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| Need to regulate foreign investment in agriculture, says think tank |
| Surinder Sud / New Delhi May 04, 2009, 01:03 IST |
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Taking note of the trend of rich countries acquiring land in developing nations for growing food and fuel crops, a global farm policy think tank has suggested evolution of an international code of conduct for foreign direct investment (FDI) in agriculture.
Such investments in land acquisition have the potential to inject the much-needed funds into agriculture and rural development in under-developed countries. But at the same time they also run the risk of dispossessing the poor of their land that they have been depending on for livelihood. Besides, such deals tend to push up land prices.
This has been indicated in a study — ‘Landgrabbing by foreign investors in developing countries’ — by the Washington-based International Food Policy Research Institute (IFPRI). It has attributed the strengthening of this trend to the food price crisis of 2007-08.
“Food importing countries with land and water constraints but rich in capital, such as the Gulf states, are at the forefront of new investments in farmland abroad. In addition, countries with large populations and food security concerns, such as China, South Korea and India, are seeking opportunities to produce food overseas,” the IFPRI report points out.
These investments are targeted towards developing countries where production costs are much lower and land and water resources are abundant.
Giving some recent examples (based on press reports) of such land deals involving states or private parties, the IFPRI report has said that China has acquired over 1,240,000 hectares of land in the Philippines and 11,000 hectares in Zimbabwe. Among other countries, South Korea has taken over 690,000 hectares in Sudan, Saudi Arabia about 500,000 hectares in Tanzania and Jordan about 25,000 hectares in Sudan.
The IFPRI study has said that farmland prices have risen throughout the world in recent years. “In 2007 alone, farmland prices jumped by 16 per cent in Brazil, by 31 per cent in Poland and by 15 per cent in the Midwest United States.”
Among the positive fallout of such investments, the IFPRI study has listed benefits to the poor such as generation of additional farm and off-farm employment, introduction of new agricultural technology, development of rural infrastructure and poverty-alleviating improvements like construction of schools and health posts.
On the downside, small landholders can get displaced from their land through such deals on terms unfavourable to them. Since the state often formally owns the land in many countries, the poor run the risk of being pushed off the plots in favour of the investors without compensation.
“Land is an inherently political issue across the globe, with land reforms and land right issues often leading to violent conflicts. The addition of another actor competing for this scarce and contested resource can add to socio-political instability in development countries,” the IFPRI has pointed out.
The code of conduct suggested by the IFPRI to regulate the FDI in agricultural land has elements like transparency in deal negotiation, respect for existing land rights, sharing of benefits, environmental sustainability and adherence to national trade policies.
Maintaining that the local communities should benefit and not lose from foreign investments, the IFPRI has suggested that land leasing should be preferred over lumpsum compensation. Contract farming is even better because it leaves small holders in control of their land but still delivers output to the outside investors.
Besides, it has also asserted that at times when national food security is at risk (for instance in case of drought), the domestic supplies should have priority. For this, foreign investors should not have a right to export during an acute national food crisis.
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