This small country is the peninsula jutting out of Saudi Arabia and is the richest country per capita in the world (at just over 100k – the US is 14 at 52.8k); largely due to the fact that it is rich in energy production and that only 2.1mm people live there. The major religion is Islam.
Qatar will be hosting the 2022 FIFA world cup and has a problem with modern slavery.
Energy production is huge for Qatar, as it estimated that about 60% of its GDP comes from energy exports. According to the CIA fact book, Qatar’s GDP was $213Bn in 2013. It is the largest producer of liquified natural gas in the world (LNG is basically turning natural gas into liquid so it can be transported easier/cheaper/safer). Qatar is also part of the Organization of petroleum Exporting Countries (OPEC), which is cartel (a group that works in conjunction on price and production to reduce competition) of 12 countries, that produce about 40% of the world’s crude oil. You can thank OPEC in part for the low gas prices you are enjoying, as they will maintain energy production at the same rate (you can also thank fracking and weak demand in Asia for the over supply).
The land is arid and isn’t ideal for agriculture, so Qatar imports at least 90% of it food. 90%. This is where it gets interesting.
Let’s recap: It’s a small country in the middle east, most of the people are very wealthy, migrant workers are exposed and taken advantage of, that produces a ton of energy to foot it expenditures and livelihood, but it cannot produce enough food to sustain its population.
What do you do? You are really good at making energy, but not food. You can buy food from other countries. Market places after all are a great way to exchange goods and you can do it. However, you are susceptible to competition for the same goods, geopolitical strife, bad production years, etc. In other words, it is difficult to rely on someone else. For instance, in 2010, during the most severe droughts in history Russia, India, and other countries put a trade block on with Qatar.
So, what do you do? You have cash. You have loads of it. You buy other countries property for agricultural purposes. You cut out the middle man. Its called foreign investment.
Leasing or buying other countries land, or “land grabbing”, is not a new practice, making it heyday between 2008 and 2010, and Qatar isn’t the only country doing it; Brazil, China, and India make up the largest investors, with the rest of the world doing the same. Private companies are also putting investors dollars in foreign land. The bet is that rising food prices will put a premium on farm land in the future.
Since 2000, there has been over 70.2mm hectares sold or leased to foreign investors. How big is that? Its about 271k square miles or just bigger than all of Texas. Of the 70.2mm hectares, 34.3mm was from Africa, or about 49%; that’s just over 117k square miles or bigger than Arizona.
In many countries, like Mozambique, Tanzania, Ethiopia, and Sierra Leone the government owns all of the land and no one can actually buy or sale the land. This leaves the local farmer with no say and is pushed off for a large commercial operation lay down its operation. Local farmers are also left uncompensated for their loss, as companies will make promises and not follow through. Finally, resources, like water, can be tight in many of these small villages and areas so naturally conflict arises when a large foreign commercial farm is competing with locals for vital resources.
“The UN Food and Agriculture Organization, Jacques Diouf is also concerned about this ongoing practice, citing that it could create a “neo-colonialism”, where the poor produce food for the rich and the poor continue to suffer.”
Emerging markets, like those in Africa, have to consider their own country’s future as well. These investments bring needed capital, jobs, and technology. Companies also want to leave a positive footprint and help the local economy and farmers.
Losing out and moving on
Qatar had its eyes on Kenya in 2008. There was a deal where Kenya would lease about 100k acres of land in return for the construction of a new port, valued at about $3Bn. Political strife and another bidder (China, who led the deal) led to the fall out in 2010. Qatar still faces a serious challenge with estimates of food consumption to grow by 6.3% they have turned to other countries in Latin America and Europe and away from direct farmland purchases.
The Qatar Investment Authority (ie the Government investing arm) has used one of its subsidiaries, Hassad Foods, to combat the food problem. Hassad Foods isn’t interested in land, they want companies on the ground to do the lifting and buy ownership stakes in them. Doing a simple search on AraibanBusiness.com (you should bookmark this NOW!) shows the expansive view and strategy they are taking with investments in countries like: Australia, Sudan, India, Turkey and industries like: rice, poultry, dairy, and meat. Their global investments total $1Bn and they plan on spending more.
The strategy of small country in the middle east speaks to the broader picture. Globalization is the bigger theme and story here. It affects us directly and indirectly. The US employs the same strategy and is interwoven into the fabric of the global economy that we can’t easily separate ourselves. This story is part of the macro look at the world. We rely heavily on each other.