Gulf States:
Net Importer Seeks Supply Alternatives

By Nicole Liang

Sustaining a healthy demand for imports does little to ease the region’s shortage on food supply and security.

Dubai is rising a food product exporter with around AED 3.5 billion (US$952.86 million) traded in 2008, according to recent figures from Dubai Export Development Corporation. Re-exports, on the other hand, totalled AED 4.1 billion the same year.

Sugar and confectionery ranked at the top of the list of food exports, making up 37 percent of the export value of all food products.

"The UAE has many great food products to sell to the world," said Bobby Krishna, Senior Food Studies Officer, Dubai Municipality. "Dubai was built around the trade industry, and with the Arab Free Trade Agreement and the close proximity of our neighbours, we are well positioned to export many great products to the region."

Consumption Of Confectionery

Consumption of this sector’s products is noteworthy too. Not only Dubai; the entire Middle East region is identified as one of the top 10 markets for confectionery products in the world, with a high per capita consumption of chocolate in particular. Imports in the Gulf Cooperation Council (GCC) region reach US$12 billion annually and worldwide chocolate sales account for US$4.2 billion.

According to TNS Media Intelligence, the total Middle East confectionery market is valued at US$113 billion and the market has grown by 15 percent over the last three years in 2009 with Saudi Arabia and Qatar experiencing the largest growth at around 24 percent.

And apparently, this upward trend is set to continue despite the global economic downturn.
Non-oil exports from companies in Dubai that are based outside the emirate’s free zones increased by two percent in the first half of 2009 compared to the same period last year, the Khaleej Times reported on July 7, 2009. This led other food and beverage sectors to keep an optimistic outlook too.

“Dubai’s beverage technology firms are highly developed and have been very successful in entering foreign markets,” Dubai Export Development Corporation Chief Executive Officer Engineer Saed Al Awadi said in the report.

Within the GCC beverages market, the compound annual growth rate for 2008 was 6.7 percent for bottled water, 7.2 percent for ready-to-drink tea products, 8.3 percent for energy drinks and 6.2 percent for liquid milk, according to the organisers of the Dubai Drink Technology Expo.

But the healthy demand does little to ease the region’s shortage on food supply and security.

Food Security Threats

The UAE currently relies on imports for at least 80 percent of its food product consumption, according to a press release by the organisers of the Sweets Middle East exhibition. In fact the GCC’s dependence on food imports had reached US$10 billion, according to a report by Gulf News on March 22, 2008. The UAE imports over EUR 3 billion (US$4.29 billion) worth of food annually. This amount is only second to that in Saudi Arabia, which is the GCC’s largest food and beverage importing country.

Arab nations, reportedly, have been suffering from a shortage in all farm products except for fish and vegetables. The gap between their production and demand volume has widened over the past 20 years, and at an escalating rate, the Emirates Business 24|7 newspaper reported on January 17, 2010, citing figures by the Arab Monetary Fund (AMF) in Abu Dhabi and the Khartoum-based Arab Organisation for Agricultural Development (AOAD).

Arabic countries can only supply themselves with 30-53 percent of cereal, wheat, barley and cooking oil, the report added. The farm gap (the difference between imports and exports of food products) reached a record high of about US$23 billion in 2008 to bring the cumulative Arab food shortage to US$155.5 billion during 2000-2008, the figures showed.

As a result of the stark realities of depleting self-sufficient supplies, inflation and unpredictable world crop harvests, governments in the region have been keen, to say the least, to attract investments into developing their agricultural and food processing industries.

Strategies To Secure Food Supplies

The UAE Government has invested US$1.4 billion since 1994 to develop a value-added food-manufacturing sector to target local and re-export markets, say reports by Dubai Chamber of Commerce and Industry. The result is that there are around 150 food-processing plants in the country representing a large number of the region's food manufacturing capability.

Valued at US$3 billion (2007) the UAE's food processing industry is growing at 11 percent a year, owing its growth to being the world's third largest re-exporter.

This growth rate, however, needs time to accelerate. Rising food prices, on the other hand, is an immediate problem.

The surge in food prices in 2008 prompted plans by the UAE, Saudi Arabia and other arid Gulf countries to fund agricultural projects in Sudan and other fertile areas in the region. But meanwhile, the UAE has resorted to a food security strategy of building a stockpile of 15 commodities.

“The strategy will establish an early warning system for crises and disasters that may affect national food security in the country and build strategic stock of 15 commodities that covers three months in the first phase,” Minister of Economy Sultan bin Saeed Al Mansouri said in December 2009. Projections indicated that prices of many essential commodities would rise during the coming two years, he added.

Already, annual inflation in Saudi Arabia has rebounded from a 28-month low to four percent in November 2009. Reuters reported that as the economy in the oil-exporting region recovers, price pressures are seen to intensify in tandem.

As a long-term measure to cushion against these price increases, the Gulf States have agreed to invest US$2 billion in an agricultural fund, which they will use to acquire stocks in food companies in the Middle East and Africa, according to another report by Reuters on October 12, 2009.

Other Gulf investments in agriculture by the UAE are put overseas, in Sudan, and in Cambodia for rice. Saudi Arabia is planning to lease a farmland in Pakistan, with area twice the size of Hong Kong, the Khaleej Times reported on December 24, 2009. It hopes to cease domestic wheat production completely by 2016 in order to conserve water in the desert landscape.

Major Food And Drink Trade Shows In GCC:

February 21-24, 2010
Gulfood
Dubai

April 26-28, 2010
Middle East Food
Abu Dhabi

May 16-19, 2010
Food & Hotel Arabia / ProPac Arabia
Saudi Arabia

July 29-August 10, 2010
Ramadan Food Exhibition
Kuwait

September 26-28, 2010
Private Label Middle East
Dubai

October 4-7, 2010
Saudi Agro-Food
Saudi Arabia

October 12-14, 2009*
Seafood Expo
Dubai

November 2-4, 2009*
Sweets Middle East
Dubai

November 10-12, 2009*
Halal Expo
Dubai

November 15-17, 2010
SIAL Middle East
Abu Dhabi

December 1-3, 2009*
Diyafa International Hotel, Restaurant and Food Exhibition
Qatar

December 7-9, 2010
Middle East Natural & Organic Products Expo
Dubai

December 13-15, 2010
Dubai Drink Technology Expo
Dubai

*No new dates available at press time.