International investments in agricultural production
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International investments in agricultural production. David Hallam Deputy Director, Trade and Markets Division, FAO. Agricultural investment in the headlines. Saudi Investors to Put $100m into Ethiopian Farm ( Fortune , 15.4.2009)

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International investments in agricultural production

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International investments in agricultural production

International investments in agricultural production

David Hallam

Deputy Director, Trade and Markets Division, FAO


Agricultural investment in the headlines

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)

Korea’s 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)


Outline

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


Recent investment trends and patterns

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


Recent investment trends and patterns1

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


Motivations investing countries

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


Motivations host countries

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


Oda to agriculture

ODA to agriculture


Impacts of international investments

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


Impacts of international investments1

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


Policy implications

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?


Policy implications1

Policy implications

  • international codes of conduct and global corporate social responsibility initiatives

  • international investment agreements

  • dispute settlement

  • WTO disciplines (URAA, SPS-TBT, TRIPS)


Some outstanding issues

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?


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