Why Arab countries must adopt FDI in agriculture

Pexels/Hanif Ali Baluch

When food prices spiked for the first time in 30 years during the global food crises of 2007-08 and 2010-11, many governments considered securing food imports by buying or leasing land in developing countries.

Agriculture was once again considered as an asset to alleviate food supply shortages, especially for those countries less endowed with land and water. 

Poorly researched media articles speculated about millions of acres of land being purchased by the governments of the Gulf Cooperation Council and China, especially in Africa.

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Ideologically inspired research labelled these hypothetical investments “land grabs”.  Little to none of this ever materialised. 

The “facts” as presented by researchers from the Global North had very little empirical foundation. 

Responsible investment

That said, the rationale for agricultural investments abroad is clear: inadequate arable land and water at home in regions such as the Arabian Peninsula make alternative means of achieving food security mandatory. This especially applies to water-intensive bulk commodities such as cereals or animal feed.

In 2010, the then UN special rapporteur on the right to food, Olivier De Schutter, issued 11 principles for responsible investment in land, which sought to ensure both investors and host societies are treated fairly.

Most of the principles focus on ensuring that those living in areas that receive agricultural investment continue to have access to food. 

One such investment was in Arizona, by Saudi Arabia’s Fondomonte. The experience is both enlightening and salutary.

Fondomonte has grown alfalfa for animal feed on 6,000 acres in Butler Valley, taking advantage of lax groundwater laws in Arizona. However, since the project was launched in 2014, civil society resistance has been fierce and is becoming fiercer. 

A combination of a drought and increasing demand by town and city dwellers is undermining the investment.

The Arizona case illustrates that when water becomes scarce, municipal users are prepared to pay more per cubic metre – much more – than agricultural offtakers. 

This is likely to become a recurring theme in the future. The limiting factor for investment in agriculture will be available water resources.

Facing up to water scarcity

Putting water first means investors must change their general approach and choice of geographical location. Since more and more regions around the world face either water stress or water scarcity, a feasible future strategy is to invest in regenerative agricultural projects. 

Regenerative agriculture is a broad set of techniques that prioritise soil health.

First, by avoiding mechanical disturbance of the soil – no tillage – water and nutrient retention is improved as a fertile topsoil (humus) builds up.

Second, the use of cover crops increases microbial diversity.

Third, integrating livestock helps to improve soil nutrient levels. Animals also eat plants and weeds during the land’s dormant season, decreasing the need for synthetic fertilisers and pesticides. 

Regenerative agriculture is not easy. It takes several years to change a production system. It also requires significant human input – and good farmers are an increasingly scarce commodity these days.

Any investment in regenerative agriculture therefore requires a long time horizon before returns can be achieved.

And investors need to understand that they may lose money at first, although they will be rewarded with substantial returns within, say, five to seven years. Those returns will subsequently rise as climate change and water scarcity kick in around the world. 

This raises the question: where to invest?

In general – and despite climate change – northern and central Asia are among the most promising agricultural areas.

One option is to scrutinise the potential offered by the Islamic Organisation for Food Security based in Kazakhstan. The country offers land and water but also relatively stable population growth. It is also physically close to the GCC.

However, agricultural investment must go hand-in-hand with diplomatic efforts to strengthen land and water governance. It is therefore not only a task for investors but also for the foreign ministries to ensure successful outcomes. 

The Cop28 environmental conference, to be held in Dubai at the end of November, offers an opportunity to expand further the responsible investment guidelines conceived by the UN in 2010.

They should incorporate clear environmental targets to highlight sustainable investment pathways such as in regenerative agriculture. 

Food security will be a recurring theme for many years and decades to come. Considered investment in agriculture must have a place in strategies to keep the world food-secure. 

Martin Keulertz is a lecturer in environmental management at the University of the West of England, Bristol