Three Takeaways from the New Middle Eastern Food Corridor for Emerging Economies
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Three Takeaways from the New Middle Eastern Food Corridor for Emerging Economies
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By Naam Chakravorty, Gulf Analyst, Botho Emerging Markets Group
September 23, 2022
With a pandemic disrupting supply chains and the Russian-Ukrainian war causing severe food shortages worldwide, emerging economies need to work together to build critical infrastructure and counter-balance trade monopolies. Such collaborations could efficiently increase employment, promote economic growth, and counteract trade disruptions.
The recently established Middle East Food Corridor between the UAE, India, and Israel is a good example of what emerging economies should focus on when considering trilateral trade alliances. The partnership is particularly notable because it came together amid regional disputes through carefully orchestrated joint venture investments and bilateral public-private partnerships.
Less than 10% of India's agricultural output is processed, and the country produces approximately 350 million tonnes of agricultural waste every year. This makes for an opportune partnership for countries such as the UAE and Israel, who are seeking food security and have been independently attempting to enhance food commerce with India for the last few years prior to the Abraham Accords.
The trilateral partnership was on the table once the UAE and Israel normalized relations in 2020. And even though the alliance wasn’t initially intended, each country's offerings fit together like the proverbial pieces of a puzzle, with India supplying agricultural produce, while Israel and the UAE invest in requisite infrastructure. The success of the arrangement is yet to be measured; however, the intentionality behind it is noteworthy. Emerging markets can draw several important lessons from the Middle Eastern food corridor while developing their own trilateral alliances:
The UAE and Israel have successfully and efficiently coordinated public-private partnerships in their respective countries to realize the Middle Eastern Food Corridor
For instance, the UAE engaged India in establishing a $7 billion project to create an India-UAE Food Corridor in 2019. Emaar Group, a Dubai-based real estate corporation, coordinated investments from several UAE entities as soon as the project was announced. Simultaneously, the Dubai Chamber of Commerce (DCC) began collaborating with Indian and Emirati organizations to build a specific logistical infrastructure for the food corridor. The coordination of the initiative by both public and private sector entities assisted in attracting financial commitments and goodwill while negotiating favorable terms with Indian counterparts. The initiative has since seen active participation and investments in the food corridor’s value chain by other UAE-based supply chain and logistics giants, such as Sharaf Group and DP World.
It is undoubtedly challenging for the private and public sectors to work together efficiently, as both are driven by different objectives. Governments fund infrastructure initiatives to boost economic growth, strengthen ties with other countries, and broaden their influence. The private sector, on the other hand, is fundamentally motivated by commercial goals, chief among them a successful return on investment.
In this particular instance, the UAE was successful in getting private sector participants to drive negotiations while adhering to the food corridor development framework put in place by both the Indian and the UAE governments in 2019. The lesson here is that appointing a prominent private sector corporation to carry out the project in tandem with a public sector organization helped to balance private and public goals while moderating discussions with key participants from both sectors.
Before entering into a trilateral agreement, Israel and the UAE each independently improved their bilateral ties with India
Once the Abraham Accords were in place, the countries came together to initiate three-way coordination in developing the India-Middle East Food Corridor and cut out many inefficiencies. Israeli companies, such as Evogene, worked with India’s Rasi Seeds Ltd to improve Indian rice quality and yield. ProFit Agro Ltd also launched its first Indian Hydroponic Raft System in Bengaluru in 2019, helping to move India closer toward industrialized agriculture. Israel’s contribution to the food corridor is focused on innovative technologies and the promotion of its start-ups. Meanwhile, most of the UAE investments are focused on shipping, logistics, supply chain, and retail sectors.
In February 2022, the UAE inked an economic partnership agreement with India removing almost 90% of tariffs on mutually traded goods. Thereafter, in May 2022, India and Israel signed a similar agreement. Since the Abraham Accords, a bilateral trade deal between the UAE and Israel has facilitated their cooperation in tackling the Middle East’s food security issues.
Thus even before the UAE and Israel's relations normalized, each country had the opportunity to evaluate bilateral partnerships. This gave the alliance the opportunity to understand what each brought to the table. Prior to establishing trilateral alliances, emerging economies must consider the bilateral social and economic gains with each partner to minimize the possibility of political or regional issues impeding the desired outcome.
All three countries considered long-term development objectives when establishing the food corridor to ensure that citizens come first.
The introduction of labor-eliminating agri-tech can seem daunting to a country like India, where 70% of its rural households still depend primarily on agriculture for their livelihood. However, a few initiatives took into account that Indian farmers were at the center of the progression of the food corridor. For instance, to directly connect Indian farmers with food companies in the UAE, the Dubai Multi-Commodities Center developed Agriota, a trading platform for agricultural products. The platform will facilitate the direct purchase of agricultural raw materials from Indian farmers and their delivery to the processing parks being constructed in India with funding from the Emiratis. Through such initiatives, the food corridor is expected to assist 2 million Indian farmers and provide an additional 200,000 people with employment, according to the UAE's Ministry of Economy. Additionally, Israel developed 29 agricultural centers of excellence across India between 2012 and 2015 to train people in agricultural best practices and technology, all while promoting agri-focused start-ups in its own country. In 2019 alone, these facilities provided training to an estimated 150,000 Indian farmers.
The trilateral arrangement between the UAE, Israel, and India looks to have a bright future and might be the cornerstone of broader commercial and regional arrangements. It is noteworthy how deliberately all three nations strived toward the best possible outcome for each. Because of this intentionality, this trilateral partnership between the UAE, India, and Israel will likely have long-term trade benefits for all three countries.
Naam Chakravorty is a Gulf Analyst at Botho Emerging Markets Group