Oman: Setting the price

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In a move that is expected to strengthen food security in Oman, the Public Authority for Stores and Food Reserves (PASFR) announced in late May that it was planning to standardise the prices of certain essential items in different parts of the Sultanate.

Such an initiative has already gone into effect in the Muscat region, where staple food items in supermarkets have been set at uniform prices. Now PASFR hopes to put similar programmes into effect in other areas – a move it expects will ease the burden of rising food prices on the general public.

According to Rashid Al Masroori, the CEO of PASFR, a project for the establishment of uniform food prices has already been drafted. Speaking at the Al Roya Economic Forum, held in Muscat on May 26-27, Al Masroori presented a number of plans for the development of the agriculture sector. These include the construction of further facilities for grain storage, the creation of a fund to buy grains to be supplied to limited-income households, and an initiative to fix the price of animal feed, which would help stabilise the costs of eggs, meat and other animal-derived products.

Food security has long been an important issue for the Sultanate and for the wider region. Only 2% of land in the GCC – an area that continually suffers from water scarcity – is arable, which means that countries in the region have traditionally had a difficult time producing their own food, choosing instead to rely on imports for many staple items.

Oman’s percentage of arable land is even lower than the average – 0.3%, according to 2009 statistics from the World Bank. The Sultanate imported $1.4bn worth of essential food products in 2010, Al Masroori said, adding that approximately 29% of average household expenditure went towards food that year.

This has been identified by a number of international organisations as unsustainable food policy for the region: factors such as political unrest, rising inflation or global economic turmoil could reduce or cut off imports, leaving the region without enough food to sustain its population.

The major spike in the price of food imports in 2007-08, set off by supply-demand imbalances in an increasingly volatile global economy, proved to be a great burden for local economies and the population. In Oman, the dramatic price increases, combined with higher public spending, caused inflation to double from a rate of around 6.2% in 2007 to 12.4% in 2008, according to central bank figures.

While the inflation rate fell to 3.3% by 2010, the Sultanate still exercises caution, putting into effect measures that will mitigate the negative effects of similar jumps in food prices. Given that food imports to Oman are set to grow to $4.8bn by 2020 – up 269% from $1.3bn in 2007, according to the Economist Intelligence Unit – it is key for the Sultanate and other GCC countries to ensure the prices of imports and food staples remain stable.

Attempting to grow crops at home is not sustainable for many countries in the long term due to the region’s dependence on desalinated water. Indeed, Oman purchased more than 112.9m cu metres of water in 2009, up 14% from 97.6m cu metres in 2008, according to data from the Oman Power and Water Procurement Company. Some countries in the region are addressing this issue by investing in agricultural ventures abroad to better control the source of their food supply, leasing land to grow crops and raise livestock in foreign countries.

However, the Sultanate has the advantage of a strong aquaculture industry. Oman is able to more than adequately meet domestic demand for seafood, with enough for export, through domestic production. The government is currently in the process of setting up a national company to increase production in the fisheries sector and turn the Sultanate into a regional centre of seafood production. Additionally, the development of a bigger aquaculture export industry could contribute significantly to GDP growth.

The prospect of a larger fisheries sector, combined with the new initiatives being put in place to stabilise food prices, bode well for the Sultanate’s ability to maintain stable food prices.

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