UN sees rise in land grab for food security

Financial Times | September 17 2009

By Javier Blas, Commodities Correspondent

Overseas agriculture investment by developing countries is “on the rise” due to food security concerns, the UN said on Thursday but it warned that similar moves to secure food in the past had been “mostly unsuccessful”.

The UN Conference on Trade and Development (Unctad) said in a report that foreign direct investment flows in agriculture jumped to $3bn (€2bn, £1.8bn) annually in the 2005-2007 period, up from $600m during the 1990s.

However, FDI flows in agriculture remain very limited when compared with overall levels.

Unctad’s World Investment Report is the first detailed analysis of FDI flows behind the so-called farmland grab trend, in which countries such as Saudi Arabia or South Korea invest in overseas plots. The investors plan to export most crops back to feed their own populations.

The trend – which some see as neocolonialism and others as a development opportunity – gained notoriety after an attempt by South Korea’s Daewoo Logistics to secure a big chunk of farmland in Madagascar .

“This year’s World Investment Report reveals a real and rising interest?.?.?.?for investment in developing countries’ agricultural industries,” said Supachai Panitchpakdi, secretary-general of Unctad. “There are indications that ‘south-south investment’ in agricultural production is on the rise, and that this trend is set to continue in the long-term.”

Analysts said the bulk of previous foreign investment in agriculture – particularly in cash crops such as coffee, sugar or bananas – was from the northern hemisphere’s rich countries into the southern hemisphere’s poor countries.

Unctad said investment in agriculture had been spurred by rising food prices and shortages, which had resulted in some export bans.

“In the wake of the food crisis, the push for food security has become a major driver of new investment in agriculture,” the report states.

The Geneva-based body warned that such moves to secure food supplies had previously been “mostly unsuccessful”, such as the case of South Korea in the 1960s and 1970s and Gulf countries in the 1970s.

“One reason was that agriculture is among the most sensitive and thus most regulated industries in host countries,” it said.

At the same time, investors’ inappropriate policies, inexperience and lack of understanding of the local culture also contributed to the failures, it added.

But it acknowledged that, even if past experiences did “not bode well for the latest wave of such investments”, the current situation represented a “sea-change from the past, with high prices, shortages and volatility in food crops” that could result in investments thriving.

“Success in these investments is imperative” for some countries, it said, noting scarce farmland and water supplies and rising populations.

Unctad also cautioned that the scale of some of the potential investments was “large and controversial” because they will affect exiting use of farmland, “thereby creating major changes and potential displacements in traditional agriculture”.
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