Pandemic spurs GCC to explore newer ways to ensure food security

Shiva Mehrotra is a Senior Director at Alpen Capital (ME) Limited and is based in Dubai. She is a specialist in the Food & Agri sector and drives Alpen’s engagements within the sector. Prior to joining Alpen, she worked with YES Bank in India and led project financing for the Food and Agri sector and debt distribution desk for the Bank. She is a management graduate from MANAGE, Hyderabad and holds BSc (Agri) from ANGRAU, Hyderabad.

The industry's growth potential coupled with series of government reforms to enhance local food production is encouraging local and international players to expand their foothold in the sector

  

The concept of food security has evolved and expanded in recent decades. It has gone beyond increasing food production to ensure ‘access to food and nutrition for all’ on a sustainable basis. The transition is evinced in the improvement in ranks of the GCC countries on Global Food Security Index - affording these countries a more ‘food secure’ status than most other countries.

The GCC region consumes about 57 million metric tonnes of food with Saudi Arabia and the UAE contributing nearly four-fifths of the total consumption. Challenged by unfavorable climatic conditions and limited water and arable land resources to perform traditional agricultural activities, the region imports 85 per cent of its total food consumed. Nonetheless, these capital-rich countries have robust fiscal positions and traditionally been less susceptible to food shortages and price risks compared to most other import-reliant countries.

The dependence is expected to continue on account of production constraints and steady growth in the consumption demand duly supported by favorable demographics and growing population. Moreover, higher proportion of young population placing taste, nutrition, convenience and cost as factors determining their food basket, makes the case for local production and sourcing more compelling.

COVID pushed the panic button globally, threatening one in every nine of the world’s population of chronic undernourishment. However, the discussion on food security became mainstream much before in the region. The ongoing volatility in geo-political and business environment particularly since the global financial crisis did not dissuade the prominent leaders from looking inwards and addressing food security concerns. Though current dialogue is by and large not driven by food shortages, the region is cognizant of the peril supply disruption from one or more major exporting partners or diplomatic missteps asserts on its food security.

The immediate interventions of GCC governments such as diversifying import sources, streamlining logistics and distribution, offering monetary incentives and discouraging hoarding to circumvent pandemic related supply disruption as were observed in several countries globally, are laudable. Additionally, the members have been taking proportional measures including investments, policy reforms and international collaborations to contain imports and ensure steady supply of food.

In 2019, Saudi Arabia launched the Sustainable Agricultural Rural Development Program worth over $2.3 billion targeting selected agriculture related sectors and is expected to fulfil 19 per cent of total food demand. Oman enjoys the highest food self-sufficiency amongst GCC nations credited to $4.9 billion investment in agriculture projects during its 8th five-year economic development plan (2011-15).

Governments in partnership with the private sector and international organizations are optimizing production capabilities by adopting leading agricultural practices such as greenhouse cultivation, hydroponics, aquaponics, seawater farming and vertical farming and deploying technologies including remote sensing, artificial intelligence and data analytics. The cultivation of rice in Sharjah in partnership between the Ministry of Climate Change & Environment, UAE and South Korea is one such example. 

The inherent growth potential of the industry coupled with the regional governments’ series of reforms to enhance local food production is encouraging international as well as local players to expand their foothold in the sector. KIZAD and KPFTZ have become home to some of the largest food products manufacturers in the region by offering fast-track business formation processes and liberal policies including 100% foreign ownership, duty free imports and re-exports and, no restriction on repatriation of capital and profit.

With companies looking to strengthen their geographic presence, several intra-regional and cross-border deals were closed in the past few years. Saudi Arabia’s Almarai has collaborated with Germany-based GEA Group to build the nation’s largest dairy processing facility. Qatar has collaborated with Spanish Companies to build greenhouses on 100 hectares incurring investment of $118 million.

There has also been a growing trend of the GCC nations investing in cultivable lands in Africa, Asia and Australia. Riyadh-headquartered SALIC has acquired 200,000 hectares of farmland of Baladjie aggregation, Western Australia’s wheat belt, for an undisclosed amount.  Kuwait Investment Authority announced a mega program across Pakistan worth an initial investment of $20 billion. Likewise, UAE committed to invest $5 billion in India-UAE food corridor to strengthen its imports from India.

Countries are also making efforts to gain control of the overall food supply chain by developing strategic food reserves and related storage infrastructure and reducing food wastage by forming food banks. Dubai Municipality oversees the first Food Bank in the UAE to eliminate food wastage of $3.5 billion. By collaborating with local as well as international charities it has created an ecosystem to store, package and distribute excess foods from hotels, restaurants and supermarkets to those in need. 

Future disruption to food supplies is looming. For the climatically challenged and land-scarce region, therefore, continued and focused efforts on enhancing per-foot yield will be critical differentiators. Playing on region’s strengths manifested in strong political will, policy initiatives, tech-readiness and global accessibility, stakeholders need to leverage opportunities and plug slippages across the food value chain. Furthermore, integration of core infrastructure across the value chain with online supply chain to improve transparency and efficiency will be critical. 

© Opinion 2021

Any opinions expressed in this article are the author’s own

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