Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
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diversifying investments across a number of countries, including those such as Argentina, Brazil,
Turkey, Canada, and the United States, which have more stable investment climates, may be less
vulnerable to climate change and are certainly less prone to domestic food security concerns,
Jenaan and other investors may reduce some of the risk of price controls, export bans, or
government-imposed changes to investment agreements, and may also reduce susceptibility to
adverse events related to climate change.
Case Assessment
Saudi Arabia’s government intervened on the commodities market by imposing a minimum
price for wheat well above the global market price, which triggered a lot of farmers to continue
producing wheat despite the fact that production was expensive, inefficient and absorbed a lot
of water resources.
Soon after reducing the fixed price, production of wheat in the current setting seemed
economically unfeasible. Only through innovations, and technological advances, production of
wheat and other commodities became sustainable. For the remaining part, the government of
Saudi Arabia (as well as Qatar in this respect), explored for opportunities to invest abroad.
Greenfield agricultural FDI strategies were developed to remain in full control of the production
and export of the agricultural products. Full control was considered a priority as a result of
contractual breaches during the food crisis with explosive price increases as a result. Not only
Saudi Arabia, but almost all GCC countries combined should be considered as a prime target
region for outward FDI projects into other COMCEC Member Countries.
4.2 Case II Turkey as destination for inward FDI
Turkey’s agricultural sector is attractive to foreign investors from many different regions and
for many different reasons. With approximately 76 million people, a fast-growing economy, and
upper middle-income status, it is large and growing market with consumption trends that reflect
growing affluence. It is also both a large importer and a large exporter of agricultural produce
and food items, with trade that has increased by an annual average of 8.6 percent over the past
20 years (See figure 30). Turkey, which has an association agreement and is in accession
negotiations with the European Union, offers investors free access to the EU, a market of more
than 400 million people. Turkish companies also have a large and expanding presence in Central
Asia. Turkey has a large industrial base and food-processing industry, which offers investors the
potential to develop vertically integrated agriculture and agro-processing operations. Finally,
the country has a very attractive investment climate, especially when compared to most other
COMCEC Member Countries and most other developing countries.
Turkey is also an attractive agriculture investment destination because it is possible for
investors to reap significant gains through improvements in productivity, which remains
relatively low. About 25 percent of the labour force still works in the agricultural sector, as
compared to two percent in the United States and Germany, three percent in France, seven
percent in Bulgaria, and twelve percent in Greece.93
93 World Bank statistical database.