International investments in agricultural production

1
International investments in agricultural
production

• David Hallam
• Deputy Director, Trade and Markets Division, FAO

2
Agricultural investment in the headlines

• Saudi Investors to Put 100m into Ethiopian Farm
  (Fortune, 15.4.2009)
• Saudis Set Aside 800m to Secure Overseas Food
  (Financial Times, 15.4.2009)
• UAE Stepping Up Agricultural Investment in Sudan
  (Sudan Tribune, 7.8.2008)
• Food Is Gold So Billions Invested in Farming (New
  York Times, 5.6.2008)
• Daewoo Leases African Plantation (BBC,
  19.11.2008)
• Land Leased to Secure Crops for South Korea
  (Financial Times, 18.11.2008)
• Koreas Daewoo Logistics Leases Madagascar Land
  for Feed, Fuel (Bloomberg, 18.11.2008)
• Short of Food? Rent Half a Country (New York
  Times, 19.11.2008)
• Pakistan Offers Farmland to Foreign Investors
  (Reuters, 20.4.2009)
• UN Warns Of Neo-Colonialism (Financial Times,
  19.8.2008)
• Manufactured Famine A New Wave of Food
  Colonialism Is Snatching Food from the Mouths of
  The Poor (Guardian, 26.8.2008)
• Dispute Erupts Over Plans to Invest Millions in
  Rice Farming (Economist, 23.4.2009)

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Outline

• Recent trends and patterns in international
  investments in agriculture
• Motivations for international investments in
  agriculture
• Impacts of international investments in
  agriculture
• Policy implications
• Outstanding issues

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Recent investment trends and patterns

• focus on investment for agricultural production
• available information WIR, media plans versus
  realized investments, inadequate national
  statistics
• not a new development but is there an increasing
  trend (land grab)?
• who are the investors? private sector
  (agribusiness, investment companies, trading
  companies, mining companies), governments,
  sovereign funds Arab States, China
• destinations of investment flows Africa, S.E.
  Asia but also S. America

5
Recent investment trends and patterns

• nature of investments land acquisitions
  predominate?
• many land acquisitions in excess of 10 000 ha and
  up to 1 million ha
• examples
• land acquisition UAE in Pakistan
• contract farming horticulture in East Africa
• traditional FDI - Chiquita bananas in Mozambique
• mixed models sugar in Southern and East Africa
• vertical integration against recent trends in FDI

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Motivations investing countries

• Motivations depends on investor private sector,
  government, sovereign funds
• food security
• (worsening) natural resource constraints land
  and water
• international trade policies and the reliability
  of international markets
• biofuel production
• portfolio diversification financial gain

7
Motivations host countries

• need for investment foreign direct investment
  needed to supplement other sources of investment
  funds
• financial benefits of asset transfers small?
• developmental benefits technology transfer,
  employment creation, infrastructural developments

8
ODA to agriculture
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Impacts of international investments

• economic, political, social, environmental
  impacts
• win-win or neo-colonialism? - ethical
  concerns
• positive developmental effects of foreign direct
  investment
• technology transfer and upgrading
• employment creation, multiplier effects and
  poverty reduction
• food production and food security
• commercialisation and large-scale agriculture
• diversification and development of value-added
  production

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Impacts of international investments

• negative developmental effects
• inappropriate economic model
• social, rights issues,
• transparency, governance issues and sovereignty
• environmental issues
• worst case scenarios
• the record on foreign direct investment in
  agriculture

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Policy implications

• encouraging inward investment recent policy
  reforms but land raises particular issues
• creation of receptive domestic sector
• investment climate and incentives
• trade policy commitments
• consistency with food security strategies
• establishing clear property rights
• limiting adverse social and environmental impacts
• land use rights, involvement and compensation of
  stakeholders strengthen or maintain weak?

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Policy implications

• international codes of conduct and global
  corporate social responsibility initiatives
• international investment agreements
• dispute settlement
• WTO disciplines (URAA, SPS-TBT, TRIPS)

13
Some outstanding issues

• Investing country issues
• why vertical integration? alternatives to equity
  investments non-equity investments trade
• Host country issues
• policy and legal frameworks to minimise risks and
  maximise benefits
• International issues
• international regulation and codes of conduct
• matching capital to opportunities but how to
  devise investment programmes to meet investment
  needs?