Food Security: Key issues for an emerging MENA priority

Published March 21st, 2010 - 09:06 GMT

Universal access to affordable food is a critical issue globally. The heightened concern regarding secure, ready access to food supply stems from soaring commodity prices, a reduction in global stock levels, the increasing cost of agricultural inputs, and competition from alternative energy producers. The Middle East and North Africa (MENA) region is strongly affected by these factors, given limited arable land and irrigation water.

“In some MENA countries, food shortages have led to civil unrest, while escalating food prices have also forced some governments to step up food subsidies, further straining public finances,” explained Nabih Maroun, a partner with Booz & Company. As a result of these factors, several MENA governments have begun taking steps to create a comprehensive food security policy.

Food security: Why now, and what is involved?
In 2008, as oil prices rose, alterna¬tive energy producers added to the demand for certain crops, driving up food prices. Sudden, steep price increases triggered mass domestic protests and unrest in some countries, while in others it strained the government’s finances as food subsidy costs soared. Moreover, much of the MENA region has limited arable land and water supply and many countries even fall below the United Nations stan¬dard for water poverty. “Because certain crops, such as rice, require a large amount of water for cultivation, many MENA countries must resort to imports, thus increasing their vulnerability to global supply trends and disruptions,” explained George Atalla, a partner at Booz & Company.

MENA countries are now taking a close look at alternative sourcing strategies as part of a comprehensive food security policy. This policy must determine which foods are strategic, before focusing on the four major policy components: availability, affordability, nutritional and health value, and safety.

Food availability: The intersection of quantity, timing and reach
Quantity, timing, and reach are critical elements for ensuring food availability. Booz & Company’s approach is based on maximizing the efficiency of all three elements: strategic commodities must be available in the quantities needed, on time, and within full reach of the popula¬tion.

Quantity: Increasing readily available food
“Policymakers must ensure there is an ample amount of food within the country through a mix of domestic pro¬duction and imports. A third emerging alternative is off-shore contract farming, where countries gain access to another country’s arable land, water, and labor to grow their strategic crops and import them,” commented Maroun.

Domestic food production: To maximize their domestic food produc¬tion policymakers can choose to increase cultivated land area or alter the crop mix in favor of the strategic crops, enhance land productivity and yields through research, and/or introduce biotechnologi¬cal advancements in the form of Genetically Modified Organisms (GMOs).

Food imports: Imports help meet consumption needs when a gap arises between demand for food and domestic supply. Liberalized economies typically rely on the private sector for imports, however in the MENA region this remains shared between the public and private sector. Additionally, a reliance on imports will require governments to ensure an effective supply chain infrastructure, such as offload¬ing capabilities at ports, sufficient storage capacity, and so forth.

Offshore contract farming: When domestic production is not possible and imports are volatile and unstable, offshore contract farming has emerged as an alter¬native. A country would enter into an agreement with another for access to its agricultural land, water, expertise, and labour. Recently, Gulf Cooperation Council governments seeking to ensure food security have considered contract farming.

It is not yet clear whether contract farming will prove successful as in times of tight supply, many countries will ban exports. “To ensure crop availability, policymakers should ideally devel¬op strong trade agreements and relationships with resource-abundant and politically stable countries,” said Atalla.

Timing: Ensuring the availability of food
Providing sufficient quantities of food the moment it is needed is vital. To do so, policymakers have typi¬cally resorted to stockpiling and reducing lead times to speed delivery.

Stockpiling: This involves the creation of strategic reserves that will be sufficient for a defined period of domestic consumption. Stockpiling requires sufficient planning to determine the size of the stocks needed the purchasing method, the methods of physical management and storage, and when to release these stocks into the local market. Strategic reserves quantities are determined by the time it would take for contracted shipments to be delivered, and the likelihood of supply disruptions.

Lead time reduction: Lead time reduction can be achieved when supply sources are diversified, and when there are clear preferences for procuring food products from countries that are in near proximity.

Reach: Paving the way for food to get to the market
Reach is the ability to deliver food throughout a coun¬try. It requires an assessment of each commodity’s supply chain including processing capacity, transportation networks and capabilities, and points of sale, all while taking into account a country’s demographic concentrations.

Food affordability: Tools to cut prices
Food affordability is the second component of a comprehensive food security policy. Countries can employ a wide range of tools to ensure that strategic commodities and food products are affordable to society. The application of these tools and their associated costs are dependent on the country’s broader macroeconomic policies.

“Some governments subsidize the agricultural sector to provide incentives for the production of strategic food commodities, while others subsidize the end product, thus reducing the financial burden on the poor and vulnerable” Atalla stated.

In Egypt, the Ministry of Social Solidarity is responsible for making available at affordable prices basic strategic commodities through two main programs: subsidized bread for the entire population and subsidized rice, sugar, oils, and tea through ration cards for the poorer segments of the population.

In a recent Food and Agricultural Organization of the United Nations (FAO) survey of international government officials, the majority of respondents demonstrated a preference for targeted price controls and subsidies to ensure food security. However, in designing any food subsidy policies there are three considerations that have to be taken into account:

• Targeting: Determine specific groups to be targeted through subsidies by taking into account poverty levels and which groups are socially vulnerable.
• Form: Design the subsidy in a way that achieves its desired objectives, such as subsidizing the final product only as opposed to subsidizing the entire supply chain.
• Effectiveness: Ensure that the subsidized product reaches the intended users and achieves the desired objectives.

“Ideally, market dynamics should set prices, while governments redraft existing laws that have historically caused price distortions,” said Maroun. Countries should resort to price controls only in extreme situations, and then only in a targeted manner.

Nutritional and health value: Targeted welfare programs
Within many developing nations, citizens suffer from either undernourishment, whereby they are not con¬suming a sufficient amount of calo¬ries or malnutrition whereby diets do not have the right mix of carbohydrates, proteins, and fats as recommended by the FAO. Countries can design program to educate people on the hazards of not consuming a well-balanced diet or the recommended number of calories according to age and gender. Health and education ministries in MENA can work jointly to create programs encouraging citizens to improve eating habits. In addition, governments can consider establishing subsidy programs that encourage healthier food items.

Food safety: Complying with international standards
Food safety encompasses the han¬dling, preparation, and storage of food to ensure that it is healthy and safe to consume. In 1963, a commission established by the FAO and WHO created the Codex Alimentarius—a collection of standards, guidelines, and practices pertaining to food safety. Local, state-run agencies typically administer food safety under those guidelines including the Saudi Food and Drug Authority (SF& DA) in Saudi Arabia and the Abu Dhabi Food Control Authority (ADFCA) in Abu Dhabi.

Increasingly, the private sector will play an important role in maintain¬ing food safety as it becomes more involved in the food supply chain. Policymakers should establish safety guidelines for the private sector to follow and moni¬tor their efforts. “In the case of food emergencies or crises—such as widespread food contamination—the government can intercede to ensure a safe food supply,” said Atalla.

Public and private sector roles
In implementing food security policies, MENA governments can select the ideal balance between public- and private-sector involvement. Food security strategies work best when the role of government is limited to the regulatory arena. Most countries rely on joint public- and private-sec¬tor efforts to maintain the availability of strategic food commodities.

Nonetheless, Governments are ultimately respon¬sible for strategic deci¬sions regarding the amount of stockpiled reserves, and in setting incentives or policies to enable the private sector to grow or import an ample supply of food commodities.

Securing ready access to strategic food commodities is a major concern for governments. “MENA govern¬ments can implement food security policies that ensure that strategic commodities are available, afford¬able, nutritious, and safe for consumption. These aims can be achieved through a number of measures that include clear private sector incentives and a resilient supply chain infrastructure,” commented Atalla.

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