Part 8: Outcomes of the Saudi Arabia Food Security Partnership

Inquiry into the Saudi Arabia Food Security Partnership.

In this Part, we look at the outcomes intended from the Partnership.

With the Ministry signing the contract for services with HAATT Est on 19 February 2013, the Partnership has been in place for about three and a half years. As at June 2016, the Partnership continued. The arrangement includes paying or providing up to $11.5 million of cash and goods and services to the Al Khalaf Group. As at June 2016, $8.7 million had been spent. The Ministry is contractually required to complete the project and spend up to the remaining $2.8 million.

No formal assessment of the benefits to New Zealand of proceeding with the Partnership was prepared before or after Cabinet made its decision to set up the Partnership in February 2013. We cannot now look back on this project and accurately assess the benefits for New Zealand from the money spent, although there are some indicators as to what the project might have achieved in a wider sense.

In its decision in February 2013, Cabinet sought to achieve several outcomes through the Partnership. These included:

  • settling the "long running dispute" with a Saudi Arabian investor in New Zealand;
  • improving the relationship between New Zealand and Saudi Arabia;
  • improving New Zealand's relationship with the Gulf Cooperation Council, including food security and removing blockages to the free trade agreement; and
  • entering New Zealand companies into new markets by creating a hub for New Zealand businesses to launch into the Middle East and Africa.

The dispute with a Saudi Arabian investor in New Zealand

In Part 2, we noted that animal welfare concerns resulted in changes to New Zealand's export of sheep for slaughter policy. We noted how this affected Sheikh Hmood's companies in New Zealand and led to a dispute. In Part 3, we explained how the Partnership was set up and was intended to settle the dispute, including by exporting sheep for breeding. The Partnership has resulted in the negotiation and signature of the export for breeding protocols between New Zealand and Saudi Arabia.

We noted in Part 7 that 900 breeding ewes were exported from New Zealand to Saudi Arabia for breeding purposes.

Interviews and documentation, including letters from Sheikh Hmood and his companies' representatives, have shown his satisfaction with the Partnership in that it has resulted in limited sheep exports for breeding, new approaches at his Um Alerrad farm, and improved relations between New Zealand and Saudi Arabia. We understand that Sheikh Hmood's companies have invested more than $80 million in the agri-business operation on his Um Alerrad farm (including meeting most of the costs of the ongoing abattoir build). We were told that the Al Khalaf Group still expects that New Zealand might eventually allow the exports of sheep for slaughter to resume.

The current and future relationship between New Zealand and Saudi Arabia

We were told that there has been an improvement in the relationship between Saudi Arabia and New Zealand, particularly after New Zealand sheep arrived in Saudi Arabia in October 2014. Saudi Arabian objections to the free trade agreement could be spoken about directly. An official told us that the evidence for this improvement is the continued and growing trade between Saudi Arabia and New Zealand.

Meeting reports show that the then Saudi Arabian Minister of Agriculture thought that, after a period of turbulence, relations with New Zealand were more settled and that the signing of protocols about exporting sheep for breeding would have a positive effect on Saudi Arabia's perceptions of New Zealand.

Officials told us that restrictions to trade between Saudi Arabia and New Zealand had not (re)appeared and subsequent diplomatic encounters between the two countries are reportedly no longer "poisoned" by discussions about exports of sheep for slaughter. The protocols for exporting sheep for breeding were signed because of the need to export breeding stock for the Partnership. It remains to be seen what future use is made of the protocols.

The free trade agreement, Gulf Cooperation Council relationship, and food security

Reports from 2014 meetings with the then Saudi Arabian Minister of Agriculture show that the Partnership removed one barrier to finalising the free trade agreement with the Gulf Cooperation Council. The free trade agreement currently remains unsigned, although we have been told that discussions continue. We note the joint statements on 7 April 2016 and 27 September 2016 by New Zealand and Saudi Arabia confirming a desire for progress, positivity about the trading relationship and growing food security partnership, and pleasure with progress being made to complete the free trade agreement.

We noted in Part 3 that, although officials identified the "live sheep issue" as a significant obstacle to the signing of the free trade agreement, we found no evidence of substantial analysis about whether this was so, including whether there were other obstacles to signing. Also, we did not see evidence of substantial analysis assessing the risk to existing trade from live sheep exports.

As noted in Part 3, the decision to set up the Partnership was made in the context of New Zealand's interests in the broader Gulf region, including the food security objectives of the Gulf Cooperation Council and the possible export opportunities for some New Zealand companies involved in the Partnership. We have been told that representatives from other Gulf states and other areas of Saudi Arabia have visited and shown interest in the New Zealand companies and technologies on show at the Agrihub.

New Zealand companies' entry into Gulf Cooperation Council markets

More than 30 New Zealand companies are reported as having had some engagement in the Agrihub. We interviewed three New Zealand companies involved in supplying goods and services to HAATT Est under the Partnership.

We were told two New Zealand companies used equipment from the Agrihub to display agriculture technology at the Riyadh regional trade fair in 2015. We also understand that some companies intend to continue their involvement in the Agrihub and have received some interest from other Gulf Cooperation Council markets.

One of the companies we interviewed told us that its involvement in the Agrihub has directly led to new export opportunities. Others commented on their limited involvement and that "time will tell" on subsequent opportunities. We were told that at least four New Zealand companies will be at the Riyadh regional trade fair in 2016 and that two new projects are being scoped.

Interviewees who have visited the Agrihub mentioned Sheikh Hmood's continued representation and promotion of New Zealand interests, including at the Riyadh regional trade fair in 2015. Our interviews with New Zealand companies show that Sheikh Hmood readily allows those companies access to the Agrihub (as we noted in Part 4, there are no contractual rights to access it). We were also told that Sheikh Hmood hosts interested parties from Saudi Arabia and the Gulf Cooperation Council to view his Agrihub.

Our comments on these matters

Cabinet sought to achieve several objectives through the Partnership. Many uncertainties remain about whether these objectives have been achieved. The Partnership depends on the quality of interpersonal relationships between New Zealand Ministers, officials, companies, and Sheikh Hmood and his companies' representatives.

We have not seen a formal assessment of the benefits to New Zealand of proceeding with the Partnership. We cannot now look back on this project and accurately place a value on what New Zealand gained for the money spent.

We expect the Ministry and NZTE to assess and report on what the Partnership has achieved once all of the goods and services that are covered by the contract for services have been provided. We expect that this reporting would help the public to understand the outcomes if it included such matters as:

  • what has been achieved with the money spent, including progress towards the free trade agreement and other benefits;
  • the financial benefits;
  • the residual risks; and
  • the lessons learned from the arrangements, including an assessment of the success and suitability of the mechanisms used.