Thursday, June 26, 2008

Feeding the Arab Gulf

Saudi Arabia and the United Arab Emirates are trying to lock in food supplies by investing directly in South Asian farmland:
"With Gulf countries importing 60 percent of their food on average, Saudi Arabia and the United Arab Emirates (UAE) are taking the lead in investing in Asia and Africa to secure supplies of cereals, meat and vegetables...

"Calling for transforming the buyer-seller relationship in the energy sector between India and the Gulf countries into a more substantial and enduring relationship, Indian External Affairs Minister Pranab Mukherjee told the Emirates Centre for Strategic Studies and Research last month, 'I see India’s requirement for energy security and that of the Gulf countries for food security as opportunities that can be leveraged to mutual advantage.'

"Similarly, during Prime Minister Yousaf Gillani’s visit to Saudi Arabia in early June, Pakistan sought 6 billion dollars in financial and oil aid in return for 'hundreds of thousands of acres of agricultural land, which could be tilled by the Saudis.'

"Such arrangements are likely to become increasingly common since inflation and food shortage are likely to worsen worldwide in future, said Shoaib Ismail, a halophyte agronomist who studies utilising plants for food, fuel, feed, and fiber...

"Media reports indicate that the UAE government and private entities like Abraaj Capital have already acquired about 800,000 acres of farmland in Pakistan. As incentive, Islamabad is offering legal and tax concessions to foreign investors in specialised agriculture and livestock ‘free zones’, and may also introduce legislation to exempt such investors from government-imposed export bans."

From the standpoint of the Gulf countries, this move replaces ill-starred attempts to develop their own agricultural sectors. Outside of Oman, which has lots of fertile wadis, only the UAE sits atop enough water in aquifers to meet its own consumption needs. Developing agriculture would require huge investments in desalination and irrigation. I am, however, interested in what deals like this might mean for the global markets in both food and oil. If some gets locked in to direct bilateral exchanges, there's less to meet rising demand on the open market, right?

UPDATE: Sticking with the UAE angle on things, I've been poking around with water use statistics, and what I find is mostly in the ballpark of this 2002 report from Abu Dhabi. Between 85% and 90% of water use in the UAE is for agriculture and other purposes which require irrigation. This has led to over-pumping of groundwater at up to 20 times the natural replenishment rate. I don't know how much of that agricultural use is related to the government's efforts to promore self-sufficiency, but you can see that without it, the problem would be reduced to manageable proportions.

(Crossposted to American Footprints)

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