* Past farmland purchases focused on Africa, developing
* But these plans ran into political controversies
* Gulf investors vulnerable to capricious policy shifts
* Now focus is on Europe, North America, Australasia
* Many of these investments are in companies, not mere land
By Maha El Dahan
ABU DHABI, Dec 30 The desert states of the Gulf
are changing tack in their multi-billion dollar search for food
With their farming projects in some of the poorest African
nations sometimes arousing local hostility, wealthy Arab
investors are turning to those developed countries that
comfortably produce more food than they consume.
United Arab Emirates-based agricultural firm Al Dahra has
chose this path in March, buying eight agricultural companies
for $400 million in Serbia, a major food exporter where public
attitudes to foreign-owned farming may be less sensitive.
Projects in Europe, North America and Australasia tend to be
more expensive and offer less scope to build vast estates like
in Africa. But they also present fewer political problems and
less risk for the UAE, Saudi Arabia, Qatar and Kuwait which all
need to feed growing populations.
For years the Gulf states, dependent on imports for 80 to 90
percent of their food, poured cash into buying tens of thousands
of hectares of cheap farmland and other agricultural assets in
the developing world, mainly Africa.
They hoped these investments would give them direct access
to big food production bases, insulating them from global swings
in food prices. But the reality has proved difficult.
Some of the African projects have drawn accusations that
Arab investors are grabbing land that should be used to feed
local people. Bad security and weak infrastructure have plagued
Although Gulf companies announced plans to spend billions of
dollars, the problems mean many of the projects have not gone
ahead, at least not to the point of large-scale food production,
said Eckart Woertz, senior research fellow at the Barcelona
Centre for International Affairs.
"Rather than greenfield investments in Africa, the focus is
more on putting money in already established agro-producers,"
said Woertz, author of a book on the subject, Oil for Food.
Factbox on Gulf states' food dependency:
The Gulf states began investing heavily in farmland overseas
around 2008, after bad weather in big food producing nations,
growing use of biofuels and curbs on farm exports by some
governments sent grain futures markets soaring.
Wealthy Gulf governments never came close to facing food
shortages but they did get a fright - especially because the
price of oil, their main source of income, briefly tumbled by
three-quarters in 2008.
At the same time, expensive programmes to increase food
production within the Gulf were running up against the region's
brutal climate and lack of water. Saudi Arabia began to scale
back a domestic wheat-growing programme in 2008, planning to
rely completely on imports by 2016.
So Gulf states encouraged their companies to buy arable land
in the developing world. Al Dahra is typical of that drive; it
is a private firm, owned mainly by Abu Dhabi investors, but its
mission statement pledges to "partner with the UAE government in
realising the strategic food security programme".
The last few years have demonstrated the limits of the
Gulf's strategy of throwing money at the food security problem,
however. Many projects abroad have found themselves vulnerable
to capricious policy changes and trends in local politics.
Abu Dhabi investment firm Jenaan has since 2007 accumulated
about 160,000 feddans (67,200 hectares) of arable land in Egypt,
which is a big importer of wheat. The company originally planned
to grow fodder to feed the UAE's livestock.
But Jenaan was hit by a 300 Egyptian pound ($43) a tonne
export tax, and faced other problems such as labour strikes and
shortages of diesel to power machinery. This has forced Jenaan
to grow wheat instead of fodder, all for consumption within
Egypt, said company chairman Mohammad al Otaiba.
"We were incurring loss after loss. So now in Egypt we will
only grow grains and we will also work in the dairy business -
but all for local consumption," he said.
Saudi Arabia-based billionaire Mohammed al-Amoudi faced
problems in Ethiopia after his firm Saudi Star acquired about
10,000 hectares in the Gambella region to grow rice. In April
2012 an armed group ambushed Saudi Star employees, leaving five
Human Rights Watch, a non-governmental body, said it thought
the attack was linked to government moves to resettle villagers
to clear the way for commercial farming. Saudi Star said at the
time that it thought the violence was propagated by outsiders
and has continued with its project.
Gulf investors say they are sensitive to host nations' needs
and the projects benefit local people by stimulating the
economy. But in countries with a history of poverty and famine,
it can be hard to escape controversy.
"It has proven very difficult to get big projects like that
off the ground as apart from the problems with the lack of
infrastructure, the poor irrigation and low technology, you also
need to deal with the local population and their issues," said
Rob Bailey, research head at London think tank Chatham House.
Gulf states are therefore looking more closely at projects
in Europe and the United States, where political and policy
risks - while not negligible - seem smaller.
Details of some projects are not announced, so there is no
comprehensive information on the scope of the Gulf investment.
But Bailey said Gulf states were "rebalancing their portfolios"
towards the West in the agricultural sector.
Al Dahra's investment in Serbia, aimed at developing the
companies to grow and process food for export, was said to be
the biggest investment in the country's agriculture for decades.
In addition the Abu Dhabi Fund for Development, an official aid
body, announced a $400 million loan to Serbia's agriculture
Apart from the Serbian venture, Al Dahra has been investing
elsewhere in Europe and in the Americas, while Jenaan has
investments in the United States and Spain. Hassad Food, the
agricultural arm of Qatar's sovereign wealth fund, set up an
Australian subsidiary in 2009 with a focus on wheat, barley and
In June this year Saudi Arabian-owned United Farmers Holding
Co acquired Continental Farmers Group, a firm which has farming
operations in Poland and Ukraine and produces crops including
wheat and maize. United Farmers is jointly held by Saudi
Agriculture and Livestock Investment Co, Saudi food producer
Almarai and Saudi Grain and Fodder Holding.
Gulf projects in Africa were often mainly land purchases,
needing infusions of technology for farming to begin. By
contrast, many of the investments in Europe are in agricultural
businesses that just need some financial help to grow.
"Often you have companies that have reached a certain level
and they need investments to move to the next level themselves,
so it makes a good partnership for us," said Brian Barriskill,
supply chain director at Al Dahra.
Gulf executives and officials insist they will not give up
on most of their ventures in the developing world. Jenaan's
Otaiba said he remained optimistic about nations such as Sudan.
Jenaan wants to boost its land holdings there from the
current 200,000 hectares to 1 million by 2020, according to
Khalil al Shammari, the company's general manager for projects
But future Gulf investment in food security are likely to be
more cautious and diversified. Abu Dhabi's Food Security Centre,
a body set up in 2010 to coordinate activities across the UAE,
encourages investments in a broad range of countries.
"Instability in some countries...is something that happens,
so we just have to spread our risk," said Khalifa al-Ali,
managing director of the centre.