From deep under the Saharan desert to the Libyan coastline, a 4,000-kilometre- network of pipes is being built to transport up to 6.5 million cubic metres a day of water from ancient fossil water basins to the country’s coastal towns.
The $33bn Great Man Made River project is scheduled for completion between 2015 and 2020, as the local Al-Nahr Construction finishes the final stages of the scheme. It will be the legacy of a government policy likely to be the last of its kind in the region – that of agricultural self-sufficiency.
The project was first conceived in the 1980s, when oil exporting states in the Middle East grew concerned about the prospect of being cut off from food supplies by sanctions or war in neighbouring states. Under a similar policy, Saudi Arabia was once the sixth largest wheat producer in the world, with output of about 4.5 million tonnes in 1993. That year, the kingdom produced enough wheat to feed its population and export a small surplus to Russia.
Unsustainable food and water policies in the Middle East
However, a more stable political environment, high oil prices and soaring populations across the region have rendered such policies – which entail huge subsidies to make growing crops in arid countries economically viable – unsustainable. It takes more than 1,000 cubic metres of water to produce one tonne of wheat in Saudi Arabia, some two to three times the volume used in other major producing countries.
Today, Saudi Arabia is cutting its spending on agriculture and phasing out wheat production; the agriculture ministry intends to import almost all of its grain by 2016.
The drain on state finances, combined with the pull of expanding urban populations and industry on diminishing groundwater resources, have effectively ended thoughts of self-sufficiency, says John Sfakianakis, chief economist and group managing director at Saudi Arabia’s Banque Saudi Fransi.
“The current policy, attempting self-sufficiency, has failed,” he says. “You are going to see a change and the realisation that the policy will not [alter] the fact that the region will be dependent on imported food commodities.”
But even the richest of the Middle East’s oil producers are nervous about relying on imports to provide food for their populations. In 2007 and 2008, soaring commodity prices saw wheat trading at up to $440 a tonne in March 2007, more than double the level at which it was sold a year before.
According to Saudi Arabia’s NCB Capital, the Gulf states food import bill was $10.9bn in 2007, equivalent to 1.3 per cent of regional gross domestic product. Food prices rose 26 per cent that year, sparking widespread inflation across the region. “The big warning for the Gulf states was the 2007-08 shocks, which showed how things could be if they did not act,” says Jarmo Kotilaine, chief economist at NCB.
The question for the GCC is what to do next? Several Gulf states have started buying land abroad and setting up funds to invest in overseas grain producers. A recent investigation by UK newspaper The Observer suggested that overseas funds – largely Middle Eastern – have bought up to 50 million hectares of land for agricultural development in Africa alone over the past five years.
Farming overseas to secure produce for the Middle East market
“There is a bit of a distorted view that a policy of buying land abroad will solve all our problems,” says Sfakianakis. “Bearing the risk of being foreign firms in foreign countries is one that will soon be abandoned. Gulf countries are not farmers. They will need to talk to producer states about imports, rather than go to new countries.”
Kotilaine does not agree that there is no farming expertise in the region, pointing to Saudi Arabia’s wheat production as an example. “There are two things [Middle Eastern states] can do and are, in fact, doing. A food security policy has replaced food self-sufficiency and now they need to buy into the means of production – the industry. This also means improving trade relations to allow the Gulf and other states to work closely with producer nations,” he says.
In the future, long-term agreements and better trade relations with major producers, such as the US, Canada and Australia, will be needed to mitigate the risk of new price shocks, along with investments into food stockpiles. The need for greater food security could also boost the role of the GCC.
“The common agricultural market policy in Europe isn’t something that you would get people to wax lyrical on,” says Kotilaine. “But one of the areas where the GCC could cooperate is commodities and resources. This is an issue on which they should focus more. The GCC doesn’t have a budget to compare to the EU’s.”
Regardless of how it goes about it, the region needs to secure food supplies for the future, and this will become an increasingly important priority for governments.