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Abu Dhabi, UAESaturday 20 April 2019

UAE-Saudi supply union will equip both for crises such as natural disasters

A sort of customs union between the two countries is expected to mean they could rely on each other in the event of shortages of food or key goods

The important step by the UAE and Saudi is part of wider global efforts to stockpile foodstuffs to prevent shortages and ensure price stability. Ian Jones
The important step by the UAE and Saudi is part of wider global efforts to stockpile foodstuffs to prevent shortages and ensure price stability. Ian Jones

An agreement between the UAE and Saudi Arabia to form a union to ensure the flow of supplies in a time of crisis highlights the importance of food security to GCC nations, analysts have said.

The union is part of a new seven-point bilateral co-operation plan outlined last week, which includes the development of a joint cryptocurrency.

A joint training exercise will be undertaken by the two countries to test how well prepared the supply chain would be for a crisis or natural disaster. It is expected to mean the countries could rely on each other in the event of shortages of food or key goods.

It is an important step by the UAE — which relies on up to 85 per cent of its food being imported — and Saudi that is part of wider global efforts to stockpile foodstuffs to prevent shortages and ensure price stability.

Jeffrey Culpepper, chairman of the Dubai-based food investment firm AgriSecura, said the Government works “incredibly hard” to keep food prices stable.

The key concern, he said, was to ensure the cost of basic foodstuffs, which lower-income workers rely on, from increasing dramatically because of shortages.

“The treaty with Saudi will streamline the process if we need to import bulk supplies without going through a tremendous amount of bureaucracy,” he said.

“Before, it was treated as normal trade, with the normal bureaucracy.”

Efforts to safeguard food supplies in the UAE date back many years, with the National Emergency Crisis and Disasters Management Authority launching in 2007. In 2011, the organisation said that it was formulating plans to ensure there were adequate food, water and medicine stockpiles in case of emergency.

Over the longer term, to further improve security by safeguarding access to food grown abroad, UAE organisations have invested in agribusiness in Turkey and African countries, including Namibia, Sudan and Zimbabwe.

Food security through stockpiling is a strategy many countries follow. China is said to hold 50 million tonnes of wheat and hundreds of thousands of tonnes of meat in reserve.

The US, meanwhile, has replaced food stocks with more than $300 million (Dh1.10billion) of emergency cash to buy foodstuffs.

Dr Mukesh Kumar, a university lecturer in operations management at the University of Cambridge who researches global food supply, said the risk that food shortages could cause price rises and, in turn, political problems, was a key factor why governments stockpiled.

Another is to prevent famine, particularly in areas where yields are highly vulnerable to weather.

A third reason for food stockpiling, he said, was to support farmers by providing an outlet for them to sell their produce at a reasonable price.

In a 2011 report from the International Centre for Trade and Sustainable Development, Professor Christopher Gilbert, then of the University of Trento in Italy, said food security stocks were directed towards the “overall availability and general level of prices found in local markets”.

He contrasted such reserves with humanitarian food stocks, which are targeted specifically at “vulnerable groups” to prevent famine and other disasters.

And food is far from the only thing that governments stockpile.

Dozens of countries hold petroleum reserves, which, like food stocks, maintain price stability. The US, for example, sells off portions of its Strategic Petroleum Reserve when prices spike.

Nations also stockpile to support industry — China keeps a reserve of rare earth elements, which are central to the country's electronics industry.

Stockpiling can also happen to safeguard public health. UAE hospitals hold reserves of medical supplies that earlier reports have indicated would last for at least six months.

Defence is another factor behind stockpiling, with the US's Federal Helium Program stockpiling the gas as it is vital to air-to-air missile guidance systems.

In the first half of the 20th century, the UK planted forests so that it would have reserves of wood to support military efforts after running short because of trench building during the First World War.

Perhaps the most unlikely stockpile is the Strategic Maple Syrup Reserve kept by Canada's Federation of Quebec Maple Syrup Producers.

Quebec reportedly accounts for most of world supply, and large amounts are kept in reserve because the weather causes production to fluctuate, potentially leading to price changes. A reserve assures manufacturers of an adequate supply at a predictable price.

Updated: January 27, 2019 10:08 AM

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