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Tuesday, February 5, 2013
Failure to Launch? Gulf Food Security Initiatives

Failure to Launch? Gulf Food Security Initiatives
Eckart Woertz - Gulf Research Center February 5, 2013

Gulf countries are food secure, yet they constantly worry about food
security, which they erroneously equate with food self-sufficiency. Their
most salient food-related challenge pertains to an abundance of calories not
lack thereof: their obesity rates are among the highest in the world. They
have plenty of oil revenues to pay for necessary food imports. However, the
reliance on food imports can be risky, as the global food crisis of 2008
showed when major food producers like Russia, Vietnam, and Argentina
announced temporary export restrictions. Since then, the Gulf countries have
enacted a number of policies to support food security. They have raised
subsidies or enacted price controls to ensure affordability of food,
increased strategic storage to reduce the vulnerability to supply disruption
and tried to make domestic agriculture more water efficient and phase out
water-intensive crops like wheat or Rhodes grass. Their most publicized and
controversial move has been projects for food production in food-insecure
countries like Sudan, Pakistan, and Ethiopia, most of which have not made it
beyond the announcement stage, however.

Five years on, the challenges and pitfalls of the chosen strategies have
become apparent. Price controls in the UAE and Saudi Arabia without
concomitant subsidy increases have forced retailers to cross-subsidize
staple foods or withdraw them from shelves. Without the eventual release of
government subsidies, the development of a black market would have become a
distinct possibility. Economists have argued that direct monetary transfers
to vulnerable segments of the population would be a better recipe than
constant interference with market forces via subsidies; yet, Gulf residents
have come to regard them as an entitlement and a crucial part of their
budgetary considerations. It is also unclear whether Gulf bureaucracies
would have the administrative depth to monitor direct aid payments.

Strategic storage can create a buffer and allows for critical lead time to
source alternative suppliers in the event of a crisis. Yet it represents a
tremendous technical challenge. Often termed "above ground mines" for their
propensity to develop heat and explode, silos require constant turnover and
elaborate systems of management. The Gulf countries now aim at storage of
staple foods that would cover at least six months of consumption. They are
still debating whether and how to include the private sector in such
schemes. The International Food Policy Research Institute (IFPRI) in
Washington has criticized national approaches to strategic storage as they
could lead to hoarding and create the very problem they want to address:
illiquid and volatile food markets. Instead, it has proposed an
international food reserve that could increase market transparency and limit
unnecessary and expensive storage. Development experts have unsuccessfully
propagated such plan s for decades, while sovereignty concerns thwarted
their implementation. However, the Gulf countries may consider at least a
regional coordination of their storage efforts and link them with their
supply chain management. Isolated storage in a small country like Qatar is
more expensive than in a larger one like Saudi Arabia, as the World Bank has
pointed out. Pooling of interest can make storage more efficient as the
experience of the Allied Middle East Supply Center in Cairo has shown during
World War II. It could also limit excessive capacity build-up.

Water conservation should be high priority in the Gulf countries, which have
among the highest per capita water consumption rates globally in a region
with the highest water scarcity. While expensive desalination is used to
provide cities with drinking water, non-renewable fossil water reserves have
been used to fuel an unsustainable boom in subsidized wheat production in
Saudi Arabia. As aquifers run dry, wheat production is now being phased out
until 2016, yet farmers are switching to even more water guzzling alfalfa
production for the substantial livestock industry of the country in order to
amortize machinery and other fixed capital. Apart from cutting back producer
subsidies, the government will need to monitor wells directly and will need
to intervene more in water management as Abu Dhabi is now trying to do.

Finally, foreign agro-investments have been the most controversial part of
Gulf food policies. Advocacy groups have accused the Gulf countries of
engaging in a land grab of epic proportions at the expense of small-scale
farmers and pastoralists in target countries. There are reasons for concern.
In most African countries, the land is formally owned by the state but
occupied by customary land rights holders. If they do not get a fair deal in
the form of business, jobs, or compensation, conflict is bound to emerge. In
fact, there have been violent protests against the Gulf-financed Merowe Dam
in Sudan that led to the displacement of some 50,000 people, and last April,
several workers were shot on a project site of Saudi billionaire Al-Amoudi
in Ethiopia. There is an emerging consensus in academic circles that
outgrower schemes and inclusive projects with joint equity are more
promising than the focus of Gulf countries on actual land ownership and
fully controlled plantation models. So far, there is a huge gap between
announced projects and their actual implementation, particularly in
developing countries. Some involved Gulf institutions hardly have a single
agro-engineer among their ranks. Most successful projects have been
implemented in developed agro markets like Argentina or Australia. If
history is a guide, poor infrastructure and governance issues are not easily
overcome, as seen in Sudan which the Gulf countries tried unsuccessfully to
develop as an Arab breadbasket in the 1970s.

Going ahead, many Gulf countries will cut food production to ensure water
security while managing import dependence via elaborate management of
storage and supply chains. Consumers do not care whether their food has been
grown at home or not. They just want to be able to afford it. Besides
subsidies and transfer payments, economic diversification and job creation
for a burgeoning youth population are also important aspects of food
security policies. The Gulf countries will also need to interact more
efficiently on an institutional level with international organizations like
the World Trade Organization (WTO) or the World Bank that are crucial for
food policies. At the end of the day, assured food imports, not food
self-sufficiency, will be the basis of Gulf food security.

Eckart Woertz is a senior researcher at the Barcelona Centre for
International Affairs (CIDOB) and author of Oil for Food (Oxford University
Press, forthcoming). He can be followed on Twitter @eckartwoertz and at
www.oilforfood.info.

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