Farm projects in fertile Arab nations can cut GCC gap

Emirates Business 24/7 | Wednesday, May 28, 2008

Nadim Kawach

Gulf oil producers need to set up agricultural projects in fertile Arab countries to achieve self-sufficiency and to bridge a massive farm deficit that exceeded $12 billion (Dh44bn) in 2006, a Gulf group said yesterday.

The six Gulf Co-operation Council (GCC) countries are reeling from a painful gap between food imports and exports given the limited farm potential in the desert region and lack of interest in setting up joint farm ventures, the Dammam-based Federation of GCC Chambers of Commerce, Industry and Agriculture said in a study, sent to Emirates Business.

This is despite efforts by these countries to expand their agricultural sector over the past two decades.

From about $8.9bn in 2001, the GCC's combined farm gap surged to $12.2bn in 2006 and is expected to further widen because of low growth in the agricultural sector and a surge in imported food prices.

"The issue of food security has become a priority for the GCC countries in the current circumstances," the Federation said in the study. "The steady increase in the farm gap has been due to lack of co-ordination and co-operation among member states in the agricultural sector and in the establishment of joint farm projects… it is time for the GCC countries to take measures to cover that gap by setting up farm projects in such fertile Arab countries as Sudan, Egypt and Yemen."

The study proposed signing of agreements between the GCC states and those countries for the allocation of land to Gulf investors to set up farm projects.

"These projects could be run as joint ventures under the management of GCC companies, which could also market their products in the region," the report added. "Another step is that GCC citizens should be educated about the need to change their eating habits to match the new market and farm conditions. The GCC governments should also negotiate with the world's major food producers to obtain some supply and price privileges and to allocate funds to offset price increases."

The GCC countries comprising the UAE, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia, which control nearly 45 per cent of the world's proven oil wealth, are the largest farm importers in the Middle East given their poor agricultural sector and high per capita income. These countries food imports accounted for more than 70 per cent of the total Arab farm imports of about $16bn in 2006.

Although they have enormous arable land, Sudan and Iraq have remained key food importers as persistent conflicts have prevented them from investing in farm projects. Yemen's poor financial resources have also made it a net food importer.

According to a government group, the GCC and the other Arab countries reeled under a massive cumulative farm import bill of more than $200bn between 1990 and 2006 and the recent surge in food prices could block sufficient supplies to the poor and threaten stability in the region.

"High food prices directly affect the ability of Arab citizens to obtain enough foodstuffs given the limited income in most member states," said the Arab Organisation for Agricultural Development (AOAD), an affiliate of the Arab League.

"Prices have steadily risen between 2002 and 2006 and are still recording sharp increases because of the rise in global food prices. Given the Arab region's heavy reliance on imports, this will have serious repercussions on food security in member states and will negatively affect regional stability."

Between 2000 and 2006, Arab countries suffered from a cumulative food deficit of more than $110bn while the gap was about $100bn between 1990 and 2000. This means the cumulative farm gap, the difference between food imports and exports, has exceeded $200bn in nearly 15 years. The painful gap affected most types of farm products, mainly cereal, rice, sugar, wheat, cooking oil, chicken, meat and dairy products.

AOAD's figures showed the gap in most products has worsened over the past years, with that in grain and flour rising from about $8.5bn in 2004 to $9.1bn in 2005 and $9.58bn in 2006.

Wheat gap widened from $4.4bn in 2004 to $4.6bn in 2006 while that in corn surged from about $1.5bn to $2.02bn. The gap in rice also grew from about $1.24bn to $1.32bn and that of barley jumped from nearly $868 million to $1.9bn during the same period.

In 2006, the gap stood at $1.27bn in sugar, $2.4bn in cooking oil, $1.3bn in meat, $1.19bn in chicken and $2.8bn in dairy products. Only fish recorded a surplus of around $914m in 2006.

Abu Dhabi agricultural firm to invest in Sudan

The Abu Dhabi Fund For Development (ADFD) has established an agricultural company in Sudan to invest in its agricultural sector.

Agricultural products produced through the venture will then be distributed in countries where the ADFD is active, said a board member for the fund, Fawzya Hamad Al Mubarak.

She made the statement on the sidelines of an event to unveil ADFD's five-year strategic plan for 2008 to 2012 at the Intercontinental Hotel in Abu Dhabi.

Al Mubarak said the setting up of the firm is in line with Abu Dhabi's plans to fight growing prices of basic commodities, especially strategic ones such as wheat.

She added the ADFD is due to establish a fund to support UAE exports and said it would become functional next year.

To date, ADFD has handed out loans totalling Dh23 billion in 52 developing countries. Under its new strategy, the fund will focus on developing specific sectors of an economy, such as the agricultural sector, in co-ordination with other development funds. (Abdel Hai Mohamed)

The numbers
  • $12bn: Combined farm produce deficit of the GCC countries in 2006, up from 8.9bn in 2001.
  • 70%: Share of GCC states in the total farm imports of about $16bn of the Arab countries in 2006.
  • $200bn: Total farm import bill of Arab countries between 1990 and 2006.
  • $914m: Surplus of fish recorded in 2006.

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