FOOD IMPORTS IN THE MIDDLE EAST: A GROWING PROBLEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00096R000400550002-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 26
• Document Creation Date: December 22, 2016
• Document Release Date: April 4, 2011
• Sequence Number: 2
• Publication Date: February 1, 1987
• Content Type: REPORT

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Directorate of
Intelligence
A Growing Problem
Food Imports in the Middle East:
NESA 87-10007
February 1987
Copy 4 0 0
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Directorate of Confidential
Intelligence
A Growing Problem
Food Imports in the Middle East:
This paper was prepared b he
Office of Near Eastern and South Asian Analysis.
Comments and queries are welcome and may be
directed to the Chief, Issues and Applications
Division, NESAF-
Confidential
NESA 87-10007
February 1987
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Food Imports in the Middle East:
A Growing Problem
Key Judgments The Middle East has the world's most rapidly growing region-wide food
Information available deficit despite concerted efforts since 1974 to boost production. Between
as of 2 January 1987 1973 and 1985, Middle Eastern food imports soared from $4 billion to
was used in this report.
almost $30 billion. The current regional recession will make it increasingly
difficult to maintain this level of imports or to increase incentives for
domestic production.
Spurred partly by a fear that the West would counter the Arab use of the
oil weapon with a food embargo, Middle Eastern countries launched
programs in the 1970s to close the gap between domestic production and
consumption. There have been a few instances of significant increases in
production-notably of extremely high-priced wheat in Saudi Arabia and
hothouse vegetables in the United Arab Emirates-but overall food
production has not kept up with population growth. Behind this lagging
production record are decades of low agricultural productivity and public
policies that have slighted the rural sector, major resource constraints, and
regional conflicts that have disrupted production.
Meanwhile, consumption was stimulated by large increases in general
income and by public policies aimed at raising nutritional levels. Thus,
countries that only a decade or two ago were close to self-sufficiency in im-
portant food crops or that had a favorable food trade balance are now
major importers of food. The region depends on imports for at least 60 per-
cent of its requirements for several major items, such as wheat, and at least
eight Middle Eastern countries import at least 60 percent of their total
food requirements.
The food gap is likely to continue to widen, and nearly all Middle Eastern
countries will probably be worse off in terms of food self-sufficiency by the
end of the century than they are today. Production will probably continue
to make modest increases, but the major forces behind higher consump-
tion-including urbanization, population growth, and a shift to better
diets-show no signs of diminishing.
Mounting budget deficits and dwindling foreign exchange holdings will
make it increasingly difficult for many Middle Eastern countries to
maintain ample supplies of low-cost food. This will increase the risk of
political instability in the area, as such supplies are widely seen as a basic
iii Confidential
NESA 87-10007
February 1987
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human right and part of a social contract. Attempts to reduce food
subsidies have sparked riots in Egypt, Tunisia, Morocco, and Algeria.
Similar riots might recur in countries such as Egypt if the government
attempts to cut subsidies again, despite the economic arguments for such
cuts.
The United States probably will not regain the share of the Middle Eastern
food market it had five years ago, because there are now more exporters
and they are competing vigorously for sales. Even more countries with
surplus crops are likely to enter the Middle Eastern market over the next
several years, and competition for food sales will intensify. Markets for
food-related products such as food-processing equipment, however, may
open up for US businesses.
Poorer Middle Eastern nations with large food deficits will probably
request food aid from the United States. Friendly Arab nations will regard
the US response as an indicator of US reliability as an ally. Provision of
food aid-especially as outright grants-might allow regimes to postpone
reforms that would be necessary to increase the efficiency of their
agricultural sectors.
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Key Judgments
Agricultural Productivity
4
Patterns of Consumption
6
Population
9
Trends That Affect Production and Consumption
9
Migration
9
Implications for the United States
11
Country Profiles: Egypt and Saudi Arabia
13
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Figure 1
Arable Land and Urban Centers
in the Middle East
Boundary representation is
not necessarily authoritative.
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Food Imports in the Middle East:
A Growing Problem
The Food Gap
Food security has been a major concern of Middle
Eastern nations since the oil boom in the 1970s raised
standards of living and consumption of food.' A food
gap-an excess of consumption over production-
opened in the Middle East in the 1970s and has
widened greatly since then. This gap increased con-
cern about food security, as many governments feared
that Western nations might use the food weapon to
retaliate against Arab oil export policies. Most Mid-
dle Eastern regimes perceived this weapon as real,
even though we do not believe that market conditions
have ever favored the formation of an OPEC-like food
cartel.'
Food imports have increased rapidly throughout the
region, rising in value by about 650 percent between
1973 and 1985-from about $4 billion to just under
$30 billion, according to academic research and the
US Department of Agriculture (USDA). Although
the dollar value of imports peaked in 1984, the volume
of imports has often continued to increase as world
prices have declined. In Egypt, for instance, corn
imports increased from about 1.7 million metric tons
in 1984 to slightly more than 1.9 million tons in 1985,
while the value fell from $295 million to $247 million.
Trends in Production
Middle Eastern agriculture has not progressed as
rapidly as agriculture in other parts of the less
developed world. Despite the influx of large amounts
of capital into the region over the past decade, the
Middle Eastern countries have shown limited ability
' Twenty-one Middle Eastern countries are covered in this study:
Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Leba-
non, Libya, Mauritania, Morocco, North Yemen, Oman, Qatar,
Saudi Arabia, South Yemen, Sudan, Syria, Tunisia, and the United
Arab Emirates (UAE).
' For a cartel to be effective, suppliers must have a common
interest, they must maintain the discipline necessary to pursue it,
and there should be no readily available substitutes for the
particular item involved. None of these conditions exist in markets
to develop and sustain effective and profitable agricul-
tural systems. Behind rising food imports are low
agricultural productivity and public policies that
slight the rural sector, regional conflicts that have
disrupted production, and major resource constraints.
The region's food production has not kept up with its
rapid population growth of about 3 percent per year.
In Libya, for example, food production increased by
31 percent from 1976-78 to 1985, according to USDA
data, while the population increased by 42 percent.
Total food production in Iran decreased by 2 percent
from 1976-78 to 1985, while total population in-
creased by 27 percent. Overall, per capita Middle
Eastern food production in 1985 was just 96 percent
of the 1976-78 level, according to USDA data.
to an academic study.
In many Middle Eastern countries, investment in the
agricultural sector is less than investment in indus-
try-reflecting an urban/industrial bias on the part of
planners. Planners often believe that economic devel-
opment means copying patterns of Western industrial
societies. Overall investment in agriculture was not
more than 15 percent of total investment in the
Middle East in the 1970s and early 1980s, according
Arable Land. The scarcity and uneven distribution of
arable land impose a constraint on agriculture in the
region. About 14 percent of the land in the Middle
East is arable, and almost half of this is in one
country-Sudan.' Only about 1 percent of the land in
Mauritania is arable, and in some Persian Gulf states
the percentage is virtually zero. Countries that have
the most arable land-Sudan, Iran, Morocco, and
' Most land-use percentages are rough estimates. In some cases
land reported as "arable" is that under cultivation rather than the
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Figure 2
Middle East Food Production, 1981-85
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1981 82 83 84 85 0 1981 82 83 84 85
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III
III
II
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II.
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Lebanon-have not significantly increased the por-
tions of arable territory under cultivation in recent
years because of civil strife, war, lack of capital,
and/or distorted economic policies toward
agriculture.
In Iran, irrigation and swamp reclamation projects
allowed cultivation of about 1 million new hectares
between 1962 and 1983. Some new farms, however,
proved to be economically unviable and have since
been abandoned, according to an academic study. In
one province, only 10 percent of the reclaimed land
remains under cultivation. According to the same
source, the overall result has been no net addition to
the amount of arable land, because land about equal
to that created was being abandoned in other parts of
the country.
Soil erosion has reduced the amount of arable land
and limited agriculture in parts of Syria, Lebanon,
Israel, and Jordan, according to a geographic study.
Lack of rainfall, shifting sand dune patterns, shifting
cultivation, lack of fertilizers, and overuse of land
have resulted in increased desertification in countries
such as Algeria and Libya. Furthermore, in some
parts of Syria and other countries, soil fertility has
been declining for about the last 30 years. Population
pressure has led to some plots being used every year,
instead of being allowed to lie fallow periodically. The
result is that in many cases the land is wearing out,
according to a report by an agricultural research
institute.
Arable land has increased in only a few countries-
most often through irrigation and reclamation proj-
ects-and has not increased significantly overall. The
total area of arable and permanently cropped land in
the Middle East increased by only about 1 percent per
year from the early 1960s to 1981, according to an
academic survey:
? In the 1960s and 1970s the amount of arable land
increased by 0.28 percent per year in Algeria,
according to an academic survey. Similar findings
were reported for Iraq and Sudan.
? Syria's arable land decreased by 1.25 percent per
year over the same time period.
? In the 1960s and 1970s irrigation and reclamation
projects were more successful in Jordan, Lebanon,
and Saudi Arabia, and the amount of arable land-
total and per worker-increased. The largest in-
crease in total arable area was Jordan's 0.66 percent
per year. The largest increase in arable land per
worker was Lebanon's 5.22 percent.
Water. Lack of water has been the most important
constraint on the region's ability to provide its own
food. Rainfall is inadequate-often less than 100
millimeters per year-throughout most of the region.
Rainfall is sufficient to support agriculture without
irrigation only in the Fertile Crescent-a narrow
band from the Levant east to Iran-and in another
band along the North African coast of Algeria,
Tunisia, Libya, and Morocco. Even there, however,
rainfall varies greatly from year to year, with a
scarcity of rain having a severe impact on harvests in
four years out of 10.
Elsewhere in the region low levels of rainfall and high
rates of evaporation make irrigation necessary. Out-
side of Israel, Jordan, and small parts of Saudi
Arabia, however, irrigation projects have not been
especially well managed, according to studies by
geographers. Traditional Middle Eastern irrigation
practices are generally inadequate and wasteful. Of-
ten they are harmful, as when application of excessive
amounts of water leads to waterlogging and/or soil
salinity. In Qatar, for instance, about one-fourth of
the land cultivated in 1970 was out of production by
1980 because of waterlogging and salinity caused by
profligate irrigation practices, according to an aca-
demic study. Planners of irrigation projects have often
been overly optimistic. Many projects have lasted less
than half of their intended lifetime because silt has
caused more rapid wear of viaduct surfaces than
anticipated.
In some areas, such as parts of Saudi Arabia, much of
the groundwater is found in deep underground depos-
its created in earlier geologic periods. These deposits
are often fixed pools and are seldom renewable.
Elsewhere, as in parts of Libya, Qatar, and the UAE,
the groundwater is found in aquifers that are much
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closer to the surface and can occasionally be re-
charged by careful practices. Attempts to recharge
aquifers were begun only recently, however, and it is
too early to evaluate their success, according to
hydrologists. There is reliable evidence that in parts of
Iran the water table is falling significantly; as a result,
the quality of fresh water is dropping. In Libya,
Qatar, and the UAE, the extraction of large quanti-
ties of groundwater near oceans has resulted in
saltwater intruding into the fresh water aquifer. F_
The Great Manmade River:
Pipeline or Pipedream?
Water shortages in the Middle East are so acute that
even some projects that Western observers consider
foolish get consideration if they promise to provide
water. Libya, for example, has undertaken the Great
Manmade River Project to tap large reserves in
aquifers in the southern part of the country. A
hydrological study predicts the reserves may be
sufficient to meet the project's plans for 50 years.
Cost estimates for the project range from $11 billion
to more than $20 billion. Cost overruns have plagued
the Libyans from the outset, and completion is in
doubt because of engineering difficulties and greatly
reduced oil revenues. The project uses 75-ton,
4-meter-diameter pipe, the largest in the world.
Scheduled completion of just the first ofiive phases
of the scheme would require the installation of one
piece of pipe every five minutes for five years. In one
long portion of the pipeline, water will have to flow
uphill from a, reservoir. Although that is technologi-
cally possible-with enough pumps-we believe that
it is not economically practical.
Agricultural Productivity. The productivity of agri-
cultural labor in the Middle East has rarely increased
sufficiently to offset shortages of arable land. In fact,
the average productivity of agricultural labor de-
creased from 1960 to 1980 in most countries of the
region, according to an academic survey.' Most of the
few notable gains in productivity have been made
from an extremely low base. Substitution of machin-
ery for labor has been slow, with the average Middle
Eastern farm plot being too small to permit the
economically efficient use of such machinery. Even in
states with socialist economies such as Libya and
Middle Eastern states have only limited opportunities
to increase their available water supplies. Some states,
such as Syria and Sudan, have the potential to develop
their surface water resources, but at the expense of
downstream neighbors. Sudan, for example, is not
taking all of the Nile water to which it is entitled
under an agreement with Egypt. Sudan can take more
water, but that would leave less available for Egypt.
' Changes in productivity were measured as changes in the ratio of
agriculture's contribution to GDP to its share of the total labor
force. (Other measures of productivity, however, show more cases of
increases.) The most dramatic gain in productivity is found in Syria.
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Algeria there has been a cultural antipathy toward
cooperatives or other means to join farms together to
further the mechanization of agriculture.
The introduction of some new high-yield variety
(HYV) crops such as wheat and rice into the region
has had disappointing results, and Middle Eastern
countries rely less on HYVs than almost any other
developing region, according to studies by geogra-
phers. HYV seeds that grow well elsewhere do not
grow well in the Middle East because they:
? Require ample and/or reliable supplies of water.
? Require more fertilizer. The use of HYV wheat
peaked in Egypt in 1974 and has declined since then
because the 12-percent additional yield was not
enough to compensate farmers for the additional
cost of, and care in, application of fertilizer, accord-
ing to the US Agency for International Develop-
ment (AID).
? Are not climate resistant. The heat and aridity of
the Middle East present problems not encountered
in other regions. In Morocco, for instance, two
specific HYVs that seemed promising in the first
two years of use were subsequently found to be
especially susceptible to a climate-related disease
that appears periodically. Use of the varieties de-
creased significantly, according to AID. Today less
than one-third of Morocco's wheat is grown with
HYV seeds.
Increases in productivity from the HYVs in the
Middle East have been much smaller than the in-
creases that resulted when the same varieties were
introduced in other regions. In addition, almost no
Middle Eastern country has been able to sustain
increases in yields: wheat and rice harvests in Iraq, for
instance, often vary by more than 50 percent from one
year to the next.
State Policies. State policies have sacrificed-often
consciously-the interests of the agricultural sector to
promote urban and industrial development. Agricul-
ture has frequently been viewed as a source of funds
to promote industrial development. There has often
Figure 4
Estimated Area of High-Yield Varieties of
Wheat and Rice as a Portion of Total Area
in Developing Nations, 1982-83
Asia, Non-Communist
Latin America
Africa
Middle East
Asia, Communists
Total
Asia, Non-Communist
Asia, Communist
Latin America
Middle East
Africa
Total
Latin America
Asia, Communist
Asia, Non-Communist
Middle East
Africa
Total
20 40 60 80
WE
a Incomplete estimate of proportion of varieties in China.
Note: Taiwan and North Korea are not included in this survey.
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The International Center for Agricultural
Research in Dry Areas
One major reason for declining food self-sufficiency
in the Middle East is the lack of successful research
into the special problems that the and climates of the
region present. The International Center for Agricul-
tural Research in Dry Areas (ICARDA) was estab-
lished in 1977 near Aleppo, Syria, to investigate ways
to improve the productivity of agriculture in the
region. Funding-about $15 million in 1984-comes
from about a dozen Western governments and several
private philanthropic institutions and international
agencies. The center's principal concerns are improv-
ing farm management techniques and developing
higher yield seeds. ICARDA is the world center for
development of better barley, lentils, and faba beans.
It is also the regional center for research in bread
wheat, durum wheat, chick-peas, and pasture forage
crops
Although ICARDA is a member of the international
research group that pioneered "the green revolution, "
we believe it will not achieve comparable break-
throughs soon because:
? It has chosen to limit its primary research to areas
that get limited winter rainfall. Any successes it
might achieve may not be transferable to areas
requiring irrigation-which includes most of the
region.
? Successful high-yield seed development may take
as long as 20 years from the time seeds are first
selected to the time farmers harvest the first crops
using the new seeds.
been considerable discussion about increasing agricul-
tural investment, but the reality has seldom measured
up to the rhetoric:
? Over the past two decades in Iran, total annual
agricultural investment never exceeded 12 percent
of government expenditures. Actual investment in
agriculture has consistently been less than planned
even when the agricultural sector was to have been
given special emphasis.
? Under North Yemen's first two development plans
(1974-8 1), agriculture was scheduled to receive
about 15 percent of all investment, but it actually
received only 8 percent.
We believe the procurement policies of many Middle
Eastern states destroy the incentive to produce food
domestically. Governments often pay farmers artifi-
cially low prices for crops. In Algeria, for instance,
under the 1980-84 development plan, farmers were
frequently paid less than their cost of production for
crops. Low procurement prices are probably intended
to serve a number of government goals:
? Most Middle Eastern governments probably consid-
er city dwellers more important politically than
farmers.
? Low procurement prices may be seen as a way to
transfer wealth from agriculture to urban industries.
? If food prices are held down, city dwellers are less
likely to demand wage increases that may hurt
development efforts.
? Low procurement prices hold down the overall cost
of food subsidization programs.
The low prices paid by the governments are, in effect,
taxes on production, and farmers respond by restrict-
ing output, switching to crops whose prices are not
regulated, or quitting farming. An IMF study of
several Middle Eastern states concluded that, unless
major changes are made in food procurement policies,
domestic production of several crops will remain
stagnant. The survey found that, for at least 19 crops
in five separate Middle Eastern countries, a 1-percent
increase in procurement prices would lead to virtually
no increase in quantity supplied.
Patterns of Consumption
Total food consumption has grown rapidly in almost
all Middle Eastern countries since the early 1970s.
Consumption of staples such as cereals grew more
than 5 percent per year throughout the 1970s. During
this period, many Middle Easterners altered their
tastes and began to eat more meat, fresh vegetables
and fruit, and packaged convenience foods.
Price. World food prices have fallen precipitously in
the 1980s, adding significantly to the quantity of food
demanded by Middle Eastern countries. Composite
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to gain favorable terms.
indexes of food prices on international markets fell
between 20 and 35 percent from 1980 to the end of
1985. Consumer prices often fell as a result. In other
cases price increases were not as rapid as they other-
wise would have been. By late 1985, wheat and sugar
prices, in real terms, were at their lowest levels since
the early 1930s. The low prices have resulted from
abundant stockpiles in exporting countries and vigor-
ous competition among sellers. Middle Eastern states
are using the buyers' market to great advantage.
Algeria, Tunisia, and North Yemen, for example,
have frequently played one seller off against another
items most frequently eaten by the poor.
Subsidies on Consumption. Middle Eastern countries
have increased the quantity of food demanded by
using subsidies to keep domestic prices artificially low
even as real incomes increased. Subsidies are often
unrelated to consumers' incomes and not restricted to
In our view, food subsidies are so firmly established as
policy in Middle Eastern states that they cannot be
modified easily. Subsidized food is often regarded as a
basic human right, part of a social contract under
which wealth is distributed to consumers. In many oil-
producing countries subsidies are a vehicle to distrib-
ute oil revenue to the people. Further, because a cheap
and steadily available food supply is one of the most
visible indicators by which citizens evaluate govern-
ment performance, governments are reluctant to
make cuts. Tunisian officials, for instance, have stated
government tried to modify food subsidies
in published interviews that bread and cooking oil
subsidies are so politically sensitive that they cannot
be phased out in less than 10 years without significant
risk. In Morocco it was only under pressure from the
World Bank and the IMF that the government an-
nounced in 1985 that subsidies on selected food items
would be gradually phased out through price in-
creases. To cushion the impact and reduce political
opposition, Rabat ordered a simultaneous increase in
the minimum wage. Riots erupted in Egypt, Tunisia,
and Morocco between 1977 and 1984 when the
Many governments of the region have increased bud-
get deficits and depleted foreign exchange to maintain
subsidy levels. When expenditures must be cut, other
areas are often sacrificed to preserve food subsidies.
Saudi Arabia has run budget deficits, drawn down
currency reserves, and postponed some development
projects in large part to maintain subsidies, according
to the US Embassy in Riyadh. Tunisia has stated an
intent to reduce its investment in textiles, construc-
tion, and tourism rather than reduce food subsidies.
Income. As Middle Easterners' incomes rose during
the oil boom, consumers-who often began at fairly
low levels of nutrition-improved their daily diets by
eating more food staples such as grains. When in-
comes rose to high levels, as they did in many oil-
exporting countries, consumers improved the quality
of the food, adding items such as meat and fruit. The
average daily diet in Kuwait, for instance, increased
from 2,500 to 3,400 calories per day, according to
USDA reporting. Currently, high-valued items such
as beef, dairy products, and fresh fruits account for
about 70 percent of the value of Kuwait's food
imports, according to the same source.
Food imports in the Middle East have not decreased
by as much as personal income has fallen during the
current regional recession. Other factors, such as the
adoption of new and better diets, lower food prices,
and subsidization of consumption, have intervened to
prevent the declines that might otherwise have oc-
curred.
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Figure 6
Food Imports as a Share of Total
Consumption in Selected Countries, 1986
Kuwait
UAE
Saudi Arabia
Iraq
Egypt
Algeria
Libya
Mauritania
Population. The region's rapid population growth-
almost 3 percent per year, or more than 7 million
people in 1985-has been a major factor in increasing
food imports.' Only two countries of the region-
Israel and Lebanon-have population growth rates
below 2 percent per year. In contrast, nine have
growth rates exceeding 3 percent.
Trends That Affect Production and Consumption
Urbanization. Urbanization in the Middle East is
proceeding rapidly, adding to the demand for import-
ed food. The region's urban population is increasing
by about 4 percent per year
In 17 o the
region's 21 countries, urban populations are growing
more rapidly than the national population, according
to the same study.
Urbanization in the Middle East increases food im-
ports in a variety of ways:
? People who move from farms to urban areas no
longer produce their own food. In Libya in the
1970s, for instance, government policies caused
many private farmers to leave their land and move
to cities. Frequently their land was not maintained
in use and domestic production fell, according to an
academic study.
? Agricultural laborers who move to urban areas are
often relatively young and educated; those remain-
ing behind are often less productive.
? Wages are often higher in urban areas than in rural
areas, allowing consumption of more food.
? Urbanization is frequently associated with changes
in consumption patterns. A UN Food and Agricul-
tural Organization (FAO) survey found that in
Tunisia, for example, urbanites consume more
meat-both absolutely and as a share of total
calories-than do rural residents.
? Urban areas compete directly with rural areas for
land. In the Middle East, cities and farming areas
are often close together since both must be near
water. As "urban sprawl" encroaches on surround-
ing areas, farmland is absorbed.
? Urbanization is associated with industrialization
and increases demand for water. We believe that
urbanites-with higher average incomes-will fre-
quently be able to pay more for the scarce resource 25X1
and win the competition for it.
Migration. Migration-most frequently of laborers-
has significantly reallocated the consumption and
production of food. Several million North Africans,
for instance, now reside in Europe and have reduced 25X1
the Maghreb's consumption of food.' A different 25X1
pattern exists in Saudi Arabia, where an increasing
proportion of the agricultural labor is performed by
South Asians. Even though they produce much of the 25X1
country's large wheat crop, we believe they consume
enough other food so that their net impact is to
increase overall food demand. In addition, expatriates
in urban areas clearly increase total consumption of
food. We believe the net regionwide effect of migra-
tion has been to increase demand for food.
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Outlook
We believe that there is virtually no chance the
Middle East will be able to produce enough food to
meet its needs and that the food gap will continue to
widen for the rest of this century. We judge that at
least 20 of the region's 21 countries-Saudi Arabia is
the only possible exception-will be further from food
self-sufficiency in the year 2000 than they were in
1985.'
The region's population will grow from 236 million
people in 1985 to more than 367 million in the year
2000 if present rates of increase continue,
IIn
addition, in all 21 Middle Eastern countries the
percentage of the population that is urbanized will
increase by the year 2000,
=Urban populations will be about 64 percent of
the total population by the end of the century-up
from about 49 percent in 1985. Urbanization will be
associated with industrialization and will continue to
stimulate demand for scarce water.
' The USDA and the FAO classify countries as food self-sufficient
if the amount of food produced is at least equal to the amount
consumed, both measured in calories. Countries are food self-
reliant if they are food self-sufficient or if they can export enough
goods and/or services to pay for imports. We believe that for the
rest of the century no Middle Eastern country will attain food self-
sufficiency, even for a short period of time. Some of the wealthier
oil-exporting states attained food self-reliance during the oil boom.
A few may still be self-reliant, and others will probably regain food
A reliable geographic study concludes that the
amount of arable land in the Middle East would have
to double to make the region self-sufficient, given the
regional population that is likely at the end of the
century. We believe there is little chance that irriga-
tion schemes or other development plans will lead to
such a doubling.
Lack of water may become an increasingly severe
constraint in the near future and force several Middle
Eastern countries to reassess their irrigation practices.
Continuation of current practices will almost surely
deplete pools and aquifers more rapidly than they will
be recharged. Only states located on major river
basins will be able to increase readily the amounts of
water available, and then only at the expense of
downriver states. In all other cases it will be necessary
to improve the management and productivity of exist-
ing water resources. A technical study of regional
irrigation systems, however, concludes that no signifi-
cant improvements in management techniques or
engineering practices can be expected within the next
five years.
Agricultural productivity in the region will remain
low. We do not foresee much chance for a major
productivity-increasing breakthrough in agricultural
technology. Agricultural geneticists, for instance, re-
port that, given their current state of knowledge, it is
not clear that it is possible to develop climate- and
disease-resistant HYVs for the region.
Middle Eastern states will continue to benefit from a
buyers' market in food for several years. Worldwide
there are large-and increasing-stockpiles of many
food items, allowing Middle Eastern states to obtain
favorable prices by playing one seller off against
another. The future value of food imports is less clear
because of changing commodity prices. If present
consumption and production trends continue, the val-
ue of food imports may increase by 40 percent by the
year 2000.
If-as many experts believe-oil prices increase dur-
ing the 1990s, there will be a further major stimulus
to food consumption. We share the widely held view
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when income goes down.
of academic economists that consumption increases
when income goes up but does not decrease as rapidly
We believe that Middle Eastern leaders facing severe
financial difficulties will continue to resist pressure
from international donors and lenders to reduce food
subsidies. We believe many of these leaders are deeply
worried that major changes will spark unsettling
opposition, including violent protests. High levels of
food imports and low consumer prices, however, will
continue to be protected only at great cost:
? In Egypt, the dire need for economic reform is, and
may continue to be, stymied by the Mubarak gov-
ernment's reluctance to risk the political conse-
quences of reduced food subsidies.
? In Iran, virtually all foreign exchange earnings will
continue to be spent on military goods and food.
Imports of raw materials and spare parts for civilian
industry have been sacrificed. This has increased
unemployment as well as the general level of
discontent.
? Saudi Arabia may continue to draw down financial
assets, curtailing other spending and postponing
projects rather than cutting subsidies on food
imports.
subsidies.
? Tunis may give up investments in textiles, construc-
tion, and tourism rather than cut food imports and
Food problems per se will not topple a Middle Eastern
regime, but they could become the catalyst for a
larger collection of economic, social, and political
grievances that could make future food riots far more
important than those of the recent past. We believe
that food problems will pose the greatest risk to
political stability in the Maghreb states and Egypt.
Even a buyers' market, however, will not allow Mid-
dle Eastern states to ignore mounting economic prob-
lems and diminishing resources to pay for food im-
ports. Scarce foreign exchange and credit facilities
combined with shrinking government revenues will
make it more likely that lenders such as the IMF will
insist on agricultural reforms as a condition for loans.
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Implications for the United States
Although food imports will remain high, the US share
of the Middle Eastern market for most commodities,
especially wheat, is decreasing and probably will
continue to do so. We believe there is little chance
that the United States will regain the market share it 25X1
had five years ago. The value of US food sales to the
Middle East fell 14 percent, or $429 million, between
1983 and 1985, while European Community (EC)
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sales increased 14 percent, or $824 million. The EC's
share will probably continue to increase because of
aggressive marketing techniques and heavy subsidiza-
tion of agricultural exports. Furthermore, the appear-
ance of new sellers such as Brazil and Thailand in
some Middle Eastern markets has also eroded the US
share. We believe that within the next five years
several countries, including India, Argentina, and
Indonesia, may emerge as sellers and erode the US
share even more.
Despite the drop in the US share of the Middle
Eastern food market, new related markets in the area
may open up, and some countries may look to the
United States for help in improving agricultural yields
and processing food. Algeria, for instance, is a good
prospect as a market for US seeds, agricultural
machinery, irrigation equipment, and expertise, ac-
cording to the US Embassy in Algiers. There may
also be an opportunity to sell food-processing technol-
ogy and packaging machinery and to build turnkey
plants.
Poorer Middle Eastern states that are experiencing
difficulties getting sufficient food supplies through
commercial channels probably will ask the United
States for help in meeting food needs. Friendly na-
tions, such as Egypt and Morocco, hope that Wash-
ington will offer more food at reduced prices or as
outright grants. They will judge the response as an
indicator of the United States' reliability as an ally.
Large US food aid programs, however, may enable
recipient nations to postpone agricultural reforms that
would increase production efficiency.
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Appendix
Country Profiles:
Egypt and Saudi Arabia
The following case studies illustrate how food imports
by Middle Eastern countries have changed in response
to the forces of supply and demand in both domestic
and international markets. Egypt is typical of coun-
tries where an array of environmental and policy
variables ensure a continued need for large amounts
of imported food. Saudi Arabia, in contrast, may be
able to reduce imports of certain crops-but only at
tremendous cost and what many experts believe to be
a major misallocation of resources.
Egypt
Egypt has virtually no chance to attain food self-
sufficiency or self-reliance in this century. In fact, it is
slipping backward. Egypt first became a net importer
of food about 1974, and since then imports have
risen-to $4.3 billion in 1985 or about 60 percent of
total consumption. Egypt will probably be even fur-
ther from food self-sufficiency in the year 2000 than it
was in 1985.
Egypt's population growth rate of 2.8 percent per
year, with a base population of 50.5 million in July
1986, adds 1 million people about every nine months.
Programs to slow population growth have been largely
unsuccessful, according to reliable press reports. The
population will be about 74 million by the end of the
century if present rates continue
The proportion of Egyptians living in urban areas-
and consuming food without producing it-has in-
creased constantly since at least 1950,
Currently about 45 percent
Egyptians live in urban areas, according to reliable
estimates. By the year 2000, more than 57 percent of
the population will be urban,
Urbanization has resulted in a significant loss of
agricultural land. Urbanization in Egypt between
1960 and 1980 absorbed about 18 percent of the
arable land, according to the FAO. Urbanization has
removed from agricultural use an area equal to that
brought into agricultural use by the Aswan Dam
project, according to the same source.
Egypt's policies on subsidies and procurement create a
high need for food imports by increasing consumption
while simultaneously decreasing domestic production.
Food consumption is supported by heavy subsidies,
available to almost the entire population, regardless of
income. Money prices have been held so artificially
low, even as income has risen, that real food prices 25X1
have fallen significantly. For instance, real bread
prices fell by more than 5 percent per year from 1970
to 1980. Per capita consumption of wheat increased
by more than 3 percent per year, and wheat imports
increased by more than 11 percent per year over the
same period, according to a report of the World Bank.
Wasteful consumption, such as feeding bread to live-
stock, is common,
Egypt is under great pressure from international 25X1
lenders to make basic reforms in its food subsidy
programs. Some minor and tentative steps have been
taken-the price of a loaf of bread went up from 1 to
2 piasters, while the size of the loaf was increased but
not doubled. We believe President Mubarak will resist
any basic reform because food subsidies are so politi-
cally and socially sensitive. Cairo will make cuts in
import-dependent industries before it will significant- 25X1
ly reduce food subsidies.
Low procurement prices distort production incentives
and lead to production of the wrong crops. Prices paid 25X1
to farmers for wheat, for instance, were increased by 25X1
39 percent in 1985, but wheat production rose by only
3 percent because, even after the increase, it was still
four times as profitable to grow clover, according to 25X1
the USDA. The price of clover is not regulated, so it 25X1
can be sold at a profit as livestock feed or fertilizer.
We believe many more farmers would like to shift
from wheat to clover production, but land use restric-
tions prevent the shift. Many agricultural experts
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Figure 9
Egyptian Population by Governorate
Frontier Governorates:
Marsa Matruh
Al Wadi al Jadtd
Al Bahr al Ahmar
Complete statistics for
Sma' (Sinai) a not
available for 1976.
k
+ Bar Said
Egyptian Cultivated Land
Land under cultivation, 1953
Land reclaimed, 1953-80
Land reclamation planned, 1980-85
o 50 100 Kilometers
' 'rte
0 50 100 Miles
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under $700 million.
believe that it was economically inefficient for Egypt
to devote its resources to clover in a year in which it
imported 4.75 million tons of wheat at a cost of just
ing to the same source.
Attempts to introduce high-yield varieties (HYVs)
into Egypt have failed. In 1984 a Japanese HYV rice
seed was found to be severely susceptible to a local
plant disease and is no longer recommended for use in
Egypt, according to published AID reports. It was
replaced by a hardier Philippine HYV that has a long
grain. Egyptian mills are geared to short grain rice,
however, and Egyptian consumers strongly prefer
short grain rice, according to the same source. Rice
production in Egypt decreased in 1985, according to
the USDA. The Egyptians have tried HYV wheat
seed with some success, but HYV wheat use peaked in
1983 and has probably fallen each year since, accord-
All arable land in Egypt requires irrigation. Yet
traditional techniques are wasteful and inefficient and
create problems on some plots even as they benefit
others. For example, plots are often so small that it is
unfeasible to meter and charge for water. Without
metering, farmers have no incentive to conserve wa-
ter, which seems free but is actually a scarce and
valuable resource. Attempts to increase efficiency by
getting farmers to adopt new methods have been
unsuccessful. As soon as the outside experts leave,
farmers revert to old, wasteful ways, according to
published analysis. Further, to ensure that adequate
amounts of water reach the far ends of canal systems,
so much water has to be put into the near ends that
land there often becomes waterlogged and/or saline!
Competition among sellers in international food mar-
kets is so intense that Egypt-which is at least $36
billion in debt-has thus far been able to arrange
credit terms on sales. Currently, about half of Cairo's
food imports is based on credit, and most of the rest is
based on countertrade, according to the USDA.
About 85 percent of US food sales to Egypt involve
US Government discount programs. We believe it will
become increasingly difficult to arrange traditional
cash sales as Egypt seeks to conserve its limited
foreign exchange.
The United States is losing ground in the Egyptian
food market-the largest market in the region for US
food.' According to the USDA, in 1985 Cairo import-
ed food from the United States worth $891 million,
less than in 1984 and 1983, while it increased its
imports from the EC and other sellers such as Austra-
lia.
Saudi Arabia
Despite the progress that Saudi Arabia has made in
agriculture, the kingdom is still the Middle East's
largest-and the world's third-largest-market for
imported food. Food imports by Saudi Arabia were
worth about $5 billion in 1985. The US share de-
creased, while the shares of the EC and other sellers
increased
Developments in the Saudi food market have been
driven by the country's vast oil wealth and the
regime's commitment to alter the composition of food
imports. Saudi Arabia, more than any other country
of the region, has had the wherewithal and determina-
tion to pursue food self-sufficiency through domestic
' In 1985 Egypt was the world's ninth-largest market for US food.
Sales in all top 10 US food markets fell, but the decline in Egypt
was smaller than the decline in Spain, allowing Egypt to move up to
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L._
Saudis will process more of their own food, and this
also will shift the composition of imports from pro-
cessed to unprocessed food items, according to the
USDA. A large soybean-processing facility recently
opened and led to decreasing imports of soybean meal
but increasing imports of unprocessed soybeans. Con-
sumption of soybeans as food has increased as the
facility has expanded. In similar fashion, Saudi im-
ports of beverages are forecast to fall by about $500
million in 1986 as locally produced items are substi-
tuted for finished imports. We believe the Saudis will
try to increase domestic meat production. If they
succeed, meat imports will probably fall, but feed
grain imports may well increase.
production while shifting consumption to be more in
line with the patterns of a wealthy society. This
commitment, made in years of increasing revenue, has
continued through several years of declining revenue
and increasing budget deficits. We believe it will
continue for the next few years.
Food consumption is heavily and widely subsidized,
and, as oil revenue increased, consumption increased
significantly. For instance, per capita daily consump-
tion of protein increased by 68 percent between 1965
and 1982, while per capita daily caloric consumption
increased by 33 percent. Malnutrition was the lot of
the average Saudi in 1961, but by 1982 the Saudi diet
compared favorably with that of Western Europe or
North America, according to the USDA. We believe
improvements in the diet will continue and that
imports of high value and convenience foods will
increase. The volume of fresh meat and fruit imports
increased in 1985, and per capita consumption rose
rapidly, according to the USDA. Imports of canned
meats and fruit and preserved milk also increased in
volume in 1985, even though the value of food imports
in general declined, according to the USDA.
Low food prices will become increasingly important in
import decisions as the Saudis shop for better deals.
For instance, although total imports of rice remained
constant-at about 500,000 tons-from 1984 to 1985,
imports from the United States declined by about
one-fourth, while cheaper rice from Thailand in-
By using extravagant subsidies Saudis have attained
self-sufficiency in wheat and may soon attain it in
poultry, eggs, milk, and some vegetables, according to
reliable economic press reports. Saudi farmers get a
variety of generous benefits at no charge. They re-
ceive land, seeds for some crops, pesticides, and
transportation of dairy cows. They also receive subsi-
dies on equipment, engines, pumps, animal feed,
fertilizer, irrigation water, and loans. Total subsidy
payments have sometimes almost equaled all of the
costs of production, according to an academic study.
Procurement prices are often several times the market
price. For instance, the procurement price for wheat
in 1986-as much as $570 per ton-was about three
times the average price in international markets.
Saudi farmers responded to the wheat subsidies by
increasing production from about 3,000 tons in
1975-76 to about 2 million tons by 1984. The 1984
harvest was equal to about twice the amount con-
sumed domestically. The surplus exceeded the capaci-
ty of silos, and part of it had to be stored on the
ground. The market for wheat imports, 1 million tons
per year as recently as 1982, virtually vanished in
1985. Wheat prices cannot legally be lowered until
1988, but, in part as a ploy to discourage excess
production, the government has delayed payments to
farmers.
Saudi wheat production is based upon successful-if
expensive-planting of HYVs developed elsewhere.
Unfil early 1984, 98 percent of all acreage planted in
creased by about one-third.
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wheat used an HYV from Mexico. Since then all seed
imports have come from the United States, according
to AID.
Subsidization of agriculture has distorted production
incentives. Even with a record wheat harvest there
was a shortage of barley, and 4.5 million tons were
imported. Because the procurement price of barley is
so much lower than that of wheat, there is no
incentive to shift production even though the shift
would help reduce both the wheat surplus and the
barley shortage. Reliable economic press reports indi-
cate that farmers are switching from barley to wheat
production even though that aggravates both prob-
lems.
The water outlook in Saudi Arabia is uncertain.
Hydrologists who have studied water resources in the
kingdom have been unable to estimate the extent of
reserves. It is known that much of the water used in
agriculture comes from layers of rock near the surface
and that the resource is being mined-used up in
quantities that are not replaced by the meager rain-
fall. We believe that it will be expensive for the Saudis
to switch to other forms of irrigation because the
country has no major river that can be dammed or
used as a major source of water. It is possible that the
Saudis will reassess the value of using such large
quantities of water for irrigation once they determine
the extent of their reserves.
Several major industrialization projects may compete
with agriculture for water in the future. At present,
much of the water used in cities comes from desalina-
tion plants. Desalination is not widely used for irriga-
tion because of its high cost. Should the heavily
subsidized desalination efforts be curtailed because of
the financial crunch or should industry and urbaniza-
tion demand more water than planned, amounts avail-
able to agriculture may fall.
Expatriate laborers in Saudi Arabia-more than 3
million in late 1985-also have increased the coun-
try's food import bill. They, along with Saudi citizens,
enjoy heavy and widespread subsidization of food.
Even though agricultural labor is performed almost
exclusively by expatriates, and progress in crops such
as wheat would probably not have been possible
without their labor, Saudi Arabia must import large
amounts of other food items for them. The net effect
is to increase food imports.
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