August 25, 2008

 

Saudi Arabia plans purchase of overseas land for grain production
 

 

Saudi Arabia is planning to set up a new investment fund to buy agricultural land overseas in an effort to meet domestic rising food demand, a Saudi official said.

 

"The Saudi government and agricultural firms will invest in the new company," Abdullah Al Shoaibi, a senior engineer at the Saudi Fund For Development, which will establish the new investment company, told Zawya Dow Jones in an interview in Dubai late Sunday (August 24, 2008).

 

Persian Gulf Arab states like Saudi and the United Arab Emirates (UAE) are rushing to buy land overseas amid rising concerns over food security after a global jump in the price of agricultural commodities.

 

The cost of grains including corn and wheat may double as economic growth in emerging economies with large populations such as Brazil and Russia push up meat consumption and demand for livestock feed.

 

Wheat and rice supply for the domestic Saudi market will be the new fund's initial priorities, the Saudi official said.

 

Rapid population growth across the Gulf is also forcing the region's planners to divert more energy, previously allocated for agricultural production, to feed their booming industrial and domestic economies.

 

The Dubai-based think-tank Gulf Research Centre estimates that its takes 1,212 cubic meters of ground water to produce a tonne of barley in Saudi Arabia. The arid kingdom depends on power-hungry desalination plants for its usable water.

 

"There's the problem of high food prices and water scarcity," Al Shoaibi said.

 

Saudi's estimated population of about 28 million people is growing at annual rate of about 2 percent, according to US government estimates. The kingdom is the most populous country in the Arabian peninsula.

 

Rising prices in Saudi Arabia are causing disquiet as the country struggles with 10.6 percent inflation that's partly undermining the benefits of record-high oil earnings. The inflation is driven mostly by rising food prices.

 

Al Shoaibi said that the new Saudi fund's first investment will be in Sudan and that it may also buy land in Turkey and Pakistan.

 

Saudi Arabia's plans to invest in Sudan's agricultural land contrast with the African country's own problems in feeding its population. The UN World Food Programme currently feeds 5.6 million Sudanese.

 

Government-financed Saudi Fund For Development has granted financing for developing nations in different sectors worth SAR 27 billion (US$7.2 billion), with SAR 7 billion (US$1.86 billion) allocated to agriculture projects, Al Shoaibi said.