Food industry is strong investment

The fundamentals of supply and demand support the case for investment in sugar refineries.
The search for reliable food supplies has led many Gulf states to invest in agricultural developments in Africa and Asia in recent years, but some attention is also now being paid to their domestic potential.

Sugar refining is a relatively small part of the food industry, but developing their capabilities here could provide a platform for wider diversification and reduce their reliance on imports.

The fundamentals of supply and demand support the case for investment. Raw sugar production totals about 6.8 million tonnes a year (t/y) in the Middle East and North Africa, but consumption is high, at 16.5 million t/y, leaving a 9.7 million t/y market for imports.

Currently, there are just two refineries in the Gulf, in Dubai and Saudi Arabia, which have a combined capacity of about 2.7 million t/y. But Abu Dhabi, Bahrain and Oman all have plans to set up their own production plants by 2011.

By capitalising on their established transport infrastructure and access to low-cost energy supplies, they are aiming to capture a share of the market by importing raw sugar from Brazil, refining it and then selling white sugar, not just to meet domestic needs but also to supply other regional consumers. A similar strategy is already being pursued in Syria.

Despite the current financial crisis, the long-term prospects for the sector are positive, with sugar demand forecast to grow at a rate of about 2 per cent a year, largely because of regional population growth.

If the three new sugar refinery projects do go ahead, it will represent a significant step in the Gulf states' ambitions to broaden their industrial base, and will establish the first link in a value-added manufacturing chain that, with time, could lessen the GCC's dependence on food imports.