U.N. Food Chief Warns on Buying Farms

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Wall Street Journal | September 10, 2008

By MARGARET COKER

ABU DHABI -- As Mideast investors make plans to pump cash into farm projects in the developing world, the head of the United Nations' food agency said he is discouraging them from making direct purchases of farmland to avoid local backlash or other controversy, which could cause the investment trend to dry up.

Amid this year's sharp rise in global food and commodities prices, public and private investment funds from oil-rich Middle East states are discussing billions of dollars worth of agriculture investment in places such as Sudan and Pakistan.

The deals are meant to ease food-security concerns in the Gulf, which imports more than 50% of its basic food needs. The strategy is to create a guaranteed supply of food at guaranteed prices by investing in land and the production of crops such as wheat and rice.

Jacques Diouf, the director-general of the Food and Agriculture Organization, has campaigned for years for more foreign investment in the global agriculture sector. But he said he is advising the Gulf states against outright land purchases, which he says could trigger political backlash in developing countries that are struggling to feed their own populations. Mr. Diouf said he doesn't want unintended scandals to cause this new wave of investment into agriculture to dry up.

"Foreign direct investment in agriculture is the only way we are going to eradicate global poverty," he said. "I have no problem in Arabs doing the investment. Where I start getting worried is [a situation in which investors] rush and buy land all over the place," said Mr. Diouf. "Land is a political hot potato," he said. "My job is to avoid...provoking a negative response in the developing world."

Joint ventures would maximize returns for both the investors and the developing countries, Mr. Diouf said. Mr. Diouf is meeting with government officials in the Persian Gulf this week to discuss the matter. Government officials in Abu Dhabi didn't return phone calls seeking reaction on the issue.

The deals have raised concern that agriculture resources could be dominated by foreign investors who will ship food overseas. In politically unstable countries, meanwhile, critics worry that large-scale foreign investments could prop up unpopular regimes or exacerbate longstanding legal disputes over land ownership, much as big foreign oil or mining concessions have done.

Mr. Diouf said he supports the proposed Gulf food deals, saying if they are constructed correctly they have the potential to transform developing economies by providing jobs both in agriculture and other supporting industries like transportation and warehousing.

He said he told members of the ruling families of Abu Dhabi and Dubai, the two biggest emirates of the United Arab Emirates, to concentrate investment on joint-venture projects in which they provide capital, management expertise and salaries to local workers.

Original source: Wall Street Journal
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