Pamela Ann Smith
DESPITE ESCALATING WEALTH, the Gulf states are facing a potential food crisis as world prices for everything from wheat and rice to fruit, vegetables, dairy goods and cooking oils rise dramatically. And while some prices may come down from their peaks later this year as bumper harvests are recorded, world shortages are expected to persist. As a result, governments throughout the region are putting food security at the top of their agendas. Both public and private sector investors in the Gulf are also looking at ways to improve local food supplies, by investing in a range of outlets from arable farm land in the Sudan, Algeria and Pakistan to introduce new technology to enhance the local production of foodstuffs and grains, livestock, poultry and fish.
Global food prices have doubled in the past three years, according to the World Bank. For developing countries, the cost of food imports is expected to rise this year by at least 40%, according to the UN's Food and Agriculture Organisation (FAO). "Food is no longer the cheap commodity it once was," states Hafez Ghanem, the FAO's assistant director general. "Rising food prices are bound to worsen the already unacceptable level of food deprivation suffered by 854m people," he added. "We are facing the risk that the number of hungry will increase by many more millions of people." Along with climate change, the steep increases in global food prices are expected to top the agenda at the G8 meeting in Japan this month [July] of the heads of state of the world's wealthiest countries.
In some parts of the Arab world like Egypt, the world's number one importer of wheat, prices have already risen 50% or more in the past year, prompting waves of social unrest as queues formed to obtain insufficient supplies of bread and other staples. In the Gulf, which imports up to 90% of its food at a cost of some $10bn a year, the rises have also been dramatic. While many households in the region enjoy far higher incomes than in Egypt and elsewhere in the Arab world, food costs are now a major contributor to the Gulf's escalating rate of inflation.
In the case of rice, for example, a main staple of the local diet, the price of basmati from Pakistan and India has gone up by 70% on average. In Qatar, the average cost of food rose by 19% in first three months of this year alone, more than three times the rise recorded in the same period last year. Bread and cereals were up by 15%, meat by 31%, milk and eggs by 17%, oils and fats by 16%, fruits and vegetables by 19%, sugar by 10% and tea, coffee and cocoa by 6%. Potatoes cost 18% more, while fish and seafood were up an average of 12%, according to government figures. Similar increases have been recorded in Saudi Arabia, Bahrain, the UAE and Oman.
In Kuwait, where the rises have been less due to the emirate's lower reliance on the US dollar as its trading currency, the government is nevertheless considering increasing its subsidies on grains and other foods, or enacting measures to limit price rises. Randa Azar-Khoury, group chief economist of the National Bank of Kuwait, warned however, that while the government could put caps in place, "you are not going to see it by September". Such "things take time," she added.
In the UAE, the government has already signed agreements with local supermarkets to hold prices on more than 30 basic commodities to last year's levels. Some of the larger retailers, such as Carrefour, Lulu, the Baniyas Co-operative Society and the Union Cooperative Society had already implemented voluntary price caps on essentials such as rice, milk, eggs and flour before the government move. But the Emirates Society for Consumer Protection estimates basic food prices will still climb by some 40% this year. Importers in the country are now demanding that the government increases its subsidies on foodstuffs to help limit the price increases.
As a result, measures to ensure adequate food supplies over the longer term, as well as to lessen the impact of future price rises, are now taking centre stage throughout the region. Several Gulf states, along with Egypt and Jordan, have turned to Sudan, the largest country in the Arab world, as a source of underused arable farm land. Talks are also reported to have been held with Somalia, which, like the Sudan, has seen its large agricultural potential go unrealised due to social unrest and civil war.
Offers of substantial funds from neighbouring oil producing states to modernise and expand its agricultural sector and to build dams and other necessary infrastructure appear to have galvanised the government of Sudan to take steps to ensure such investments are protected and exports assured. In addition to access to new sources of supplies, food exports from Sudan would help Gulf governments reduce the role of middlemen in the food trade and bypass speculation on world food exchanges.
Earlier this year, Egypt signed an agreement with the government of Sudanese president Omar Al Bashir to grow two million tons of wheat a year in the north of the country, near Wadi Halfa. "People now are thinking more about re-investing in agriculture," Egyptian Prime Minister Ahmed Nazif said. "I think the key is for governments and the business community to start formulating projects, fundable projects, projects with real value to those owning the money, so that they can invest in it."
Saudi Arabia's minister of agriculture, Fahd bin Abdul-Rahman Balghunaim, and the minister of commerce and industry, Abdullah bin Ahmed Zenel, visited the Sudan in June to survey potential investment sites in the country. The two are also encouraging Khartoum to adopt new regulations aimed at promoting private Saudi investment in livestock as well as in agriculture. Qatar is also said to be looking at the Sudan, although details of its possible investments have not yet been announced.
The Abu Dhabi Development Fund is planning to set up a company with another Arab partner to develop at least 70,000 acres (28,329 hectares) in northern Sudan. Production would centre on corn, alfalfa for animal feed and possibly wheat, with the total investment amounting to "hundreds of millions of dirhams". Initial studies are due to be completed by November, the Fund said, noting that it was also considering other agricultural investments in Senegal and Uzbekistan.
Dubai-based Abraaj Capital has been quietly buying farmland in Pakistan as part of the UAE's efforts to increase its food security and to lower inflation. Abraaj, together with the government of Abu Dhabi, was reported to have held talks with Islamabad about expanding the production of wheat and rice for export. "Our aim is not to do away with precious farmland but to raise the productivity of our farms and turn barren land into fertile farmland," a senior Pakistani official was quoted as saying.
A spokesman for Abraaj disclosed that the private equity firm had already acquired some 800,000 acres of farmland in the country during the past year. Other UAE entities are said to be ready to follow suit, including the Emirates Investment Group and the Abu Dhabi Group. So far, Abu Dhabi's investments in Pakistan's agriculture are reported to be worth some $3bn.
Companies and private investors from the UAE are also investing in the Philippines. The projects include a $50m plan to develop a 3,000-hectare banana plantation in Mindanao, a pineapple cannery in Camarines Norte and fish and grain farms in Luzon, the Philippines trade attache in Dubai, Gil Herico, said. Other UAE businesses are looking at growing organic fruits and vegetables, coconuts and seafood, the official added.
Bahrain is also turning to the Philippines, as well as Thailand, to secure its needs for imported rice, the minister of industry and commerce, Dr. Hassan Fakhro, said. "An agreement was reached with the Philippines to allocate large plots of land to grow basmati rice in a bid to secure the kingdom's needs at reasonable prices," he said. Seeral private Bahrain companies are now expected to invest in the Philippines' agricultural sector and in livestock processing facilities, the minister continued.
In Thailand, Fakhro revealed the government was discussing the formation of a joint public or private sector company to help meet Bahrain's need for basic foodstuffs. Manama had already signed an agreement with a big rice exporter in the country to secure supplies of jasmine rice at favourable prices as an alternative to basmati, the minister added.
In the longer term, governments, private companies and scientific institutes in the GCC are looking to new technology to help the region develop more of its own food supplies at costs consumers can afford. When Saudi Arabia launched a major push to produce its own wheat in the 1980s, "a ton was six times the international price", commented Samir Radwan, managing director of the Egypt-based Economic Research Forum. The higher cost of food imports in the GCC means more funds will be invested profitably in agriculture, livestock, poultry and fish farming than when world prices were low, officials in the Gulf have noted.
One Australian company, for example, has developed a low-cost, nutritious flesh fodder for livestock that can feed up to 100 animals a day after only nine days growth in arid climates. Companies in Saudi Arabia, the UAE, Jordan and Morocco have already placed orders for the fodder, according to reports in Amman.
Research by a team from the Institute for Research for Development (IRD) in France could help farmers in Morocco to reduce their dependence on irrigated water. Using images taken by a satellite over the fertile Tensift Plain around Marrakech, they discovered they could measure the transfer of water between the soil, vegetation and atmosphere, as well as assess grain yields with greater accuracy. This would help farmers control water evaporation and plant growth rates to achieve the best production levels. Local authorities could also use the satellite data to monitor water distribution and allocate it to where it is needed most.Plans by the GCC states and other Arab governments to set up a general fund to assist poorer Arab countries faced with rising food prices and food shortages are also under study. The UAE has already helped Egypt to import crucially needed supplies of wheat, while Saudi Arabia has given more than $500m to the UN's World Food Programme. The kingdom's funds enabled the WFP to reach its $755m target for a new programme aimed at ensuring the least developed countries in the world meet their extra food aid costs. Yemen, Ethiopia, Somalia and Kenya are among the countries which are expected to benefit.