Food reserve planned, but imports leave UAE vulnerable

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The Minister of Economy outlines food price-control measures that includes measures to prevent shortages, penalties against unfair increases and setting up farms abroad, but warns that we are not immune to price increases. Lee Hoagland / The National

The National (UAE) | Jan 12, 2011

Kareem Shaheen

ABU DHABI // The UAE is drafting a plan to set up a strategic food reserve that would guard against sudden shortages, the Minister of Economy said yesterday.

But the public must realise that the country will never be immune to food price increases because of its reliance on foreign imports, Sultan al Mansoori suggested at the Federal National Council (FNC).

The FNC also passed an amendment to the consumer protection law that imposes immediate penalties on companies that violate the law by unfairly raising prices. The amendment now needs presidential approval.

Mr al Mansoori came under questioning on the policies that the ministry had implemented to limit increases in the price of food.

"As of 1/1/2011, food staples like [cooking] oil, sugar and rice recorded increases that reach up to 50 per cent in the local markets," said Hamad al Midfa, a member from Sharjah.

"There are price increases and there has been no decline or stability in the prices of a lot of food staples."

Basic food staples have jumped in price in the past 18 months, and there are likely to be further increases this year, according to the United Nations.

The questioning gained added urgency with a report released last week by the UN Food and Agriculture Organisation (FAO) that showed food prices globally had risen to their highest levels since the FAO introduced its food price index in 1990.

Mr al Mansoori reiterated that food security had emerged as a priority for the government.

He acknowledged that price increases had occurred, linking them to floods in Australia and droughts in Russia and Argentina, in particular. Shortages have led some countries to impose export restrictions that have led to even further spikes in food prices.

"There are increases internationally in the prices of staples like sugar, rice, grain and corn," Mr al Mansoori said.

"All of this had negative effects and we are an importing nation," he said, adding that this should create an even stronger impetus for companies to invest in agriculture in the future.

"We have to understand in this country that we don't produce a lot of goods."

Although Mr al Mansoori outlined a slew of measures meant to control price increases or create a buffer against rapid price fluctuations, he said the country would not be immune to food shortages since it relied so extensively on imports.

The Cabinet has issued a resolution that tasks the National Crisis and Emergency Management Authority to launch a plan that would set up a strategic food reserve that could act as a buffer against shortages or spikes in prices, Mr al Mansoori revealed.

The UAE has abolished rules that allow companies to be the sole proprietors of 15 food products, including rice, tea and cooking oil. This means price increases in these staples will be smaller, as merchants can buy them directly from abroad.

Mr al Mansoori said the country was considering expanding these measures to include other staples.

Several national companies and even the Abu Dhabi Investment Authority, the capital's sovereign fund, are planning investments in agriculture in countries as diverse as Vietnam, Cambodia, Pakistan, Australia, Romania and the United States.

The Ministry of Economy has invited local companies to a range of joint economic meetings with these countries.

A group of national companies including Al Foah, Agthia and Jinan "are knocking on the doors of the ministry to look for opportunities to invest in the agriculture sector", he said.

"The Government is serious on agricultural investment."

The UAE has also met with a range of countries to explore investments in agriculture.

These investments typically include buying land and setting up farms abroad, and exporting food back to the UAE, as well as setting up food processing plants that process raw material before marketing it in the UAE or other countries.

"But the investments of these companies do not cover just these nations, but have extended to Pakistan, Romania and the United States, and there are serious discussions with other countries like Australia, and investments in Indonesia," Mr al Mansoori said. "The Abu Dhabi Investment Authority has also had a role in this issue, and has begun to co-ordinate with a number of countries on the issue of investment in the agriculture sector.".

An electronic database to track the prices and abundance in the market of 200 food products that the UAE imports is being set up at the moment, Mr al Mansoori said. A new entrepreneurship law that is expected to pass this year will include incentives and subsidies for Emiratis who enter the food processing industry.

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