Zawya Dow Jones | Tuesday, 26 August, 2008
Saudi setting up fund to buy agriculture land abroad
DUBAI: Oil-giant Saudi Arabia plans to set up a new investment fund to buy agricultural land overseas in an effort to meet rising food demand in the Middle East’s largest economy, a Saudi official said.
“The Saudi government and agricultural firms will invest in the new company,” Abdullah al-Shoaibi, a senior engineer at the Saudi Fund For Development, which will establish the new investment company, told Zawya Dow Jones in an interview in Dubai late on Sunday.
Oil-rich Gulf Arab states, that pump a fifth of the world’s oil, are rushing to buy land overseas amid rising concerns over food security after a global jump in the price of agricultural commodities.
The cost of grains including corn and wheat may double as economic growth in emerging economies with large populations such as Brazil and Russia push up meat consumption and demand for livestock feed.
Wheat and rice supply for the domestic Saudi market will be the new fund’s initial priorities, the Saudi official said.
Rapid population growth across the Gulf is also forcing the region’s planners to divert more energy, previously allocated for agricultural production, to feed their booming industrial and domestic economies.
Dubai-based think-tank Gulf Research Centre estimates that its takes 1,212 cu m of ground water to produce a metric tonne of barley in Saudi Arabia. The kingdom depends on power-hungry desalination plants for its usable water. “There’s the problem of high food prices and water scarcity,” al-Shoaibi said.
Saudi’s estimated population of about 28mn people is growing at annual rate of about 2%, according to US government estimates. The kingdom is the most populous country in the Arabian peninsula.
Rising prices in Saudi Arabia are causing disquiet as the country struggles with double-digit inflation that is partly undermining the benefits of record-high oil earnings.
“Food inflation is a concern for Gulf governments because of popular discontent,” John Sfakianakis, chief economist at SABB, Saudi Arabia’s fourth-largest traded lender.
Inflation in the kingdom, the world’s largest oil exporter, rose to 10.6% in June, a 30-year high, driven mostly by rising food prices.
Pakistan, Sudan and Thailand are amongst the country’s being targeted for agricultural land grabs by Gulf planners.
Al-Shoaibi said the new Saudi fund’s first investment will be in Sudan and that it may also buy land in Turkey and Pakistan.
Government-financed Saudi Fund for Development has granted financing for developing nations in different sectors worth Saudi riyals 27bn ($7.2bn), with 7bn riyals allocated to agriculture projects, al-Shoaibi said.