Interview: Fahd Balghunaim
How does the government encourage investment abroad while securing trade agreements with food exporting countries to ensure local food security?
FAHD BALGHUNAIM: Investing abroad and sourcing from trade are not separate actions, but rather part of a complete plan to secure food supplies for the Kingdom. Saudi Arabia has bought and will continue to buy from the international market, largely through trade from the US and Europe, but we see our overseas investments as complimentary to this. The idea behind the King Abdullah Initiative for Saudi Agricultural Investment Abroad is to boost overall global production by facilitating the investment and technology transfer necessary to improve productivity levels.
The UN Food and Agriculture Organisation has stated that by 2050 the world has to increase agricultural production by 70%. The bulk of this – 80% – will come from increasing productivity rather than increasing the amount of land cultivated. For example, countries in Africa are very fertile but have low productivity, so by investing there you are also helping these countries to expand their agriculture production without expanding their land utilisation. Saudi Arabia also benefits from these investments, because we want to guarantee our country’s accessibility to a reliable source of food. However, we are ensuring that these investments are done in a transparent and ethical way, which takes into account the needs and concerns of local communities and governments. We are creating a win-win situation for both the Kingdom and the countries where the investments will be made.
To what extent is the government encouraging the private sector to invest in foreign farmland?
BALGHUNAIM: The government is supporting the private sector by providing the two most important things an investor looks for: financing and security for their investment. The government recently agreed to expand the mandate of the Agricultural Development Fund from providing loans for domestic agriculture projects to also covering overseas investment. However, in order to secure financing from the fund, a project must be focused on key staple crops such as wheat, corn, alfalfa, soy, rice, sugar, etc. The investors must also guarantee that, conditions pending, 50% of their production will be exported to Saudi Arabia. To facilitate this, the government has drafted agreements with foreign governments such as Vietnam, Ethiopia and Sudan to guarantee the security of these investments.
The government has also created a company through the Public Investment Fund, which is 100% government owned but will act like a private sector company. The Saudi Agriculture and Livestock Investment Company has a budget of SR3bn ($800m) and will partner with the private sector as a co-investor on agriculture projects abroad. The partnership will help to prove the government’s commitment to such projects.
With a shift away from water-intensive agriculture, what do you identify as sustainable segments of the industry that can be developed domestically?
BALGHUNAIM: When people talk about Saudi agriculture, they think wheat; but that is no longer true. There are many segments within the sector that will allow us to expand our production while conserving our water resources. One such area is date farming. Saudi Arabia produces 1m tonnes of dates a year. Palm trees consume water but, through technological advancements such as drip irrigation, water can be managed much more efficiently for date production than for other activities such as wheat or animal forage production.
Another promising area is fish and shrimp farming, largely in the Red Sea. We currently export fresh shrimp to 30 countries around the world, from North America to East Asia. In fact, Saudi Arabia exports sushi-grade shrimp to Japan. Our consumption of fish is about 100,000 tonnes a year and we only produce half of that. We have plans to increase fish production to 1m tonnes a year, which will not only allow us to close that gap, but also to generate significant revenue from exports.
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