Food security a growing concern for the UAE

Importing 85 per cent of its food makes the nation vulnerable to shortages, price volatility and supply restrictions, but new steps are being taken.

Contract farming brings technology and expertise that can spread out to boost domestic food supply. Above, a Central Illinois farmer uses a combine to harvest his winter wheat crops.

The UAE and other Gulf countries are looking at land overseas to provide a steady, reliable supply of food in the face of progressively rising food crises.

This year, bad weather wiped out harvests in Russia and Pakistan, pushing up the price of staples. World food prices have now surpassed the levels reached in the early stages of the 2008 food crisis.

For Gulf countries, which produce very little of what they eat, the impact has been notable. The UAE imports about 85 per cent of its food, at a cost of around Dh11 billion a year. This makes it, like other countries in the region, particularly vulnerable to both changes in prices and shortages, says Huma Fakhar, a lawyer and agriculture expert. "Now, it's a supplier's market and supplies are low," she says.

Dr Eckart Woertz, the director of economic studies at the Gulf Research Centre, is among those urging the region to start taking food security seriously. "The Gulf countries are food secure as long as world markets are open," he says. "They have the money to buy. The problem is if there is a future food crisis and export nations restrict supplies, as Russia has just done."

Qatar launched a national programme in 2008. Last year, Saudi Arabia began offering funding to agricultural companies and investors who wanted to set up farms abroad.

The UAE is now seeking to catch up with its neighbours. On Tuesday, the Minister of Economy, Sultan al Mansouri, highlighted in a letter to the FNC the need for greater agriculture investment in countries with low production costs.

At the Arab-African summit in Libya last month, Sheikh Mohammed bin Rashid, the Prime Minister of the UAE and Ruler of Dubai, praised the "emergence of a strategic partnership" in food security between the Middle East and Africa.

But looking for land abroad remains controversial. Supporters of investing in commercial agriculture in Africa say all sides stand to benefit, but critics note the political and financial risks.

The UN estimates an extra $70 billion a year will have to be invested if the world is going to have enough to eat in 2050. Since the crisis of 2008, the acquisition of farmland has increased rapidly. Last year alone deals covering 45 million hectares of farmland were announced. Before 2008, that figure was more like four million. The big players in these deals have been China, South Korea and the Gulf states.

From the UAE, land prospectors include private and public investment groups, and food importing and processing companies. Deals have been announced with Africa, Eastern Europe, South America and Asia. The terms, however, are usually kept private, making it hard to gauge whether the land is being sold outright or simply leased.

According to Olivier De Schutter, the United Nations special rapporteur on the right to food, many of the investments have happened in countries where governments are "not effectively managing the resources".

Often, the deals get bogged down. A World Bank report published in September found that almost 30 per cent of deals were still awaiting government approvals. Barely one in five had so far resulted in actual farming.

Those farms that have managed to get up and running have mostly done so on a far smaller scale than intended. This is partly because they are still in the trial phase, testing whether the land is suitable for large-scale agriculture.

There is also a lack of expertise, especially when farms are set up by companies with no background in agriculture. The result is a process that can take years to produce commercial harvests.

Neither is it without risk for investors - especially if the land deal is seen as being heavily weighted in the outside investor's favour. In such cases, there is the danger that the host countries could re-nationalise farms, unilaterally cancel contracts or block food exports.

Mozambique, for example, has in recent years transferred millions of hectares to investors, half of whom were foreign. But most remain uncultivated, so the farmers who were thrown off their land have not received the jobs they were promised, sparking riots over bread prices in September in which six people died.

Instead of buying or leasing land, according to Mr Taylor, Gulf countries may be better of organising contract farming deals. Under these arrangements, investors partner with a farm or a group of small farms. Investors provide technology and supplies, and farmers provide the yield, often at a set price.

Operated correctly, the projects can be good for local populations. Not only does contract farming create jobs, it brings technology and expertise that can spread out to boost domestic food supply.

Often, the contracts include an agreement to sell a proportion of the food locally; in most of the contracts Ms Fakhar oversees, this figure is 40-50 per cent.

The benefits can spread wider. As well as paying taxes that can provide a valuable new source of government funding, the UN suggests that investor countries may find it worthwhile to become involved in building local infrastructure.

David Hallam, at the UN's Food and Agriculture Organisation, said in a recent letter that the lack of roads in rural areas, for example, is often a major constraint to development.

He also called for other measures to prevent future food price shocks. He suggested creating global or regional food reserves, the use of greater price controls and the increased use of futures contracts, in which buyers agree to purchase crops at a set price at a future date.

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Land focus moves away from Africa as investors eye developed markets

Africa has long been the first stop for countries seeking to develop farms overseas. But as many gain experience with overseas farming and tackle its myriad challenges, the focus has begun shifting to more developed nations such as eastern Europe, central Asia and even countries such as Australia.

However, land in Africa is cheap and the potential for commercial agriculture is large. Many African countries offer investment incentives and are making land transfers easier. Sudan had long been a particular target: it is close, and shares cultural similarities that make it a relatively comfortable place for Gulf Arabs to do business.

During the oil price boom of the 1970s, Gulf countries invested heavily in large tracts of Sudan's underdeveloped farmland. UAE firms alone own 283,000 hectares of land there, with the rest of the GCC controlling another 200,000. Many of those investments, however, have shown limited returns and suffered from the region's mismanagement, cronyism and corruption.

The Sudanese authorities, especially, have been accused of riding roughshod over land rights. Roland Marchal, a research fellow at the National Centre for Scientific Research, part of SciencesPo in Paris, says land that the government sells as "unused" may actually belong to opposition groups.

Land disputes continue because it is unclear who actually owns the land in question. Land tenure is made up of various traditional, communal and government claims and farmers who have been using the land for generations could be easily displaced, often without compensation. "In Africa more than elsewhere the land is very much part of the identity of the people," said Mr Marchal.

Such difficulties have encouraged the shift over the past year or so to more developed markets such as Australia, eastern Europe and Brazil.

For example, Abu Dhabi is considering a proposal drafted by the Azerbaijan Embassy, said Etbar Abdullayev, the second secretary of trade and economics at the embassy. He says the capital for agricultural projects could be raised domestically. "But taking into account the financial opportunity in the UAE," he said, "we're inviting UAE investment to actively participate in this project."

The trend is a signal that Gulf countries are becoming more realistic about opening operations abroad, said Eckart Woertz of the Gulf Research Centre.

There are clear benefits to investing in more developed markets. Infrastructure such as roads and ports is already established. A tradition of commercial agriculture means market channels exist and experienced staff are already available. Those, said Mr Woertz, are "three important factors that you don't have in Africa".

While land and equipment are more expensive in more developed nations, says Sudhakar Tomar, managing director of Hakan Agro DMCC, they come with legal security. "The long-term benefits far outweigh the political instability and ethical issues that a company might face," said Mr Tomar, whose company is one of the largest food trading companies in the Gulf region.

Other nations, too, are interested in encouraging UAE agricultural investment. In March, Clyde Agriculture of Australia approached potential buyers in the region for its 165,000 hectares of farmland in eastern Australia.

No deal, however, was immediately forthcoming.

According to Clyde's managing director, John McKillop, the UAE was still considering the details of its strategy, including whether it should be a government or private enterprise, as well as a national or regional project.