Dubai: A demand-supply mismatch could increase price volatility in the global food and commodities market that could increase the vulnerability of GCC consumers who mostly rely on imported foodstuffs, a latest report by Alpen Capital said, which stressed the strengthening of food security across the region.
Food security is a situation that exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life.
Total food consumption by the 41.7 million population of the six Gulf countries has reached 38.8 million metric tonnes of which only 30 per cent or 11.3 million tonnes was produced locally.
“Amid rising population and insufficient domestic food production, GCC countries rely heavily on imports. The Gulf countries import 70 per cent of their food requirement, or 27.5 million tonnes annually,” the report said.
With limited food production due to the shortage of arable land and water, the region depends upon imports to meet its food requirements.
“As a result, any disruption in global food supply or prices, similar to the food crisis of 2007–2008, is likely to significantly impact food security in this region. This makes food security a critical policy issue for GCC governments,” it said.
In the absence of buffer stocks of food grains and proper food security mechanism, the growing population of the region remains vulnerable to food price shocks if the prices of essential foodstuffs and commodities fluctuate.
“This over-dependence on imports, together with rising global food prices, has alleviated the food security issue in the region,” Alpen Capital says. “In the past, disruptions in food imports, either due to policy restrictions by exporting countries or natural calamities, have affected the region significantly.” As a result, all Gulf countries are taking measures to secure and regularise the food supply.
However, Samita Khawar, Head of Growth Implementation Solutions at Frost & Sullivan, said that the Gulf countries are not doing enough for food security.
“The GCC is not doing enough to ensure its food security. The region is actually waking up now to the enormity of the issue of food security. Further, it is still grappling with the local and global dynamics that impact its food supply; and has a long way to go before it can ensure food security for itself,” she told Gulf News.
The value of food imported into the GCC is five times what the region can produce in a year. “Apart from huge food import bills, ever increasing international food prices, high population growth rates and fiscal and inflationary pressures, the GCC countries are also compelled to spend anywhere from 0.15 per cent to 0.6 per cent of their GDP on food subsidies to ensure affordable food availability in the region,” she said. While the government is encouraging investment in acquiring farmland in different parts of the world, retailers also have begun undertaking their own initiatives to sustain uninterrupted food supplies and maintain stable prices in uncertain times.
Abu Dhabi-based EMKE Group, which generates annual turnover of Dh17.43 billion ($4.75 billion) from 105 supermarkets and hypermarkets in the Gulf, has undertaken a number of steps to secure its food supply at steady prices.
“In 2011 we started to set up food sourcing and processing centres in key source markets, such as India, UK, Kenya, Uganda and now we are expanding this network to the American continent,” Yousuf Ali M.A., Managing Director of Abu Dhabi-based EMKE Group, operator of the largest organised retail chain in the Middle East, told Gulf News.
As part of its corporate social responsibility, the company has also started to support the farmers in Abu Dhabi by procuring from them. “We have tied up with the Abu Dhabi Farmer’s Union to source locally produced vegetables and support them. This will help us to not only ensure steady supply of vegetables, but to support the local farming community,” Yousuf Ali said.
GCC governments are keen on utilising the available domestic resources efficiently besides exploring options available internationally through the public-private route. To support water, agriculture and infrastructure, Saudi Arabia increased the budget for these segments to $13.6 billion in 2011. During 2011-2012, it invested $23.1 billion in food security initiatives. Last year, the UAE government subsidised key food items which helped residents save approximately Dh13,000 per annum. At a macro level, the GCC governments are also investing in developing strategic food storage facilities which will help avoid the situation faced during the 2008 food crisis.
