Agriculture represents a viable source of life and income. People depend on agriculture for their livelihood, and investment in agriculture is a powerful policy tool to fight poverty, boost productivity and feed people in need. Healthy and sustainable systems of agriculture are key to achieving developmental goals, including raising income and the standard of living. What’s more is that agriculture is essential for food security and does represent an entry point for economic development. It can be used within the smart policy mix to propel growth and development. In the GCC, it can be effectively leveraged alongside other sectors to financially empower communities and drive growth.
Food Security
Millions of people around the world are either not eating enough or eating the wrong types of food, resulting in malnutrition, illness, and economic waste. In addition, the lack of investment in agriculture and the reliance on imports result in food insecurity, particularly at times of financial instability and crises. Food insecurity impairs the quality of diet and increases the risk of malnutrition and undernutrition. A recent report from the Food and Agriculture Organization of the United Nations suggests that between 720 and 811 million people face hunger. This raises the question about the type of policy governments should adopt to ensure a modern agriculture sector that offers food security without necessarily being inefficient or dependent on subsidies.
Smart Policies
An agriculture-driven growth model is not always thought of as being the best policy option. Rapid growth and modernization are almost always tied to prioritizing technology, manufacturing, and the service sector, oftentimes at the expense of agriculture. The reason is the common, yet distorted belief that agriculture is nothing more than a recipe for poverty and underdevelopment. In addition, agriculture itself often suffers from pandemic-related disruptions, global warming, and conflicts, with these challenges resulting in higher food prices and impacting efforts to curb hunger and malnutrition.
Countries boasting of economic transformation attribute their success to building the technology, manufacturing, industry, and service sectors but rarely give agriculture any priority or policy consideration. The reality, however, is more nuanced; economic development is a process of structural and gradual transformation, and agriculture is one essential engine to jumpstart such a process. As countries start off poor, they modernize their agriculture sector before shifting to industry and manufacturing. Agriculture modernization is a requirement for industrialization as it boosts labor productivity and brings in foreign exchange currencies via exports, in addition to increasing agricultural surplus and accumulating capital. At the same time, agriculture modernization raises income and the productivity of poor farmers, lowering food prices, improving nutrition, and reducing hunger.
The challenge, therefore, resides in moving from traditional-technology agriculture to modern-technology agriculture, and then from agriculture to industry and manufacturing, before attaining a high-level income economy. For this developmental process to happen, the agricultural sector needs to be modernized in the first place.
GCC’s Policy Challenges
Smart policies, including in the GCC, need to give priority to agriculture, alongside developing other sectors. Policymakers need to create the conditions that would allow farmers to have enough technical and financial capabilities to grow the right crops and sell them, at reasonable prices, to the people who need them most. Prices of agricultural products, of course, should follow supply and demand, and undue economic subsidies that ofttimes perpetuate inefficiencies need to be phased out. If any, as one Strategy& report emphasizes, the focus should be on output subsidies due to their efficiency and productivity benefits.
In places far from the center, the lack of development has left communities destitute and has forced many to migrate towards the cities. Investing in agriculture could reverse this trend. In brief, governments should create the conditions for a competitive, modern agriculture sector, filled with skilled, equipped, and agile farmers.
GCC countries still import a large chunk of their food products, with only 15% of these products produced domestically. More particularly, cereal imports constitute around 93% of all consumption, meat imports constitute around 62% and vegetable imports around 56%. Given this situation, GCC countries should directly intervene with smart policies to achieve, at least, three broad objectives:
1- They need to make modern technologies available, largely by investing in agricultural research and development (R&D) because the private sector is unable to fully capture the benefits of developing such technologies.
2- They must create an enabling business environment that allows farmers to make effective use of modern irrigation technologies and improved market infrastructure.
3- They should build human capital to ensure a skilled labor force that masters new technology, handles logistics and cleverly work through the value chain.
Other types of challenge remain obvious, however. The GCC region is characterized by a generally arid climate with limited water resources and scare lands suitable for growing crops. This is detrimental to agriculture and hardly provides an incentive for governments to end dependence on imported agricultural products. But these types of challenge should also represent an opportunity for GCC countries to turn around vital sectors, including agriculture, and put economic development on the right track without much delay and before further environmental degradation and climate change complicate policies and make it much harder for them to adjust in the future.
The payoffs
A developed agriculture sector allows people to be well nourished and earns higher wages. At the same time, increased agriculture productivity and higher income means consumers are better equipped at buying manufactured goods and there is a surplus to invest in advanced technologies. The increase in agriculture productivity, in turn, results in excess labor moving from rural to urban jobs, with manufacturing benefiting from an influx of skilled labor as human capital is built over time. This process of agriculture modernization requires a direct intervention by governments, in addition to local development initiatives to end hunger and undernutrition in remote, peripheral areas.
With the GCC flush with oil cash, the potential is there to start an ambitious agriculture modernization process and build the very economic foundations to diversify away from oil. As George Washington once said: “Agriculture is the most healthful, most useful, and most noble employment of man.”
