International International investments in investments in

agricultural productionagricultural production

David HallamDavid HallamDeputy Director, Trade and Markets Division, Deputy Director, Trade and Markets Division,

FAOFAO

Agricultural investment in the headlinesAgricultural investment in the headlinesSaudi Investors to Put $100m into Ethiopian FarmSaudi Investors to Put $100m into Ethiopian Farm ((FortuneFortune, 15.4.2009), 15.4.2009)

Saudis Set Aside $800m to Secure Overseas Food Saudis Set Aside $800m to Secure Overseas Food ((Financial TimesFinancial Times, 15.4.2009), 15.4.2009)

UAE Stepping Up Agricultural Investment in Sudan UAE Stepping Up Agricultural Investment in Sudan ((Sudan TribuneSudan Tribune, 7.8.2008), 7.8.2008)

Food Is Gold So Billions Invested in Farming Food Is Gold So Billions Invested in Farming ((New York TimesNew York Times, 5.6.2008), 5.6.2008)

Daewoo Leases African Plantation Daewoo Leases African Plantation ((BBCBBC, 19.11.2008), 19.11.2008)

Land Leased to Secure Crops for South Korea Land Leased to Secure Crops for South Korea ((Financial TimesFinancial Times, 18.11.2008), 18.11.2008)

Korea’s Daewoo Logistics Leases Madagascar Land for Feed, Fuel Korea’s Daewoo Logistics Leases Madagascar Land for Feed, Fuel ((BloombergBloomberg, , 18.11.2008)18.11.2008)

Short of Food? Rent Half a Country Short of Food? Rent Half a Country ((New York TimesNew York Times, 19.11.2008), 19.11.2008)

Pakistan Offers Farmland to Foreign Investors Pakistan Offers Farmland to Foreign Investors ((ReutersReuters, 20.4.2009), 20.4.2009)

UN Warns Of Neo-Colonialism UN Warns Of Neo-Colonialism ((Financial TimesFinancial Times, 19.8.2008), 19.8.2008)

Manufactured Famine: A New Wave of Food Colonialism Is Snatching Food Manufactured Famine: A New Wave of Food Colonialism Is Snatching Food from the Mouths of The Poor from the Mouths of The Poor ((GuardianGuardian, 26.8.2008), 26.8.2008)

Dispute Erupts Over Plans to Invest Millions in Rice Farming Dispute Erupts Over Plans to Invest Millions in Rice Farming ((EconomistEconomist, , 23.4.2009)23.4.2009)

OutlineOutline Recent trends and patterns in Recent trends and patterns in

international investments in international investments in agriculture agriculture

Motivations for international Motivations for international investments in agricultureinvestments in agriculture

Impacts of international investments Impacts of international investments in agriculturein agriculture

Policy implicationsPolicy implications Outstanding issuesOutstanding issues

Recent investment trends and Recent investment trends and patternspatterns

focus on investment for agricultural production focus on investment for agricultural production available information – WIR, media – plans versus available information – WIR, media – plans versus

realized investments, inadequate national realized investments, inadequate national statisticsstatistics

not a new development but is there an increasing not a new development but is there an increasing trend (land grab)?trend (land grab)?

who are the investors? private sector who are the investors? private sector (agribusiness, investment companies, trading (agribusiness, investment companies, trading companies, mining companies), governments, companies, mining companies), governments, sovereign funds – Arab States, Chinasovereign funds – Arab States, China

destinations of investment flows – Africa, S.E. Asia destinations of investment flows – Africa, S.E. Asia but also S. Americabut also S. America

Recent investment trends and Recent investment trends and patternspatterns

nature of investments – land acquisitions nature of investments – land acquisitions predominate?predominate?

many land acquisitions in excess of 10 000 many land acquisitions in excess of 10 000 ha and up to 1 million haha and up to 1 million ha

examplesexamples land acquisition – UAE in Pakistanland acquisition – UAE in Pakistan contract farming – horticulture in East Africacontract farming – horticulture in East Africa traditional FDI - Chiquita bananas in Mozambiquetraditional FDI - Chiquita bananas in Mozambique mixed models – sugar in Southern and East Africamixed models – sugar in Southern and East Africa

vertical integration against recent trends in vertical integration against recent trends in FDIFDI

Motivations – investing countriesMotivations – investing countries

Motivations depends on investor – Motivations depends on investor – private sector, government, sovereign private sector, government, sovereign fundsfunds

food security food security (worsening) natural resource constraints – (worsening) natural resource constraints –

land and waterland and waterinternational trade policies and the international trade policies and the

reliability of international marketsreliability of international markets biofuel productionbiofuel production portfolio diversification – financial gainportfolio diversification – financial gain

Motivations – host countriesMotivations – host countries need for investment – foreign direct need for investment – foreign direct

investment needed to supplement investment needed to supplement other sources of investment fundsother sources of investment funds

financial benefits of asset transfers financial benefits of asset transfers small?small?

developmental benefits – technology developmental benefits – technology transfer, employment creation, transfer, employment creation, infrastructural developmentsinfrastructural developments

ODA to agricultureODA to agricultureOfficial Development Assistance 1980 – 2007 (USD million)

0

20000

40000

60000

80000

100000

120000Agriculture Total ODA

Proportion of total ODA on Agriculture 1980 – 2007

0

2

4

6

8

10

12

14

1980 1985 1990 1995 2000 2005

Impacts of international Impacts of international investmentsinvestments

economic, political, social, environmental impactseconomic, political, social, environmental impacts ““win-win” or “neo-colonialism”? - ethical concernswin-win” or “neo-colonialism”? - ethical concerns positive developmental effects of foreign direct positive developmental effects of foreign direct

investment investment technology transfer and upgradingtechnology transfer and upgrading employment creation, multiplier effects and poverty employment creation, multiplier effects and poverty

reductionreduction food production and food securityfood production and food security commercialisation and large-scale agriculturecommercialisation and large-scale agriculture diversification and development of value-added diversification and development of value-added

production production

Impacts of international Impacts of international investmentsinvestments

negative developmental effects negative developmental effects inappropriate economic model inappropriate economic model social, rights issues, social, rights issues, transparency, governance issues and transparency, governance issues and

sovereigntysovereigntyenvironmental issuesenvironmental issuesworst case scenariosworst case scenarios

the record on foreign direct the record on foreign direct investment in agricultureinvestment in agriculture

Policy implicationsPolicy implications encouraging inward investment – recent encouraging inward investment – recent

policy reforms but land raises particular issuespolicy reforms but land raises particular issues creation of receptive domestic sectorcreation of receptive domestic sector investment climate and incentivesinvestment climate and incentives trade policy commitmentstrade policy commitments consistency with food security strategiesconsistency with food security strategies establishing clear property rightsestablishing clear property rights limiting adverse social and environmental limiting adverse social and environmental

impactsimpacts land use rights, involvement and land use rights, involvement and

compensation of stakeholders strengthen or compensation of stakeholders strengthen or maintain weak?maintain weak?

Policy implicationsPolicy implications international codes of conduct and international codes of conduct and

global corporate social responsibility global corporate social responsibility initiativesinitiatives

international investment agreementsinternational investment agreements dispute settlementdispute settlement WTO disciplines (URAA, SPS-TBT, WTO disciplines (URAA, SPS-TBT,

TRIPS)TRIPS)

Some outstanding issuesSome outstanding issues Investing country issuesInvesting country issues

why vertical integration? alternatives to equity why vertical integration? alternatives to equity investments – non-equity investments; tradeinvestments – non-equity investments; trade

Host country issuesHost country issues policy and legal frameworks to minimise risks and policy and legal frameworks to minimise risks and

maximise benefitsmaximise benefits International issuesInternational issues

international regulation and codes of conductinternational regulation and codes of conduct matching capital to opportunities but how to matching capital to opportunities but how to

devise investment programmes to meet devise investment programmes to meet investment needs? investment needs?