The New Security Beat | 12 May 2009
By Michael Kugelman, Asia Program Associate, and Susan L. Levenstein, Asia Program Assistant
The world is experiencing a grain rush. With increasing frequency, wealthy, food-importing, and water-scarce countries—particularly the Arab Gulf states and the rich countries of East Asia—are investing in farmland overseas to meet their food-security needs. Similarly, the private sector is pursuing farmland deals abroad, with many investors perceiving land as a safe investment in an otherwise-shaky financial climate.
These investments are sparking both hope and fear. Some believe the deals can boost global agricultural productivity and farm yields, thereby bringing down global grain costs. Others, however, point to the land acquisitions’ negative impacts on small-scale farmers. On May 5, the Asia Program and four other Wilson Center programs hosted a half-day conference that considered the implications for investors, host countries, and food security, highlighting case studies from Asia, Africa, Europe, and the former Soviet Union.
The private sector—including private firms, agribusiness and trading houses, and sovereign wealth funds—now plays a key role in overseas land investment, noted David Hallam of the Food and Agriculture Organization. These investors come from China, the Arab Gulf states, South Korea, and Japan, and they have mainly targeted Africa. Hallam asserted that these investors could potentially benefit developing countries through asset and advanced-technology transfers, employment opportunities, and economic and infrastructure development.
Alexandra Spieldoch of the Institute for Agriculture and Trade Policy examined the “lopsided” power relations that prevail in foreign land acquisitions. Smallholders in poor countries like Sudan, Ethiopia, Madagascar, Zimbabwe, and Pakistan “have no political voice,” making them vulnerable to exploitation. The loss of land invites political conflict and violence, as exemplified by the public outcry in Madagascar over that country’s proposed land deal with South Korea’s Daewoo. Gary R. Blumenthal of World Perspectives, Inc., acknowledged that displacing small farmers in favor of large agribusiness activities generates “social push-back,” but contended that modern farms and private-sector funding are necessary to feed the world’s hungry and growing population.
Ruth Meinzen-Dick of the International Food Policy Research Institute discussed prospects for a “code of conduct” to regulate foreign land deals. She proposed that such a code have teeth and be modeled after the European Union’s code of conduct on bribery. Meinzen-Dick argued that questions regarding land use, land tenure, property rights, environmental concerns, and transparency should be settled before finalizing land deals. She also underscored the key role of governments in safeguarding and monitoring people’s rights, and of the media and civil society in increasing transparency and keeping up the pressure against “unjust expropriations.”
Case Studies: Asia, Africa, Europe
Raul Q. Montemayor noted that in Asia, some local people are facilitating land deals on behalf of foreign investors. In the southern Philippines, “goons and rogue elements” have been “let loose” to terrorize farmers, compelling the latter to lease their land—or evacuate. Montemayor argued that Asian farmers stand to benefit little financially from leasing their land to agribusiness enterprises. Those who have done so are receiving rental payments between 50 cents and a dollar per day. Yet he argued that any Asian farmer with his or her own standard two-hectare plot can generate the same, if not higher, daily income without renting out land.
Chido Makunike, a Senegalese agricultural commodities exporter, declared that without understanding local conditions, agribusiness investments in Africa are destined to fail. Like Spieldoch, he singled out the deal between Daewoo and the Malagasy government, which would have given Daewoo a 99-year lease on 1.3 million hectares of land—with Madagascar receiving little in return. The deal collapsed after it triggered political unrest. “It’s not enough to look at risk factors,” Makunike argued. “You must look at the sentiments of the people.” In Africa, far from being perceived as a mere “economic resource,” land has cultural, sentimental, and political meanings, and its loss was “one of the strongest symbols of dispossession” during the colonial era.
Carl Atkin of Bidwells Agribusiness highlighted investment opportunities in Central and Eastern Europe and the former Soviet Union. Land in these areas boasts high-performing and resilient soil, and production costs are low. However, there are also considerable challenges. Infrastructure is lacking, and grain storage is problematic. Obtaining land titles can be “complex,” and land tenancy laws can be “very archaic.” According to Atkin, however, the biggest challenge is local management: “Can people on the ground get things done?”Though they indicated varying levels of support for overseas farmland acquisitions, all panelists agreed that international investment in agriculture can be a good thing—if done the right way. While Meinzen-Dick and others lobbied for an international code of conduct to govern the transactions, other panelists insisted that foreign land investment must respect regulations in host countries. Montemayor, for example, called for “clear rules consistent with national policy goals,” and implored foreign investors to respect local laws. Video of the event & other: