The 2008 food price shock – which saw global food prices rise dramatically, and GCC food import spending jump 41% year-on-year to US$25.7bn – is still making itself felt in Gulf policymaking, claims the EIU report “The GCC in 2020: Resources for the future”. The report was sponsored by the Qatar Financial Centre Authority.
Focus on security
By 2020, the EIU forecasts food imports will make up 8% of all GCC imports by value, on the back of a long-term drive to ensure sufficient food supplies for the Gulf countries’ fast-growing populations. Faced with price rises driven by speculation and poorly-functioning market mechanisms, along with export bans in key supplier countries, GCC policymakers made a shift towards protecting food supplies to maintain food security, the report suggested.
“A number of Gulf countries were on the market for food at a time when prices had gone up, and some exporting countries had put up export bans, especially for rice—creating a nervousness that even if they could afford it, they couldn’t get it,” said Ruth Meinzen-Dick, senior research fellow at the International Food Policy Research Institute, quoted in the EIU report.
Because of the lack of water throughout the Gulf, long-term agricultural development is not a viable option, the report noted – more than 90% of Saudi Arabia and Oman’s water supplies are used for agriculture, with the figure for the UAE at more than 80%. While some GCC governments continue to protect existing agricultural enterprises, others such as Saudi Arabia are actively working to reduce crop production, in favour of switching to imports – often from GCC-owned lands in other countries.
Buying up land
“The main strategies are buying or long-term leasing land in developing countries to use for export-oriented farming. If oil prices average US$70 a barrel per year over the next decade, the GCC’s cumulative current-account surplus would reach some US$240bn by 2020. If just 5% of this total were to be invested in agricultural projects each year, this would provide an average investment fund of US$10.6bn per year – twice the annual GDP of Rwanda – or a cumulative total of US$106.1bn,” said the report.
Aside from major crops, the report said GCC countries were likely to maintain their production of dairy and fish, along with non-water-intensive crops such as dates. It also predicted a rise in agro-processing industries in the region, for the processing of raw materials into marketable food products.