The small Gulf Arab countries heavily depend on foreign supplies for their food requirements. Yet, very little empirical analysis has been conducted on food security issues facing these countries. This column describes a novel micro-data set for Qatar which is capable of feeding analysis to assess the special food security dilemmas of food-import-dependent micro states.
The special economic problems of small countries are well known (Streeten, 1993). One typical stylized fact of small countries is the heavy dependence on imports of nearly all goods and services for domestic purpose. The subset of Gulf Arab states comprising Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE), all having minuscule populations, deserve special attention.[i] Despite the (recent) relative economic success of some Gulf Arab micro states, especially Kuwait and Qatar, their economic structure is still less diversified than that of a large country at a similar level of development.
Particularly in agriculture, due to the lack of cultivable land and water along with the adverse climatic conditions, the Arab micro states are heavily dependent on foreign supplies for their food requirement.[ii] The sharp rise in food prices during the recent 2007-08 global food crisis triggered grave concerns about food security in small Gulf Arab states. It was an eye opener for these countries that despite their strong fiscal balances to offset high price risk, they are highly vulnerable to uncertainty associated with substantial and systemic price volatility and to quantity risk stemming from export bans by major producing countries.
Hitherto, there has been no empirical analysis of the special food security issues facing micro states in the Arab world. Empirical analysis is necessary to determine whether these micro states face a different set of food security issues than larger states and, if so, how they are manifested. Investigation of such issues, however, requires an extremely rich and detailed micro data set. In a recent work with Simeon Kaitibie and Ishrat Hossain (Basher et al., 2012), we describe a micro-data for Qatar which is capable of feeding analysis to assess the special food security dilemmas of food-import-dependent micro states.
The micro-data consist of 102 raw agricultural imported commodities[iii] on a shipment-by-shipment basis over the period January 1, 2005 to June 30, 2010. The data comprise over half a million individual observations, with a very rich set of characteristic specifications such as: (a) method of transport (air, sea, land); (b) country of origin; (c) c.i.f. value and quantity; (d) methods of packaging; (e) entry dates; (f) carrier of shipment; and (g) importing company in Qatar.
Our research reveals that many commodities shipped into Qatar display extreme import-price volatility, especially as compared to world prices as represented by U.S. export prices. For example, price volatility of imported cucumbers in Qatar was 16 times larger than that of the world price level. Further, volatility appears to change from year to year for some Qatari imports. For example, rice import-price volatility was high in 2008, very high in 2009, but dropped in 2010. Another interesting finding is that price volatility does not only manifest over substantial time periods, it is also evident over very short periods of time. For example, prices of the totality of shipments of tomatoes that arrived in Qatar in the second week of January 2010 not only exhibited substantial source related price variations; price variability within one week for tomatoes of the same origin are also apparent. Indeed, high and volatile food-import prices have been endemic in Qatar for many years, not just during the most recent global food crisis.
A key element of a viable food security strategy is a country’s ability to diversify import sources to provide buffers against political, health, weather and other disruptions. Diversification of source can also serve to dampen high prices and price volatility through competitive purchasing and greater parity relative to the market power of suppliers.
Our results show that, with very few exceptions, the concentration levels as regards the sources of agricultural imports into Qatar are extremely high. Most dairy products are at near-monopoly levels, suggesting sole sourcing of dairy imports and virtually no diversification. Similarly, with the exception of lentils in 2008 and 2009, vegetable sourcing is highly concentrated. This is also true of fruits with the exception of apples. Grains are as well highly source concentrated with barley origins at sole-source monopoly levels. Meat imports are also highly concentrated as to origin, although not at sole-source levels.
Concentration among importers can also have food-security consequences, especially as regards high prices and price volatility. Results show that import markets for fruits and vegetables are almost completely unconcentrated. This is not true for cereals. Importation is associated with monopoly power for wheat, and monopoly or near monopoly structure (depending on the year) for barley. For the most part importation is highly concentrated for meat and dairy. For example, for carcasses and half carcasses, three importers dominate the market with approximately equal shares. These findings are summarized in Figure 1, which reports the distribution of supply and importer concentration over the 2008—2010 period.
Figure 1. Supply and importer concentration
Note: For each histogram, the solid black line represents the Kernel density plot.
Identifying shipping patterns and anomalies unique to small-scale import-dependent country like Qatar has significant repercussions on national food security. Evidence on shipments to Qatar in the cereal sector revealed that contrary to common belief, grains (e.g. barley, wheat, corn) are not always shipped directly from the source into Qatar. Instead, importers employed a variety of alternative methods to import cereals into Qatar.
For example, in 2010H1, although over 99% of barley were imported from Australia, they were not completely shipped directly from the source. Some were shipped via single-hold shipments on larger general-cargo carriers, while some were transshipped (using small general cargo ships) from a regional port where a large ship had off-loaded large quantities. The remainder of shipments were offloaded and delivered by trucks and were packaged in 30kg bags. Similar shipping anomalies were also documented for normal wheat and yellow corn.
These differences in shipping method and packaging appear to have a substantial effect on unit price, despite the fact that in all cases the subject shipments were of a basic feed commodity. Given that only one of the transportation modes is cost efficient, the asymmetry in shipment method displayed in Qatar is a symptom of the effects of small scale on logistics.
For the purpose of policy making, our results can be used to design a robust food import-management strategy addressing both the market imperfection (both at supplier and importer end) and transportation bottlenecks causing high and volatile import prices. On the academic front, the rich micro-data set provides fertile ground for new and expanded research on relevant food security issues such as (i) hedonic price modeling to measure shadow prices and costs of characteristics for various commodities; (ii) demand and substitution modeling for commodities between commodities and sources; and (iii) a deeper analysis on the sources import price volatility.
Basher, S.A., Raboy, D., Kaitibie, S. and Hossain, I. (2012). The economics of food security in Arab micro states: Preliminary evidence from micro data. MPRA Paper No. 39357.
Streeten, P. (1993). The special problems of small countries. World Development 21, 197-202.
About the authors
Syed Abul Basher is a research economist at the Qatar Central Bank. He also serves as an economic consultant at the Qatar National Food Security Programme. His research profile can be viewed on his personal webpage at: www.syedbasher.org
David Raboy is the chief economic consultant at Patton Boggs LLP, Washington DC. At this time of this research was undertaken, he was seconded as chief economist to the Qatar National Food Security Programme. His profile is available at: http://www.pattonboggs.com/draboy/
[i] Streeten (1993) considered a country to be “small” if its population were less than 10 million people. Save for the UAE, the remaining four Gulf Arab States have populations much smaller, in the 2 to 3 million range and therefore we refer to them as micro states.
[ii] Typically majority of Arab countries import 50% to 90% of their food requirement.
[iii] These include included 22 commodities from HS Chapter 2 (meats), 25 from Chapter 4 (dairy), 24 from Chapter 7 (vegetables), 20 from Chapter 8 (fruits), 10 from Chapter 10 (cereals), and 1 from Chapter 12 (fodder). The list of commodities is available from the authors by request.