Gulf News | 9 September 2008
By Natasha Marrian, Staff Reporter
Dubai: Gulf Cooperation Council (GCC) countries must invest in foreign arable land to boost its food supply and increase food security in the region in the long term, Standard Chartered economists said on Tuesday.
Short-term solutions to food inflation such as price caps, enforced in the UAE at present, were not viable and were in fact market-distorting, said Standard Chartered Senior econ-omist Phillipe Dauba-Pantanacce.
A global food supply crunch, prompting many countries to restrict exports of certain commodities, along with structural changes and a decline in arable land, have impacted on GCC food supplies since the region is a net food importer.
Fifty-five agricultural commodity prices surged 37 per cent year-on-year in July, said Abah Ofon, an analyst at UK-based Standard Chartered.
"While the number of farms in the country rose by 10,000 to around 38,500 between 1999 and 2003, total cropped area in the country actually peaked in 2000 at 2,446,125 donums (611,531.25 acres)," said the report presented by Ofon.
"However, total cropped area has been declining ever since, falling to 2,144,216 donums in 2003. This decline in local and national productive capacities has been a catalyst for inflation when viewed against rising population growth."
The food bill for the GCC surged by 25 per cent from $16 billion in 2007 to $20 billion in 2007, accounting for ten per cent of total GCC imports.
The GCC countries were looking to invest in countries such as Sudan, Ethiopia, Turkey and Pakistan, fand investments have already been made in parts of Sudan, Ofon said.
Like any other investment, agricultural investment carries various risks. Political instability, protectionism and water shortages could pose problems in the countries identified.
To circumvent some of these risks, the benefits of the investment must be made clear to the countries where investment is being made, the surrounding communities and all other stakeholders. "There is a possibility of making it a win-win situation," he said.