Gulf News | August 30, 2008
By Babu Das Augustine, Banking Editor
Dubai: Gulf countries contemplating direct agro-investments in central Asia and Africa should evaluate the relative merit of these investments in comparison to similar potential in Eur-ope and Latin America, the Gulf Research Centre said in a recent report.
Analysing the recent efforts by some Gulf governments to invest in overseas food production to achieve food security, the report - Potential of GCC agro-investments in Africa and Central Asia - said though some African and central Asian countries offer investment opportunities, investments in alternate destinations such as Europe and Latin America could yield better results.
"Mozambique, Sudan and South Africa could prove to be important destinations of agricultural investment by GCC countries. However, the infrastructure development required is considerably larger than in the case of developed markets," the report said.
While African countries mainly suffer water shortages that demand huge investments, central Asian countries and Pakistan suffer a physical water shortage which limits the potential for enhanced irrigation and agricultural productivity.
Food exports from the landlocked central Asian countries constitute a logistical challenge while transport security is much more guaranteed in the case of East African countries and Pakistan.
Given the limited agricultural potential of central Asia, the required magnitude of agro-investments in Africa and the institutional shortcomings in both regions, the report said GCC investments in agricultural trading companies and in developed agro markets like Europe and Latin America might be a safer bet.
Besides more land and water resources, Latin America and Europe would offer established markets - with better rule of law and safety of foreign direct investments (FDI) - as well as existing know-how and infrastructure, the report said.
The option of indirect access to food trade flows via investments in trading companies and trading infrastructure like ports would also be more available in these developed markets. Such investments offer the opportunity to lower food procurement costs by cutting out middlemen and agency fees.
According to the report, the major challenge for any Gulf investment programme that aims at food exports from Africa, central Asia and Pakistan is the consideration of local needs of food consumption, as most of the countries in question are, at this stage, net food importers themselves.