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No Let Up in Gulf Nations’ Quest for Foreign Land

Inflation almost doubled the price of basic food last year. Higher prices and shortages caused protests and violence globally and shook governments in the Middle East, which import more food than any other in the world. Gulf states, mostly desert, lack the water and farmland to feed themselves. As they look for food security, Gulf states have spent billions of dollars of oil money on buying foreign farmland.

“We have no choice but to continue leasing and buying land,” said Abdulla El Obied, head of the strategy unit at the Ministry of Agriculture in Saudi Arabia. The kingdom needs 2.6 million tonnes per year of wheat alone, and is abandoning a project to produce the grain domestically due to a shortage of water.

But once foreign land is acquired, operating the farms is no easy task, said Sudhakar Tomar, managing director of Hakan Agro DMCC, one of the leading food commodities trading companies in the Gulf region.

“Many of the countries that the Gulf is targeting are unstable socially and politically, that alone is a huge risk,” he said.

Those countries include Iran, Pakistan, Sudan and Thailand, which have all seen political upheaval in the past year.

Sudan’s Darfur remains a conflict zone, so investments that aim to develop farmland there can look optimistic. Mirak Agricultural Service, the UAE’s largest private agriculture firm, had a bitter experience with its investment in Iran after farmers held protests, hurting profitability, a company executive said.

“We are scaling down on our operations and would rather invest more in the UAE after farmers in Iran refused to work,” Nejdeh Ghadimi, Mirak assistant managing director, said.

The company owns 200 hectares of farmland in the UAE and 16 hectares in Heshetgerd, west of Iran’s capital Tehran. Other individual investors have been forced to back out of land deals due to red tape and opposition from farmers. “Whether we like it or not there are political strings attached to these land deals because the two basic elements of land and food are involved,” said a UAE-based investor who declined to be named. “So it’s not going to be a smooth transaction like other deals.”

“I was given the chance to invest in farmland in Egypt and I said no because I couldn’t deal with the red tape,” he said. Egypt said this year it is looking to sell 1.3 million acres of farmland by 2020.

Fighting Back:

Foreign land acquisitions, sometimes labelled land grabs, have provoked opposition from some sectors of society and from many farmers in developing nations.

In April, the United Nations expressed concern that farmers’ rights in developing nations could be compromised as rich countries buy farmland to secure food supplies.

The government of the southwestern Pakistani province of Baluchistan, which borders Iran, blocked farmland deals in April with UAE private investors due to concerns about farmers rights.

In Thailand, the government requires foreign investors to establish joint ventures with local companies, in a measure that authorities hope would help protect farmers and food supplies. Some in Thailand doubt the government’s initiatives would prevent farmers exploitation, and fear that they may just facilitate farmland sales.

“I’m sure that [the government] will step up their effort, trying to use our land and irrigation facility to produce food for the foreign investors. I’m afraid Thais will lose,” said Preecha Harntongtas, director of The Office of Secretary of Foreign Business Committee in Thailand.

Despite the difficulties and criticism, Gulf states show no sign of slowing their quest for foreign land.

So far foreign investors have acquired some 15-20 million hectares of farmland in poorer countries since 2006, according to the International Food Policy Research Institute.

And Gulf states say that without their investments, target countries simply could not afford to develop their own farmland.

The land is typically underdeveloped because it is in countries that have suffered wars, famines and other crises. “We are encouraging the private sector to invest in farmland abroad and I think it’s a fair deal,” said Saudi’s El Obied.

“We have the funds that will help developing nations increase their output and we are willing to share the produce with them.”