Courtesy of The Financial Times, a report on the Gulf states’ efforts to acquire farmland overseas. As the article notes:
“…The import-dependent Gulf states were left facing a troubling question when a food crisis sent the prices of staples such as rice and wheat soaring two years ago: how could they secure food for their expanding populations if crises recurred?
At the time a spectacular construction boom was already driving up people’s rents and inflationary pressures in the oil-rich states; then some foreign food producers began imposing restrictions on their exports. Leaders were shaken into action.
The result was a slew of new policy initiatives across the Gulf Co-operation Council, which includes Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.
The common idea was to use oil wealth to snap up land overseas (often in poorer countries) and grow crops such as maize, wheat and rice that could be shipped back home to build up strategic reserves and secure stable supplies of key foods.
Yet the progress being made is open to question as high profile announcements of grand plans have not always been followed up by real action.
Saudi Arabia, Qatar, the UAE and Kuwait have all discussed such projects, with a focus on Africa, Asia (including Pakistan) and eastern Europe.
The International Food Policy Research Institute (IFPRI) estimated in 2009 that between 15m and 20m hectares of farmland had been purchased in poorer countries by foreigners for some $20bn-$30bn since 2006.
Jarmo Kotilaine, chief economist at NCB Capital, a Saudi investment bank, estimates a third of this investment comes from the GCC, although no official statistics exist in a region where transparency and accurate data are often lacking.
According to research by Kotilaine, the GCC region imported $10bn of agricultural commodities in 2007, up 70 percent on the average over the 2000-2004 period.
He says:
In many cases we are looking at a future of total dependency of key food imports, in other cases a very high dependency of 70-100 percent.
Saudi Arabia, the Gulf’s most populous state and its main agriculture producer, has been among most active of the countries searching for new sources of food. It has created the King Abdullah initiative for food security and officials have been criss-crossing the world hunting for suitable investment opportunities.
The kingdom hopes the private sector will lead the overseas projects, with the government playing a supportive, facilitating role, and in 2008 it announced it was setting up an $800m company to back the projects.
Ironically, shortly before the food crisis struck, Riyadh had decided to phase out domestic wheat production by 2016 after realising that its wheat-growing programme – which was set up in the late 1970s – was no longer sustainable given the desert country’s finite water resources.
Meanwhile, Qatar – by some estimates the world’s richest country – is working on an ambitious “National Food Security Programme” with the aim of achieving food sustainability by 2023. It is not only looking to utilise overseas markets, but also hopes to turn its own desert green with the development of the latest agricultural technologies.
The notion of buying land in impoverished regions, particularly African countries that suffer perennial food shortages, has drawn much controversy. Experts say such investments could benefit recipient countries if handled correctly, but warn of the potential political risks of exporting crops from countries where hunger is common and land is a highly sensitive issue.
Most of the companies willing to talk about such plans say they understand the risks and are taking measures to build good relations with host countries and local communities.
Jannat, a limited liability company that brings together seven Saudi firms, has set a target of securing 100,000 to 215,000 hectares of land abroad, including a $100m investment in Africa. It has a project in Egypt in a venture with an Egyptian firm that is producing wheat, barley and alfalfa on 10,000 fedans (roughly the same as a hectare), and it has a provisional agreement with a Sudanese company that is expected to lead to the development of between 10,000 and 15,000 hectares in that country. Jannat has also been in talks with Ethiopian officials and is considering banana and rice projects in the Philippines.
Another Saudi firm, Planet World Food started investing $3bn in 2009 to form partnerships with local farmers in Turkey for 20,000 commercial farms it plans to establish over a five year period.
Kotilaine says the added-value coming from the Saudi private sector lies in the innovation and efficiency gains being introduced along with these investments.
But investments in poorer nations are likely to remain under the scrutiny of activists.
Grain.org, a Spain-based campaigning organisation that tracks news relating to large agricultural investments in developing counties, estimates 47m hectares of farmland has been sold in recent years, over double the IFPRI estimate.
The actions of state enterprises tend to be even more opaque than those of the private sector – the Kuwait Investment Authority is one state body that Kotilaine says is active. But if they or anyone else are to make a success of their plans, they need to be seen to be transparent and to benefit local communities, not take advantage of them.
You must be logged in to post a comment.