RIYADH, 4 January 2006 — A group of Saudi farmers will leave for Sudan on Jan. 31 on a four-day visit to explore the possibility of investing in that country’s agricultural sector.

“We are willing to invest up to $ 100 million for setting up a joint stock company provided we own the land and not lease it,” Turki Faisal Al-Rasheed, president of Golden Grass Inc., told Arab News. Dr. Fahad Al-Sultan, secretary general of the Council of Saudi Chambers of Commerce and Industry, will be the leader of the delegation.

Asked why the Saudi farmers would like to invest in Sudan when the Saudi government was providing incentives to them, he said the high cost of diesel oil was having an adverse impact on the agricultural production. “The price of diesel oil has shot up from eight halalas to 40 halalas per liter during the last seven years,” Al-Rasheed said, adding that the price hike had an adverse impact on the Saudi agriculture. Also, the government is discouraging the production of water-intensive crops.

“At one time, 85 percent of our peanut production was earmarked for exports. Now under the World Trade Organization (WTO) rules, export items are not eligible for subsidies. This has left farmers with no option but to scale down their production or quit the market,” he observed.

Al-Turki blamed the Saudi negotiating team for keeping the farmers in the dark about the implications of joining the WTO. “There was no transparency on the government side as far as the farming community is concerned. If Saudi Arabia became a member of the WTO, it is not because of the negotiating team, but due to the political clout of our leadership and the initiative of King Abdullah.”

With the Kingdom having formally acceded to the WTO, agricultural subsidies are to be gradually reduced by 13.3 percent over a 10-year period. The Kingdom has also pledged to reduce its overall support for agriculture under a long-term plan to minimize any adverse impact on the agricultural sector.

The tariff levels for the rest will remain unchanged for now. However, the Kingdom has agreed that it would not maintain any export subsidies on agricultural products.

The downturn on the farm front began when the government launched its program of gradual reduction of subsidies for the production of water-intensive crops like wheat, alfalfa, peanuts, etc. One of the early firms to feel the impact was the Bisha Agricultural Development Company which posted a net loss of SR1 million for 2003, slightly down from a net loss of SR1.1 million for the year before. This was after reporting a net loss of SR820,000 for the first nine months of 2003, compared to SR645,000 for the same period of 2002.

The company’s total assets declined to SR31 million from SR31.8 million, while total liabilities edged up to SR8.6 million from SR8.5 million. Shareholders’ equity shrank 4.3 percent year-on-year to SR22.4 million.

According to Professor Muhammed Sahlawi, a Riyadh-based economist, smaller producers of foodstuffs (basic) - for example vegetables and fruit for consumption within the Kingdom - will feel little or no threat from imported produce. “We produce these basic foods cheaply and competitively, and they should be encouraged,” he said, adding that they have little need of subsidy.

However, large-scale industrial farming - wholesale production of beef and dairy produce - will be affected by the WTO requirement to reduce and eventually eliminate farm subsidy. These industries, he points out, “are still relatively infant here, and should be subsidized for some time, but gradually phased out.”