Whose crops, at what price? Agricultural investment in Myanmar
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After years of international isolation, Myanmar is liberalizing its economy and seeking to attract growing levels of foreign investment. Agriculture currently plays a crucial role in the country's economy and more than 60 percent of the population depend on agriculture for their livelihoods.
The Government of Myanmar (GoM) has acknowledged the need to support smallholders by improving access to credit and providing affordable fertilizers and seeds, but it has also made it clear that attracting foreign investment is crucial to achieving its goals for economic reform and reintegrating Myanmar into the global economy. This paper looks at the current level and types of agribusiness investment into Myanmar, outlines some of the potential risks to communities posed by these investments, and explores state regulation of outbound investments as a potential way to promote responsible business practices in the sector.
The paper finds that while foreign investment can play an important role in developing Myanmar‟s agriculture sector, in the current environment of limited transparency and accountability, an increase in agribusiness investments poses serious risks to the livelihoods of small-scale farmers and others dependent on land for their livelihoods.
Although the agriculture sector accounts for a small percentage of overall investment into Myanmar, a very substantial amount of land has already been handed over to companies. As of April 2014, an area nearly 10 times the size of Hong Kong (939,683 hectares) had been granted to private businesses (both Myanmar and foreign) in the form of land concessions.3 Agribusiness investments are often hidden in Myanmar. Official statistics on investments are unreliable due to over-reporting (of projects that are approved but not implemented) and under-reporting (of projects that do not go through the formal approval channels). In many cases, land concessions that have been granted to private businesses are not being cultivated, but are instead being used to enable mineral extraction or logging. Some publicly available data do exist, but more information on agribusiness investments is required both from the GoM and from investing companies. Limited transparency creates blind spots in which corruption can flourish, and incoming investors risk worsening this situation if they do not act responsibly and publish investment details.
As of December 2015, China, Singapore and Hong Kong (China) rank as the top three foreign investors into Myanmar. Thai, Malaysian, Korean and Vietnamese companies are also significant investors, and all have invested in agriculture projects in the country. Where land concessions and investments are being used for agriculture purposes, foreign businesses are investing in rubber and palm oil, with smaller investments into corn, sugarcane, biofuels, fruits and other crops.
Some companies have obtained large tracts of land for plantations, while others are purchasing from small- and medium-scale local farmers through contract farming agreements or brokers.
Both of these paths of investment – large-scale land acquisitions and contract farming arrangements – carry risks for smallholders and communities who rely on land. The granting of land for large-scale agriculture in Myanmar, as elsewhere in Southeast Asia, is frequently connected to land conflict and displacement and environmental degradation. Land dispossession has already reportedly occurred through Malaysian joint investments with the development of palm oil plantations in Tanintharyi. Poor rural women are often disadvantaged with regards to land access and ownership, and therefore investment that affects the land use of local people has a disproportionate impact on women. Even in cases where investment generates employment, when those investments require large-scale land acquisition, the disadvantages may outweigh the benefits for local people in a context where land rights are unclear and insecure.
The number of land and agricultural investments in Myanmar is highly likely to rise in the near future, from foreign and domestic companies alike. Thailand and China have guidelines and mechanisms in place to promote socially and environmentally responsible behaviour of outbound investments, although it is unclear to what extent these guidelines are being implemented.
If investment in agribusiness is isolated from the broader development of Myanmar's agriculture sector, the potential benefits will be limited. Simply approving large-scale investments will not automatically translate into benefits for small-scale farmers unless targeted policies are put in place that focus on increasing smallholders‟ access to inputs, safe credit, training, markets and security of land tenure.
This paper sets out recommendations that businesses and governments could consider following to ensure that agriculture investments into Myanmar are transparent and follow international best practice regarding due diligence, upholding human rights and providing redress to communities for violations.
Recommendations to the Government of Myanmar
- Cease granting large-scale concessions until the new National Land Use Policy is being effectively implemented and a Land Law is passed. The laws currently being used to grant concessions are widely seen as failing to protect smallholders and ethnic groups. Until the new Land Law is passed, the GoM should suspend the granting of new concessions.
- Review the implementation of existing concessions. Existing concessions should be monitored against their development plans and agreements with the government, and if the company has not met its obligations, concessions should be frozen, or revoked if serious violations have occurred.
- Ensure that decisions to grant additional land concessions in the future are based on a thorough and responsible assessment of proposals. This must take into account existing land use, and no concession should be granted without a detailed assessment and mapping of existing land use rights.
- Ensure that all relevant stakeholders are consulted on concessions, including, crucially, potentially affected communities. No land use rights should be transferred from pre-existing land users without their free, prior and informed consent (FPIC).
- Increase transparency and access to information regarding existing and future investments related to land. The GoM should increase transparency in investment by making available reliable statistics, maps and other documents related to land-based investments. This includes releasing details of the locations and boundaries of existing land concessions. These data should be stored in an open database which includes project maps, names of investors, purpose of the project and status of implementation.
Support for small-scale farmers
- Reallocate the national budget to increase agricultural spending, particularly to improve the quality and reach of extension services and inputs; this also means resourcing local government to focus on farmer-identified challenges and solutions.
- Support the development of agricultural cooperatives and producer organizations based on an appropriate regulatory framework, and empower them to link to and work with the local private sector.
- Provide scrutiny of investment proposals and monitoring of approved investments to ensure that they protect smallholder interests.
- Use government bodies to provide support to farmers in the negotiation of contract farming arrangements, and regulate and monitor ongoing contract farming agreements.
Recommendations to foreign governments
- Recognize that, to be effective, the duty to protect must extend beyond national boundaries. The duty to protect against business-related abuses is not confined to a state‟s own territory. In cases where a company‟s overseas operations are causing harm, both host and home states have a duty to act.
- Promote the adoption of international standards, principles and guidelines by companies investing overseas. Home governments should promote and encourage companies to implement international standards such as the UN Guiding Principles on Business and Human Rights (UNGPs), the OECD Guidelines to Multinational Enterprises and the UN‟s Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests (VGGT). • Governments across the region and regional institutions such as ASEAN should develop guidelines related to social and environmental safeguards in overseas investment. China has developed a number of guidelines for Chinese companies and financial institutions operating overseas. Although basic, they can serve as a foundation from which to promote improved conduct in overseas investment.
Recommendations to businesses investing in or sourcing from Myanmar
- Ensure compliance with local laws and regulations and follow international standards, including the responsibility to respect human rights as set out in the UNGPs, and the VGGT. Businesses have the obligation to follow local laws and regulations, but should go further by implementing higher standards that go beyond what is required under state law, using the International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability as a minimum. End-user companies should ensure that the companies with which they have business relationships adhere to these standards.
- Consider alternatives to large-scale land investments. Prioritize models of investment that do not require the transfer of land away from small-scale farmers and communities, and that are based on fair contracts.
Conduct thorough due diligence. Before buying or leasing new land, expanding existing operations or developing existing holdings, investors must conduct robust due diligence. This enables the company to gain a clear understanding of the local context and of social, environmental and human rights risks and/or impacts. End-user companies should likewise conduct due diligence, looking into the policies and practices of the companies with which they have business relationships. According to the UNGPs (Guiding Principles 17–21), due diligence includes:
- assessing the actual and potential impacts of human rights (including investigating impacts on existing land users);
- integrating assessment findings into decision-making processes and addressing risks and adverse impacts identified;
- tracking the effectiveness of the company‟s efforts to address adverse impacts;
- communicating these efforts to stakeholders (such as local communities).
- Assessments should also examine other environmental and social impacts, and must include the participation of potentially affected communities.
- Assessments must be based on timely, transparent and meaningful consultation with affected communities, including women. Businesses should engage with and seek the input of those who could be affected by investment decisions. These assessments should be made public in an accessible format so that communities and civil society groups can engage with the findings.
- Ensure respect for the free, prior and informed consent (FPIC) of indigenous peoples and local communities. Before making major investment decisions, businesses must consult with local people, including women and marginalized groups. Any land acquisition or land use change must follow the principles of FPIC. Consultation should continue after a project becomes operational.
- Make available operational-level grievance mechanisms, as per UNGP 29 and following the principles of UNGP 31. Effective grievance mechanisms will enable investors to catch adverse impacts before they escalate, and provide potentially affected communities and workers with a means of redress.
- Provide access to remedy in cases where the company has caused or contributed to adverse human rights impacts, as per responsibilities under the UNGPs.
- Improve transparency by disclosing project details. Companies should disclose the locations of their investments, including maps showing the boundaries of plantations and processing plants, the purpose of the investment, periods of contracts and concession agreements. Businesses should also publish information on what processes they have in place to ensure respect for human rights, including access to grievance mechanisms. Publications should be presented in a form that is accessible to affected people, and this should be done in a manner that guarantees accessibility to affected communities (e.g. appropriate language, channels of communication for disclosing project details, and so on).
- Adopt a comprehensive commitment to respect the land rights of women, communities and indigenous people; including customary and usage rights. The policy commitment should cover the company and its suppliers, and should be based on existing guidance for such commitments. • Champion responsible land-based investments among government officials, peer companies, multi-stakeholder initiatives and other stakeholders. Take an active role to foster a race to the top and strengthen sector-wide initiatives and regulations.
Further recommendations for governments, businesses and development actors can be found in the "Conclusions and recommendations‟ section at the end of this paper.