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Soaring global interest in Farmland how can mozambique benefit? . Maputo, Feb. 10, 2011. Klaus Deininger, World Bank. The global picture. Daewoo to cultivate Madagascar land for free. Commodity price rise triggers land demand. Investor demand in Africa unprecedented.

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soaring global interest in farmland how can mozambique benefit

Soaring global interest in Farmlandhow can mozambique benefit?

Maputo, Feb. 10, 2011

Klaus Deininger, World Bank

a large danger of neglecting rights
A large danger of neglecting rights
  • Determinants of a country attracting investor interest/actual implementation
actual land transfers lower but still large
Actual land transfers lower but still large

Total area transferred, no of projects and share of domestic investors, 2004-2009

Investment is often not predominantly foreign.

Many ventures did not start production – thus positive impacts limited.

why has success been so limited
Why has success been so limited?
  • Gaps in legal & policy framework
    • Requires expropriation/extinction of existing rights (e.g. ZMB)
    • Unclear/duplicative institutional responsibility (e.g. ETH)
    • Low land payments/participation; non-collection (e.g. LBR)
    • Requirements for liquidating non-profitable investments rarely considered
  • Weak institutional capacity & implementation
    • Lack of information & consultation -> Neglect of property rights
    • Neglect of economic/technical viability (e.g. GHA)
    • Limited capacity to do or monitor ESIAs (e.g. SDN)
    • Weak land administration -> Boundary conflicts, overlap
    • Agreements are not written/monitored
  • Communities with little voice, capacity, and ability to resist
    • Negative effects shifted to locals who receive damage but no benefits
    • Non-viable projects encroach on local rights to make ends meet
    • Vulnerable & women left out –poor people subsidize (foreign) speculators
    • Historical examples of this leading to conflict or revolution
slide9

Boundary of allocated land

1 km

Boundary misaligned with road

Allocation over existing smallholders

No visible large-scale cultivation despite transfer 5 yrs ago

An example from Zambia

countries that fared better did 3 things
Countries that fared better did 3 things
  • Assessing potential and integrating it into their development strategy
    • Rather than having ad-hoc decisions by investors determine the country’s future
    • Identify suitable & off-limits areas as well as suitable crops (demand, endowment)
    • Strategically provide infrastructure (roads, research)
    • Link with local factor endowments, development strategy, and aspirations
  • Securing existing property rights & allowing their voluntary transfer
    • Development is for local people & unlikely to be promoted by expropriation
    • Often at group/community level: Need internal rules & outside representation (TZN)
    • Well-defined mechanisms to transfer all or part of local land (PER)
    • Clear demarcation of land & scope for transfer of unsuccessful ventures (MEX)
  • Implementing transparent processes & effective ways of monitoring/redress
    • Avoiding traps of rent seeking, corruption, and another resource curse
    • Auction of public land: Technical review, down-payments & investor vetting (PER)
    • Publication of contracts (LBR) can allow learning and independent monitoring
    • Build on initiatives to set technical standards & independent monitoring (RSPO; EP)
    • Incentives to avoid merely speculative land acquisition
assessing potential methodology use
Assessing potential: Methodology & use
  • Identify potential per crop & grid cell (5’ or 1 km resolution)
    • Data on soil, slope, elev., rainfall, temp. to simulate crop growth
    • Output prices for ‘local’ output value; transport cost for global price -> ‘best’ crop
    • Input prices to compute net profit & implicit land rental value
  • Cultivated land -> yield gap (actual/potential output)
    • Productivity increase often only option; may be cheaper & socially more appropriate
    • Area expansion risky & costly (soil tests, investment, compensation)
    • Yield gap can be attributed to technology, infrastructure & institutions
    • Leave options for expansion of existing farms (e.g. via mechanization)
  • ‘Uncultivated’ land -> possibly available/of interest to investors
    • Identify areas of highest potential/threat, opportunity cost & need for scrutiny
    • Priority areas for tenure regularization
    • Land rental surface can form a basis for negotiation
    • Investors benefit from that knowledge – and in Brazil make lots of money from it
  • The scenario used below
    • Rainfed Maize, soy, wheat, sugar, cassava, groundnut, oilpalm; high input intensity
    • Exclude forested & protected areas; levels of population density (5, 10, 25/km2)
land availability by country
Land ‘availability’ by country
  • World total
  • 445 Mn ha (< 25/km2)
  • 306 Mn ha (< 10/km2)
  • 198 Mn ha (< 5/km2)
  • Key characteristics
  • Highly concentrated
  • > 90% in 32 countries
  • Half of these in Africa
  • Large rel. to current area
  • > double in 11 countries
  • > triple in 6 countries
  • Sheer size is instructive
  • Multiple constraints likely
  • Need sophisticated investors
  • Potential social dislocation
illustrative expansion potential by crop
Illustrative expansion potential by crop

Top countries with maize expansion potential (<25/km2)

  • Latin America’s advantages
  • Technology & land for expansion
      • Human capital
  • Infrastructure & market access
  • Institutions:
    • Property rights secure
    • Thriving land markets
    • Transparency
    • Contract enforcement
    • Financial markets
  • Africa’s opportunity
  • Borrow technology
  • Focus on regional markets
  • Expand from existing production
  • Rel. low opportunity cost of land *
  • Challenges to be overcome
  • Institutions
  • Mix of large & small
  • Public and private sector roles
available options differ by country
Available options differ by country
  • Africa
  • Latin America & Caribbean
a typology of agrarian structure
A typology of agrarian structure
  • Type 1 (Korea, China, Vietnam, India)
    • Significant gains from technology & institutional change by smallholders in the past
    • Intensification & (private sector) value addition as only sources of on-farm growth
    • Off-farm employment a main engine for increases in farm sizes via (rental) markets
  • Type 2 (Brazil, Argentina, Peru)
    • Technological barriers to large farm expansion low - big recent investment inflows
    • Land markets function relatively well, currently danger of bubbles
    • Regulation needed to avoid distributional, environmental & social externalities
  • Type 3 (Malawi, Rwanda, El Salvador)
    • High yield gap often a consequence of past underinvestment
    • Land is a key safety net; danger of people being pushed out with no alternative
    • Private investment to complement public initiative; contract farming
  • Type 4 (Sudan, Tanzania, Zambia, Mozambique)
    • Mechanization & larger farm size can be sustainable; incentive for private sector
    • Institutions (property rights & land markets) a key challenge
    • Factor market imperfections, if unchecked, can cause dualism & conflict
policy focuses on the right issues
Policy focuses on the right issues
  • Agricultural zoning (1:1 Mn; ongoing at 1:250,000) to assess potential
    • Based on identification of agro-ecological suitability
    • Excluding productive forest, parks, cult. area, protected areas, concessions
    • -> Identify blocks of land possibly ‘available’ for investors
  • Property rights rightly recognized as a key pillar
    • Recognition of community occupancy rights; option of delimitation
    • Process for negotiation with investors
    • Land policy forum to explore key legislative & regulatory issues
    • Investors’ DUATs conditional on compliance with investment plan
  • Implement transparent processes & effective monitoring/redress
    • Establishment & gradual decentralization of CEPAGRI
    • Format for investment processing (res 70/2008) & process to vet proposals
    • Efforts to better regulate consultation process
    • Increasingly vigilant monitoring of investor compliance
    • Cleaning and consistency of data from provincial offices
but challenges remain
But challenges remain
  • Zoning may be too narrowly focused on land availability only
    • Local strategy/understanding how to close yield gap needed required
    • Access to markets & technology has a key role; concessions underutilized
    • The exercise could yield vastly more insights
  • Land rights ‘recognition’ de facto often irrelevant
    • Lack of demarcation makes rights invisible
    • Land system serves a small minority & excludes women
    • Land transfers costly & uncertain even where they are allowed
  • Processes often costly & ineffective
    • Process for individualization/mutation ill-defined
    • Consultations deficient (few people, actas incomplete)
    • ‘Plan compliance’ costly to ascertain & easy to abuse
  • Structures often duplicative & centralized
    • Registry & cadastre operate in parallel spheres
    • Low/non-collected fees ($0.8/a) foster land speculation
    • Whatever revenues exist do not accrue to local gov’t

Yield gap for maize

slide22

Background

    • 1997 law recognizes community rights – good legal basis
    • Huge potential: 34 mn. ha arable land; only 3.7 mn. ha cropped
  • Want to attract investors
    • New applications for 13 mn. ha in 18 months
    • Land audit: > 50% of existing awards of land use rights (DUATs) un- or underutilized
  • … then backtracking
    • Moratorium in 2008
    • Identify available land first

Overlaps can create

problems

Limited delimitation

the potential is enormous
The potential is enormous
  • Use global methodology to get land prices
  • Large variation over space
  • Overall level surprisingly high: Prices > $ 3,000/ha
  • Considerable potential around Beira (transport)
  • This area has currently low level of cultivation
  • Cultivated areas
  • Average profits about $ 500/ha
  • Compared to current value of < $ 100
  • Poverty impact of closing yield gap & expansion immense
  • Concessions
  • Even higher potential ($ 700/ha)
  • But half of them are underutilized
  • Need cheap models to check (satellite imagery)
  • Rental fees could yield revenue & discourage speculation
  • Feed into local revenue; expand land rights

Residual land values; high input scenario

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it may be useful to explore options for
It may be useful to explore options for ..
  • Using zoning information to feed into a broader rural development strategy
    • Identify yield gap & overlay with pop. density/poverty to define strategic options
    • Add prices & transport cost to potential for actual & potential profits & land values
    • Use this to evaluate potential impact of infrastructure improvement
  • Making occupancy rights relevant and exploring options for land transfer
    • Use information from ‘top-down’ zoning to feed into ‘bottom up’ land use planning
    • Define ‘community’, its representation, and its land rights (vs. individuals)
    • Eliminate dualism of rights through systematic low-cost delimitation/titling
    • Assess leasing options and study other countries’ experience (Vietnam, China)
  • Focusing on low-cost & incentive compatible monitoring/enforcement
    • Reduce cost & eliminate dualism by unifying registry & cadastre
    • Design low-cost compliance monitoring to cancel non-compliant DUATs (Brazil)
    • Ensure community consultation is informed, inclusive, and results in clear contract
    • Let lease payments benefit land owners & be determined by local level negotiation
    • Use part of fees to maintain system to make secure land rights accessible to all