“Land-grab” deals involving multinationals in developing countries have often been seen as detrimental to food security and the livelihoods of millions of small farmers, but a new study puts such deals into the context of agricultural investments more generally.
“Yes, these deals are important, but in most countries domestic investors acquire more land than foreigners,” said Pascal Liu, one of the editors of a new report by the Food and Agriculture Organization (FAO) which looks at various forms of foreign investments in agriculture including land deals.
Liu says most agriculture-related foreign direct investment (FDI) flows into food processing (such as – fruit juices, sauces and tinned food), distribution and retailing rather than into land acquisition.
The FAO researchers, in collaboration with the International Institute for Environment and Development (IIED), examined foreign investments in nine countries (Ghana, Mali, Senegal, Uganda, Tanzania and Zambia Thailand, Cambodia and Brazil) selected on the basis of the
availability of data and the ability of local institutions to provide additional research.
FAO estimates that investments of more than US$80 billion a year are needed globally to keep pace with population and income growth, and feed more than nine billion people in 2050. “High food prices in recent years have cast a spotlight on the need to boost investment in poor countries, so that farmers can respond to rising demand, and as a means to raise rural incomes,” said Jonathan Hepburn of the
Geneva-based International Centre for Trade and Sustainable
Although FDI has risen significantly, especially in Asia and Latin America over the past decade, only a small share goes to agriculture – less than 5 percent in sub-Saharan Africa, said Liu.
The FAO study also looked at research on “land-grab” deals by the Land Matrix, a partnership between the Centre for Development and Environment (CDE) at the University of Bern in Germany, the French Centre de coopération internationale en recherche agronomique pour le développement (CIRAD), the German Institute of Global and Area Studies (GIGA), the German Agency for International Cooperation (GIZ) and the International Land Coalition (ILC) – a global alliance of NGOs and intergovernmental organizations.
Ward Anseeuw, a CIRAD researcher at the University of Pretoria, told IRIN the “nuanced viewpoints” in the FAO study on agricultural production, diversification of crops, employment creation, technology transfer and infrastructure development, “based on empirical case studies and presenting mixed results, are important contributions to a too often ideologized debate”.
IRIN summarizes some of the findings from the study and other reports:
1) Lack of data prevents the establishment of trends in FDI, including those relating to the acquisition of land for agriculture. The number of countries for which data are available varies from year to year. Looking at agriculture alone, comparable data are available for 44 countries, so you never have the complete picture.
2) Media reports on “land-grab” deals are not entirely reliable, as most countries do not have accurate records. In Mozambique, for example, media sources indicated that more than 10 million hectares were acquired between 2008 and 2010, whereas a national inventory for 2004-2009 calculated a figure closer to 2.7 million hectares.
3) The Land Matrix, which collates and seeks to cross-check
information on large-scale land acquisitions, is a more reliable source but is also affected by other factors such as the lack of transparency in such deals. Investors and governments may not want to publicize such deals for various reasons. And even when agreements are signed and sealed, the portion of land that is actually cultivated could be very different from the total amount acquired. Kerstin Nolte, a researcher with GIGA, told IRIN: “What the Land Matrix data confirms is that indeed something is going on – we find that a large share of the deals are actually implemented (as opposed to speculation) and the noise made about `land grabbing’ is based on a real phenomenon.”
4) Investors are targeting countries with weak land tenure security but at the same time relatively high levels of investor protection. “Some 66 percent of the deals reported in the Land Matrix were in countries with high prevalence of hunger.” This was backed up by the 2012 Global Hunger Index.
5) Good quality, fertile land with irrigation is being targeted by investors. Most deals also target areas close to cities, which reduces the scope for infrastructural development spin-offs.
6) Countries can reduce the risk of entering into harmful deals by taking guidance from international agreements such as the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security (adopted in May 2012 by the Committee on World Food Security), or Voluntary Principles for Responsible Agricultural Investment which respect rights, livelihoods and resources. Liu said Sierra Leone had approached FAO to develop guidelines for sustainable bioenergy investment. “They [Sierra Leone] were being approached by several foreign investors and wanted to do it properly without compromising their food security and farmers.”
7) As far as large-scale land deals are concerned, different business models which involve small farmers while letting them keep ownership of their land, work best. A number of models envisage varying degrees of participation, including contract farming arrangements; there are also more innovative models such as joint ventures between foreign investors and a local farmer cooperative. In such models, local farmers and other members of the local community are active partners.
8) The impact of FDI varies by project and type of business model adopted, and it is difficult to generalize. In most cases jobs were created initially, but livelihoods may not have been sustained. Projects became increasingly mechanized or the crop being produced was changed; less labour was needed. Small farmers are often displaced, pastoralists lose grazing land; general income loss may lead to social fragmentation. GIGA’s Nolte said research on the impact of FDI relating to land acquisition “is not very advanced, yet. The Land Matrix data is very poor on this. We cannot cite good examples of land deals; this is extremely difficult as land deals are dynamic. Impacts are likely to change over the course of an investment project.”
9) Business models in which small farmers got to sell their produce to a contractor at higher prices (or where locals earned additional income for services such as weeding) helped the local economy. Another positive spin-off was when small farmers who worked as wage earners reinvested their earnings in their own farms.
10) In some investment projects small farmers acquired new skills. But, “the studies suggest that the actual transfer of technology is seldom up to the level announced by the investors.”
11) The impact of FDI on local livelihoods depends on the production system and crops selected. Imported synthetic inputs and equipment are unlikely to help the local economy. Crops such as coffee, fruit and vegetables would involve more small farmers than commercial crops.
12) At the national level, FDI has brought about some substantial benefits. Ghana’s total palm oil output is expected to improve quite substantially because of investment by a single transnational company. In Uganda, rice production nearly doubled from 120,000 tons in 2002 to 200,000 in 2010 (The Daily Monitor, Nov 2011) because of the introduction of a new rice variety by private sector investments. In Ghana, export earnings from non-traditional agricultural commodities increased four-fold between 2000 and 2009 thanks to FDI.
13) Ten countries have received the bulk (70 percent) of FDI targeted at land acquisition: Sudan, Ethiopia, Mozambique, Tanzania,
Madagascar, Zambia and the Democratic Republic of Congo, the Philippines, Indonesia and Laos.
14) Governments are increasingly supporting investments by their private sectors in foreign land deals, rather than investing directly in agricultural land in developing countries. “This results partly from a strategy of risk reduction, including financial risks and risks to their reputation in the wake of negative media coverage. This support can take the form of public-private partnerships whereby the government provides or guarantees loans and provides tax rebates, technical assistance or other means of assistance,” said the FAO study.
15) South African companies lead African investment on the continent. Globally, most investors are focusing their agriculture-related FDI in Africa – in Nigeria (with UK and Netherlands being the top two investors), South Africa (Switzerland and Netherlands), Ghana (UK and USA), Egypt (Saudi Arabia and Switzerland) and Angola (USA and UK).
16) In Asia – Japan leads investment, followed by China. Global investors tend to favour China, India, Vietnam and Indonesia. 17) FDI encourages the diversification of crops. In Senegal FDI contributed positively to the production of some high quality fresh fruits, according to the FAO study.
* Originally published on IRIN (the humanitarian news and analysis service of the UN-OCHA), on Nov. 14, 2012, titled ‘FOOD: Spotlight on “land grab” deals’. Items from IRIN are published in this blog with a written permission to do so, without implying endorsements.
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