Blog about the upcoming food shortage crisis

Everybody throws stones at the prophet, but when the crisis comes they yell: “Why nobody warned us?”

UAE looks at building food reserve

By Simeon Kerr in Dubai
Published: March 13 2008 00:08 | Last updated: March 13 2008 00:08
The United Arab Emirates is considering building a strategic reserve of essential foodstuffs as the government seeks ways to curb rampant inflation to a new target of 5 per cent in 2008.
Sultan al-Mansouri, the UAE’s newly appointed economy minister, said on Wednesday the federation would within six months complete a feasibility study on building six months’ worth of staple food reserves to enable the government to control food prices as it seeks to tame inflation.
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“We need a formula to control prices once they are out of our control,” he said.
Inflation is rising across the oil-rich Gulf, threatening competitiveness on ample oil-fuelled liquidity, rising government spending and low interest rates due to the country’s peg to the US dollar. It is also hurting residents’ finances.
Analysts estimate inflation in the UAE rose to about 10 per cent last year, but the economy ministry will not release its analysis of last year’s inflation figure for at least another month.
Mr Mansouri on Wednesday also signed an initial agreement with a co-operative supermarket chain to maintain 2007 prices in 16 basic foodstuffs throughout 2008. Union Co-op will spend Dh45m ($12m, €8m, £6m) to absorb expected food price rises of up to 40 per cent this year on rising domestic demand and global food price increases.
Ownership shift
The United Arab Emirates is set to introduce a new companies law opening up some sectors to 100 per cent foreign ownership within six months, the economy minister said on Wednesday.
Sultan al-Mansouri said the government would raise the foreign ownership threshold only in sectors that benefit the economy, declining to elaborate. The UAE currently forces foreign businesses to hold minority stakes or to operate from “free zones”. The law has been delayed for years in part by vested interests opposed to opening the economy too quickly at the expense of domestic businesses. It aims to reform regulations and encourage more initial public offerings by allowing firms to retain control and float less than 55 per cent of their equity on the Dubai and Abu Dhabi stock markets.
The company said the move was part of its commitment to “corporate social responsibility”.
The economy ministry hopes other supermarkets will follow suit. French hypermarket Carrefour has a large presence in the UAE, while the booming economy and fast-growing population has persuaded the UK’s Waitrose to open up to 20 branches by 2010.
Mr Mansouri said the government would consider introducing price curbs in the coming year. Abu Dhabi and Dubai have already introduced biannual rent caps of 5 per cent in a bid to cool the rental market in the UAE’s two largest cities.
The government is also considering subsidising essential foodstuffs for its citizens, who make up one-fifth of the expatriate-dominated UAE. Other Gulf states such as Saudi Arabia, Kuwait and Oman have introduced some food subsidies, as states try to ease inflation without resorting to the political and economic minefield of revaluation or delinking from the dollar peg.
Mr Mansouri conceded that the currency link to the weakening dollar was helping fuel import-related inflation, but said the decision rested with the central bank.
The bank governor has ruled out depegging from the dollar or revaluing the dirham. Officials have said the bank continues to weigh monetary policy options, such as revaluing the currency, but that no decision is expected until next year.

source.

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March 13, 2008 - Posted by | Uncategorized

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