Business | Analysis

Investing abroad is right decision to ensure food supply

It is suggested that rising food prices is responsible for about 30 per cent of inflationary pressures encircling the economies of the Gulf Cooperation Council (GCC).

  • By Dr Jasim ali, Special to Gulf News
  • Published: 23:24 July 26, 2008
  • Gulf News

It is suggested that rising food prices is responsible for about 30 per cent of inflationary pressures encircling the economies of the Gulf Cooperation Council (GCC). To be sure, all GCC countries are suffering from inflation, though Qatar and the UAE stand out as being the worst hit. Inflation rates stood at 14 per cent and 11 per cent in Qatar and the UAE in 2007, respectively.

By one account, prices of foodstuff had increased by some 75 per cent since 2000. Oil prices are partly blamed for the inflation debacle by increasing cost of production in food producing countries as well as pushing up insurance and freight rates. Clearly firmer oil prices are a mixed blessing for GCC economies.

Still, discrepancies amongst major stakeholders of the farm industry only add to uncertainties related to food supply. Major players in the farm business, notably the US, the 27-member European Union as well as Brazil, China and India, are yet to sort out their differences regarding the level of subsidies granted to farmers. Last week, ministers from more than 30 countries gathered in Geneva under the auspices of World Trade Organisation in a fresh attempt to resolve outstanding matters related to Doha Round. Disagreement amongst member countries on the level of subsidies granted to the agriculture sector is delaying completion of the round, which started in 2001.

GCC countries are increasingly exploring investments abroad as they seek solution to the food crisis. For instance, recently the UAE explored the option of investing in farmlands in Kazakhstan. The matter was discussed during a recent visit by UAE President His Highness Shaikh Khalifa Bin Zayed Al Nahyan to the central Asian state.

Additionally, the UAE has reportedly purchased 70,000 acres of arable land in Sudan to develop products for home market. Other reports have advised of a plan by the UAE to buy more than 100,000 acres of farmland in Pakistan worth $500 million.

Still, Pakistan has reportedly offered Saudi Arabia a large amount of acres of agricultural land in return for oil. Egypt is also said to have offered both Saudi Arabia and the UAE the opportunity to purchase farmland.

Even Bahrain, the smallest economy in the GCC, has started exploring buying farmland in southeast Asian nations, notably Thailand and the Philippines. Bahrain is considering the option of promoting rice from Thailand as opposed to the traditional type of Basmati. King Hamad Bin Eisa Al Khalifa of Bahrain is expected to discuss the question of food supply during his upcoming visit to China.

Undoubtedly, home-grown solution is not viable due to some hard facts, namely scarcity of fertile land and water shortage. By one account, only 10 per cent of lands in GCC countries are arable, primarily located in Saudi Arabia. Nevertheless, according to Dubai-based Gulf Research Centre, production of a tonne of barley requires some 1,212 cubic metres (42,801 cubic feet) of ground water reserves in Saudi Arabia. Certainly, this is not wise use of a scarce resource.

In a far cry from the policies of 1970s and 1980s it seems that Saudi Arabia has little interest in developing local agriculture industry.

Experience has shown that producing at home could end up being considerably more expensive than importing.

The GCC's food import bill amounts to some $12 billion annually. However, the figure is subject to increasing substantially with rising food prices. Yet, GCC authorities are doing the right thing by investing abroad, as they seek to ensure availability of stable supplies in a turbulent global economy while addressing the question of food prices.

- The writer is a Member of Parliament in Bahrain.

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