Thais to weed out farm investment


Thailand’s agriculture ministry is drafting legislation that would impose new zoning regulations. Chaiwat Subprasom / Reuters

The National (UAE) | 3 September 2009

Sarmad Khan

DUBAI // Gulf investors may be forced to reconsider plans to acquire agricultural land in Thailand following moves there that could curb foreign investment in the sector.

Thailand’s agriculture ministry is drafting legislation that would impose new zoning regulations to prevent farmland from being switched to new purposes, such as exporting to specific countries.

“We have finished drafting,” Nikorn Jamnong, an adviser to the agriculture minister, told Reuters. “The law should be endorsed by the house of representatives very soon, as the government has a very clear policy that farm businesses are not allowed to be owned by foreigners.”

Gulf agricultural investors seeking to secure long-term food supplies are finding it increasingly difficult to buy foreign farmland amid a growing chorus of land-grabbing accusations coming from some of the countries that they have targeted.

Thailand in June refused ownership rights for land and agricultural businesses to several Gulf investors, citing its foreign business act, in place since 1999. The law forbids foreigners from owning businesses related to farming and livestock.

Thailand is the world’s biggest rice and rubber exporter, producing about 30 million tonnes of paddy and about 3 million tonnes of rubber sheet a year. The current law allows foreigners to form farming joint ventures there, but Thais must own at least 51 per cent.

Thai officials are now pressing to further restrict investment.

Analysts say the move could force Gulf investors to switch their attention to other countries.

“The CIS [Commonwealth of Independent States] and eastern European market perhaps will be a better strategy, and they can avoid being called land grabbers,” said Sudhakar Tomar, the managing director of Hakan Agro, a Dubai-based commodities trading firm that owns and operates farms in North America and central Asia.

Recent negative media coverage of Gulf-based agricultural investment in developing countries is forcing many deals underground, according to Huma Fakhar, the chairwoman of Market @ccess Promotion, a Bahrain-based international consultancy that advises Gulf states and other investors making agricultural investments.

“Investors are ready to tap markets like the Philippines, Indonesia or Thailand, but they are not willing to announce deals due to the bad publicity,” she said.

Some regional investors have already set up ventures in Thailand, including the Bahrain-based Islamic bank Al Salam, which in June signed an agreement with Charoen Pokphand Foods to jointly invest in agricultural businesses there.

Soaring commodities prices and high inflation last year increased concerns about food security, stoking interest in foreign agricultural assets. The UAE imports about 85 per cent of its food at an estimated cost of Dh10.64 billion (US$2.89bn) a year, and all Gulf countries are net importers of food.

The UAE last year started talks with Pakistan to invest up to $500m in its farming sector. What started as a drive to secure cheap food resources has become a viable business model and many investors are venturing into agricultural investments to diversify their portfolios amid turbulent times on global stock markets.

Jenaan, a private UAE agricultural investment firm said last month it would invest Dh925m in a venture to grow wheat in Egypt, the most populous country in Africa and a big importer of cereal.

A report from two UN agencies in May was critical of foreign land acquisitions in Africa, saying many countries were getting little for their land in return, beyond vague promises of jobs and investment.

* with Reuters

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Original source: The National

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