[DEBATE] : Gulf States Want India and Pakistan to Grow Food for Them

[Yoshie Furuhashi]

The Gulf Arab ruling class want India and Pakistan, which can barely
feed themselves in part due to higher oil prices, to grow food for
them. -- Yoshie

<http://ipsnews.net/news.asp?idnews=42877>
Gulf Eyes 'Oil-For-Food' Deal With Neighbours
By Meena Janardhan

DUBAI, Jun 19 (IPS) - Recent attempts by Gulf countries to invest in
farmlands abroad to counter soaring inflation and guarantee long-term
food security could prove to be a win-win situation in the short-term
for both the oil-rich region and its investment-hungry neighbours, but
continued high oil prices may neutralise the gains in the long-run,
feel experts.

With Gulf countries importing 60 percent of their food on average,
Saudi Arabia and the United Arab Emirates (UAE) are taking the lead in
investing in Asia and Africa to secure supplies of cereals, meat and
vegetables.

The move reverses a recent Gulf trend of acquiring plush assets in the
West in favour of acquiring agriculture lands in developing countries,
who are themselves facing a crisis amid high oil price-induced
inflation and even food shortage.

Calling for transforming the buyer-seller relationship in the energy
sector between India and the Gulf countries into a more substantial
and enduring relationship, Indian External Affairs Minister Pranab
Mukherjee told the Emirates Centre for Strategic Studies and Research
last month, "I see India's requirement for energy security and that of
the Gulf countries for food security as opportunities that can be
leveraged to mutual advantage."

Similarly, during Prime Minister Yousaf Gillani's visit to Saudi
Arabia in early June, Pakistan sought 6 billion dollars in financial
and oil aid in return for "hundreds of thousands of acres of
agricultural land, which could be tilled by the Saudis."

Such arrangements are likely to become increasingly common since
inflation and food shortage are likely to worsen worldwide in future,
said Shoaib Ismail, a halophyte agronomist who studies utilising
plants for food, fuel, feed, and fiber.

Worried about inflation fuelling social unrest, major food exporters
to the Gulf countries resorted to export curbs. For example, India --
the world's second-largest rice exporter in 2007 -- banned all
non-basmati rice shipments in March. Simultaneous moves elsewhere
triggered a wave of panic buying, causing benchmark Thai prices to
triple.

"The Gulf region is not conducive for sustainable agriculture and has
been dependent on imported food, which it has been able to buy at the
prevailing international price without difficulty. However, when oil
and other natural resources diminish in future, the region cannot
maintain the same level of dependence on external food supplies,"
Ismail told IPS.

Just one percent of land in the UAE is arable, while in Saudi Arabia
it is marginally better at three percent. In comparison, 24 and 40
percent of land in Britain and Poland respectively is arable.

As a result, Saudi Arabia plans to stop purchases of wheat from local
farmers by 2016, abandoning a three-decade programme aimed at
self-sufficiency that has depleted the country's scarce water
supplies. Reeling under shortages of rice, Saudi Arabia has approached
India, which annually exports 500,000 to 600,000 tonnes of rice to the
kingdom.

"Given that global political scenarios vary constantly, the Gulf
countries could come under pressure in future food negotiations,"
added Ismail of the International Centre for Biosaline Agriculture in
Dubai.

Explaining the willingness to invest over the long term, Ismail said
the Gulf countries are cooperating with developing countries that have
similar cultural, religious and political backgrounds, and with whom
they have had longstanding ties. "They could get basic commodities at
relatively low prices, thereby reducing their dependency on Western
countries; and food-exporting counterparts get investments that could
offset hardships related to increasing cost of land, water and
fertilisers."

The Gulf countries unsuccessfully attempted to convert Sudan into
their breadbasket in the 1970s after the U.S. threatened to cut food
supplies following the oil boycott.

This time, however, media reports indicate that the UAE government and
private entities like Abraaj Capital have already acquired about
800,000 acres of farmland in Pakistan. As incentive, Islamabad is
offering legal and tax concessions to foreign investors in specialised
agriculture and livestock 'free zones', and may also introduce
legislation to exempt such investors from government-imposed export
bans.

The Gulf countries are increasingly receptive to such arrangements
because they view this as an opportunity to import food at 20 to 25
percent less cost, thereby addressing domestic inflationary pressure,
which was officially about 12 percent in the UAE last year, and
perhaps double unofficially.

Since self-sufficiency is not an option, apart from dialogue with
exporter countries and investments in agricultural projects abroad,
"buffer stocks of basic food items should be contemplated to reduce
exposure to market volatility," the Dubai-based Gulf Research Centre's
Food Inflation Report recommended in May.

With oil prices likely to remain well over 100 U.S. dollars a barrel,
the Gulf countries are estimated to reap a cumulative windfall of
about nine trillion U.S. dollars by 2020, allowing them to intervene
in the market through various measures ranging from price caps to
subsidies.

But, one of the chief reasons grain prices have increased is due to a
rise in production costs -- particularly from higher energy
expenditure -- estimated at about 40 percent. Thus, "what makes the
UAE's export earnings increase is also what causes its imported food
to increase apace," Dalton Garis, of The Petroleum Institute in Abu
Dhabi, explained in the UAE's 'Gulf News' last week.

Commenting on the viability factor of the new initiative, Ismail
explained, "India, Pakistan and Sudan have closer ties with the Gulf
compared to Thailand. While political stability would be a factor in
Sudan and Thailand, India and Pakistan are likely to be attractive
destinations because of their relations with the Gulf countries, which
pre-dates oil."

Encouraging the new public-private partnerships, Ismail said he
preferred a proactive private sector role because "it can bring about
significant results" quickly. The government, he added, should "serve
as facilitator and oversee policies and regulations."

But questions remain about how such direct arrangements would work or
how domestic shortages, inflationary pressures and politics in the
food exporting countries would pan out in the long run.

Anticipating a second wave of trouble as the region's population booms
in the years ahead, Ismail stressed that "with all limitations to make
agriculture sustainable in this region, efforts should also be made to
produce vegetables [in greenhouses], fruits and other crops. There
should be clear prioritisation for primary agricultural products
[grains and pulses] and secondary products [fruits and fodder]. It is
possible to make the latter sustainable with relatively marginal land
and water resources."

(END/2008)

<http://www.nytimes.com/2008/06/22/business/22indiafood.html>
June 22, 2008
The Food Chain
In Fertile India, Growth Outstrips Agriculture
By SOMINI SENGUPTA

Progress in Farming Is Leveling Off
<http://www.nytimes.com/imagepages/2008/06/22/business/22indiafood.graphix.ready.html>

JALANDHAR, India — With the right technology and policies, India could
help feed the world. Instead, it can barely feed itself.

India's supply of arable land is second only to that of the United
States, its economy is one of the fastest growing in the world, and
its industrial innovation is legendary. But when it comes to
agriculture, its output lags far behind potential. For some staples,
India must turn to already stretched international markets,
exacerbating a global food crisis.

It was not supposed to be this way.

Forty years ago, a giant development effort known as the Green
Revolution drove hunger from an India synonymous with famine and want.
Now, after a decade of neglect, this country is growing faster than
its ability to produce more rice and wheat.

The problem has grown so dire that Prime Minister Manmohan Singh has
called for a Second Green Revolution "so that the specter of food
shortages is banished from the horizon once again."

And while Mr. Singh worries about feeding the poor, India's growing
affluent population demands not only more food but also a greater
variety.

Today Indian agriculture is a double tragedy. "Both in rice and wheat,
India has a large untapped reservoir. It can make a major contribution
to the world food crisis," said M. S. Swaminathan, a plant geneticist
who helped bring the Green Revolution to India.

India's own people are paying as well. Farmers, most subsisting on
small, rain-fed plots, are disproportionately poor, and inflation has
soared past 11 percent, the highest in 13 years.

Experts blame the agriculture slowdown on a variety of factors.

The Green Revolution introduced high-yielding varieties of rice and
wheat, expanded the use of irrigation, pesticides and fertilizers, and
transformed the northwestern plains into India's breadbasket. Between
1968 and 1998, the production of cereals in India more than doubled.

But since the 1980s, the government has not expanded irrigation and
access to loans for farmers, or to advance agricultural research.
Groundwater has been depleted at alarming rates.

The Peterson Institute for International Economics in Washington says
changes in temperature and rain patterns could diminish India's
agricultural output by 30 percent by the 2080s.

Family farms have shrunk in size and quantity, and a few years ago
mounting debt began to drive some farmers to suicide. Now many find it
more profitable to sell their land to developers of industrial
buildings.

Among farmers who stay on their land, many are experimenting with
growing high-value fruits and vegetables that prosperous Indians are
craving, but there are few refrigerated trucks to transport their
produce to modern supermarkets.

A long and inefficient supply chain means that the average farmer
receives less than a fifth of the price the consumer pays, a World
Bank study found, far less than farmers in, say, Thailand or the
United States.

Surinder Singh Chawla knows the system is broken. Mr. Chawla, 62, bore
witness to the Green Revolution — and its demise.

Once, his family grew wheat and potatoes on 20 acres. They looked to
the sky for rains. They used cow manure for fertilizer. Then came the
Mexican semi-dwarf wheat seedlings that the revolution helped
introduce to India. Mr. Chawla's wheat yields soared. A few years
later, the same happened with new high-yield rice seeds.

Increasingly prosperous, Mr. Chawla finally bought his first tractor in 1980.

But he has since witnessed with horror the ills the revolution
wrought: in a common occurrence here, the water table under his land
has sunk by 100 feet over three decades as he and other farmers
irrigated their fields.

By the 1980s, government investment in canals fed by rivers had
tapered off, and wells became the principal source of irrigation,
helped by a shortsighted government policy of free electricity to pump
water.

Here in Punjab, more than three-fourths of the districts extract more
groundwater than is replenished by nature.

Between 1980 and 2002, the government continued to heavily subsidize
fertilizers and food grains for the poor, but reduced its total
investment in agriculture. Public spending on farming shrank by
roughly a third, according to an analysis of government data by the
Center for Policy Alternatives in New Delhi.

Today only 40 percent of Indian farms are irrigated. "When there is no
water, there is nothing," Mr. Chawla said.

And he sees more trouble on the way. The summers are hotter than he
remembers. The rains are more fickle. Last summer, he wanted to ease
out of growing rice, a water-intensive crop.

The gains of the Green Revolution have begun to ebb in other
countries, too, like Indonesia and the Philippines, agriculture
experts say. But the implications in India are greater because of its
sheer size.

India raised a red flag two years ago about how heavily the appetites
of its 1.1 billion people would weigh on world food prices. For the
first time in many years, India had to import wheat for its grain
stockpile. In two years it bought about 7 million tons.

Today, two staples of the Indian diet are imported in ever-increasing
quantities because farmers cannot keep up with growing demand —
pulses, like lentils and peas, and vegetable oils, the main sources of
protein and calories, respectively, for most Indians.

"India could be a big actor in supplying food to the rest of the world
if the existing agricultural productivity gap could be closed," said
Adolfo Brizzi, manager of the South Asia agriculture program at the
World Bank in Washington. "When it goes to the market to import, it
typically puts pressure on international market prices, and every time
India goes for export, it increases the supply and therefore mitigates
the price levels."

In April, in a village called Udhopur, not far from here, Harmail
Singh, 60, wondered aloud how farmers could possibly be expected to
grow more grain.

"The cultivable land is shrinking and government policies are not
farmer friendly," he said as he supervised his wheat harvest. "Our
next generation is not willing to work in agriculture. They say it is
a losing proposition."

The luckiest farmers make more money selling out to land-hungry mall developers.

Gurmeet Singh Bassi, 33, blessed with a farm on the edges of a booming
Punjabi city called Ludhiana, sold off most of his ancestral land. Its
value had grown more than fivefold in two years. He made enough to buy
land in a more remote part of the state and hire laborers to till it.

Meanwhile, Mr. Chawla's neighbors migrated to North America. They were
happy to lease their land to him, if he was foolish enough to stay and
work it, he said. Today, he cultivates more than 100 acres.

Last year, on a small patch of that land, he planted what no one in
his village could imagine putting on their plate: baby corn, which he
learned was being lapped up by upscale urban Indian restaurants and
even sold abroad.

At the time, baby corn brought a better profit than the government's
price for his wheat crop.

This had been the Green Revolution's other pillar — a fixed government
price for grain. A farmer could sell his crop to a private trader, but
for many small tillers, it was far easier to approach the nearest
government granary, and accept their rate.

For years, those prices remained miserably low, farmers and their
advocates complained, and there was little incentive for farmers to
invest in their crop. "For farmers," said Mr. Swaminathan, the plant
geneticist, "a remunerative price is the best fertilizer."

Mr. Swaminathan's adage proved true this year. After two years of
having to import wheat, the government offered farmers a substantially
higher price for their grain: farmers not only planted slightly more
wheat but also sold much more of their harvest to the state. As a
result, by May, the country's buffer stocks were at record levels.

Nanda Kumar, India's most senior bureaucrat for food, said the country
would not need to buy wheat on the world market this year. That is
good news, for India and the world, but how long it will remain the
case is unclear.

Will greater demand for food and higher market prices enrich farmers,
eventually, encouraging them to stay on their land? There is
potential, but other conditions, like India's inefficient
transportation and supply chains, would have to improve too.

How to address these challenges is a matter of debate.

>From one quarter comes pressure to introduce genetically modified
crops with greater yields; from another come lawsuits to stop it. And
from yet another come pleas to mount a greener Green Revolution.

Alexander Evans, author of a recent paper on food prices published by
Chatham House, a British research institution, said: "This time
around, it needs to be more efficient in its use of water, in its use
of energy, in its use of fertilizer and land."

Mr. Swaminathan wants to dedicate villages to sowing lentils and
oilseeds, to meet demand. The World Bank, meanwhile, favors high-value
crops, like Mr. Chawla's baby corn, because they allow farmers to
maximize their income from small holdings.

The market may yet help India. Mr. Chawla, for instance, has replaced
baby corn with sunflowers, prompted by the high price of sunflower
oil. For the same reason, he is also considering planting more wheat.

Hari Kumar contributed reporting.

<http://blogs.reuters.com/pakistan/2008/06/16/should-pakistan-grow-food-for-the-gulf/>
June 16th, 2008
Should Pakistan grow food for the Gulf?
Posted by: Myra MacDonald
Tags: Pakistan: Now or Never, Dubai, farmland, food, oil, Pakistan,
Saudi Arabia, the Gulf, United Arab Emirates, Wheat

Queuing to buy wheat flour in Peshawar/May file photoThis is an idea
that looks crazy at first glance — Pakistan, struggling with its own
food shortages and rising prices, rents out its farmland to grow
grains for the rich Gulf states instead.

But the idea appears to be gaining momentum. Saudi Arabia is holding
talks with officials in Pakistan [LINK:
<http://www.reuters.com/article/GCA-Agflation/idUSL1420967720080614?sp=true>],
among other countries, to set up projects to grow wheat and other
grains to protect itself from crises in world food supplies.
Dubai-based private equity firm Abraaj Capital has already said it is
looking at investing in agriculture in Pakistan [LINK:
<http://www.reuters.com/article/privateEquity/idUSL1273369520080512>]
and other Gulf countries are also showing an interest [LINK:
<http://southasiainvestor.blogspot.com/2008/06/investors-rush-to-buy-farmland-in.html>].

So is this good or bad news for Pakistan?

U.S. News & World Report [LINK:
<http://www.usnews.com/articles/news/world/2008/06/12/countries-are-renting-farmland-abroad.html>]
says there may be "potential for large and enduring benefits on both
sides. The reported sellers of under-developed farmland, Pakistan and
Sudan, for example, are poor and lack the resources to make their own
land productive," it says. "Foreign investment is meant to help the
investor, but in these cases it might also help the host countries by
improving roads and irrigation and, of course, providing cash."

The Financial Times last month quoted a senior Pakistani official
[LINK: <http://www.gulfnews.com/BUSINESS/Investment/10212801.html>] as
saying of the talks to sell farmland to the United Arab Emirates: "Our
aim is not to do away with precious farmland but in fact to raise the
productivity of our farms and turn barren land in to fertile
farmland."

On the positive side is the potential for big investments in Pakistan
from wealthy Gulf economies looking to use windfall oil profits to
diversify away from oil.  According to one expert [LINK:
<http://www.reuters.com/article/rbssInvestmentServices/idUSB62711920080616?sp=true>],
the cumulative sovereign wealth fund wealth in the Middle East is now
about 1.5 trillion dollars, mostly in the United Arab Emirates; and
their assets could triple or quadruple in five to 10 years time.

Pakistan also has an interest in keeping relations sweet with Saudi
Arabia as it seeks a deal on deferred oil payments [LINK:
<http://www.business-standard.com/common/storypage_c_online.php?leftnm=10&bKeyFlag=IN&autono=39746>]
to ease its own financial crisis. Is this the beginning of a new
version of oil for food deals?

On the negative side are all the issues about sovereignty and economic
control. And of course the perennial question in emerging markets.
What will it mean for the poor man who is already struggling to feed
his family.