Developing agriculture sector in the Gulf Cooperation Council (GCC) as a means of

diversifying the economy

Salma Said Humaid AL-NaamaniPhD

Ibra College of Technology
Business Studies Departement
April 2018

1
Abstract

With the fall in oil prices, many Arab countries, including Oman and the other GCC states –
Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE – have been confronted with the urgent need
to broaden their economies away from dependence on the ‘black gold’. One possibility is to
stimulate agriculture.
This paper discusses into how this might be done, using Oman as a case study, for the
benefit of all GCC states. The conclusion was that with their modern infrastructure, sound revenue
collection, and policies to protect consumers and the environment, the GCC countries should be
able to modernize and expand their agricultural output.
The governments of the GCC states are aware their economies need to be less dependent
on a single product. An example is encouragement of the small-to-medium size businesses (SME),
which points the way to a straightforward and relatively low-cost development of agriculture.
Given the up-to-date communications and transport in the GCC states and the ready
demand from the populations of the urbanized states like Dubai and Doha, it appears that there is
a very sound basis for a successful agriculture industry.1
The separate governments of the GCC states are already strengthening their infrastructure;
roads, water collection, seaports, and energy generation and transmission, all of which is vital to
the creation of an agriculture sector that can make a major contribution to the economy. This paper
considers the part these developments will play in the raising of the agricultural input into the
economies of these states. This study reveals the level of government activity in terms of
regulations – affecting both land use and labour – and improvement of the physical capabilities of
the nation to generate agronomic leadership by the Omanis.

Introduction
Alsadoun (2009) describes oil and gas extraction as representing over 85 per cent of GDP of the
GCC states – a worryingly heavy dependence on one source of income, and a situation clearly not
sustainable.2 These states must move to a more sustainable economy and therefore one with
significant inputs from resources other than fossil fuels4. Knowledgeable commentators have made
the case that for so long the wealth generated by oil and gas blinded the Gulf Coast economies to
the need to nurture alternative sources of revenue and is the principal cause of the economies of
these states being underdeveloped in relation to those of others.
For some years now, Oman and the other Gulf States have been working to raise the
importance of agriculture to the economy, along with manufacturing and the provision of services.
Focusing on agriculture and its capacity for generating jobs, the governments of the GCC
states have turned towards it as a way out of the one-product trap. There is a sufficiency of labour,
and a well of experience from the indigenous farming communities, so there is no reason for the

1
Rizzo, A. (2014). Rapid urban development and national master planning in Arab Gulf countries. Qatar as a case
study. Cities, 39, 50-57.
2
Alsadoun, N. A. (2009). Essays on economic integration among the Gulf Cooperation Council countries (Doctoral
dissertation, University of Southampton).

2
sector not to be modernised and to expand.3 Some overseas investment is already being sought,
given attractiveness via the improvements to infrastructure mentioned earlier.4
To secure foreign investment from places such as the US, the governments have had to
remove obstacles and restrictions both political and cultural, so that foreign money feels
comfortable developing manufacturing, services, and of course, agribusiness.5 While not popular
with some sections of the population, such opening up is essential if the countries are to find other
employment for its citizens other than in oil and gas extraction.
Examples of products that can be commercially farmed in these states are dates, citrus fruit,
mangos, coconuts, honey, dairy products, poultry and fish. While overseas investment is being
welcomed into other sectors of the GCC economies, 6 local businesses with sound management
and modern technology are being encouraged to compete at a global level.7
Alsadoun (2009) stated that principal contributor to GDP in the GCC states was oil,
followed by chemicals; agriculture made no contribution at all. 8 In general, the local population
is only willing to work in the public sector – some types of works in oil and gas extraction,
however, the lands, are left to ‘foreign-workers’.9 The agricultural community has low levels of
education and there has been little planning from government.
Development in some states of the GCC is affected by unbalanced managing of public
money, for instance sometimes unnecessarily large sums are allocated to some sorts of ineffective
projects.10
In preparation for the reforms necessary in the economies of the six GCC states, vocational
training is now available for some of the young.11
Provided they are used in the right ways, reforms to the conduct of concerned authorities and
business, and the provision of better roads, harbours, housing, agriculture, and power distribution
are the keys to growth in the six states that make up the GCC .12

3
Dutton, R. W. (1983). Handicrafts in Oman and their role in rural community development. Geoforum, 14(3), 341-
352.
4
Al-Iriani, M. (2007). Foreign direct investment and economic growth in the GCC countries: A causality
investigation using heterogeneous panel analysis. Topics in Middle Eastern and North African Economies, 9.
5
Bolle, M. J. (2006). US–Oman free trade agreement. Congressional Research Service.
6
Mishrif, A., & Al-Naamani, S. (2018). Regional Integration, the Private Sector and Diversification in the GCC
Countries. In Economic Diversification in the Gulf Region, Volume I (pp. 209-233). Palgrave Macmillan, Singapore;
Metwally, M. M. (2004). Impact of EU FDI on economic growth in Middle Eastern countries. European Business
Review, 16(4), 381-389.
7
Anderson, J. W. (2000). Producers and Middle East Internet Technology: Getting beyond" Impacts". The Middle
East Journal, 419-431.
8
Alsadoun, N. A. (2009). Essays on economic integration among the Gulf Cooperation Council countries (Doctoral
dissertation, University of Southampton).
9
Fasano-Filho, M. U., & Goyal, R. (2004). Emerging strains in GCC labor markets (No. 4-71). International
Monetary Fund.
10
Delavallade, C. (2006). Corruption and distribution of public spending in developing countries. Journal of
economics and finance, 30(2), 222-239.
11
Carroll, M., & Palermo, J. (2006, January). Increasing national capability for quality higher education the case of
the Sultanate of Oman. In AAIR 2006: Community, Customers, Clients, Colleagues and Competitors: Defining
relationships through institutional research: Proceedings of the 2006 Australasian Association for Institutional
Research annual forum. AAIR.
12
Mina, W. (2007). The location determinants of FDI in the GCC countries. Journal of Multinational Financial
Management, 17(4), 336-348.

3
 Under the Omani government, export shipping has been helped by the development and
upgrading of ports, for example Sohar, Duqam, Sultan Qaboos, and Salalah ports.13 Industrial
corridors will run up and down each of the six countries generating exports and breathing life into
their economies, including agriculture – and all of this creates employment and adds to GDP.
In addition, there has been a surge in the provision of tertiary education. In 2002, there
were 37 universities in the area, five years later there were 62.14
Considering the agricultural sector in some developed countries, for instance the USA and
Germany, it is evident that these have a healthy and expanding agronomy.15 This is because
their infrastructure is well-planned and efficient, supported by appropriate funding from the state.16
The GCC states have invested in projects designed to promote foreign investment in agriculture,
particularly in the critical area of the water needed for farming.17 The GCC states have a current
target to recover used water to a level of 14 per cent of total requirements – in the process they
recycle over half of the water they use.18

CASE STUDY
Both Germany and the US provide examples of a dynamic agronomy, although they both nurture
an equally dynamic automotive industry and, in the case of the US, is also a significant producer
of oil and gas.19 The export of agricultural products delivers US$118 billion to GDP, while the
figure in Germany is the equivalent of US$71 billion,20 while in the GCC, as we have already
remarked, the contribution of agriculture is negligible (Alsadoun, 2009).
Both Germany and the US are attractive to foreign investors in agriculture, and local
business is also encouraged through government activity.21 The US is acknowledged by
commentators as a leader in agribusiness and is also rated as the easiest country in the world in
which to do business.22 And, of course, it has a first-world level of infrastructure.23

15
Al-Alawi, M. K. M. S. FOOD SECURITY APPROACH IN SULTANATE OF OMAN. FOOD SECURITY–
GLOBAL TRENDS AND PERSPECTIVE, 239.
13
Mukerji, S., & Jammel, N. K. (2008). Perspectives and strategies towards collaboration in higher education in the
GCC Arab states of the Gulf. Asian Journal of Distance Education, 6(1), 76-86.

15
Yussefi, M. (2010). The world of organic agriculture: statistics and emerging trends 2008. Earthscan.
16
Schmoch, U., Reid, P. P., Encarnacao, J., & Abramson, H. N. (Eds.). (1997). Technology transfer systems in the
United States and Germany: Lessons and perspectives. National Academies Press.
17
Al-Zubari, W. K. (1998). Towards the establishment of a total water cycle management and re-use program in the
GCC countries. Desalination, 120(1-2), 3-14.
18
Ibid.
19
Specht, K., Siebert, R., Hartmann, I., Freisinger, U. B., Sawicka, M., Werner, A., ... & Dierich, A. (2014). Urban
agriculture of the future: an overview of sustainability aspects of food production in and on buildings. Agriculture
and human values, 31(1), 33-51.
20
Simpson (2018)., Top Agriculture producing countries., available online at;
https://www.investopedia.com/financial-edge/0712/top-agricultural-producing-countries.aspx. [Accessed
26/4/2018].
21
Porter, M. E. (1996). Competitive advantage, agglomeration economies, and regional policy. International
regional science review, 19(1-2), 85-90.
22
Arabic 21 (2016), How does the FDI map look like globally in 2017?; available at:
https://arabi21.com/story/1012573/-2017. [Accessed 26/4/2108].
23
Solis, L. E., Raghu-Nathan, T. S., & Subba Rao, S. (2000). A regional study of quality management infrastructure
practices in USA and Mexico. International Journal of Quality & Reliability Management, 17(6), 597-614.

4
 By contrast, although Oman has made improvements to and constructed some ports, to
match the level of infrastructure in the developed economies calls for a yet much greater degree of
investment and government support.24
Agriculture in both Germany and the US has the advantage of proximity to huge
markets – in the case of Germany, the EU, and of the US its own massive domestic market. The
GCC states are at some distance from large consumer markets. Europe and the US have networks
of large rivers and their ports are large, highly developed, and technologically sophisticated.25
There are even plans to stimulate and sustain agriculture on and around urban buildings in cities
in Germany and the USA.26
Through government in the US and Germany farmers have adequate access to power and, vitally,
water.27 It helps both of course to have large and generally full rivers and both have substantial
rainfall.28 Both countries employ technology to extend and multiply harvests.29
In contrast, the GCC countries, being largely desert, are short of water. To counter this,
there are some suggestions to dam Wadis in Oman, to build desalination plants because Oman has
1700 kilometres of coastline, and to activate artificial rain.
Both the German and US governments encourage investment in agribusiness, as a means
of increasing levels of employment.30
For instance, the volume of Corn (maize) production of US accounts for half of all global exports
of corn, and wheat, 18 per cent.31
Both the USA and Germany have ports, with highly-skilled operators, from which their
exports can reach the rest of the world.32 In both cases, the principal food producing areas are
close both to the ports and to their internal consumer markets. 33
There are small businesses within the agricultural sector of the GCC that need to become
more productive in order to compete with overseas suppliers. 34 They need better technology, and
government help to get it, and this is only at a very early stage. Small businesses in the GCC are

24
Winckler, O. (2000). The challenge of foreign workers in the Persian/Arabian Gulf: The case of
Oman. Immigrants & Minorities, 19(2), 23-52.
Hanasaki, N., Inuzuka, T., Kanae, S., & Oki, T. (2010). An estimation of global virtual water flow and sources of
water withdrawal for major crops and livestock products using a global hydrological model. Journal of
Hydrology, 384(3-4), 232-244.
26
Chapagain, A. K., Hoekstra, A. Y., & Savenije, H. H. G. (2006). Water saving through international trade of
agricultural products. Hydrology and Earth System Sciences Discussions, 10(3), 455-468.
27
Van Vliet, M. T., Yearsley, J. R., Ludwig, F., Vögele, S., Lettenmaier, D. P., & Kabat, P. (2012). Vulnerability of
US and European electricity supply to climate change. Nature Climate Change, 2(9), 676.
28
Ahrens, L., Felizeter, S., Sturm, R., Xie, Z., & Ebinghaus, R. (2009). Polyfluorinated compounds in waste water
treatment plant effluents and surface waters along the River Elbe, Germany. Marine pollution bulletin, 58(9), 1326-
1333.
29
Broadberry, S. N. (1998). How Did the United States and Germany Overtake Britian? A Sectoral Analysis of
Comparative Productivity Levels, 1870–1990. The Journal of Economic History, 58(2), 375-407.
30
Smit, J. (1996). Urban agriculture, progress and prospect: 1975-2005. Cities feeding people series; rept. 18.
31
Simpson (2018)., Top Agriculture producing countries., available online at;
https://www.investopedia.com/financial-edge/0712/top-agricultural-producing-countries.aspx. [Accessed
26/4/2018].
32
Mahroum, S. (2001). Europe and the immigration of highly skilled labour. International Migration, 39(5), 27-43.
33
Ibid.
34
Saleem, Q. (2013). Overcoming Constraints to SME Development in MENA Countries and Enhancing Access to
Finance. International Finance Corporation, IFC0513. Online available: http://www. ifc.
org/wps/wcm/connect/1e6a19804fc58e529881fe0098cb14b9/IFC+ Report_Final. pdf.

5
probably over-regulated and starting a business is unnecessarily complicated.35 The government
needs a better grasp of the statistics of the agricultural sector and a clearer real-time picture of what
is happening to harvests, production and marketing, amounts exported, the number of jobs being
created and who is taking them, projects and progress.36
The GCC states have to use the example of the advanced economies to evaluate their own
agricultural sector and to develop it. The USA and Germany, both major manufacturers of
automobiles, the USA additionally a major producer of oil and gas, provide an excellent model
from which other less developed states have been able to build and develop their own agriculture
sectors.

Irrigation as an a major issue

For agriculture in dry territories, irrigation is a critical factor, and the primary one which the GCC
countries have to develop. These states have to examine and evaluate:
 Building more dams in Omani wadis
 Desalinating seawater and pumping it to the inland areas
 Cloud seeding to produce rainfall in rural arid areas; and activate the artificial rainfall.
 Reduce the amounts of moisture needed by trees and bushes

Major Challenges
Summing up the problems GCC states must overcome:
 Lack of water
 Lack of proper education and instruction in agronomy
 Cultural barriers to local citizens working on the land
 Preference for imported foods by the better-off
 No tariffs on imported foodstuffs
 High fuel costs
 Delays at borders
Further to the above mentioned points; education and training for farmers and agricultural workers
has not been a government priority so is disorganised. The sector, such as it is, depends on the
acquired skill and knowledge of the older generation who are less inclined than the young to
embrace and maintain technology-based tools, so efficiency and productivity is low. Mainly for
cultural reasons, farm labour is mostly imported; ‘foreign-workers’ are not normally educated, or
inclined to creative ideas, and they are likely to be subject to incompetent management.

Overcoming the challenges:

Previous paragraphs in this paper have indicated what needs to be done – and that the fundamental
element in creating an agrarian sector that can support the inevitable decline in revenues from
fossil fuels is to ensure adequate supplies of water. Then it should be a staged process to lift the
sector into being a major contributor to GDP.

35
Saleh, N. A. (2002). Research management issues in the Arab countries. Higher Education Policy, 15(3), 225-
247.
36
Ibid.

6
 The Omani government is experimenting with the use of fertilizers which require lesser
amounts of water and has ordered the planning of a million palm trees.37
There are some initiatives by His Majesty to improve the agriculture sector; to improve and
develop such vital sector which are supported by the governments as a part of projects of food
security. For example the project of having million palm tree based on the order of His Majesty to
have them in Ibri.38
This move towards agribusiness as a substitute for total dependence on oil and gas to drive
the economy needs to be done in stages but each stage must be done efficiently and with an eye to
the future. As mentioned earlier in this paper there is a wide range of agricultural products that can
be grown and harvested for both the domestic and overseas markets. The efforts must be spread
across this range.
The GCC governments have encouraged the movement of products by creating free-trade
zones. They have also recognised the need for inward foreign investment in some sectors of the
economy – a number of international corporations have taken up offers – and for partnerships
between the governments and private entrepreneur.39
Distribution of produce and manufactures in the GCC states is by road and everything
has to pass through national borders. The seaports are state-owned and the question is why not
open them to private ownership? So far, state efforts to improve infrastructure have not taken into
account the needs of a nascent agricultural sector.40
Although at present most freight in the GCC states goes by road, there are plans to
upgrade the rail network, which is quite extensive, to handle a great deal more freight, including
agricultural produce. 41 Rail is a more efficient way of moving goods in bulk than in large road
vehicles because it ought to be faster, less subject to delays caused by road accidents or heavy
traffic – and it is environmentally more friendly.
Linked to the more efficient movement of goods within the GCC states, the seaports play
a key role in being able to earn export income from the agricultural sector. The governments have
to concentrate on developing all the parts of the economy that further the growth of sectors other
than oil and gas production. Every area, no matter how small or distant from the main centres,
must be connected to the infrastructure and the opportunities for higher employment levels will
come.
Conclusion:
The fall in oil prices and global reductions in use, plus the reaction to importing oil from politically-
sensitive areas means that the six GCC states need to diversify their economies – and quickly. The
most promising alternative to dependence on fuel extraction is to develop agriculture. Since
agriculture in GCC states is based on small businesses, the states’ governments must introduce

37
AbdulRazak, N. A. (2010, March). Economics of date palm agriculture in the sultanate of Oman, current situation
and future prospects. In IV International Date Palm Conference 882 (pp. 137-146).
38
Ibid.
39
Oman, C. P. (2000). Policy competition for foreign direct investment.
40
Mina, W. (2007). The location determinants of FDI in the GCC countries. Journal of Multinational Financial
Management, 17(4), 336-348.
41
Belwal, R., & Belwal, S. (2010). Public transportation services in Oman: A study of public perceptions. Journal of
Public Transportation, 13(4), 1.

7
reforms to regulations in order to attract investment and to make it easier to do business in
agriculture sector, while at the same time continuing to develop infrastructure to facilitate this
shift.
If the agricultural sector in the GCC states is to assume the size and importance in future
economic growth the governments wish, then there have to be significant changes in the laws and
regulations that affect it. Small businesses, such as farms, are hampered by rules and regulations,
especially those governing employment, that generate costs for them. If this administrative regime
is lightened and made more small business-friendly, socio-economic growth will follow.

For a much larger and dynamic agricultural sector, there is going to have to be a rethink of
the way farm products are collected, stored, carried, and distributed. Hubs and storage facilities
must be in the right places for efficiency and least cost. Now logistics service providers will have
to rethink their supply chains of agriculture products, emphasizing on the optimal locations.
The logistic sector would also need to improve their service level which help the local farmers.
The transportation is also going to be more efficient in order to activate such vital sector.

References:
AbdulRazak, N. A. (2010, March). Economics of date palm agriculture in the sultanate of Oman,
current situation and future prospects. In IV International Date Palm Conference 882 (pp.
137-146).
Ahrens, L., Felizeter, S., Sturm, R., Xie, Z., & Ebinghaus, R. (2009). Polyfluorinated compounds
in waste water treatment plant effluents and surface waters along the River Elbe,
Germany. Marine pollution bulletin, 58(9), 1326-1333.
Al-Iriani, M. (2007). Foreign direct investment and economic growth in the GCC countries: A
causality investigation using heterogeneous panel analysis. Topics in Middle Eastern and
North African Economies, 9.
Alsadoun, N. A. (2009). Essays on economic integration among the Gulf Cooperation Council
countries (Doctoral dissertation, University of Southampton).
Al-Zubari, W. K. (1998). Towards the establishment of a total water cycle management and re-
use program in the GCC countries. Desalination, 120(1-2), 3-14.
Anderson, J. W. (2000). Producers and Middle East Internet Technology: Getting beyond"
Impacts". The Middle East Journal, 419-431.
Arabic 21 (2016), How does the FDI map look like globally in 2017?; available at:
https://arabi21.com/story/1012573/-2017. [Accessed 26/4/2108].
Belwal, R., & Belwal, S. (2010). Public transportation services in Oman: A study of public
perceptions. Journal of Public Transportation, 13(4), 1.
Bolle, M. J. (2006). US–Oman free trade agreement. Congressional Research Service.
Broadberry, S. N. (1998). How Did the United States and Germany Overtake Britian? A Sectoral
Analysis of Comparative Productivity Levels, 1870–1990. The Journal of Economic
History, 58(2), 375-407.
Carroll, M., & Palermo, J. (2006, January). Increasing national capability for quality higher
education the case of the Sultanate of Oman. In AAIR 2006: Community, Customers,
Clients, Colleagues and Competitors: Defining relationships through institutional
research: Proceedings of the 2006 Australasian Association for Institutional Research
annual forum. AAIR.

8
Chapagain, A. K., Hoekstra, A. Y., & Savenije, H. H. G. (2006). Water saving through
international trade of agricultural products. Hydrology and Earth System Sciences
Discussions, 10(3), 455-468.
Delavallade, C. (2006). Corruption and distribution of public spending in developing
countries. Journal of economics and finance, 30(2), 222-239.
Dutton, R. W. (1983). Handicrafts in Oman and their role in rural community
development. Geoforum, 14(3), 341-352.
Fasano-Filho, M. U., & Goyal, R. (2004). Emerging strains in GCC labor markets (No. 4-71).
International Monetary Fund.
Mahroum, S. (2001). Europe and the immigration of highly skilled labour. International
Migration, 39(5), 27-43.
Mina, W. (2007). The location determinants of FDI in the GCC countries. Journal of
Multinational Financial Management, 17(4), 336-348.
Mishrif, A., & Al-Naamani, S. (2018). Regional Integration, the Private Sector and
Diversification in the GCC Countries. In Economic Diversification in the Gulf Region,
Volume I (pp. 209-233). Palgrave Macmillan, Singapore; Metwally, M. M. (2004). Impact
of EU FDI on economic growth in Middle Eastern countries. European Business
Review, 16(4), 381-389.
Mukerji, S., & Jammel, N. K. (2008). Perspectives and strategies towards collaboration in higher
education in the GCC Arab states of the Gulf. Asian Journal of Distance Education, 6(1),
76-86.
Oman, C. P. (2000). Policy competition for foreign direct investment.
Porter, M. E. (1996). Competitive advantage, agglomeration economies, and regional
policy. International regional science review, 19(1-2), 85-90.
Rizzo, A. (2014). Rapid urban development and national master planning in Arab Gulf countries.
Qatar as a case study. Cities, 39, 50-57.
Saleem, Q. (2013). Overcoming Constraints to SME Development in MENA Countries and
Enhancing Access to Finance. International Finance Corporation, IFC0513. Online
available: http://www. ifc.
org/wps/wcm/connect/1e6a19804fc58e529881fe0098cb14b9/IFC+ Report_Final. pdf.
Saleh, N. A. (2002). Research management issues in the Arab countries. Higher Education
Policy, 15(3), 225-247.
Schmoch, U., Reid, P. P., Encarnacao, J., & Abramson, H. N. (Eds.). (1997). Technology
transfer systems in the United States and Germany: Lessons and perspectives. National
Academies Press.
Smit, J. (1996). Urban agriculture, progress and prospect: 1975-2005. Cities feeding people
series; rept. 18.
Solis, L. E., Raghu-Nathan, T. S., & Subba Rao, S. (2000). A regional study of quality
management infrastructure practices in USA and Mexico. International Journal of Quality
& Reliability Management, 17(6), 597-614.
Specht, K., Siebert, R., Hartmann, I., Freisinger, U. B., Sawicka, M., Werner, A., ... & Dierich,
A. (2014). Urban agriculture of the future: an overview of sustainability aspects of food
production in and on buildings. Agriculture and human values, 31(1), 33-51.
Van Vliet, M. T., Yearsley, J. R., Ludwig, F., Vögele, S., Lettenmaier, D. P., & Kabat, P. (2012).
Vulnerability of US and European electricity supply to climate change. Nature Climate
Change, 2(9), 676.

9
Winckler, O. (2000). The challenge of foreign workers in the Persian/Arabian Gulf: The case of
Oman. Immigrants & Minorities, 19(2), 23-52.
Yussefi, M. (2010). The world of organic agriculture: statistics and emerging trends 2008.
Earthscan.
Al-Alawi, M. K. M. S. FOOD SECURITY APPROACH IN SULTANATE OF OMAN. FOOD
SECURITY–GLOBAL TRENDS AND PERSPECTIVE, 239.
Hanasaki, N., Inuzuka, T., Kanae, S., & Oki, T. (2010). An estimation of global virtual water
flow and sources of water withdrawal for major crops and livestock products using a global
hydrological model. Journal of Hydrology, 384(3-4), 232-244.
Simpson (2018)., Top Agriculture producing countries., available online at;
https://www.investopedia.com/financial-edge/0712/top-agricultural-producing-
countries.aspx. [Accessed 26/4/2018].

10