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 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. This run on agricultural land has been described as a new phase of the world food crisis.
These investments are sparking both hopes and fears. Some believe the deals can boost global agricultural productivity and farm yields, thereby bringing down global grain costs. Others, however, point to the troubling questions raised by the land acquisitions, particularly in terms of impacts on small farmers, their land, and their livelihoods. On May 5, the Asia Program and four other Wilson Center departments hosted a half-day conference that examined the patterns and motivations of such investments; considered the implications for investors, host countries, and food security; and highlighted case studies from Asia, Africa, Europe, and the former Soviet Union.
The first panel featured general perspectives. David Hallam gave an overview of international agricultural investments. He noted how the private sector—which has traditionally had a negative track record in agricultural investment—now plays a key role in overseas land investment. The principal investors include private firms, agribusiness and trading houses, governments, and sovereign wealth funds. They come from China, the Arab Gulf states, South Korea, and Japan, and they have mainly targeted Africa. Hallam asserted that these investors can potentially benefit developing countries through asset and advanced technology transfers, employment opportunities, and economic and infrastructural development.
Alexandra Spieldoch 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. They lack organization, common interests, bargaining power, credits, access to markets, and wealth. The dispossession of land leads to a loss of national identity and an invitation to political conflict and violence, as exemplified by the public outcry in Madagascar over that country's proposed land deal with South Korea's Daewoo corporation.
Gary R. Blumenthal assessed overseas farmland acquisitions from an investor's standpoint. He advised prospective investors to weigh a land's volatility, expansion capacity, asset depreciation, and historical record, in order to minimize investment risks. He acknowledged that the idea of displacing small farmers in favor of large agribusiness activities leads to "social push-back," yet contended that modern farms and private sector funding are necessary to feed a world with a hungry and growing population.
Ruth Meinzen-Dick 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 advanced a series of "critical questions" to consider before settling land deals. These include questions about land use, land tenure, property rights, environmental concerns, and transparency. She also underscored the key role of governments in safeguarding and monitoring people's rights, and of media and civil society in keeping pressure against "unjust expropriations" and on increasing transparency.
The conference's second panel focused on regional case studies. Raul Q. Montemayor spoke about Asian farmers. He noted that in Asia, some local people are acting thuggishly on behalf of foreign investors to facilitate land deals. In the southern Philippines, "goons and rogue elements" have been "let loose" to terrorize farmers, compelling the latter to evacuate, or lease, their land. 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, in an impassioned presentation that drew on his family's experiences with land dispossession in the former Southern Rhodesia, declared that without understanding local conditions and sentiments, agribusiness investments in Africa are destined to fail. He—like Spieldoch earlier—singled out the deal between Daewoo and the Madagascar government, which would have given Daewoo a 99-year lease on 1.3 million hectares of land—with Madagascar getting nothing 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 represented "one of the strongest symbols of dispossession" during the colonial era.
Carl Atkin highlighted investment opportunities in Central and Eastern Europe and in the former Soviet Union. Land in these areas is of an ideal quality, as it boasts high-performing and resilient soil. Additionally, production costs are favorable for investors. 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?" "Deployment and execution" are "everything," he argued, and they require working with the most competent people on the local level.
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. How is one to ensure the foreign land deals are 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.
Drafted by Michael Kugelman and Susan L. Levenstein.
- Deputy Director, Trade and Markets Division, UN Food and Agriculture Organization
- Director, Trade and Global Governance Program, Institute for Agriculture and Trade Policy
- President and CEO, World Perspectives, Inc.
- Senior Research Fellow, International Food Policy Research Institute
- National Manager, Federation of Free Farmers Cooperatives, Inc. (Philippines)
- Agricultural Exporter and Consultant (Senegal)
- Partner and Head of Research, Bidwells Agribusiness