The GCC’s Food Security Dilemma

The GCC is known for having energy resources in ample supply, but when it comes to food the picture is quite the opposite.

Imports account for between 80 to 90 per cent of GCC food consumption, meaning the region is almost entirely dependent on other parts of the world to feed its population.

Demand for food is projected to grow by 50 per cent over the next 20 years, while prices are on the rise, impacted by bad crops and instability.

“We’ve seen dramatic increases in population across the Gulf states and this has been one of the critical macro structural features that has led to increasing concerns around food,” said Zahra Babar, associate director for research at the Centre for International and Regional Studies at Georgetown University Qatar, a food security expert.

In contrast, domestic farming is limited and in some cases decreasing due to concerns regarding water use, with Saudi Arabia’s venture into wheat production set to halt by 2016.

“Saudi Arabia’s experiments in agriculture, which led to it becoming one of the largest grain exporters in the world, came with huge consequences, in the sense that they depleted water resources drastically,” said Babar.

In other nations, like Qatar, there are plans to produce more fruit and vegetables locally, but with greater care regarding sustainability.

“They are trying to enhance domestic production in a way that is not going to have devastating environmental consequences.”

However, local agriculture can only go so far, with the emphasis still very much on imports.

The Economist Intelligence Unit predicts food imports to the GCC alone will be worth $53.1 billion by 2020, more than double the $25.8 billion in 2010.

Price increases and supply shortages are both vulnerabilities in this area, and have led to food protests in other parts of the Middle East over the past few years, including Egypt and Yemen.

Higher per capita incomes in the GCC buffer the region to some degree against sudden price increases, but those in lower income brackets are more vulnerable.

The poorest 10 per cent in GCC countries may spend as much as 30 to 50 per cent of their income on food already, with price risk a major threat to these families, according to a November 2013 report by Chatham House.

In response to the world food price crisis in 2007 and 2008, GCC countries have looked to diversify their import sources, moving away from previously monopolistic trade partnerships.

A number of countries are also looking to improve ties with the region and become part of the food security solution.

These include New Zealand, which is increasing the size and role of its office in Dubai and appointing a new trade commissioner based in Riyadh to support businesses in the region.

New Zealand dairy company Fonterra recently opened a new ingredients warehouse in Dubai to support its MENA distribution, while meat exporter ANZCO and kiwi exporter Zespri have established Middle East representative offices.

“There is a number of different models or ways of addressing different food security issues and many of them require expertise in agricultural technology, pasture management, innovation in supply chain and logistics. Those are areas in which New Zealand has developed a great deal of expertise over a long period of time,” said Steve Jones, New Zealand trade commissioner and consul general, Middle East, Africa and Pakistan.

The nation, often recognised for its high ratio of sheep to people, is focusing on sharing its knowledge in farming and food production for investments inside and outside the GCC.

Its commitment to the region includes the establishment of a $6 million agribusiness hub and demonstration farm in Dammam, Saudi Arabia.

The first services from the site, which will consist of 15 centre pivot irrigators, a feed mill, sheep breeding operation, lamb and cattle finishing feedlot and processing facility, are planned by mid 2014.

“New Zealand has a lot to offer investors in this region who are looking at particularly dairy and red meat investments,” said Jones.

One particular focus is on New Zealand’s farm management service companies, helping food security conscious investors to bring land they have acquired into efficient production.

“Where our expertise can assist is in bringing that land into full production. So investors get the kind of returns that they’re looking for and consumers here get products onto this market at the prices they want to pay,” he adds.

The country has also hosted visits from GCC businesses interested in acquiring land and production, some of the negotiations from which are well advanced.

“It’s simply a case of understanding how the deals are to be structured and how much of the off take from those assets will be marketed into global markets and how much will be reserved for this part of the world [the GCC],” explained Jones. This interest is not unusual, with several GCC companies now holding farmland investments overseas. But the practice has attracted controversy and in some cases hostility.

In a high profile incident in 2012, five employees from billionaire Mohammed al-Amoudi’s Saudi Star were killed in an ambush at his 10,000-hectare site in Gambella, Ethiopia.

Poor infrastructure and irrigation have also held back other African investments, leading investors to now look at more developed and less sensitive farming countries.

In March last year the UAE’s Al Dahra acquired eight agricultural companies in Serbia for $400 million. While in June, Saudi Arabia’ United Farmers Holding acquired eastern Europe’s Continental Farmers Group, which has wheat and crop operations in Poland and Ukraine.

But rather than other regions, Babar believes local investors would be better off looking closer to home. Investing in land and production in Middle Eastern nations and thereby improving food security for the wider region.

“There has been a lot of controversy around this idea of GCC states taking up international ownership of land or investing in agricultural entities and initiatives overseas. But I do think that some of the other countries in the region would benefit from an injection of capital, from assistance to access to technological advances in food production,” she said.

“The GCC can certainly provide some of that, which might bring about positive changes to household level food security and national level food security in other Middle Eastern countries, while also contributing to the GCC in terms of its food needs.”