Jordan’s cut flower sector has enjoyed double-digit growth over the past decade. But this success is being threatened by new tax hikes affecting consumer spending, in addition to increasingly fierce competition from African growers.
By Celine Alkhaldi
Rows of red rose bushes, pink carnations and white Lilies stretch out for seemingly ever in huge symmetrical green houses. It feels like one could be standing in one of Holland’s mega flower farms, but it is actually in the Jordan Valley, as the Kingdom is now one of the region’s biggest producers of cut flowers.
Around 70 farms produce over 70 million cut flowers annually. Year-on-year sales have been growing steadily by 10 percent over the past five years, according to Mazen Ghalayini, the head of Amman’s Flower Stock Market, the first of its kind in the Arab world. “The industry is also able to meet local demand,” added Ghalayini, “saving the country over $15 million in foreign currency that was used to import flowers before.”
According to the Ministry of Agriculture, the country today is not only self-sufficient in terms of flower production, but is also exporting regionally to markets including the Gulf and Lebanon, and internationally to countries like the UK, Germany, France, and ironically, even Holland.
“Production varies throughout the year, reaching a peak in the spring while its lowest level is during the winter, excluding the time around Valentine’s Day in February and Mother’s Day in March,” said Ghalayini. The increase in supply has also resulted in an increase in demand and consumption in the local market.
Employing over 3,000 workers, the cut flower industry has been a true local success story. The country is currently seeking partnerships with leading global producers like Holland to train local farmers, build a new flower bourse and start a regional auction for flower exports.
The government is trying to take steps to further grow the sector. Minister of Agriculture Khaled Huneifat announced that starting this year, the government will offer interest free loans to farmers who want to start producing cut flowers.
“We are trying to encourage farmers towards cultivating cut flowers because of the higher return they receive compared to other crops,” said Huneifat.
Historically, most of the cut flowers consumed in Jordan were imported. In early 1985, the government placed a temporary ban on these imports so as to kick-start a domestic flower industry and direct the private sector’s interest towards establishing production for export programs. Farmers began marketing produce through two main outlets: the Amman Flower Auction (AFA), established in 1987, and the Cut Flowers Producers Cooperative Association (CFPCA), established in 1989. On average, producers were paying a marketing fee of 5 to 7.5 percent to market their produce through either of the two channels. Many of the growers were selling their produce directly to the consumers throughout their retail outlets.
In 1996, the marketing structure of cut flowers in Jordan underwent significant changes. The Greater Amman Municipality (GAM) discontinued both the CFPCA and the AFA from practicing wholesale in their marketing centers—opening its own cut flower and foliage wholesale market. This market consisted of nine wholesale outlets, whereby GAM was charging 4 percent of the total sales value as a marketing fee for each shipment sold in the new market.
Despite its success in recent years, industry leaders are raising a red flag, citing international competition and government policies as major challenges which could severely damage the sector.
After weeks of protests from local farmers, the government backed down from a proposed 10 percent tax hike on some agricultural outputs and inputs like bulbs, seeds and greenhouses.
The move would have increased the cost of production, hitting local farmers hard, given fierce competition in the global market, which is currently dominated by African producers in Kenya and Ethiopia as well as in India.
“We have suspended the tax increase on all agricultural outputs because of the economic conditions Jordan is currently suffering from, due to the situation in the region that has led to the closure of borders for over three years” said Huneifat, referring to the borders with Syria and Iraq, seen as key export routes.
However, the government’s financial policies, which include tax hikes across the board on several commodities, have left consumers with less disposable income.
“Since the government announced new taxation measures, the public’s purchasing power has plunged. Consequently, this is affecting flower consumption, which is seen as a luxury item,” Ghalayini said. “The expected fall in the demand will cause prices to plummet further.”
He said some of the most important varieties of flowers are already facing a sharp decrease in prices. Over the past year, the price of flowers such as Baby’s Breath has dropped from 30 piasters a flower to 10 piasters. The lilium is being sold today at 20 piasters per flower, a sharp decrease from its price last year, which was 50 piasters. These sale prices are barely sufficient to cover the cost of production, transportation and packaging.
“Despite intensive attempts to find export markets, the competition between Kenya, Ethiopia and India is hindering our efforts due to their low labor costs, abundant water, and high production due to high temperatures,” added Ghalayini.
According to Engineer Saleh Ali, production manager at the Al Khatib Farms, around 150 cubic meters of water is used annually per greenhouse—whereby 1 cubic meter of water costs JD1. “Competitors are paying next to nothing for the water they are consuming,” he explained. “Water scarcity in the country is definitely one of the most difficult obstacles to cope with.”
Most local consumers, shop owners and event planners agree the market is price-driven at the end of the day; they will go for the high quality, lower price given the choice.
“It all depends on the budget I am given when putting together an event and whether I am given a budget to pay a higher price for higher quality flowers. Recently, local flowers have become more expensive,” said Faisal Abu Matar, cofounder of Koncept Haus event planning agency.
In light of all the challenges, the demand and supply dynamic needs to be tweaked in the growing industry. Ghalayini said Jordanian flower farms produce 100,000 flowers a day, many of which are damaged due to the lack of an efficient marketing mechanism to control supply and demand. Flower traders and shopkeepers certainly counted on Mother’s Day last month to compensate for their losses and pay their shop fees.
However, with less money to spend, local consumers may not be the answer to the increasing volume of the product. The sector will have to boost exports and compete on a regional and international level for a bigger piece of the pie for it to remain viable and sustainable.