, as well as the small size of landholdings.

Farming will have to face growing challenges stemming from difficult climatic conditions. In addition, product quality, safety and sanitary standards are usually not aligned with best international standards, which undermines the ability to eventually broaden and diversify their olive oil exports.

Nuno Santos, an FAO senior economist and one of the study’s authors, said, “Given the expected increase in domestic consumption (particularly linked to population growth) and assuming that productivity levels are not improving, we can easily expect the West Bank and Gaza Strip to see diminishing quantities of olive oil available for exports.”

To address these challenges, the sector would benefit from a broad range of interventions and would need to attract more financing.

“One key area to focus on is improving the efficiency and quality of olive oil production, and this requires support along the whole value chain. The needed interventions include capacity building activities to raise awareness among farmers on best production practices from field to bottle, such as optimizing irrigation with inclusion of precision agriculture technologies, adequate and regular pruning of olive trees, mill management and olive oil tasting,” Mr Santos added.

There are also options to improve the environmental impact of olive oil production, by investing in green technologies and supporting legislative efforts, especially in the area of by-products management. On the commercialization side, future export development could benefit from strengthening the marketability of local olive oil with internationally recognized certification, supporting local brands and labelling, as well as improved quality controls. Finally, institutional support in terms of public-private policy dialogue for improved policies, developing cooperatives and setting up systems for quality control, as well as more data collection about the sector are key themes to support fulfilment of the sector’s potential.

To address these challenges in practice, FAO, the EBRD, public and private sector players, as well as international experts in attendance, discussed options for supporting policies and growth opportunities along the value chain, focusing on working towards a more sustainable and greener sector as well as on upgrading of local olive oil quality.

Coming up, the two institutions are planning to hold a session in June on exploring the potentials of olive oil in Jordan.