In Theory: Agriculture spending is key

Within a few days, the price of wheat rose in global markets by a staggering 42 per cent. This rise prompted a meeting in Moscow that included 500 experts to discuss the grain issue the world is facing, and which was caused by various climate changes, for example, the floods in Pakistan and China and fires in Russia and Portugal.

Coinciding with such price changes, intense speculation at the commodities market began, which led to a price hike in wheat, rice and other food commodities.

Possible crisis

Some reports even indicated that Russia would have to resort to importing wheat - after decades of being the third largest exporter of this key staple, despite Russia's denial of this matter and insisting that it would still be self-reliant throughout 2010.

What is truly striking, however, is that some countries have announced that they are halting their exportation of grains. This could in turn cause food crises in some countries, such as Egypt and Turkey, which are considered the world's biggest importers of wheat, or lead to a search for an alternative exporting source that charges high prices.

This shortage in some food products occurs in countries that are abundant in water resources and have massive land space for cultivation that has not been appropriately utilised yet.

It is predicted that the recently completed Shaikh Zayed water canal in Egypt, which was funded by the Abu Dhabi government through a generous grant of Dh100 million ordered by Shaikh Zayed Bin Sultan Al Nahyan, will help with transporting water from the Nile into the desert, turning it into lands that can be used for projects for agricultural and livestock production.

Such projects are considered projects that will benefit future generations and will substantially contribute to taking advantage of available opportunities, increasing development rates and ensuring food security.

However, the true issue lies in countries that do not possess these fundamental agricultural and water resources, such as the Gulf Cooperation Council countries, which see a rising increase in import expenses for food commodities every year, especially in rice and wheat.

Nevertheless, GCC countries have immense financial capabilities that allow them to diversify their investments abroad to many countries that have the fundamentals for agricultural investment. Agricultural investment, despite its importance, does not comprise a very significant amount of total Gulf investments.

With increasing predictions on climate change affecting food production, then closing the food gap in the Arab world, particularly in the GCC region, has become a pressing issue for the future and requires securing food necessities by pumping more investments into the agriculture sector abroad through long-term agreements and guarantees that are determined in accordance with foreign investment laws.

In this regard, Arkadiy Kornatsky, a prominent agricultural investor in Ukraine, is welcoming partnerships through foreign investments.

Arkadiy's lands require additional investments to double its production. Some other necessities also include the need for storage silos and modern means of transportation in order to minimise the spoiling of foodstuff that occurs due to the lack of such facilities.

Partnerships

Arkadiy stressed that these foreign investment partnerships can also include partnerships in production and buying new low-priced agricultural lands, in addition to providing guarantees pertaining to property rights and export destinations.

Through the ongoing developments since the 2008 food crisis, it seems like these crises will recur and become more complex in the coming years due to substantive reasons that involve climate changes, and the growing population on one hand, and speculation on the other.

The effects of such crises can be reduced by spending more on agriculture.

Dr Mohammad Al Asoomi is a UAE economic expert.