Lack of investments plagues the Arab farm sector - Emirates24|7

Lack of investments plagues the Arab farm sector

The surge in food prices has prompted plans by some Gulf states to fund projects in fertile areas in the region. (CHANDRA BALAN)

Poor water resources and flawed farm policies have turned Arab states into the largest food importers in the world and the situation is expected to worsen in the absence of major investments in the sector, according to an official report.

Nearly three years after they approved a 15-year common farm strategy in 2005, the Arab countries have become more reliant on farm imports as such a strategy remains inefficient in the absence of right policies and sufficient funds.

What complicates the problem is that most wealthy Arab nations are still reluctant to invest heavily in farming projects in fertile member states for political and security reasons, while only around 12 per cent of the total available arable land in the region is exploited, said a report by the Khartoum-based Arab Organisation for Agricultural Development.

"There are several obstacles and challenges facing the development of the farming sector in the Arab world… they include low investments, defective government policies, poor water resources, inefficient use of available land and water resources, and low level of utilisation of available cultivated areas," said AOAD, which groups most Arab governments.

"The biggest obstacle has been and will remain the relatively small water resources available in the region. This obstacle has blocked investment in the farming sector and will hinder any programme aimed at exploiting those areas."

The report, obtained by Emirates Business yesterday, said the Arab world is one of the poorest areas in the world in terms of water wealth, with the quantities of available renewable water resources standing at only around 1.3 per cent of the world's total renewable water wealth although the Arab region accounts for more than 10 per cent of the total world land area.

The low water resources have sharply depressed the per capita share of water in the Arab world because of a steady population growth of more than two per cent.

"The Arab region is considered one of the most arid areas in the world and the per capita share of the water wealth is among the lowest as it has remained much below the global water poverty level of 1,000 cubic metres per year… in some countries, this level is even below 500 cubic metres," the report said.

"As for arable land, it is estimated at nearly 550 million hectares but only around 12 per cent is exploited… even in that 12 per cent part, the farming efficiency does not exceed 60 per cent of the world level… this means the Arab world is facing a real problem of not only low exploitation of arable areas but low efficiency in the cultivated land and its productivity."

Despite the enforcement of the 2005-2020 strategy, which involves more investment and exploitation of arable land, Arab nations have become more reliant on foreign food imports and the bill is expected to surge in the coming years because of soaring food prices and the absence of major farm projects.

Between 2000 and 2006, Arab states suffered from a cumulative food deficit of more than $110 billion (Dh400bn), while the gap was around $100bn between 1990 and 2000. This means the cumulative farm gap, the difference between food imports and exports, has exceeded $200bn in 15 years.

The gap affected most types of farm products, mainly cereal, rice, sugar, wheat, cooking oil, chicken, meat and dairy products.

AOAD's figures showed the gap in most products has worsened over the past years, with that in grain and flour rising from around $8.5bn in 2004 to $9.1bn in 2005 and $9.58bn in 2006.

Wheat gap widened from $4.4bn in 2004 to $4.6bn in 2006 while that in corn surged from around $1.5bn to $2.02bn. The gap in rice also grew from around $1.24bn to $1.32bn and that of barley jumped from nearly $868m to $1.9bn during the same period.

In 2006, the gap stood at $1.27bn in sugar, $2.4bn in cooking oil, $1.3bn in meat, $1.19bn in chicken, and $2.8bn in dairy products. Only fish recorded a surplus of around $914m in 2006.

As a result, the self-sufficiency level in most farm products retreated in many Arab nations. From 55.2 per cent in 2004, self-sufficiency in cereal grew to 57.6 per cent in 2005 before receding to around 56.2 per cent in 2006, while wheat dropped from 53.7 in 2004 to 50.7 per cent in 2006 and corn from around 44.3 to 36.8 per cent, according to AOAD.

Other essential products also recorded a decline in self-sufficiency, with that in barley tumbling from 51.6 to 41.59 per cent and dairy from 73 to 70.9 per cent. Self-sufficiency in rice improved from 73.2 per cent in 2004 to 75.7 per cent in 2005 before receding to around 74.6 per cent in 2006

Experts expect the food import bill to have widened in 2007 and is projected to grow further this year because of higher food prices and a population growth.

The surge in food prices has prompted plans by some countries in the Gulf, including the UAE and Saudi Arabia, to fund agricultural projects in Sudan and other fertile areas in the region. But such projects are expected to take time and they are not large enough to slash the Arab farm import bill.

In a report last month, the Federation of the GCC Chambers of Commerce and Industry said the only solution to the food problem in the Gulf is to create large farm projects in Sudan and other fertile Arab states. It noted that GCC states could suffer more than their fellow Arab countries from higher food prices given their heavy reliance on imports, which exceeded $12bn in 2006.

"The issue of food security has become a priority for the GCC countries in the current circumstances," the Dam-mam-based federation said.

"The steady increase in the farm gap has been due to lack of co-ordination and co-operation among member states in the agricultural sector and in the establishment of joint farm projects… it is time for the GCC countries to take measures to cover that gap by setting up large farm projects in such fertile Arab countries as Sudan, Egypt and Yemen."

The study proposed signing of agreements between the GCC and those countries for the allocation of land to Gulf investors to set up farm projects. "These projects could be run as joint ventures under the management of GCC companies, which could also market their products in the region," it said.

According to experts, low investments have been one of the main factors for the Arab farm plight on the grounds there are enough arable areas in the region.

"In 2006, the combined Arab investments totalled around $267bn but less than five per cent has been pumped into the farming sector," one expert said.

"One of the main reasons for the low investments is the reluctance by wealthy nations in the Gulf to invest in fertile Arab countries because of insecurity and political disputes… at the same time, the financial resources of those countries have been too small to affect the development of the agricultural sector."

Arab officials have repeatedly voiced concern about the agricultural gap and growing reliance on food imports, mainly from the US and other Western countries. Some officials considered such reliance as a risk to their security. According to AOAD and the Arab Fund for Economic and Social Development, most Arab nations are suffering from slackening farm exports and rapid growth in the population, leading to a steady increase in their imports.

The shortage persisted despite an expansion in the cultivated areas in some Arab countries as a result of reforms aimed at increasing crop. From around 67 million hectares in 1999, the combined Arab cultivated area widened by nearly 4.3 per cent to 70 million hectares in 2002 and continued to expand to reach around 75 million hectares in 2006. "Arab states have sought to improve farming policies and such moves have resulted in some positive developments," AOAD said.

"But they have also produced negative results, including the private sector's malpractices, which have hurt the interests of the farmers… new policies are needed to regulate these activities and encourage farmers." In its annual report released last month, AOAD warned that the surge in farm prices would deprive the poor from food and threaten the region's stability.