Imports up, food production down, GCC eyes arable land overseas

By Paul Cochrane in Dubai
Executive magazine

Last year, food was big news as prices soared globally by 54.9 percent and associated riots erupted in 60 countries, while in the Arab world the shortage in food sufficiency was estimated at $18 billion by the Arab Authority for Agricultural Investment and Development (AAAID). In the Gulf countries, dependent to the tune of $12 billion a year on imports and agricultural water consumption at unsustainable levels, the issue took on grave importance. State and private investors promptly started eying up arable land in Africa and Asia to secure food for a region that is expected to increase import dependency to 60 percent by 2010, according to the UN’s Food and Agriculture Organization (FAO).
But while food prices and commodities have reduced in the wake of lower oil prices and the global financial crisis, the issue of food security has not gone away. Although whether all the touted agribusiness projects will take off is not a given as Sovereign Wealth Funds (SWFs) and private investors tighten their belts in the face of the slowdown.

The big issues

The Arab world’s population ballooned 121.9 percent between 1975-2005, while over a similar period, 1980-2004, the region’s food grain and meat production increased by 93 percent.
The shortfall was not overly concerning given access to the free market and staples such as wheat and rice being fair cheap, certainly affordable enough for governments to subsidize. Additionally, countries such as Saudi Arabia, Syria and Iraq were involved in large-scale agricultural projects to boost domestic production.
Saudi Arabia, for instance, spent a staggering $85 billion on agricultural development between 1984-2000, according to estimates by Elie Elhadj in The Middle East Review of International Affairs.
But the cost of such investment has gone beyond budgetary concerns. Aside from the fact that Saudi Arabia was paying up to $500 a ton for domestically produced wheat - whereas international market rates were around $120 – to maintain local agriculture some 300 billion cubic meters of water was used between 1980-1999, two-thirds of it non-renewable, according to the Ministry of Agriculture and Water. Such a gigantic amount of water was needed to grow produce in the kingdom’s arid climate, which is two to three times more water than required in a temperate climate.


After investing an estimated $16-18.7 billion over the last 30 years on its wheat program, according to BMI, Riyadh last year decided to phase out production due to water shortages. The costs versus the benefits were no longer sustainable, having been self-sufficient in wheat since the 1980s when production reach 4 million tones per year, but now a net importer and as of 2016 totally dependent on imports. Furthermore, with Saudi Arabia joining the WTO, the kingdom has to abide by the organization’s requirement to reduce state support for agriculture to 13.3 percent over the next decade. This will have other knock on effects, such as on the 12 percent of the workforce involved in a sector that accounts for just 3.3 percent of GDP.
Saudi Arabia is not the only country re-thinking its agriculture policies, with the region losing an estimated one million hectares a year to salinity, according to Dr Shoaib Ismail, a halophyte agronomist at the International Center for Biosaline Research (ICBR) in Dubai.

Crop circles in Saudi Arabia

“Twenty years ago there was good quality water everywhere. Now there is one-third seawater concentration in the groundwater, and salinity is even higher in other places. Mismanagement has led to more salinity,” said Ismail. “Some 85 percent of water usage in the GCC is for agriculture, the highest in the world. In that sense, the question arises, how feasible is agriculture over here?”
The short answer is that it isn’t. Even producing processed foodstuffs for domestic consumption and export requires water, what has been called the “export of virtual water,” and may have to be re-thought given looming water constraints.
One solution is to use halophytes, plants that grow under high saline conditions, as opposed to glycophytes, non-salt loving plants, an alternative the ICBR is involved in. But while halophytes could be used to replace more water intensive plants and trees, such plants would not produce adequate amounts of food. It is in landscaping, which accounts for 18 percent of water use in the UAE, that plants and non-conventional grasses can be advantageous, according to Ismail.
Oman is developing a salinity plan, and has invested in a project to clean water from the oil industry, as for every barrel of oil pumped out of the ground seven barrels of water are used. The UAE has also developed a Master Development Plan to assess water usage and improve efficiency, such as changing irrigation systems, phasing out subsidies and expanding water pricing to include agriculture and industry.
Desalinization is another touted panacea for the region’s water concerns, but costing between $0.81-$1 per cubic meter, desalinated water is too expensive for agricultural usage.
“Building new desalinization plants is not the solution, as warms up the sea and affects marine life,” said Ismail. It also increases the sea’s salinity and, once entering groundwater, makes fresh water even more brackish, of little to no use to either man or beast.

Dr Ismail is not optimistic about improved use of water resources in the region

Eying pastures new

With wheat prices rising 83 percent last year and other staples doubling in price, governments started eating into their reserves to placate populations that were spending ever larger amounts of their income on food.
Over in Pakistan, the NGO Oxfam reported that due to food inflation the number of poor has risen from 60 million to 77 million since 2007, while in the Arab world the AAAID predicted some 35 million people were falling into poverty due to high food costs. With the region having an overwhelmingly young population and high population growth, food security is paramount.
For the GCC, the surge in food prices didn’t push people under the poverty line, but was a contributor to inflationary pressures. And with the population expected to double by 2038 to 60 million, demand for food will continue to grow at a rapid pace. Saudi Arabia, the Gulf’s most populated country, already imports some $5 billion a year of food and beverage items, according to BMI, and that will figure will spike in years to come.


“Food security is officially defined not just as a shortage, but also looking at availability and affordability,” said George Attala, a Principal at Booz Allen Hamilton. “There are a number of ways to ensure supply is always available. One is try and diversify sources, not all wheat from say Ukraine. Another is look at internal networks, such as imports through more than one port. A third way is storage capacity, of four to six months, while the fourth is to get into contract farming, but that is not always the best solution.”
Essentially, the Middle East is left with two choices.
“The region has to import. The question is, invest abroad or rely on the free market?” said Dr Eckart Woertz, program manager in economics at the Gulf Research Center in Dubai.
Last year, Arab states appeared to be opting for the first choice in the face of high food prices, with government missions from Saudi Arabia, the UAE, Qatar, Kuwait, Egypt and Libya visiting Pakistan, Ethiopia, Cambodia, Uganda, Angola, Kazakhstan, Ukraine, Thailand and the Philippines to discuss the possibilities of buying up arable land to cultivate. The private sector also got in on the act, with the likes of the Emirates Investment Group, Abraaj Capital, Al Qudra Holding and the Bin Laden Group reportedly acquiring land in Sudan and Pakistan.
But such policies are not always popular, and also not necessarily dependable sources in the long run. “For the GCC it is a ‘pros and cons’ situation. In the short term it is profitable to buy or lease land, but it also depends on the geopolitical situation. A country may be a friend today, but might not be tomorrow, so it is a dependency issue,” said Ismail.
Last year, the FAO warned that rich countries trying to secure land overseas risked creating a “neo-colonial” system. The concerns were related to Gulf investments in Sudan where only indigenous water and land were used, whereas fertilizer, seeds, equipment and labor came from abroad. It was a similar story in Pakistan.
As Woertz remarked, “the negative case is bribe an African official, then expel locals and pastoralists, so no benefit for the local population at all. There is political baggage.” Furthermore, he added, “the GCC doesn’t have a good track record of labor rights or the environment, and these need to be taken into consideration.”
And while the countries being courted may be interested in foreign investment, they also have to feed their own populations. Sudan for instance has an estimated 200 million acres of fertile land, yet only 20 percent is being utilized. However, despite 160 million acres of available arable land, the country is importing two millions tons of wheat per year and five million people are dependent on food aid. Similarly, Pakistan is facing problems in feeding its population, as well as losing groundwater to salinity.
But although there are many reports on plans to buy land, there has been minimal information coming forth about these projects, with “transparency limited to media accounts,” said Woertz. “They announce it - billion dollar deals - but it is unclear whether it has taken off the ground, and how the private sector has been brought in.”
An additional factor is that discussions to acquire land overseas were kicked off when oil and food prices were higher. “The urgency is not there now and there is less money to throw around,” said Woertz. “The SWFs lost money in the markets and have less revenues, so [acquiring land abroad] may not be such a widespread phenomenon as made out.”

Photographs by Paul Cochrane