UAE in farm talks with Egypt for food supply

Vivian Salama

• Last Updated: July 07. 2008 9:26PM UAE / July 7. 2008 5:26PM GMT

Mr Rachid said the proposed projects ranged from farmland investment and development to setting up infrastructure for agribusiness and food processing.

CAIRO // The UAE is pursuing investments in farmland and other agricultural business projects in Egypt in an effort to secure strategic food reserves.

The Egyptian minister of foreign trade and industry, Rachid Mohammed Rachid, confirmed that his government was in talks with Abu Dhabi to embark on bilateral agricultural investment projects.

“There are some projects we are negotiating with the UAE related to food security for the UAE, and possibly third countries,” said Mr Rachid. “At the same time, the UAE is willing to help from an investment point of view, because it became a viable investment proposition to put more money into food, especially agriculture and agribusiness, and there are a number of projects we are currently negotiating.”

Mr Rachid said the proposed projects ranged from farmland investment and development to setting up infrastructure for agribusiness and food processing. He is scheduled to travel to Abu Dhabi tomorrow for further discussions with Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi. .

While an Egypt-UAE agricultural alliance could prove to be vital in helping to protect UAE residents against crippling export bans, record-high commodity prices and potential food shortages, it would also be of equal benefit to Egypt.

Mr Rachid said his country was looking to boost its annual agribusiness investments from about four billion Egyptian pounds (Dh2.75bn) to the rate of about 25bn pounds per year for the next 10 years. Details for any UAE-Egypt initiatives have yet to be finalised.

Egypt, the world’s fourth-largest exporter of rice, is set to produce 4.6 million metric tons this year. A total of 3.2 million metric tons were estimated for local consumption, while 1.4 million were available for exports. It is also a significant producer of wheat, corn, sugarcane, fruit and vegetables, and fodder. With almost 80 million residents, Egypt has the highest population of any country in the Arab world.

In an effort to preserve local supplies, the Egyptian government has implemented a controversial ban on rice exports, which Mr Rachid said could last until April next year. Earlier this year, Egypt, like many countries worldwide, was the scene of violent social unrest over rising food prices.

“We are not happy having the ban in place, but obviously we are not in a position to pass these high prices to Egyptian consumers,” Mr Rachid said. “Egyptians are paying double the price for wheat, three times the price for corn – animal feed is up by three to four times.”

Various factors including limited water and agricultural land force countries in the GCC to rely almost entirely on imported food items. The UAE imports nearly 85 per cent of its food, worth an estimated Dh11bn annually.

UAE inflation accelerated to a 20-year high of 11.4 per cent last year – its highest level in 20 years – with food, beverage and tobacco accounting for 11 per cent of that hike. The situation is just as grim in Egypt. Inflation rates rose to 19.7 per cent in May, the highest since the government began regularly releasing records to the public, in 1998. Official statistics show that food and beverage prices in Egypt rose by 27 per cent in the year ended in May.

The Egyptian government has long implemented subsidies on various basic goods, with state subsidies for basic food products estimated at more than 21.5bn pounds, compared to 10bn pounds last year, an increase of 115 per cent, the Ministry of Finance reported. Mr Rachid said it was his government’s intention to transform the subsidy system from a commodity- to a cash-based system, a move expected to shave 30 to 40 per cent off government expenditure.

“What we have seen in the last 18 months is a global crisis at a magnitude that we have not seen in the last 25 to 30 years,” Mr Rachid said. “The normal conditions that normal Egyptians have to cope with is horrendous.”

The partnership with Egypt is the latest effort by the Government to establish strategic food reserves outside the UAE’s borders. Earlier this year, the Abu Dhabi Government finalised a scheme to buy 29,400 hectares of farmland in Northern Sudan, a project set to commence by the end of this year. The farm, located in the town of Abu Hamed in the state of Nahr an Nil, which borders Egypt, will be used primarily for the cultivation of alfalfa, a plant used to make food and animal feed. Government officials have confirmed that Pakistan was also on their radar for farmland investments, although no official proposals have been made public.

vsalama@thenational.ae