1 / 23

Transnational Corporations, Agricultural Production and Development

Transnational Corporations, Agricultural Production and Development. Ralf KRÜGER 23 February 2010. UNCTAD Division on Investment and Enterprise Investment Trends and Issues Branch. UNCTAD’s World Investment Report. Visit UNCTAD websites: www.unctad.org/diae www.unctad.org/wir and

margot
Download Presentation

Transnational Corporations, Agricultural Production and Development

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Transnational Corporations, Agricultural Production and Development • Ralf KRÜGER 23 February 2010 UNCTAD Division on Investment and Enterprise Investment Trends and Issues Branch

  2. UNCTAD’s World Investment Report Visit UNCTAD websites: www.unctad.org/diae www.unctad.org/wir and www.unctad.org/fdistatistics

  3. Why have we selected this topic in the middle of the financial crisis?

  4. Main Messages • Foreign participation can play a role in agriculture in developing countries to boost productivity and support economic development. • TNC participation in developing country agriculture is small but larger than in developed countries. • TNC participation in developing country agriculture can have significant positive and negative impacts. • TNC involvement for long-term agricultural development requires an integrated policy approach aimed at generating development benefits.

  5. TNCs and agricultural production in developing countries

  6. TNC participation in agricultural production in host countries can take various formsFDI and contract farming are the most important ones

  7. FDI in agriculture and in food and beverages: rising; the latter is larger1990–2007, billions of dollars

  8. In some developing and transition economies, the share of agriculture in FDI inflows is relatively high% of 2005–2007 inflows

  9. Contract farming is a significant component of TNCs’ participation in agricultural production • Why contract farming? • For TNC: better control over quality than spot markets; and less capital-intensive, less risky and more flexible than FDI • For farmers: predictable income, access to markets, and TNC support in areas such as credit and know-how • Extent of TNCs’ contract farming: over 110 countries across Africa, Asia and Latin America • In some developing countries, share of contract farming in output is high: • Brazil: 75% of poultry production and 35% of soya bean • Viet Nam: 90% of cotton and fresh milk, 50% of tea and 40% of rice • Kenya: 60% of tea and sugar

  10. TNCs from developing economies are key players in agricultural production, but not in related industriesTop 25 TNCs in agribusiness industries (developing-country TNCs in green), 2007* * Ranked by foreign assets

  11. An example of South-South investment: Olam’s (Singapore) agricultural commodity global networkLocations where Olam has a significant presence are highlighted by darker shading

  12. Main agricultural produce targeted by TNCs varies by subregion

  13. Land acquisition is important for new investorsInvestor and target regions/countries in land investment for agriculture, 2006–2009, number of deals

  14. Development Implications of TNC involvement in Agriculture

  15. Key observations • TNCs are by no means the only – and seldom the main – agents driving the commercialization and modernization of agriculture in the developing world, but they play an important role in many countries. • FDI can help fill the investment gap in agriculture in developing countries, as well as that in technology and other resources. • Contract farming can have various beneficial effects: • Providing inputs and transferring skills to a very large number of small farmers; • Easing financial and technological constraints facing farmers; • Linking farmers up to global markets.

  16. Governments need to be aware of the potential environmental, political and social consequences • Environmental consequences are diverse. • Social consequences can be significant. • Concerns also cover political interference and extensive lobbying.

  17. TNC participation in agricultural production touches on all four dimensions of food security Domestic value chain (Entry by agriculture-related TNCs such as manufacturers and supermarkets) Spillover effects (For instance, commercial attitudes in standards and safety, transferable skills)

  18. Policy challenges and options

  19. Policy Challenges of TNC participation in agricultural production in developing countries • To meet the rising food needs and to revitalize agriculture, policymakers need to promote more investment in this industry, both private and public, and domestic and foreign. • Main challenges in this regard include: • Strategizing the agricultural sector and finding the right place for TNC involvement (both FDI and non-equity forms of participation) in order to implement the strategy. • Addressing social and environmental concerns, such as land grab, crowding out of local farmers, protection of indigenous peoples and environmental degradation. • Design of an integrated policy approach, including policies related to infrastructure, competition, trade and R&D.

  20. Host countries Leveraging TNC participation in agriculturePolicy recommendations In order to maximize development benefits and minimize costs, host countries should consider: • Promoting contractual arrangements between TNCs and local farmers, such as contract farming. • Addressing specific obstacles to efficient cooperation, such as • Capacity-building • Development of model contracts. • To maximize the development contribution of FDI, special regard needs to be paid to: • The domestic legal framework; • Investment contracts between the host government and foreign investors.

  21. Home countries International community Leveraging TNC participation in agriculturePolicy recommendations • Need to evaluate the pros and cons of national strategies to promote outward FDI for food security reasons. • Besides outward FDI, other approaches that could be taken into account are: • Contract farming • Investments in local infrastructure, e.g. trading houses, logistical infrastructure • Consider the development of a set of internationally agreed core principles for large-scale land acquisitions by foreign investors in agricultural production. • Encourage FDI in developing countries by reducing import tariffs, non-tariff barriers and agricultural subsidies in developed countries. • Consider use of ODA for agricultural development strategies involving TNCs.

  22. Four Development ChallengesAgriculture, development and the role of TNCs WIR09 has examined the investment challenge, but to realize the promise of agriculture also requires addressing four other interconnected development challenges: • Work towards food security in developing countries • Harness technology to support agricultural development • Build domestic and regional value chains in agribusiness • Address concerns about « land grab », with a particular accent in favour of the poor, marginalized and dispossessed.

  23. ThankYou! Ralf KRÜGER Investment Issues Section Division on Investment and Enterprise (DIAE) Tel: +41-22 917 5792 Email: ralf.krueger@unctad.org

More Related