The UAE’s agricultural sector is undergoing a period of change. After years of subsidies and incentives, the sector faces a series of economic and environmental challenges, and the government is seeking to address this through an overhaul of its agricultural policy.

The move comes as the rising cost of food imports is putting pressure on the government to achieve a degree of self-sufficiency in prod--uction, but in such an arid climate, creating fertile land is expensive and environmentally unsustainable.

“The problem in the UAE is that we lack arable land and water,” says Mohammed Raouf, senior environment researcher at the Dubai-based Gulf Research Centre (GRC). “Now agriculture is bringing an environmental dimension into economics. Its share of the UAE’s gross domestic product (GDP) is minimal, but it uses 60-80 per cent of our water resources.”

Environmental economics

This new breed of environmental economics is forcing the government to adapt its agricultural policies. It is shifting towards developing sustainable farming techniques that will allow the sector to grow, while reassessing the viability of pursuing expensive strategies to promote self-sufficiency.

“The government has been pursuing a food security policy over the past three decades,” says Raouf. “But I don’t think there is a big chance for expansion in the sector.”

Abu Dhabi is working with the UN Food & Agriculture Organisation (FAO) to map out the next decade of the UAE’s agricultural development. “Top policy-makers are well aware of the issues of expanding techniques that are environmentally friendly,” says Kayan Jaff, UN food and agriculture representative at the FAO in Abu Dhabi.

“But you cannot compare sustainable agriculture to any other sector. It has livelihoods attached to it. It is part of communities and the idea is to fine-tune it to fit in with modern-day development.”

Part of this fine-tuning has involved adapting expectations attached to the sector, especially when it comes to achieving self-sufficiency in food production. “The big question is, what do we mean by food security?” says Mohammed Dawoud, head of water resources at the UAE’s Environment Agency. “We have to understand that with our situation, we cannot achieve total food security and be self-sufficient. What we can do is avoid food shortages among certain foodstuffs for limited periods of time.”

Replenishment rate

Abu Dhabi has the most active farming sector of all the emirates, with 16,000 farms in operation, according to Jaff. To support this, Dawoud estimates that more than 100,000 wells have been drilled in the emirate over the past 20 years. This has placed considerable strain on non-renewable groundwater resources.

“Farming draws on non-renewable fossil water and uses groundwater beyond its replenishment rate,” says Eckart Woertz, an economics programme manager at the GRC. “This is completely unsustainable.”

Like its GCC neighbours, rain in the UAE is rare and renewable water supplies are insufficient to meet rising demand. In terms of water supply, the UN places the UAE in the category of ‘acute scarcity’. This means it has an annual renewable water capacity of less than 500 cubic metres per capita. Environmental analysts say this is closer to 100 cubic metres.

Excluding agriculture, per capita water consumption in the UAE is among the highest in the world. In 2007, it was 570 litres per person a day, more than three times the world average.

Continuing population growth, urbanisation and industrial development mean this figure is set to rise. Over the past 25 years, the region has experienced a threefold increase in popu-lation and a fourfold increase in total water use.

However, according to the UN, the region has only 2 per cent of the world’s renewable water resources and instead relies on desalination. Agriculture is judged to account for 85 per cent of water used across the GCC.

Meeting this demand for water has meant that the government’s investment in the sector has been huge. But this is not met by the revenue generated. In 2005, agriculture accounted for just 3.3 per cent of the UAE’s GDP. Today, it is estimated to contribute no more than 4 per cent of GDP. In Bahrain and Kuwait, the contribution of the agricultural sector to GDP is even lower, at less than 1 per cent. “The return on the sector is very low when compared to the investment,” says Dawoud. “The main problem is the sector’s need for water resources.”

Water-efficient crops

This is driving initiatives to promote the growth of water-efficient crops with higher market values. Dates are one such commodity. Although their cultivation requires a substantial amount of water, they sell at a high enough price to justify it. The UAE has embraced this. In 2002, the country became self-sufficient in date production and began exporting the surplus.

The years of subsidies paying for irrigation, fertilisers and infrastructure to foster productivity are coming to an end. The Environment & Water Ministry, through which the UAE’s agricultural policy-making is directed, is reorienting the country’s agricultural strategies. Like its GCC neighbours, Abu Dhabi is pursuing market-driven agricultural economic reforms, which are in part forced by the requirements of the World Trade Organisation (WTO). In particular, these requirements demand the elimination of large-scale purchases of cereals from domestic producers at guaranteed high prices.

The process is gradual. “Subsidies have come down over the past three to four years,” says Jaff. “The aim is to apply a phasing-out effect. You cannot just suddenly remove subsidies entirely.”

But the economic side of the issue is complicated by rising food prices on the global market. The price for basic foods in the UAE in early 2008 is estimated to have increased by about 35 per cent on the same period in 2007. The cost of Basmati rice, a staple food, is thought to have risen by as much as 50 per cent. These price hikes reflect global trends, and the cost of food is largely expected to remain high in the short term.

The government is trying to find a balance between achieving a limited degree of food security in some areas, while accepting the fact that importing water-intensive crops is likely to remain the best option in future. “It may make better sense economically to pay higher prices for imported foods, rather than raise subsidies to maintain domestic production at unsustainable levels,” says Woertz.

The UAE’s currency peg to a weak dollar and high rates of inflation make its economy more sensitive to the rising food import prices. “We have increased our inflation forecast for the UAE during 2008,” says Monica Malik, analyst at Egyptian investment bank EFG-Hermes. “The main reason for this is the rise in food prices.”

Saudi Arabia still uses 3.2 billion cubic metres of water to grow 2.4 million tonnes of wheat, to provide a degree of food security and avoid total dependency on imports. The UAE has focused on its poultry industry. Egg production has risen over the past decade, and half the eggs consumed in the country are now produced locally. However, domestic farms are still unable to fully supply local demand. “The industrial side of poultry farming is still not very big,” says Jaff. “There are still imports from outside.”

The price of farming in the UAE is now measured in economic and environmental terms, forcing the government to adjust its agricultural policies and expectations for the sector. Environmental constraints mean there is little room for major expansions in the sector. “We are arid and food production is low,” says Dawoud. “We are not an agricultural country.”

Key fact

Agricultural sector share of gross domestic product is 4 per cent.

Table: Rainfall in GCC countries

km2=square kilometres; km3/yr=cubic kilometres ayear; mm=millimetres.
Source: Gulf Research Centre; Environment Agency