Question

Consider the effect of trade liberalization on agricultural markets. Using your weekly readings and additional research, discuss the challenges experienced by the Saudi Arabia agriculture industry. What financial support does the KSA government provide for its agricultural sectors? How could the KSA improve its agricultural sectors policies? What types of results would you expect for these improvements? Any foreseen consequences?

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Answer 1

                                    Trade liberalisation refers to the removal of the restrictions that are imposed on the free trade between nations. These would include restrictions such as tariffs, duties, surcharges and non-tariff barriers like licensing rules and quotas. The following are expected to be the effects of the trade liberalisation on the agricultural markets

· Trade liberalisation would reduce the tariffs on import of agricultural products which would cause increased imports and thus losses to the domestic agricultural market

· The relaxation of licensing rules may induce changes in the domestic procurement policies which may affect the procuring potential of the domestic market

· It may result in job losses in the domestic market and hence would reduce the potential of job market.

· Although it may lead to higher growths in the initial stages in the economy, it would result in the reduction of scientific knowledge ratio in the longer run

                                    Agriculture contributes about 4% to the non-oil GDP of Saudi Arabia. The agricultural sector of Saudi is focused on the products like dates, diary products, egg, poultry etc which is the major export item of Saudi Arabia. Although the agrarian policies have improved the sector drastically in the past decade, the geographical factors still affects the agricultural productivity of the nation on a large scale. Saudi Arabia is being dominated by the deserts which causes the nation to focus on certain products alone and does not allow the production of many agricultural products. The agricultural policies are also based on the geographical features of the nation. The nation is also benefited with the oil richness which causes the nation to focus less on agricultural production.

                                    With reference to the above mentioned effects, the government of KSA has made substantial budgetary contributions to the agrarian sector by improving the contributions to the irrigation and similar methods that have resulted in the improvement of the sector. The recent budgetary allocation to the agricultural sector has seen an improved addition of US$200 million which is aimed at increasing the focus on organic farming by 300%. There have been similar introductions to the agrarian sector which makes sure that the future agricultural sector is safe. Although the increased financial contributions and budgetary supports have resulted in the improvements in the agrarian sector, it may reduce the focus on other sectors which have to be dealt with specific programmes so that the budgetary balance and economic growth is obtained.