January 5, 2015

By Garrett Baldwin

The Gulf region today is a powerhouse in international logistics, trading, financial services, and investment.

But since World War II, Gulf Cooperation Council (GCC) nations have heavily depended on food imports. By 2014, the GCC imported roughly 80% to 90% of all food it consumed.

Still, food-sourcing challenges are not the sole result of Western economic and political forces, such as embargo threats of the 1970s. The post-oil boom allowed GCC nations to enter the global agricultural gold rush rather than address self-sufficiency challenges. Significant wealth and higher oil prices enabled GCC nations to purchase millions of hectares and other key agribusiness assets in undeveloped nations, particularly in Eastern Africa.

In terms of investor origin for foreign agricultural resources, the UAE now rivals the United States and China, according to research from Deutsche Bank. The oft-criticized practice of buying foreign land to develop and export food back home raises social and economic concerns, particularly in poorer producer nations.

In 2009, The Economist asked whether the term “beneficial” or “neocolonialism” better defined foreign land investment.

And with arable foreign land supplies declining – in part due to increased political distrust in the practice – food insecure nations must look inward to ensure a well-fed population.

For GCC nations to do so, they must address four important security challenges.

Water Scarcity

When investors think of GCC nations, they think of arid desert climate. The GAO’s classification that the region suffers from “absolute water scarcity” only seconds that thought.

Scarce rainfall in the region has forced farms to use groundwater and aquifers significantly over their replacement rates. Failing subsidies in the sector have also fueled the depletion and increasing salinization of these aquifers.

Keep in mind that GCC nations are not just susceptible to local water challenges. The bulk of grains and other commodities are sourced using water supplies in nations facing their own challenges. As sourcing the blue commodity becomes a challenge around the world, GCC nations must look internally to address their own water needs. And while desalination seems like a worth-while investment, it is an energy-intensive and costly process.

Discovering ways to reduce waste, reuse water, and increase productivity are key plans currently underway. Oman recently signed a food-production agreement with the Australian State of Victoria. The deal will help Oman gain expertise on how to improve water-management practices.  Kuwait, meanwhile, is aggressively implementing new tools to recycle water in the irrigation process. The country uses roughly 120 million cubic meters of recycled water each year.

Incentivizing Private Sector Production

Gulf states must determine ways to partner with the private sector and boost production through innovation and best practices. With oil prices still high in comparison to just 15 years ago, public dollars have been the primary source of foreign land development.

However, efficiency and innovation to boost and promote self-sufficiency requires the knowledge and capital of the private sector. The GCC needs to determine ways to boost storage capacity, emphasize new technologies in aquaculture, and expand smart agriculture, which includes monitoring and green housing.

The process has been steady. Saudi Arabia will have phased out its wheat subsidies by 2016, which will assist in reducing water overuse. The country is aiming to boost private sector investment by providing interest-free loans for companies willing to fulfill their grain needs.

Meanwhile, Kuwait is allocating land for private investors to breed fish and livestock.

Another factor to consider on public investment is the over-reliance on oil dollars in the region.

With energy operations effectively nationalized in many states, falling oil prices have a profound impact on their social budgets. But it’s important to remember the impact of rising energy prices even in nations where gasoline and electricity are cheap.

The reasoning is two-fold.

First, rising energy costs in a globalized world will increase the cost of foods and grains across all areas of the vertical supply chain, particularly in transportation. Second, it is important to remember that as oil prices increase, so to do incentives to boost biofuel generation from the same grains that GCC nations crave.

Human Capital Development

Technological innovation requires responsible allocation of financial capital.

But implementation of best practices and advancement of local production cannot be accomplished without reliable human capital in the field.

Like the United States and China, the GCC is facing a farmer crisis. Younger generations are pursuing white-collar careers due to access to higher education and fewer economic incentives to pursue agriculture.

For example, favorable Emiratisation policies for local nationals promote careers in business development. Rather than pursue agriculture, it is far more lucrative to “sponsor” foreign companies entering the UAE and collect a strong percentage of the entrant’s profits.

Today, farmers in the region are much older and lack the necessary education in production operations, finance, and management to properly implement top-down initiatives or adopt new technologies.

Proper Implementation

A goal without a plan is just a wish.

Each GCC nation is responsible for properly developing its own plan to tackle individual food security challenges.

And a number are already in the works. This year, Qatar formed its own National Food Security Plan, which calls for the production rate of strategically important foods to hit 40% within the next decade. In 2013, the UAE unveiled new guidelines and policies to properly manage and promote technology to build a sustainable aquaculture sector. The nation is embracing aquaculture as a means to address water, soil, and climate concerns. Oman, meanwhile, granted licenses to 19 aquaculture projects worth roughly $332 million, signifying its commitment to the practice.

But while such plans are critical steps in thinking and intentions, projects will be remembered by results and the answer to one question: Is this nation more or less food secure due to the policies programs enacted?

For these reasons, nations cannot simply seek stamps of approval on their food security plans from non-governmental organizations (NGOs) and policy shops.

They require knowledgeable agricultural professionals to help implement these programs and have the necessary patience to take each step-by-step. This is especially important considering these regions lack the human capital needed to do so on their own.

Conclusion

The GCC faces a number of food security challenges in the near future. As global population is set to swell to 9.1 billion by 2050, food production must swell to meet growing demand. With that in mind, nations are smart to implement programs, adopt programs, and train the necessary human capital needed to increase self-sufficiency.