June 19, 2008
KSA Gives Up Dream of Making the Desert Green
Here’s a very interesting article on the waste that the Saudi adventure of growing its own wheat has been. A few quotes:
“Within 12 years, between 1980 and 1992, wheat production grew 29-fold--from 142,000 tons in 1980 to 4.1 million tons in 1992 --making the Saudi desert the world's sixth-largest wheat exporting country.” “Between 1981 and 1993, Saudi Arabia spent a total of $225 billion out of US$420 billion in total oil revenues on defense and security. (…) Maintaining the ruling family is estimated to have cost $4 billion per annum during the 1980s, and more in later years as the family grew”
“For the sixteen years between 1984 and 2000, it may be estimated that the assessable cost of Saudi agricultural development could be put at about $85 billion, representing 18 percent of the country's $485 billion in revenues from oil exports during the period. This huge investment produced wheat at an average cost of more than US$500 per ton. During the same period, the international market price for wheat averaged about $120 per ton. When the waste resulting from abandoning the newly reclaimed and irrigated lands plus four unquantified government subsidies are added, the cost might more than double.”
I guess those quotes alone say something about the insane magnitude of the mismanagement of Saudia Arabia’s oil resources. This unsustainable waste pushed the government to give up:
“Within four years, by the end of 1996, 76 percent of the new wheat-growing surface added between 1980 and 1992 were abandoned”
“On January 8, 2008, Reuters and other news agencies, quoting officials from the Saudi Arabian agriculture and finance ministries, reported that purchases of wheat from local farmers would be reduced by 12.5 percent, with the aim of relying entirely on imports by 2016.”
“The experience proved merely that throwing money to import the expertise and the machinery to extract mammoth volumes of water could make even a desert bloom, until either the money or the water ran out.”
I remember once reading that the central third of Sudan could feed billions if exploited to its full agricultural potential. This might be an exaggeration, but the potential is definitely huge. One of the serious issues hampering its full use is obviously the chronic unrest. Now, one could think that, one possible idea among many, given Saudi’s military expenses, its diplomatic strength, its proximity – both geographical and cultural – with Sudan could have logically led to Saudi Arabia making Sudan its stable agricultural backyard. This would have been both sustainable, profitable, and would have given it the food security it officially sought. But then again, mismanagement of epic proportions. Or, it may be, misplaced rentier elite incentives:
“The Saudi ruling elite is composed of four groups. (…)It is thought by some that Saudi desert agriculture was a scheme to enrich these groups, their families, and clients. There are three observations that tend to support that theory.
The first observation is the large scale of the wheat project. Between 1985 and 1993, Saudi wheat production grew well beyond domestic needs and the country's storage capacity. By 1992, Saudi Arabia became the world's sixth-largest exporter of wheat. Had the objective been meeting local demand, the quantities would have been considerably smaller.
Second, the early participants in desert agriculture were investors, not farmers. (…) The promise of high financial returns from government subsidies to wheat growing enticed some of the country's richest business families, mainly from the Riyadh and the Qassim Regions, to underwrite the risk of the new adventure.”
TrackBack URL for this entry:
Reminds me of a tomscud observation re the maintenance of pegged currencies in poor countries: it allows the elite to import foreign goodies at a reasonable price, regardless of its effect on domestic industry. The sort of thing that works until it doesn't. Like creating an industry out of thin air like wheat growing in the desert, which will also work, given enough free money, as the article observes, until it doesn't.
Rain doesn't follow the plow, they found out a long time ago. Neither do rainmakers, it seems.
Posted by: pantom at June 19, 2008 11:39 PM
Ahem, mate, that was my obs.
Posted by: The Lounsbury at June 22, 2008 09:14 AM
And with that, one of Lounsbury's better ideas gets implemented!
Posted by: Alex at June 27, 2008 01:40 PM