Financial Times | 7 September 2010
By Javier Blas in London
The World Bank has backed the controversial practice of countries selling large tracts of agricultural land to overseas investors but is urging vendors to demand much more to increase their farming productivity and peoples’ livelihoods.
But in a long-awaited report on the so-called “global farmland grab”, the multilateral donor organisation cautions that investors need to recognise “technical and economical challenges” in the host countries which in some cases are exacerbated by “limited recognition of local rights” and “highly centralised approval processes”.
“When done right, larger-scale farming can provide opportunities to poor countries with large agricultural sectors and ample endowments of land,” the report states. The Financial Times obtained a copy of the 164-page study ahead of its publication on Wednesday.
The study is the broadest yet of the rapidly growing trend in which countries or their proxies invest in overseas land to boost their food security. It gained notoriety after an attempt in 2008 by South Korea’s Daewoo Logistics to secure a large chunk of land in Madagascar for a very low price and vague promises of investment.
“The magnitude and often speculative nature of land transactions observed recently has caught many actors by surprise,” the World Bank says on its report “Rising Global Interest in Farmland: Can It Yield Sustainable and Equitable Benefits?” It adds: “Demand for land acquisition continues and may even be increasing.”
Critics, including prominent international non-governmental organisations like Oxfam, believe the deals are a form of neo-colonialism.
The World Bank is proposing a seven-principle code of conduct for investors and host countries, including respecting local land rights, ensuring food security, ensuring transparency and good governance, consultations with those involved, responsible agro-investing, social sustainability and environmental sustainability.
The multilateral organisation also suggests building on the experience of the Extractive Industry Transparency Initiative, which commits governments to disclose revenues from oil and mining groups to improve transparency on the deals. “The EITI provides an interesting model that can inform much-needed efforts to improve land governance,” the report sates.
Critics say that eight years after its launch, only Liberia, Timor-Leste and Azerbaijan, are full members of the EITI, questioning the efficiency of the initiative. But the World Bank’s report states that countries could receive “tangible benefits” in the form of technical, financial or reputational support.
The bank paints a poor picture of some of the deals already signed, saying that “land acquisition often deprived local people, in particular the vulnerable”. It adds: “Consultations – if conducted at all – were superficial and did not result in written agreements, and environmental and social safeguards were widely neglected.”
“In some cases, investors who were unable to turn a profit due to unrealistic plans then started to encroach … [on] land that had explicitly been set aside for use by local people, causing environmental damage and threatening local food security.”
The bank says that “45m hectares worth of large scale farmland deals were announced” in 2009, compared with annual average expansion of agricultural land of less than 4m hectares before 2008.
Juergen Voegele, director of agriculture at the World Bank, says in the report that “given commodity price volatility, growing human and environmental pressures, and worries about food security”, interest in farmland is rising.“The demand for land has been enormous,” he writes in the study’s preface.