Arab food gap crosses $180bn over past decade
Posted by Zawya
Emirates Business 24-7, 27 June 2010


Arab countries have reeled under a cumulative food gap of more than $180 billion (Dh660.6bn) over the past 10 years to emerge as the largest single farm importer despite their massive arable land potential, according to official figures.

Except for fish, vegetable and other minor crops, Arab nations are suffering from a persistent shortage in all types of farm products and the gap has steadily worsened over the past two decades, showed the Khartoum-based Arab Organisation for Agricultural DevelopmentArab Organisation for Agricultural Development (AOAD)

Wheat accounted for more than half the shortage, and a decision by Saudi Arabia, the largest Arab economy, to stop costly cultivation of wheat and rely solely on imports is expected to further upset that balance. Besides wheat, the Arab food gap is underscored in cereal, barley, sugar, cooking oil, corn, rice and poultry as the Arab World's self-sufficiency in some of these products does not exceed 50 per cent.

The farm gap, the difference between imports and exports of food products, peaked at around $29.8bn (Dh109.45bn) in 2008 due to a surge in global food prices before it edged down to nearly $27.5bn. This boosted the total Arab food gap to a staggering $182bn during 2000-2009, AOAD's figures showed.

The level is nearly quadruple the cumulative gap of around $45bn during the preceding nine years, when the region's population did not exceed 240 million in early 1990s compared with around 334 million in mid- 2008. At the end of 2009, the Arab population was projected at around 351 million.

High population growth

"The Arab population was estimated at nearly 351 million at the end of 2009. Since 1990, it has grown by nearly 2.34 per cent annually compared with global growth of about 1.16 per cent," AOAD said.

"The high population growth in the region is one of the major factors for the persistent deficit in the Arab food balance. Another result of the high growth is that it boosts demand for food, which, in turn, pushes up prices. This means a large number of people will find it difficult to get their food needs."

The report showed total Arab food exports stood at only about $11.5bn in 2009 while imports were as high as $39.04bn, one of their highest levels. It also blamed poor water resources in the region, low land utilisation and investments, and what it described as defective Arab farm policies.

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, it said.

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 AOAD, a key Arab League organization.

Multiple obstacles

"There are several obstacles and challenges facing the development of the Arab farming sector. They include low investments, defective government policies, poor water resources, inefficient use of available land and water resources, and the low level of utilisation of available cultivated areas," it said.

"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 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."

Cereal shortages

AOAD's figures showed the region suffered most from cereal shortage, with the gap in these products standing at about $16.3bn in 2009, nearly 53 per cent of the total Arab food shortage. Wheat was the main victim, with a gap of $8.75bn last year, accounting for 28.4 per cent of the total shortage. The gap value was estimated around $3.2bn in corn, $2.93bn in sugar, $2.59bn in cooking oil, $2.27bn in barley, and $1.99bn in rice. A breakdown showed cereal self-sufficiency increased in 2009 over the previous year but remained below half, standing at 49.3 per cent. Self-sufficiency was put at 47.9 per cent in wheat, 34.1 per cent in corn, 75 per cent in rice, 28 per cent in barley, 68 per cent in dairy products, 27 per cent in sugar, and around 32 per cent in cooking oil.

Many other products were also in a sharp shortage except fish, which remained in a surplus, and eggs, which were near sufficiency. But the report showed there was an improvement in the production of cereal in 2009 after a decline in the previous year. From about 46.6 million tonnes in 2008, cereal output swelled to an all time high of about 54.9 million tonnes in 2009.

Wheat production grew from? 20.4 million tones to 25.8 million tonnes; barley output jumped from 30.1 million tonnes to 43.9 million tonnes; and corn from around 76.6 million tonnes to 80.6 million tonnes. Rice production also grew from about 76.7 million to 79.8 million tonnes.

Need for investment

"One of the solutions to this problem is the need to increase investments in the farming sector and adopt more active agricultural policies," AOAD said.

The surge in food prices in 2008 prompted plans by the UAE, Saudi Arabia and other arid Gulf countries 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, according to experts. The surge in food prices in 2008 was one of the main reasons for a sharp rise in inflation rates in the UAE and other members of the Gulf Co-operation Council (GCC) given their heavy reliance on farm products.

GCC states, which control nearly 45 per cent of the world's proven oil deposits, are among the largest food importers in the world, given their poor farm potential due to their desert nature. The bulk of their food imports come from outside the Arab region, including the United States and other Western countries.

Official figures showed the GCC's combined farm imports exceeded $75bn during 2005-2009. They accounted for about 41 per cent of the total Arab food import value of $180bn although the population of the six members of around 36 million formed only about 10 per cent of the total Arab population. 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 Kuwaiti-based Arab Fund for Economic and Social Development, another key Arab League institution, most regional nations are suffering from slackening farm exports and rapid growth in the population, leading to a steady increase in their imports of food products.

Low land utilisation

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 2009. But the report showed that the cultivated areas remained a fraction of the total arable land in the region, estimated at nearly 550 million hectares.

"Arab nations 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."

The report urged Arab government to take "urgent" measures to encounter the food price increase in the future, cut food imports from foreign countries, and achieve self-sufficiency in most farm products.

Farm fund

"These measures should include improvement of farm policies, better utilisation of the available arable land, development of existing national agricultural institutions, supporting the joint Arab agricultural ventures and establishments, investment in fertile Arab nations, adoption of necessary policies and national programmes to curb price increases, creation of a pan-Arab fund to finance Arab food security projects, and setting up a joint strategic food stockpile."

The study said creation of a farm fund is crucial for the success of Arab agricultural projects aimed at achieving self-sufficiency on the grounds most fertile countries in the region lack sufficient investments in this sector. "This should prompt Arab nations to seriously consider the creation of a large joint fund to invest in farming projects in the region," it said.

"At the same time, Arab government should take the proposal of setting up a strategic cereal stockpile into consideration given its significance in ensuring the food needs of citizens and curbing sharp price increases. It could be a pan-Arab stockpile or regional silos. This stockpile should be sufficient for at least one year and should help Arab countries in finalising collective purchasing agreements that will give them a better bargaining position."

Saudi sticks to decision to halt wheat production

Saudi Arabia's decision to halt local wheat production and rely on imports from foreign markets is final as the world's oil superpower struggles to preserve its dwindling water resources, according to officials.

The desert kingdom, which sits atop more than a fifth of the world's proven oil wealth, had produced nearly three million tonnes of wheat per year to meet domestic needs but output is expected to plunge to one million tonnes this year following the government's decision to stop subsidising local production. In the next two years, output could dip further and the country will become almost totally reliant on imports, mainly from the West. "The decision we took two years ago to halt local wheat output is final and clear. There is no going back," said Fahd Balghaneem, Saudi Minister of Agriculture and Head of the Grain Silos and Flour Mills Organisation. "The country is now giving priority to water security over food security... this was a cabinet decision, which also directed us to stop producing wheat locally."

Balghaneem said Saudi Arabia, one of the poorest nations in water resources, imported in excess of one million tonnes of wheat last year, and the imports are projected to surge this year as local output is steadily declining.

By Nadim Kawach

© Emirates Business 24/7 2010

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